Buying stocks has now been much easier than before, especially after all the electronic and digital mediums that have made it possible. However, a few things are still the same such as when and how the stocks are delivered. There are a few segments in trading, such as intraday trading and equity delivery. In this article, we will cover What Equity delivery is and why you should know about this.
In the stock market, when you buy or sell, the positions are not squared off immediately or on the same day. The transaction needs to be followed by a T+2 settlement cycle to be completed. So, if you are buying stock on Monday, it will be delivered to your DEMAT account on Wednesday.
When the stocks are delivered to your DEMAT account, you can sell or contain them without any bounds. This is known as Equity delivery. In this situation, you are the complete owner of these stocks, and you contain them for a day, week, month, years or even decades; you are not bounded by any restriction on how long to contain or the period under which you need to sell the stocks.
However, In India, there is no proposition of selling the shares before actually owning them. So, you can hold on to it as long as your will, but you have to own them first. This is different from the short position and a little simpler than it.
In the stock market, as mentioned earlier, the transaction is not squared off as soon as the stocks are bought or on the same day. The transaction has to go through a settlement cycle called as T+2 cycle. In general, a T+2 Settlement cycle is not anything complex; it only means the transaction to be completed needs T+2 days. i.e., Trading Day + 2 Working Days.
Suppose you have bought a load of stocks on Monday; the stocks are not deposited directly to your DEMAT account. It will take T+2 Days, which is Monday + 2 Working days = Wednesday.
During the T+2 settlement period, you can still not sell your stock in advance (Short Position) as they are not delivered to you and nor do you own them. Once the stocks are delivered, you can hold them as long as you wish and sell them according to your will. This is called Equity delivery.
When you are buying a stock or shares, you buy them through brokerage or brokerage behind a mobile/digital application. So, you might notice when you trade or transact; a certain commission is deducted; this is how they earn.
When you buy stocks through such brokerages and after the settlement period, you receive the Equity delivery to your DEMAT account; these brokerages deduct a certain commission. However, there are a few digital applications that don’t charge you in such trades when you are a premium member of that agency.
Equity delivery can be helpful in several ways; with equity deliveries, the marketers get a few benefits such as -
Equity delivery buys you time as long as you are holding them; there are no restrictions. You are keeping them as per your willingness. Suppose you have bought a share by an XYZ company, and once they are delivered to your DEMAT account, you can hold them for as long as you wish.
If you hold shares and stocks for a longer time, you earn money in the form of dividends. Technically, we know holding the position will be beneficial as the price may rise one day or another and alongside earn extra money in the form of dividends. So, if you are holding 1000 shares of an XYZ company and the company offers Rs. 10 dividends on each share. You technically earn Rs. 10,000 in total.
The concept of capital appreciation is no complex; when you earn profits over a period of time, using the difference between the buying price and selling price of a stock is called capital appreciation.
For example, if you are buying 1000 shares at Rs. 500/share would be a total of 5,00,000 lacks of investment. While you have made this investment and you own the shares and over a period, the price increases to Rs. 700/Share, and you sell it. The total profit would be Rs. 2,00,000. The math is simple, and the concept is called capital appreciation.
The Equity Delivery is holding your shares in the DEMAT account as long as you wish without any bounds. So, you can sell or hold them for days, weeks, months, years, or decades as long as you wish. The shares are delivered to your DEMAT account only after the settlement period of T+2 days. Once they are delivered, you can either hold them or sell them.
In the Equity delivery, the stocks/shares are delivered after the settlement period (Trading Day+2 Working days), but in intraday trading, the stock is traded the same day they are bought (The transaction is completed on the same day.)
Free equity delivery trading plan offers brokerage free trading in the Equity Delivery segment.
Every equity delivery transaction has to go through a settlement cycle called as T+2 cycle, .i.e, Trading Day + 2 Working days before the stocks are delivered to their DEMAT account.