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Today’s electronic mediums have made stock purchases considerably simpler than in the past. On the other hand, a few specifics, like the timing and method of delivery, remain unchanged in the Indian stock market.
Intraday trading and equities delivery are two of the many subsets of the trading industry. Read on to find out what equity delivery is and its benefits.
What is equity delivery?
The share market offers a variety of trading options, one of which is equity delivery. When you acquire shares via an equity delivery, you retain them in your dematerialized account for a while.
In delivery trading, you can retain the shares for an unlimited period after acquiring them. When you purchase shares, you legally own them. This means you may sell them whenever you make a profit.
To sum up, after you get your shares in delivery trading, you may keep holding on to them for as long as you prefer. You can hold onto the stocks you buy until the right time comes to sell them for a profit because you fully own them.
Intraday investing, on the other hand, is when you trade stocks within a single trading day. You are not required to pay the entire amount of the share price in intraday trading. However, you’ll need enough money in your account to buy delivery shares, as margins aren’t provided.
What is delivery trading?
In delivery trading, an investor buys a certain amount of shares, and the time they hold on to their shares in these transactions is entirely up to them. Delivery trading is the term used for this procedure. An investor cannot purchase and sell shares on the same trading day using delivery trading.
Advantages of equity delivery
There are some unique benefits to trading equity delivery. Let’s check out a few of them.
- Equity delivery trading is safer than intraday trading due to the reduced likelihood of short-term swings.
- Since stocks often generate wealth gradually, the essence of equity delivery—that it is for the long term—is favourable to long-term wealth building.
- Equity delivery adds to your wealth and allows you to take out a loan later against shares held in your dematerialized account, also known as equity delivery.
- Accepting the distribution of shares makes you an investor in the business. Shareholders like you seek to benefit from any dividends or bonus shares announced by the corporation. Moreover, you may also use the rights issue. A rights issue is an opportunity for the company to distribute more shares to current shareholders.
- You cannot take advantage of the popular stocks and industry trends that equity delivery offers via short-term intraday trading.
Delivery trading rules
- Purchasing and retaining:
Investing in stocks with the hope that their value will increase over time is the main objective of delivery trading. After that, they decide how many shares to buy at the present market price. The investor becomes the legal owner of the shares when their dematerialized account is credited to the shares when the order is fulfilled.
- Settlement:
The settlement procedure starts after executing the order. Shares get moved from the seller’s account to the purchaser’s account with the support of the exchange, which receives notice of the trade from the buyer’s brokerage. The transaction is completed and the shares are transferred one business day later, at T+1.
- Duration of ownership and holding:
When an investor purchases shares, they become the legal owner of those shares and are free to keep them for as long as they choose. The objective is to gain from any future increase in value.
- Brokerage fees and capital:
The capital needed to purchase the shares must be adequate for the investor. Remember, there are costs associated with carrying out the transactions, such as brokerage charges.
Intraday vs delivery trading
| Aspect | Intraday trading | Delivery trading |
| Duration | Completed within a single trading day. | There are no time restrictions; you can hold shares indefinitely. |
| Square Off | Shares are automatically squared off before the market closes, if not done manually. | There is no automatic square-off; shares can be retained as long as the investor prefers. |
| Approach | It requires constant monitoring throughout the day. | More relaxed; no need for minute-by-minute tracking. |
| Suitability | Great for anyone who can actively follow the market and is looking for immediate profits. | It is better for those with patience and a focus on long-term investment |
| Analysis Type | Relies on technical indicators and short-term events. | Based on fundamental analysis of long-term company prospects. |
Conclusion
For those who want to keep an eye on their investments over the long haul, delivery trading is a pillar of investing in stocks. However, investors must grasp the distinctions between intraday trading and delivery trading so they may choose the technique that suits their financial objectives, risk appetite, and investing strategy.
FAQs
The choice between intraday and delivery trading depends on individual preferences and investment goals. Intraday trading is suitable for those who seek quick profits and can actively monitor the market, while delivery trading is better for investors looking for long-term growth and less frequent trading. Intraday trading allows for leveraging capital and short selling, but it requires constant attention and carries higher risks due to market volatility. Delivery trading, on the other hand, involves owning the shares outright and benefits from long-term appreciation, dividends, and bonuses.
Free Equity Delivery refers to a brokerage plan where investors are not charged any commission for holding shares in the delivery segment. In the Indian context, this means that when you buy shares, they are delivered and deposited into your Demat account without incurring brokerage fees.
Yes, you can convert intraday positions to delivery in the Indian stock market. This conversion is done through your stockbroker’s website or mobile application. When converting from intraday to delivery, you must have sufficient funds to cover the full value of the shares, as delivery trades require 100% of the investment amount, unlike the partial margins used in intraday trading.
Delivery trading can be profitable, especially for long-term investors who benefit from the appreciation of share value over time. It allows investors to earn dividends and hold onto shares for an extended period, potentially leading to significant returns. However, profitability also depends on the choice of stocks, market conditions, and the investor’s strategy. Delivery trading is considered to have a lower risk compared to intraday trading and is more aligned with building wealth over time.
Delivery trading is generally considered safer than intraday trading because it reduces the risk of short-term market volatility. Investors have the flexibility to hold onto their shares and wait for a market recovery if the share price drops, which is not possible in intraday trading, where positions must be squared off the same day. Delivery trading allows for a more strategic and patient approach to investing, which can mitigate the risks associated with rapid market movements.