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Basics of Capital Markets

Equity represents ownership in a company acquired through contribution of capital, which is required to set up or run a business. This capital is raised through issue of shares to the public or a group of private persons, where each share represents a proportion of the stake on the assets and profits of the company. These shares are either bought directly from the company through an offer, or traded (bought and sold) on the stock exchanges


Despite the risk involved, investment in equities is known to offer investors high returns in the long run. Equities investment not only helps an individual in wealth creation over time, but also builds the nation’s capital in the process.

For the investor, equity offers numerous benefits such as:

  • Entitlement to company’s profits:The holder of a company’s equity or shares is entitled to a share of profit in the company. This share of profit is received through dividends.
  • Profit through value enhancement: A shareholder can also make profits by selling the shares on the stock exchange at a price higher than the purchase price.
  • High Returns: Even though equity is a risky asset, returns on investments in equity are known to beat inflation in the long-term, and thus help in wealth creation.
  • Tax Benefits: Investment in equities offers several tax benefits. For example, under the recently introduced Rajiv Gandhi Equity Savings Scheme, investment upto Rs. 50000/- in the equity of listed companies is tax deductible. Also, the dividend received by an investor through equity shares is exempt in the hands of the investor.


You can either invest in equity for the long-term, or trade daily with the intention to profit from market fluctuations. The prerequisite is a demat account with a Depository and Trading account with a recognized broker.IIFL offers both the services: of a depository participant as well as a recognized and a well-established broker in India.

Commodities Trading involves trading in every kind of movable property other than actionable claims, money and securities. These include gold, silver and other metals and select agricultural commodities such as grains, pulses, spices, oils and oilseeds. It usually involves trading of commodities futures contracts.


Commodities prices are relatively less affected by factors influencing the stock markets, and hence, offer an excellent avenue of portfolio diversification for investors. Along with diversification and predictability, an investor can also take advantage of the leverage and the liquidity that the market offers

Commodities' trading offers the following benefits:-

  • Diversification of portfolio: Commodity trading offers a means for diversification of portfolio for the investors, by offering exposure to an asset class different from stock markets instruments such as equities, mutual funds and bonds.
  • Predictability: Commodities pricing is largely based on the demand and supply fundamentals for the commodity, and hence, becomes relatively easier to predict.
  • Leverage: Trading in commodities futures involves use of leverage through margin which is maintained with the broker. Hence, large transactions can be executed with lesser amount of cash in hand.
  • Liquidity: Futures contracts in commonly traded commodities such as gold, silver, crude oil and grains offer a high level of liquidity in the market.

Currency trading refers to the exchange of currencies, where the difference in the currency value is used to make profits. It is a huge market, with traded value being higher than equities. A few years ago, currency trading was restricted to large banks and corporations. Now, advancement in technology has equipped retail investors with easy access to currency trading and even individual investors consider it to be an attractive avenue for investment.


Currency market has a huge level of liquidity and is open for 24 hours per day. It is relatively resilient to factors affecting stock markets and hence, can act as an effective means to expand one’s portfolio. However, currency trading is risky in nature, and requires careful planning and thorough risk-benefit analysis

The advantages that currency trading offers are:-

  • High Liquidity: Owing to the large amount of trades conducted per day, the currency markets offer high level of liquidity. Hence, one can enter and exit the market with relative ease
  • Lower costs: Owing to low level of spreads, lesser brokerage is involved in the transactions, which reduces the cost for the trader.
  • Leverage: Trading in currencies futures involves use of leverage through margin which is maintained with the broker. Hence, large transactions can be executed with lesser amount of cash in hand.
  • Round-the-clock trading: The currency market is open 24 hours a day, and thus, offers the convenience to transact any time of the day.

A derivative is an instrument which derives its value from the underlying asset. The asset can be equity, a commodity, a currency or even an index. Derivatives are usually in the form of a contract, where the buyer is under an obligation to buy or seller is under an obligation to sell the underlying asset at a specified price on a specified date in the future.

Why invest in derivatives?

Derivatives have traditionally been used by businesses to hedge against different types of risks, and have been in existence for decades. With well-planned strategies based on a thorough study of the markets, individual investors and traders can earn handsome returns through derivatives trading.

Investment in derivatives has the following advantages:-

  • Hedging against risk: Derivatives are used for hedging against risk in price fluctuations of the underlying asset. Since the buy (or sell) price at delivery is specified in advance, the buyer/seller can protect his investment from deviation in price trend.
  • Lower costs: The investor needs to pay only for the contract, which is usually much less than the price of the underlying asset, thus offering a benefit of lower costs.
  • Leverage: Trading in derivatives involves use of leverage through margin that is maintained with the broker. Hence, lesser cash is required to be paid at the time of trade.

How to invest in derivatives?

Derivatives are generally short-term trading instruments, and are traded on the exchanges. Similar to stocks, to buy or sell derivatives on the exchange, you need to place orders with your broker, who then executes the order on your behalf.

IPO is a means for the company to get listed on the stock exchange, and allow its shares to be traded on the exchange. When a company offers its equity to the public for the first time, it is called "Initial Public Offering (IPO)". If the company offers its shares to the public, but not for the first time, then it is called a follow-on public offer (FPO).

How do I apply to an IPO?

One needs to collect the subscription form available at collection centres, syndicate members and bankers to the issue. After filling the form, it is to be submitted to the collection centres or the collecting bankers to the issue. Shares are allotted through bidding process and deposited in the demat account of the investor.

As the name suggests, fixed-income instruments provide fixed income to the investor. The payout may be received at fixed, regular intervals or at the end of a specified time period. On maturity of the instrument, the principal is repaid to the investor. Examples of fixed-income instruments are bonds, debentures, fixed deposits, Public Provident Fund, Post Office deposits and so on.

Why invest in fixed-income instruments?

Fixed-income instruments have long been used by people in India to park their savings and earn returns through interest rates higher than that offered by a savings account.

The benefits offered by fixed-income instruments are:-

  • Steady income streams: Fixed-income instruments providing regular interest payments act as a steady stream of income for the investor.
  • Low risk: Fixed-income instruments are less risky, and hence are ideal investment avenues for people with low risk appetite.
  • Less volatility: Owing to the low level of volatility associated with them, fixed-income instrument are ideal for requirements that are critical in nature or have a low time horizon.
  • Predictability: Since the interest rate and structure of payments is fixed in advance, returns of fixed-income instruments are easier to predict.
  • Enhanced savings: Fixed-income instruments offer higher interest rate than offered in savings account, thus acting as more efficient avenues for savings.
  • Tax benefits: Investments in instruments such as PPF, Post Office Deposits, 5-year Fixed Deposits are exempt from tax upto a certain limit, and thus enable the investor to save tax on them.

How do I invest in fixed-income instruments?

Depending on the type of instrument, you can buy them directly from the issuer, or from the capital market. Some instruments such as bonds and debentures are traded on exchange, and you can buy them through a broker. You have to approach the issuer such as banks, post-offices to invest in instruments such as fixed deposits, PPF and Post Office Deposit schemes.

  • What are the different types of accounts that can be opened with IIFL?

  • In which segments I can open an account with IIFL?

  • Who can open a Trading and Demat account with IIFL?

    • Individual
      • Resident Individuals
      • NRIs
      • Minors (Only Demat account. As sole holder)
    • Non-individual
  • What are the documents required for opening the account?

  • How can I open an account with IIFL?

  • How will I come to know if the form is rejected?

  • How will I be intimated regarding the account opening?

  • I have not received the welcome letter. What should I do?

  • How can I unfreeze the account if I have not received the welcome letter?

  • What is the brokerage charged?

  • What is the process to activate the derivatives segment?

  1. Go to exe
  2. Login with your User ID and password
  3. Click on ‘My Account’
  4. Click ‘Form Formats’
  5. Select the form of Change in Account details
  6. Fill the same and submit it to the nearest branch
  • What are the modes through which I can transfer funds?

    • Online transfer through TT web
    • Online transfer through IMPS, NEFT or RTGS (Real Time Gross Settlement)
    • Cheque
    • DD/ Pay order
  • When will the funds get credited to my account if I transfer online?

  • When will the funds get credited in my account if payment is made through cheque/DD?

  • What is the process if I have made the payment through unregistered bank?

  • Can I change the mobile number/email id online?

    1. Yes. You can change the mobile number / Email ID online
    2. Please follow the below mentioned process to change the mobile number/email id online:
  • How can I change my mobile number in account ?

  • How can I change my email id in account ?

  • How can I change my address & GSTIN No. in account?

  • What documents can I submit as address proof?

  • Where on the indiainfoline website can I find the Change in account details form?

  • How can i change my signature in trading account ?

  • Where online I can check my signature?

  • How can I change PAN card number?

  • How can I change my name on account of marriage?

  • How can I change my name on account of father's name change or any other reason?

  • What is the process to change the name in case of Body-corporate?

  • Can I appoint minor as nominee?

  • What is the process to receive the password via email?

  • I am not authorized to receive password via SMS. What is the process to enable the same?

  • What is the procedure for deactivating physical contract notes?

  • What is Running Account Authorization?

  • When can I give RAA?

  • What is the validity period of RAA?

  • Is giving RAA to the Broker a mandatory requirement?

  • How will the settlement be made in my account, in case I have not provided RAA to the Broker?

  • What is 'Periodicity of Settlement'?

  • Can I ask for payout during the Periodicity of Settlement or can the settlement happen only as per the discretion of the Broker?

  • When will be the first settlement required to be made in case I have provided RAA?

  • How will I come to know about the settlement?

  • What should I do in case of any disputes?

  • What is the process to update RAA after the account is opened?

  • Which modifications are processed by accepting soft (scanned) copies?

  • Is there any confirmation sent after updating the requested details?

  • What does linking or registering bank/demat account signify?

  • Can I give instruction to add/ change my bank account with my trading account?

  • Can I link or register multiple bank/demat account with my trading account?

  • What if I wish to receive funds in one bank account and pay from multiple bank accounts?

  • How many savings bank account I can link/register with my trading account?

  • How can I link/add new savings bank account?

  • How can I change the bank account?

  • How can I update IFSC code?

  • Can I submit the change in bank details form to change or add the bank to my Relationship Manager?

  • Can I delete the bank account from the trading account?

  • How I can change/add the new demat account?

  • Can I update the IFSC code on call?

  • Can I submit the same form to change/add the bank for Equity and Commodity?

  • Earlier my bank account number was of 4digits and now it is converted in Core Banking. So I need to update my new bank account number with my trading account.

  • I want to update the MICR number.

  • To whom can i authorize to handle my account ?

  • What authority does the person incorporates ?

  • How can i authorize person for my trading account ?

  • Can I update International number in my Individual Resident Account ?

  • What is Settlement Cycle?

    • In trading, there is a fixed time period for the settlement of trades as per terms of contract. This time period is termed as Settlement Cycle.
    • For equity trades: Currently all trades are settled on T+2 settlement cycle. 
    • For derivatives/currency/commodities: Currently all trades are being mark to market at the closing price of contract and mark to market requirement are settled at T+1.
    • For arriving at the settlement day all intervening holidays, which include bank holidays, NSE holidays, Saturdays and Sundays are excluded.
  • What are the types of settlements?

  • What is the meaning of Rolling/Normal Settlement?

  • What is the meaning of Trade-to-Trade Settlement?

  • What is the meaning of Auction?

  • What is the process of Auction at Exchange level?

  • Can I sell the shares in NSE which are bought in BSE?

  • What are Auction Settlement Charges ?

  • What is Commodity Market?

    Products used for commerce that are traded on a separate, authorized commodities exchange. Commodities include agricultural products and natural resources such as timber, oil and metals. Commodities are the basis for futures contracts traded on these exchanges. It is classified as follows:
  • Who regulates the commodity market?

  • What are the timings for trading in Commodity?

  • In which Exchange trading in Commodity is allowed?

  • How does settlement take place in Commodity?

  • Is delivery of commodities available? Is it compulsory?

  • What is the link to access my account?

  • How can I update my mobile number/email ID?

  • Can I update mobile number/email id online?

  • Can I change the mobile number/email id through email or soft copy basis?

  • How can I change my address in trading account?

  • Whether TT password for equity and commodity account will be different?

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