Functions of Depository Participants (DPs)

The entities which act as intermediaries in clearing and settlement process between investors and Depositories are called Depository Participants (DPs). A depository Participant (DP) gets registered with a depository as per SEBI regulations for offering DP services.

An investor can open a dematerialized account with a Depository Participant of his choice. When he buys securities they will get credited to his account electronically. Similarly when he sells out securities they will automatically be debited from his dematerialized account. Depositories maintain the data of security holders across all depository participants. In the clearing and settlement process when Clearing Corporation (CC) suggests the depository to debit or credit a particular De-mat account, it gives instructions to the concerned DP to do so. A depository issues instructions to DPs as per the inputs from CC and DPs act as specified by their depositories on securities pay-in/pay-out day.

For clear understanding of settlement process please read the article ‘Trade Clearing and Settlements in Stock Markets’.

List of Authorized Depository Participants and Custodians at National Securities Depository Ltd (NSDL): Read more

August 9, 2008 | Filed Under Stocks | Leave a Comment

What is Impact Cost - Effect of Impact cost on Mutual funds (Index Funds)

Impact cost can be defined as by how much large a buy/sell order increases/decreases price of scrip. This cost has more relevance to liquidity and has more effect on mutual funds (index funds especially).

For example a fund house wants to buy 1 lakh shares of XYZ Company. But at any point in time on the offer side of the order book there may not be a single for 1 lakh quantity. As you know the offer orders are placed in ascending order of prices.

Usually fund houses don’t disclose the order quantity at a time. Otherwise the price shoots up immediately. Assume the sell orders are in this range.

500   500.10
1000 500.40
2000 501.00
   …
   …

At this point in time there is a seller willing to sell shares at Rs500.10. So the ideal price for the fund house to buy is 500.10. But it can’t get all the shares that it wants to buy at this price. Impact cost is calculated as the percentage of the difference of cost of acquisition and ideal price. Let’s say it got all the required shares at an average cost of Rs508.00 then the impact cost
in this case is Read more

August 8, 2008 | Filed Under Stocks | Leave a Comment

Indian Markets Next week August 11th 2008

Sensex breached 15,000 level, but as expected it didn’t lead to continue the winning streak. Markets consolidated in the last two sessions of the week, closing at 15168.

Inflation rate has crossed 12%. The wholesale price index showed 12.01% for the week ended July 26th. It’s the highest value since May 1994. Fuel, power, light and lubricants rose 0.2 percent due to higher prices of furnace oil. It’s expected to come down little bit for the next week.

Crude oil spot prices came down below $120 a barrel. On expectations of slow down in the consumption of fuel by US the prices have come down. Earlier the three day losing streak had come to an end after Turkey announced that a pipeline carrying crude to the Mediterranean from Azerbaijan may remain shut for two weeks following an explosion on August 5. But again it was trading at $116 a barrel on Friday in the morning session.

As a whole the global market scenario hasn’t changed much. Markets may not sustain their recent highs due to profit booking in the coming week. But all the bad factors have almost been accounted. It would be a buying opportunity again if markets fall out again.

August 8, 2008 | Filed Under Market Analysis | Leave a Comment

Indian Markets Next week August 4th 2008

The political stability is not a concern now for the Indian markets. Inflation has surged again. After decreasing to 11.89% a week earlier, it again increased to 11.98% for the week ended July 19th. This increase can be attributed to the higher prices of some food and manufactured products.

The talk of the previous week was sudden increase in repo rate by the Reserve Bank of India to contain inflation. The RBI announced a 0.5 percentage hike in the repo rate to 9 percent which is at a seven-year high and lifted the cash reserve ratio (CRR) by 0.25% to 9 per cent. RBI also lowered its GDP growth forecast for the country to 8 per cent for 2009, down from between 8 per cent and 8.5 per cent previously. Markets slumped as soon as the news was out. But markets gain the momentum at the end of the week even when the global markets were down.

On August 1st the crude oil last traded at $125.10. It increased on the account of Israeli announcement on Iran’s nuclear program. Though some important support levels are crossed it’s still interesting to watch the markets this week. This whole year would be a gestation period as some global factors still need to come in good.

August 3, 2008 | Filed Under Market Outlook | Leave a Comment

Clearing Agencies at NSE, BSE

NSE and BSE have different clearing agencies to settle trades executed on their exchanges.

The Clearing House: The clearing and settlement activities of trades on BSE are taken care by BOI (Bank Of India) Share Holding. BOI Share Holding is a subsidiary company of BSE and Bank Of India. It’s also known as Clearing Hose.

The Clearing Corporation: The National Securities Clearing Corporation Limited (NSCCL) takes care about clearing and settlement activities of NSE. NSCCL is a fully owned subsidiary of National Stock Exchange (NSE), India. Simply it’s called as Clearing Corporation. Read more

August 3, 2008 | Filed Under Stocks | Leave a Comment

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