When you invest in shares of a company, you are not only providing finance to the company, but providing capital to that particular company which is known as an equity share. It means you are taking up the part of the ownership in that company. Investment in equity is undoubtedly have greater risk as you are entrusting performance of the company with the job of managing risk on behalf of you.

In what kind of business you should invest?

Normally, the new comers who are investing in equity should focus on the potential of returns received should be at least equal to the bank interest rates. You should determine the qualitative factors to invest your money into a business which ensures the security of your money in a long run. Business itself is also entitled to aspire for the same security aspect. Ideal business should have horizons where profits can be determined. There are various external factors that determine the direction and growth of this activity. While business planning all these factors are considered to sustain the growth of the business over the period of time.  Business operations would have to be evaluated from market feedback resulting into profitability described in the financial statements.

All these concepts apply to the stocks. We know the document called Annual Report of the company; which is the most basic source to know the company’s operations and quality of the performance. Annual report explains the nature of operations and the external factors affecting the performance of the company during the year. To get a fair idea about company’s reputation and stability by keeping track of the position of company’s product in the market. You can also keep track of company’s quarterly financial statements. All these are the parameters to decide which stocks will give maximum and stable returns.

Role of Equity Holder in the company

As an equity shareholder, you are delegating authority to others to run the organization you have a stake in. The company is answerable to their equity base shareholders. Thus, as you are a joint owner, you have delegated the operations of the company to the professional managers and the employees. In turn management is responsible to its shareholders by communicating the performance of the company through the balance sheet and the AGM. Equity shareholders can even voice their opinion on the performance of the company.

In fact, shareholders can actually participate in constructive criticism of the operation of the company.

The investors are able to check the prices of the stocks online with the help of easy trading. The online platform has enabled the stock brokers or individual investors to check the prices of the stocks any time anywhere. The online brokerage firms also advise and recommend the companies that are listed in BSE. Any investor can check and they trade in shares and stocks accordingly at their leisure.

The BSE is followed all through the world. It consists of 30 companies listed on it that represents 12 major sectors. These companies are measured by the Sensex based on a ‘free float’ methodology. There are many fluctuations in the market and these fluctuations occur according to changing market dynamics. Sometimes the sectors climbing up the graph in the BSE index may, in a short while climb down. So the overall profit making capacity depends on the expertise of the investor and constant analysis of the BSE 30 and BSE stock prices. You can have continuous profit only if you maintain and follow mechanical systems, identify trend changes, study the market trends closely, take advice of experts, and related paraphernalia. This way you are sure to gain in the Indian stock exchange

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Rights issue – In proportion to your existing holding
A rights issue is offered in proportion to your existing holding. Hence, you cannot buy how many ever shares you desire. Taking the above example forward, if the company announces a rights issue of 1:5, and you presently hold 100 shares, you will be eligible to receive an additional only 20 shares.
The record date
When a rights issue is announced, the company also announces a record date for the issue. The record date is the date on which the rights issue will take effect, and, the shareholders on that date are entitled to the rights.
Cum rights
After the announcement of the rights but before the record date, the shares are referred to as cum- rights.
Ex rights
After the record date, when the rights has been given effect, the shares become ex- rights.

Tax liability on rights issue
Rights are allotted at a discount to existing investors. The difference between sale proceeds and total cost of shares bought (original+ rights issue) is taken as your capital gains. Long term capital gains (for shares held for more than 1 year) are exempted from tax and short term capital gains are taxed at a rate of 15%. Suppose you buy 100 shares of ABC Limited at a total cost of Rs. 20000 on April 01, 2007. On December 31, 2007, the company declares a right issue in the ratio of 1:2 at a price of Rs. 150. Thus if you subscribe fully to rights issue, you are allotted additional 50 shares at a cost of Rs. 7500 (50*150). If you sell all your 150 shares on say January 31, 2007 at a price of Rs. 210 per share, your total sale proceeds will be Rs. 31500 (210*150). Your short term capital gains is Rs. 14000 (31500-27500) and you will have to pay tax of Rs. 2100 (14000*15/100).

Example
Company ABC Limited has huge cash reserves amounting to Rs. 5 crore in its balance sheet. The share capital of the company is Rs. 1 crore divided into 10 lakh shares of Rs. 10 each. The company decides to buy back a part of its capital amounting to 2 lakh shares. Thus the remaining share capital of the company will reduce to 8 lakh shares and company will distribute a part of its cash reserves to shareholders from whom shares have been bought back.

Impact of the buy back
Buy back indicates that the company has surplus funds that it would like to distribute to its shareholders rather than investing the same for future growth. Thus it indicates that the financials of the company are on sound footing. Post buy back, the earnings of the company will have to be divided by reduced number of shares.

Earnings Per Share (EPS) = Net profit / number of shares
Since the profits remain the same but the number of shares has decreased, the EPS will rise. Thus sometimes buy back is also used by the company to shore up the market price of the shares.

Eligibility
Shareholders whose name figures as per the books of the company on record date are eligible for buy back. However if you are holding shares in physical form and still not transferred these shares in your name, you can still participate in buy back by tendering transfer deed as well as buy back offer form to the company or its registrar.

Should you opt for it?
Following factors are worth consideration when a company comes out with a buy back offer:

• The attractiveness of price at which buy back offer is made. If it is near current market price and there are expectations that market price may rise, there may not be good reason to opt for it.
• The future growth potential of the company. If the company is poised for good growth, its share price may go up further as compared to buy back price.
• If the intrinsic value or book value of shares is more than the buy back stock price, there are possibilities that the share price may go up further and it may not be an appropriate time to exit.

A stock broker is an entity which is a registered member of a stock exchange and is also registered with SEBI. A stock broker acts as a facilitator or a bridge between stock exchanges and investors to carry out their transactions. He is in fact an interface between stock exchange and investors who want to buy or sell shares. Thus if you want to buy say 100 shares of say Reliance Industries Limited, listed on say National Stock Exchange, you would have to approach a stock broker registered in NSE to carry out your transactions.

Stock brokers are well regulated in Indian securities market. Stock brokers are governed and regulated under SEBI Act, 1992, Securities Contracts (Regulation) Act, 1956, Securities and Exchange Board of India [SEBI (Stock brokers and Sub brokers) Rules and Regulations, 1992], Rules, Regulations and Bye laws of stock exchange of which he is a member as well as various directives of SEBI and stock exchange issued from time to time. They are also subject to disciplinary action by SEBI and stock exchanges in case of default in complying with requirements.

Today the growing competition and a large number of options available to investors have drastically reduced the brokerage rates. You can chose a stock broker based on the amount of brokerage charged for your transactions, other services offered by him such as depository participant services, research etc. The background of the broker is an important parameter for selection. You may keep these factors into account before starting your trading through a particular stock broker.

Before start of trading with a stock broker, you are required to submit your details such as name, address, proof of address, proof of identity etc. Such documents may include copies of your passport, ration card, PAN, voter identity card. This process of verifying identity is called ‘Know Your Client’ or ‘Client Due Diligence’ and is a mandatory requirement. You also need to execute a broker client agreement specifying terms and conditions and other details. You are also entitled to a document called Risk Disclosure Document, which would give you an idea about the risks associated with trading in securities market. Go through all these documents carefully. As per the requirement of SEBI, all investors who want to trade in securities market need to have PAN allotted by the Income Tax department and submit a copy of PAN card to his broker.

Today as investment opportunities are varied and complex, it takes time to convince private investors about your business potential and profitability. A number of private investment consultancy firms have therefore come into play to act as a mediator between private investors and business firms needing incubation funding to start with. Many of these firms work on commission and profit sharing proposition and also charge a project management fees to take care of the initial expenses. If you are in need of funding and investment for your business, it makes sense to get in touch with one. In fact you can get in touch with a lot many sharing your dream and business proposition all at the same time.

Private investors have been responsible for a large number of successful projects see light of the day with their risk taking capacity, business acumen and ability to find out winners from the lot. Private investor funding is the best thing to happen in the field of innovation and enterprise, success coupled with professional satisfaction of seeing your idea taking a concrete shape and making a difference in lives of so many people.

If you are looking for private investor funding, make sure that your business proposal makes sense and has a potential to make money. You have to do your homework well in advance. You need to give the message that you know what you are talking about ad can take it forward with investment made by private equity funds. Remember you are dealing with busy people who have to listen to guys like you day in day out. These people have a wealth of experience and can see through your proposition in no time. Make sure that you are different from the lot.

Private investor funding is a way to make sure that your dream does not remain a pipe-dream rather it becomes a dream for a large number of persons sharing your dream. If you are serious to make a mark in your chosen field, private equity is there to take care of your financial needs and requirements.

Let us have a look at a few of the investment strategies followed by informed investors to make a killing out of the market:

Value investing:
This is by far the most traditional and yet the most effective way of making money in stock markets. Irrespective of the market conditions, there will be certain companies, which have great potential of rise and yet undiscovered by the market. There will be certain stocks, which are not part of momentum and are a great value buy. You need to do a bit of research in identifying such scrips and make an investment. The idea is to identify their potential early, make an investment and remain committed. You are bound to make a killing at an appropriate time. The objective of the strategy is long term growth as most of the purchases are at a relatively lower levels.

Long-short strategy
The strategy involves identifying scrips which have risen too much and too short as well as scrips which are lagging behind without any reason and which have a great upside potential. Thus you may go short in scrips which you think are not worth the price and are expected to fall. So that when these scrips actually fall, you buy back and make a profit of the difference At the same time, you go long in scrips which have the potential to catch the market fancy. This way you will be making contra positions in certain scrips or sectors and make a profit if the market moves as per your expectations. This strategy is used world over by hedge funds and other high net worth investors who spend time and money on research about companies and sectors to identify the targets for investment.

Contra investing
This is the reverse of herd mentality. Thus when everyone is buying as if there is no tomorrow, you sell as you expect that big correction is round the corner and when market is in doldrums as everyone wants to get out of the market, you go long as markets are expected to stage a smart rally. This way you make your own path irrespective of what people around you are saying and make a profit from the market. The strategy is quite popular amongst informed traders and those who keep a keen eye on the market.

Who can nominate?
Nomination can be made only by individuals holding beneficiary accounts either singly or jointly. Non-individuals including society, trust, body corporate, karta of Hindu Undivided Family, holder of power of attorney cannot nominate.

In the event of death of the sole holder, how the successors should claim the securities lying in the demat account?

The claimant should submit to the concerned DP an application Transmission Request Form (TRF) along with the following supporting documents

1. In case of death of sole holder where the sole holder has appointed a nominee
Notarised copy of the death certificate
2. In case of death of the sole holder, where the sole holder has not appointed a nominee
Notarised copy of the death certificate
Any one of the below mentioned documents -
Succession certificate
Copy of probated will
Letter of Administration
The DP, after ensuring that the application is genuine, will transfer securities to the account of the claimant