The act of purchasing and selling stocks on the market via a registered trading account is known as equity trading or stock trading. To grasp what equities trading is all about, you must first understand the concept of stocks. Equities are ownership shares in a corporation. And for listed companies, these shares can be freely traded on the NSE and the BSE. The BSE now has over 4,700 listed stocks. Although they go by several names—equity, stock, share, etc.—they all refer to the same thing.
The term “equity trading” must be understood concerning the stock market, equity market, or share market, as they are all commonly referred to. Equities are traded in the equity market, often known as the share or stock market. A stock market is a meeting place for buyers and sellers of equities. Equity trading today happens in a virtual setting, as opposed to earlier periods when it took place in the ring utilizing the open cry system.
Importance of trading in equity
Below are the two most important things to consider while trading on equities.
- Fund/Tax Factor- When a company borrows money through different avenues, it has to cope with the interest assessed on the amount provided in the fund. And this sum is given and deducted from taxes. The borrowing corporation can thus benefit from a reduction in the total cost of the loan they have taken on because it must pay the lower tax.
- Lower cost of debt servicing- Businesses might benefit from lower debt servicing costs by using equity trading. Additionally, it can generate additional sources by acquiring new assets that boost revenue.
Different types of equity
Financial leverage is also known as trading on equity because businesses exploit their equity power to collect debts from their creditors. There are two primary types of trading on equity, and we’ve covered both of them briefly below.
- Trading on thick equity- Thick equity refers to a company’s equity capital being significantly higher than its debt. As an illustration, consider a company with a revenue of approximately Rs. 8,205,505,100 and debt financing of only Rs. 1,641,107,060. The company is therefore trading on substantial equity.
- Trading on thin equity:- This type of equity scenario happens when a company’s equity capital is significantly less than its loan capital. XYZ Company, for instance, has an equity debt of Rs. 4,102,752,550. Only Rs. 2,051,065,175 is available as equity capital for the same company. The XYZ company is then operating with low equity.
How to start the process of equity trading?
Here is a look at how to begin the process of trading in stocks. You will be able to understand the concept much better as a result.
- A Demat account and a trading account are required to begin equities trading. Although shares get maintained in a Demat account, equity trading gets carried out in a trading account.
- To start trading stocks, you must first activate your trading account. Ideally, you should also activate your online trading so that you may make all of your orders online.
- When you issue a buy order, the trading system checks to see if the price matches what the sellers are willing to offer. A deal happens in that situation.
- Your buy order will always get filled, even if your pricing is not the most competitive. It guarantees that only the best order is delivered, regardless of your order.
- Prices change when you place an order in stock trading. The activity around stocks has an impact on their costs. Usually, it comes down to supply and demand.
- You can close the trade the same day if you engage in intraday equity trading. If not, it gets transferred to your Demat account, and you must sell using that account.
- Even if you put in a sell order, it will be executed at the most excellent price possible if there are willing buyers.
Benefits of trading in equity
- Ownership- You become a shareholder or member of a company when you invest money in the trading of equity in that company. If said in simple words, you gain ownership of the business and have control over it. As an investor, you would benefit from a portion of the profits made by the company. You would also get granted voting privileges within the business.
- Increased Returns- Compared to other investment choices like bank FDs, trading in equity can produce substantial rewards quickly. Now the equity market is recovering from the Covid-19 setback of 2020 and hitting all-time highs. Future gains from the stock market may be unmatched if you make wise stock selections and use a sound trading approach.
- Dividend- One advantage of trading in equity is that it provides returns in two forms: dividend income and capital appreciation. A company’s transfer of excess profits to its shareholders is known as a dividend. For the investor, dividend income effectively represents additional revenue.
- Minimal liability- When it comes to businesses, there is always a chance of difficulties, such as bankruptcy or operating losses. However, as a shareholder or investor, your responsibility is limited to the exact amount of your investment—not a penny more.
- Liquidity- In general, equity is referred to as liquid assets. Ownership of the shares is relatively easily transferable. On NSE and BSE, there are often a lot of transactions every day. It indicates that several buyers and sellers are active in the market at any particular time of day.
- Reduces inflation while promoting wealth growth- One of the main obstacles to wealth accumulation is inflation. The optimum ROI rate would be more than the inflation rate. Wealth erosion would occur in the opposite scenario. You can invest in and trade stocks to generate a high return rate that may significantly outpace inflation. Equities enable long-term wealth building in this way. Stock indices have consistently surpassed return on debt and other investment instruments over the long term, as seen by history.
Reading all of these, do you wish to trade equity successfully? You can engage with a few stock brokers. On your behalf, they can place or carry out orders. So, to assist you in making stock market investments, here is a list of some of the best stock brokers in India.
Stock brokers for equity trading in India
The notion of discount broking was first introduced by Zerodha in 2010. It is among the huge discounts and best brokers for trading in India. All thanks to its cutting-edge technology, excellent trading tools, and three-way trading platform. No wonder it is regarded as the best trading platform in India.
Zerodha offers fantastic advantages like minimal brokerage, great exposure, and 100% web-based broker. It makes them one of the top 10 stock brokers in India. The finest discount broker and third-largest stock broker in India are two of Zerodha’s central reputations. In addition to algo trading software, Zerodha will also provide you with some top-notch trading apps.
Charges for Zerodha brokerage
- Free equities delivery: Zero brokerage on equity delivery investments (NSE, BSE).
- 20 intraday equities and F&O trades: On intraday equity, currency, and commodity trades across NSE, BSE, and MCX, 20 or 0.03% (whichever is lesser) per executed order.
The bargain broker with the fastest growth in India is Upstox. For high-volume traders seeking high margins, inexpensive brokerages, and reputable trading platforms, Upstox is the ideal option.
Regardless of the trade volume, you pay a brokerage fee of Rs. 20 to engage in equity trading, intraday, F&O, and currency. Delivery of the stock is free.
Upstox Brokerage Charges
- Charges Rs.20 per order for equity delivery
- For equity intraday, it charges Rs.20 per executed order
- Rs.20 per order for futures [Equity, Currency, and commodity]
- Rs.20 per order for options [Equity, Currency, and commodity]
In Mumbai, Sharekhan is one of the biggest full-service broking firms, with 1.4 million customers or more. Sharekhan gets frequently listed as one of India’s top 10 stock brokers.
In more than 550 cities around India, it has established its franchises and branches. With the help of their web-based trading website and more than 1800 offices, they provide top-notch brokerage services. In Oman and the UAE, the company is recognized as the top stock broker internationally.
- It charges a minimum of 10 paise per share for equity delivery.
- For Equity Intraday, charges a minimum 5 paise per share.
Since its founding in 1987, Angel One, formerly Angel Broking, has been one of India’s leading full-service brokerage houses and stock brokers. It claims cutting-edge, user-friendly trading platforms. It also offers its clients professional advice services.
The Angel Group is a recognized participant in the Bombay Stock Exchange, National Stock Exchange, NCDEX, and MCX, two commodity markets. It was additionally listed with CDSL as a Depository Participant. It can become the best helping hand while equity trading or intraday.
Angel one charges
- It charges Rs.0 for equity delivery.
- It charges Rs.20 per trade for equity intraday.
- For futures [equity, commodity, currency], levies Rs.20 per trade.
After reading them all, you must now have a solid understanding of everything related to equity trading. Without a doubt, equity has excellent potential to provide rewards. But you must invest wisely; let facts rule your decisions rather than feelings. The long game entails minimizing risks while achieving the desired return.