FAQs (Source: http://www.indusinvest.com/FAQ/FAQ_GENERAL.

html)
General
Q1. What is a Bull?
Ans. A Bull is an investor who buys a security in the hope of selling it at a higher
price . He sells the shares and squares up the transaction at a profit, whenever the
prices rise. This process is called a Long Purchase. A Bull market is a rising market.
Q2. What is a Bear?
Ans. A Bear is an investor who believes a stock, sector or the market will go down in
value. His intention is to buy those shares at a later date, when the prices decline
and then square up the transaction at profit. This activity is generally referred to as
selling Short. A bear market is a falling market.
Q3. What is a Stag?
Ans. One who applies for a new issue in the hope of being able to sell the shares
allotted to him/her at a profit as soon as dealing starts, is known as a Stag.
Q4. What is stock exchange?

Ans. Generally speaking the stock exchange is a marketplace where shares can be
bought and sold.
Legal definition: 'Stock Exchange' means any body of individuals, whether
incorporated or not, constituted for the purpose of assisting, regulating or controlling
the business of buying and selling in the securities.
Q5. What is carry forward?
Ans. A person buys or sells shares with the intention that the price movement will be
to his advantage by the end of the trading cycle. However, when this does not
happen, he has the option of holding his hunch by doing a carryover of his
transaction to next trading cycle. This activity is known as Carry Forward.Carry

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forward trading has evolved in response to local needs in India and it refers to the
trading in which the settlement is postponed to the next account period on payment
of contango charge(Known as 'vyaj badla') in which the buyer is interest on
borrowed funds or the backwardation charge(Known as' undha badla') in which the
short seller pays a charge for borrowing securities.
Q6. What is Badla?
Ans. Carrying forward of transaction from one settlement period to the next without
effecting delivery or payment is called 'badla'.
Backwardation is also known as 'undha badla' in Indian stock exchanges. When the
bear sells in anticipation of a fall in prices in the immediate future (so that he can
pick up the shares later for delivery and make a profit), but the fall doesn't happen
within the trading cycle, he has the option to buy the shares from the market for
delivery, or have his sales carried over to the next trading cycle on payment of
'undha badla' or backwardation charges to the buyer. The 'Badliwala' finances him.
Contango is also known as 'seedha badla' in Indian stock exchanges. When a bull
buys in anticipation of an immediate rise in price, but finds at the end of the trading
cycle that the price has not risen, he may either pay for the shares and take
delivery, or he may carry over his transaction to the next trading cycle by paying
over charges or "seedha badla' to the seller. 'Badliwala' finances the badla.
Q7. What are Foreign Institutional Investors (FIIs)?
Ans. The rapidly growing Indian economy needs large investments for development.
The government has removed many cobwebs of rules to encourage Direct Foreign
Investment

Foreign

Portfolio

Investment.

However,

only

recognized

foreign

institutions such as pension funds, mutual funds, etc. can have portfolio investment
after taking permission from the Reserve Bank of India and SEBI. Registered FIIs are
allowed to operate freely in the primary and secondary markets, subject to certain
prudential guidelines.
Q8. What are Global Depository Receipts (GDRs)?
Ans. Since April 1992, Indian companies with good track record are permitted to
raise funds from the international market by way of Global Depository Receipts

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(GDRs). GDRs are issue in the name of a foreign bank and normally listed on
Luxembourg or London Stock Exchange. This provides opportunities to international
investors to participate in the Indian capital Market without going through the
hassles of paper-based settlement system. Underlying company shares of GDR are
held by a custodian bank in India.
Q9. What are Specified Shares and Non-Specified Securities?
Ans. All the listed securities on the stock exchange are classified as either
(i)'specified shares'-'A' Group shares or (ii) 'non-specified securities'-'B' Group
securities. The Stock Exchange authorities notify from time to time the shares, which
should be included in the specified list. The main difference between specified shares
and non specified securities is in the process of settlement of transactions. Only
equity shares are included in the specified list . The considerations for an equity
share to be included in the specified list are generally the size of the company, the
number of shareholders, dividend record, growth prospects and average volume of
business.
Q10. What are Blue Chips?
Ans. Blue Chips are shares of large, well established and financially sound companies
with an impressive record of earnings and dividends. Generally, Blue Chip shares
provide low to moderate current yield and moderate to high capital gains yield.
Q11. What is ClearingHouse?
Ans. Each exchange maintains a ClearingHouse to act as a central agency for
effecting delivery and settlement of contracts between all members. The days on
which the members pay or receive the amounts due are called pay-in or pay-out
days respectively.
Q12. What is Auction of Shares?
Ans. An Auction is a mechanism utilized by the exchange to fulfill its obligation to a
counter party member when a member fails to deliver good securities or make the
payment. Through Auction, the exchange arranges to buy good securities and deliver

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them to the buying broker or arranges to realize the cash and pay it to the selling
broker.
Q13. What is Demat trading?
Ans. The Indian Capital market has witnessed unprecedented growth in the
technology in the past few years, which has made it possible by modernization in
trading and settlement systems. Automation of the trading mechanism has given us
a trading system comparable with the best in the world. Establishment of a
settlement guarantees mechanism removed the counter party risk in stock
exchanges. Though the advent of automated trading brought with it several
associated benefits such as transparency in trading and equal opportunity for market
players all over the country; the problems related to the settlement of trades such as
high instances of bad deliveries and long settlement cycles have continued. As an
answer to these myriad settlement problems, The national securities Depository
limited (NSDL) was inaugurated in Nov 1996 as the first depository in the country.
The latest major development, which helped hasten the awakening of the capital
market, was that from Jan 4Th 1999, all category of investor can deliver only in
Dematerialized form with respect to a select list of securities. The NSDL was set up
as the major agency to give this concept, The painless scrip less nation-wide trading,
a kick-start. The NSE and the NSCC are two other active agencies indispensable to
the mechanism. Other recent developments also have suddenly thrust the NSDL, The
concept of Demat trading and the over 70 DP's approved so far into the national
glare. The developments make a closer look at Demat trading necessary.
Q14.

What

are

the

advantages

of

NSDL

for

Domestic

Retail

Investors?

Ans. The rapidly growing Indian economy needs large investment for development.
The Govt. has removed many cobwebs of rules to encourage direct foreign
investment and Foreign Portfolio investment. However, only recognized foreign
institutions such as pension funds, Mutual Funds etc. can have portfolio investment
after taking permission from the RBI. And SEBI. Registered FII's are allowed to
operate freely in the primary and secondary markets, subject to certain prudential
guidelines.
Q15. What is Arbitrage?

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Ans. Arbitrage is the business of taking advantage of difference in price of a security

traded in two or more stock exchanges, by buying in one and selling in another or
vice-versa.

Arbitration: Settlement of claims, differences of disputes between one member and

another and between a member and its clients, authorized clerks, sub-brokers, etc,
through appointed arbitrators. It is a quasi-judicial process that is faster and is an
inexpensive way of resolving a dispute. The exchange facilities the process of
arbitration between the member and their clients. After both the parties select the
arbitrator and after due deliberation and after considering the merits of the case an
award is given. In India, Arbitration is governed by the Arbitration and Conciliation
Act 1996.
Q16. How to place an Order?
Ans. When a Client instructs his broker to enter into a transaction, he may ask him
to buy or sell at the best price and leave the matter to his judgement or he may
specify reasonable price limits. For instance, The client may specify " Buy at 110
max." In such a case, The broker may not be able to execute the order even though
the quotations of the day would be "Rs110, 111,112,113" as jobber's spread of say
Rs2 would make the share available for purchase at a price not lower than Rs112.
Q17. What is the Depository System?
Ans. Under the Dep. System, Transfer of ownership of securities is done by book
entry similar to a bank deposit account. Under the system, the Depository Company
ensures delivery of shares against payment. The company also undertakes to
distribute dividends, Bonus shares, etc. to its account holders and monitor all the
accounts.
Q18. What is Depository all about?
Ans. A dep. is an organization, which holds the shares in the form, of electronic
accounts in the same way a bank holds the money. Buying and selling electronic
shares in the market is just like selling physical shares, only it's much more simple
and safe.

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Q19. What is the procedure for holding shares and settling trades in scrip less form?
Ans. The procedure is very simple and similar to operating a bank account. A dep.
Agency reaches the investors through DP's. Banks, custodians of securities and stock
brokers are some of the entities who are DP's. One can start by opening an account
with depository agency through a DP. On completion of account opening procedure,
he will be allotted an account no. He is then ready to acquire and sell shares in the
scrip less form and to demat share certificates, which he already holds.
Q20. Who are eligible to participate in Internet Trading?
Ans. All Indian Residents/Corporates, Non Indian residents, overseas corporate
bodies and FII's are eligible.
Q21. What is a Non Parri Passu (NPP) share?
Ans. In case of company issues new shares during the financial year, these shares,
unless specified otherwise, are entitled only for pro-rata dividend in respect of
financial year in which these were issued. These shares are known as NPP shares,
which like the ordinary shares are eligible for only a part of dividend.
Q22. How does one ascertain that the dividend received/ Paid on scrip is correct?
Ans. The exchange publishes a list of shares that are eligible to receive prorata
dividend per settlement. The list contains the details pertaining to distinctive
numbers and the rate of dividend payable.
Q23. What is Neat-iXS?
Ans. Neat-iXS is a web based order routing, real time market info display, and
portfolio mgmt and client info display system. Neat-iXS in the current version routes
orders to and displays real time market info of NSE. Client registered with the
brokerage house of NSE and who have hosted Neat-iXS can trade directly at NSE
after appropriate risk management by the brokerage house.
Q24. What are the basic Knowledge of Neat-iXS I need to start trading?

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Ans. Clients are required to know at least the following to start effective trading
using Neat-iXS.
1. You have to maintain your password and PIN security.
2. View market Info.
3. Place, modify and cancel orders.
4. View own info.
Q25. What is Portfolio Management?
Ans. PM is the facility provided for the clients to maintain their stock holding and
update themselves about the status of their portfolio. You can maintain multiple
portfolios.
Q26. Whom should I approach for buying /selling shares on NSE?
Ans. To buy and sell securities you could approach either:

SEBI registered trading member of the NSE, or

SEBI registered sub-broker of a trading member of the NSE.

Q27. Why should I deal only with a trading member of NSE/SEBI registered subbroker of NSE trading member?

Ans. The exchange can ensure settlement and handle disputes/claims arising out of
only those trades, which are executed, on NSE through registered trading
members/registered sub-brokers. Hence for all trades done on NSE through an entity
who is not registered, the investor has no recourse through the exchange in case of
non settlement or a claim/dispute arising out of the same.
Q28. How do I verify whether the entity is a NSE trading member/SEBI-registered
sub-broker?

Ans. You may ask the person to furnish documents such as SEBI registration

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certificate, Registration with NSE, etc to verify the antecedents of the person. You
can also approach the exchange to counter check whether the person holds the valid
registration.

Q29.What are the formalities for registering as a client of a NSE trading

member/SEBI registered sub-broker?

Ans. An investor should register himself with registered trading members/subbrokers by:

Filling a client registration form.

And signing a member-Constituent agreement (copy available with all NSE

Trading members.

Q30. What precautions should I take before signing the Member-Constituent

agreement?
Ans. You should read the various terms and conditions carefully and understand their
implications before entering into this agreement with your trading member.

Check whether it is on a stamp paper of requisite value and whether the

stamp paper is valid

Check whether your name and the name of the trading member are clearly
mentioned in the agreement

Ensure that you and the trading member have signed on all the pages of the
agreement. Also check that the witness has signed and put their name
against their signature.

Check whether the trading member or their representatives have the

authority to sign the member-constituent agreement.

Q31. In case of complaint against a trading member/registered sub-broker, whom do

I address the complaint to?
Ans. You should address the complaints to the Mumbai office or the regional offices
of NSE based on the dealing office where the deals are executed as given below:

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Q32. State in which dealing office of the trading member is located where trade was
executed Complaint to be addressed to
Ans. Maharashtra, Gujarat, Goa, Daman, Diu, Dadara and Nagar Haveli, MP- NSE of
India Ltd. 1st floor, trade World, Sena pati Bapat Marg, Lower Parel, Mumbai-400013
Tel: 4972950;4914269 Fax:4972996

Delhi, Haryana, UP, HP, J &K, Punjab, Chandigarh, Rajasthan- NSE of India Ltd.
Thapar house,Western Wing124, Janpath,Janpath Lane, Connaught Place New delhi110001

West Bengal, Bihar, Orissa, Assam, Arunanchal Pradesh, Mizoram, Manipur, Sikkim,
Meghalaya, Nagaland, Tripura- NSE of India Ltd. Ideal Plaza 11\1, Sarat Bose Road,
Calcutta-700020
Andhra Pradesh , Karnataka, Kerala, Tamil Nadu, Andaman & Nicobar, Lakshwadeep,
Pondicherry- NSE of India Ltd., Lakshmineela Ritechoice Chamber 5, Bazullah Road,
T. Nagar, Chennai-600017
Q32. In case of complaint against company traded on NSE, whom should I address
the complaint form?
Ans. All complaints in respect of companies should be addressed to:
Investor Grievance Cell
NSE of India Ltd
1st floor, Trade World,Senapati Bapat Marg,
Lower Parel Mumbai-400013
Tel: 4972950; 4914269
Fax: 4972996
e-mail-ignse@nse.co.in
Q33. What are the steps taken by investor grievance Cell to ensure speedy redressal
of the complaints by the trading members/sub-brokers and companies?

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Ans. Complaints against trading members/ sub-brokers

Complaints received from the investor if accompanied by all the relevant documents
as mentioned above are forwarded to the respective TM/sub-broker asking them to
provide their comments or for resolving the case. The TM, sub-broker are expected
to file their replies during 21 days.

In case the TM/registered sub-broker disputes the claim of the investor, the
response of the team is forwarded to the investor. If required, both the parties are
called for s joint meeting. Most of the complaints are resolved in this manner. In
cases where the disputes remain resolved in Investor Grievance Cell, the parties may
refer the manner to arbitration if they so desire.
Complaints against Companies/Shares Transfer agents & Registrars (STAs)
Complaints received from investors are forwarded to the respective companies/STAs
for necessary action at their end. In case no response is received from the
company/STAs within 21 days, a follow up by way of letter, telephone calls and
personal meetings is undertaken to expedite their replies.
Q34. What steps do I take if my shares are lost/misplaced/stolen?
Ans. You should immediately write to the company reporting the loss of shares and
instruct company to Stop Transfer the shares. You should comply with the formalities
intimated by the company for stop transfer or issue of duplicate share certificates.
Simultaneously you should lodge a police complaint/Fir reporting the loss or
misplacement.

Q35.

What

is

investor

protection

Fund

(IPF)

and

when

is

it

used?

Ans. The IPF is maintained by the exchange to take care of investor's claim, which
may arise out of non settlement of obligation by the TM for trades executed on the
exchange. The IPF is used to settle claims of such investors whose trading member
has been declared as defaulter.

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The maximum amount of claim payable from IPF to the investor (where the TM
through whom the investor has dealt, is declared defaulter) is Rs. 5 Lacs
Q36. What is bad delivery cell?
Ans. When delivery of shares turns out to be bad because of company objection
etc.the investor can approach the bad delivery cell of the stock exchange through his
broker for correction or replacement with good delivery.
Q37. What is bid and offer?
Ans. Bid is the price of share a prospective buyer is prepared to pay for particular
scrip. Offer is the price at which a share is offered to sale.
Q38. What are circuit breakers?
Ans. It is a mechanism by which Exchange temporarily suspends the trading in
security when its price are volatile and tend to breach the price band.
Q39. What is cum-bonus?
Ans. The shares are described as cum-bonus when potential purchaser is entitled to
receive the current rights.
Q40.What is cum-rights?
Ans. The shares are described as cum-rights when a potential purchaser is entitled to
receive the current rights.
Q41.What is Day order?
Ans. A day orders, the name suggest, is an order, which is valid for the day on which
it is entered. If the order is not matched during the day, at the end of the trading
day of the order get canceled automatically.

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Q42. What is ex-bonus?

Ans. The share is described as ex-bonus when a potential purchaser is not entitled to
receive the current bonus, the right to which remains with the seller.
Q43. What are ex-rights?
Ans. The share is described as ex-rights when a potential purchaser is not entitled to
receive the current rights, the right to which remains with the seller.
Q44. What is Forward trading?
Ans. Forward trading refers to trading where contracts traded today are settled at
some future date at price decided today.
Q45. What is insider trading?
Ans. Trading in a companies share by a connected person having non-public, price
sensitive information, such as expansion plans, financial results, takeover bids, etc.
by virtue of these his association with that company, is called insider trading.
Q46. What is jumbo Certificate?
Ans. A jumbo share certificate is a single composite share certificate formed by
consolidating/ aggregating a large number of market lots.
Q47. What is market lot?
Ans. Market lot is the minimum number of shares of a particular security that must
be transacted on the exchange. Multiples of the market lot may also be transacted.
Q48. What odd lot?

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Ans. A number of shares that are less than the market lot are known as odd lots.
These shares are illiquid in nature, as they cannot be transacted in the exchange.
Q49. What is order driven trading?
Ans. It is trading initiated by buy or sell orders from investors or brokers.
Q50. What is over the counter trading?
Ans. Trading in those stocks, which are not listed on a stock exchange.
Q51. What is price rigging?
Ans. When a person or persons acting in concert with each other collude to artificially
increase or decrease the price of the security, that process is called price rigging.
Q52. What is Quote driven trading?
Ans. Trading where brokers/market makers give buy/sell quote for a scrip
simultaneously.
Q53. What is screen based trading?
Ans. When buying/selling of securities is done using computers and matching of
trades is done by a stock exchange computer.
Q54. What is settlement guarantee?
Ans. Settlement guarantee is the guarantee provided by the clearing corporation for
settlement of all trades even if a party defaults to deliver securities or pay cash.
Q55. What is spot trading?
Ans. Trading by delivery of shares and payment for the same on the date of
purchase for or on the next day.

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Q56. What is Trade guarantee?

Ans. It is the guarantee provided by the clearing corporation for all trades that are
executed on the exchange. In contrast the settlement guarantee ,guarantees the
settlement of trade after multilateral netting.
Q57. What is transfer deed?
Ans. A transfer deed is a form is used for effecting transfer of shares or debentures
and is valid for a specified period. It should be sent to the company along with a
share certificate for registering the transfer. The transfer deed must be duly stamped
and signed by or on behalf of the transferor and transferee and complete in all
respects.
Q58. What is transmission?
Ans. Transmission is the lawful process by which the ownership of securities is
transferred to the legal heir/s of the deceased.

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