Equity delivery refers to the purchase and sale of shares in which the buyer takes ownership of the shares and holds them for more than one trading day. This type of trading involves actual transfer of shares, unlike intraday trading where shares are sold on the same day.
What Is Equity Delivery?
Equity delivery is a type of trading where investors buy shares and hold them for more than one trading day. In this method, ownership of the shares is transferred, and investors can benefit from potential long-term price appreciation.
In equity delivery trading, investors purchase shares with the intention of holding them for an extended period, typically beyond a single day. This strategy allows investors to take advantage of price fluctuations over time, potentially leading to capital gains.
Unlike intraday trading, where shares are bought and sold within the same day, equity delivery involves a commitment to long-term investment. Investors can also earn dividends if they hold shares during the dividend declaration period. This type of trading requires careful analysis of market trends and company performance, as investors aim to maximize their returns while managing risks associated with market volatility.
Equity Delivery Example
A great example of equity delivery is when an investor buys shares and holds them for more than one trading day. For instance, if an investor purchases 100 shares of a company at ₹500 each and holds them for several weeks, they own those shares outright.
In this example, the investor buys 100 shares of a company at ₹500, spending a total of ₹50,000. If the stock price rises to ₹600 after a few weeks, the investor can sell the shares for ₹60,000, making a profit of ₹10,000. During the holding period, the investor may also receive dividends if the company declares them.
Equity delivery trading emphasizes long-term investment strategies and requires careful market research to identify promising stocks. Investors analyze company performance, industry trends, and economic factors to make informed decisions, aiming to maximize their returns while managing risks effectively.
What Is T+2 Settlement?
T+2 settlement refers to a trading system where the settlement of a transaction occurs two business days after the trade date. This means that the transfer of securities and payment is completed within this two-day period, facilitating smoother trading operations.
In a T+2 settlement cycle, when a trade is executed on a Monday, the settlement will be completed by Wednesday. This system helps to reduce credit risk and enhances market liquidity by ensuring quicker settlement times compared to longer cycles. It is widely used in major global markets, including India and the United States. T+2 applies to various types of securities, such as stocks and bonds, making it essential for investors to be aware of the settlement process. Timely settlement ensures that buyers receive their purchased securities while sellers receive their payment efficiently, contributing to a more stable financial market environment.
What Is Equity Delivery Charges?
Equity delivery charges are fees incurred when an investor buys and holds shares of a company for more than one trading day. These charges typically include brokerage fees, transaction costs, and applicable taxes, which can vary based on the broker and trade value.
When an investor opts for equity delivery, several costs come into play. Brokerage fees are charged by the broker for executing the trade, and these fees can be a flat rate or a percentage of the transaction value. Additionally, transaction costs may include stamp duty and Securities Transaction Tax (STT), both of which are government-imposed charges. Investors should also consider other potential costs, such as demat account fees, which may apply for holding securities electronically.
Equity Delivery Time
Equity delivery time refers to the period it takes for shares to be transferred from the seller’s account to the buyer’s account after a trade is executed. Typically, this process occurs within two business days, ensuring a smooth transaction for both parties.
In equity trading, once a buyer places an order to purchase shares and the trade is executed, the delivery time starts. Under the T+2 settlement cycle, the actual transfer of ownership takes place two business days after the trade date. For example, if a trade occurs on a Monday, the shares will be delivered by Wednesday. This timeframe allows for the necessary verification and processing of the transaction, including the clearing of funds and the transfer of securities.
Advantages of Equity Delivery
One of the main advantages of equity delivery is the potential for long-term capital appreciation, allowing investors to benefit from price increases over time.
- Ownership of Shares: Equity delivery allows investors to own shares of a company outright. This ownership provides investors with voting rights and potential dividends, which are paid to shareholders based on company profits. Holding shares can also give investors a sense of belonging to the company’s growth journey.
- Potential for Dividends: When investors choose equity delivery, they can receive dividends declared by the company. Dividends are a portion of profits distributed to shareholders and can provide a steady income stream. This income can be reinvested to purchase more shares, enhancing overall returns.
- Long-Term Investment Strategy: Equity delivery supports a long-term investment strategy, allowing investors to withstand market fluctuations. By holding shares over an extended period, investors can take advantage of compounding returns, which can lead to potentially higher profits as the company grows and increases in value over time.
- Tax Benefits: Holding equity shares for more than a year can lead to lower tax rates on capital gains in many countries. Long-term capital gains are often taxed at a lower rate compared to short-term gains. This tax efficiency can significantly enhance net returns for investors.
- Reduced Trading Costs: Unlike frequent trading strategies, equity delivery involves fewer transactions, which can lower overall trading costs. Investors pay brokerage fees and transaction charges less frequently, allowing them to maximize profits over time. This approach also reduces the emotional stress associated with rapid buying and selling.
Equity Delivery vs Equity Intraday
The main difference between equity delivery and equity intraday trading lies in the holding period of the shares. Equity delivery involves purchasing shares with the intention of holding them for more than one trading day, while equity intraday trading entails buying and selling shares within the same day.
| Parameter | Equity Delivery | Equity Intraday |
| Holding Period | Shares are held for more than one trading day. | Shares are bought and sold within the same day. |
| Purpose | Aimed at long-term investment and capital growth. | Focused on short-term price fluctuations for quick profits. |
| Transaction Costs | Generally involves lower transaction frequency, reducing costs. | Higher transaction costs due to multiple trades in a single day. |
| Tax Implications | Long-term capital gains are taxed at a lower rate. | Short-term capital gains are taxed at a higher rate. |
| Market Volatility Impact | Less affected by daily market volatility; investors can hold through fluctuations. | Highly sensitive to market volatility; quick decisions are needed to capitalize on price changes. |
How to Buy Equity Delivery Shares
To buy equity delivery shares, investors need to follow a structured process that involves selecting a broker, researching stocks, and placing an order through a trading platform.
- Choose a Brokerage Firm: The first step is to select a brokerage firm like Alice Blue that offers equity delivery trading. Investors should compare various brokers based on factors like fees, trading platforms, customer service, and research resources. Choosing a reliable broker is crucial, as it will affect the overall trading experience and execution speed.
- Open a Demat and Trading Account: After selecting a broker, investors must open both a demat account and a trading account. The demat account holds the shares in electronic form, while the trading account is used to execute buy and sell orders. Completing the necessary documentation and KYC requirements is essential for account activation.
- Research Potential Stocks: Before purchasing shares, investors should conduct thorough research on potential stocks. This involves analysing company fundamentals, industry trends, and market conditions. Utilizing financial news, stock analysis tools and expert opinions can help investors make informed decisions based on their risk tolerance and investment goals.
- Place an Order: Once investors have identified the stocks they want to buy, they can place an order through the brokerage’s trading platform. They should select the type of order and specify the number of shares to purchase. It’s important to review the order details before confirming the transaction.
- Monitor the Investment: After buying equity delivery shares, investors should continuously monitor their investments. This involves keeping an eye on stock performance, market trends, and company news. Staying informed helps investors make timely decisions, such as holding for the long term or selling if conditions change.
What Is Equity Delivery In Stock Market?- Quick Summary
- Equity delivery refers to the purchase of shares where the investor takes ownership and holds them for more than one trading day, allowing for potential long-term capital appreciation and dividends.
- In equity delivery trading, investors buy shares with the intention of holding them over time, enabling them to benefit from price increases and dividends while requiring careful market analysis for informed decisions.
- An example of equity delivery involves buying shares of a company and holding them for an extended period, allowing for-profit realisation as the stock price rises and the possibility of receiving dividends.
- Equity delivery charges include brokerage fees, transaction costs, and applicable taxes, which vary based on the broker and the value of the trade, impacting overall profitability.
- Equity delivery time indicates the duration for shares to be transferred after a trade, typically occurring within two business days under the T+2 settlement cycle, ensuring efficient transactions.
- One fundamental advantage of equity delivery is the ownership of shares, allowing investors to participate in the company’s growth and receive potential dividends based on the company’s profits. This ownership provides a sense of engagement with the business’s long-term success.
- The main difference between equity delivery and equity intraday trading is the holding period, with equity delivery focusing on long-term investments while intraday trading aims for quick profits within the same day.
- To buy equity delivery shares, investors need to select a brokerage firm, open a demat and trading account, research potential stocks, place an order, and monitor their investments regularly for informed decision-making.
- Invest in the equity of the companies at just Rs 20 with Alice Blue.
What Is Equity Delivery Trading – FAQs
Equity delivery is a trading method where investors purchase shares and hold them for more than one trading day. This approach allows for ownership transfer and potential long-term capital appreciation.
Free equity delivery refers to a trading option offered by some brokers where investors can buy shares without paying brokerage fees for delivery trades. This can enhance overall profitability by reducing transaction costs.
Equity delivery typically takes two business days for settlement under the T+2 system. This means that the shares will be transferred to the buyer’s account two days after the trade is executed.
Margins for equity delivery depend on the brokerage firm and the specific stock being traded. Generally, brokers may require a certain percentage of the total trade value as a margin to execute the order.
Charges in equity delivery include brokerage fees, transaction costs, and applicable taxes. These expenses can vary depending on the brokerage firm, the size of the trade, and any promotional offers that may be available to investors.
Yes, it is possible to convert delivery positions to intraday trades before the market closes on the same day. This requires closing the delivery position and executing an intraday trade instead.
Yes, investors can sell shares held in delivery at any time after the purchase. However, selling must be done in accordance with market regulations and can be subject to various fees.
Delivery trading can be profitable if investors choose the right stocks and hold them long enough to benefit from price appreciation and dividends. However, it also involves market risks that should be managed carefully.
We hope that you are clear about the topic. But there is more to learn and explore when it comes to the stock market, commodity and hence we bring you the important topics and areas that you should know:
