What is Equity Delivery? How it works & Features

Equity delivery is a fundamental concept in the world of stock market investing. Whether you are an experienced  investor or just starting, it is crucial to have a clear understanding of this topic and its implications in online share trading.

Equity delivery refers to the purchase or sale of shares in the stock market with the intention of holding them for a more extended period, typically beyond the trading day. In an equity delivery transaction, the buyer receives the shares in their demat account, and the seller delivers the shares from their demat account. In online share trading  the actual transfer of ownership is considered a long-term investment strategy.

How does equity delivery work?

Equity delivery is a straightforward and transparent process that involves the purchase and sale of shares in the stock market with the intention of holding them for an extended period. Let's delve into the mechanics of how it works.

Purchase of Shares

To initiate an equity delivery transaction, an investor places a buy order for a specific number of shares of a particular company. The order can be placed through a broker, an online trading platform, or directly with the company's registrar or transfer agent. Once the order is executed, the shares are allocated to the buyer.

Ownership Transfer

The ownership of shares is transferred from the seller's demat account to the buyer's demat account. The demat account serves as a digital repository for holding shares and facilitates the seamless transfer of ownership.

Settlement Process

The  transactions of shares follow a T+2 settlement cycle, which means that the shares are delivered to the buyer's demat account within two trading days from the date of the transaction. On the settlement day, the buyer's demat account is credited with the purchased shares, and the seller's demat account is debited with the same quantity of shares.

Holding Period

Unlike intraday trading, where shares are bought and sold within the same trading day, equity delivery involves holding the shares for a longer duration. Investors typically aim to capitalise on long-term price appreciation and potential dividends associated with the shares they hold.

Dividends and Corporate Actions

As an owner of shares are entitled to receive dividends declared by the company. Additionally as a shareholder, you may also participate in corporate actions such as rights issues, bonus issues, or stock splits.

Selling Shares

When an investor decides to sell the shares held through equity delivery, they can place a sell order through a broker or online trading platform. The shares will be debited from their demat account and transferred to the buyer's demat account upon completion of the transaction.

Long-Term Capital Gains Tax

One of the advantages of stocks delivery is the potential for long-term capital gains tax benefits. If shares are held for more than one year, the resulting capital gains are classified as long-term and may be subject to a lower tax rate compared to short-term capital gains.

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Key Features of Equity Delivery

It is a long-term investment strategy, and offers several key features that distinguish it from other trading approaches. Understanding these features can help investors make informed decisions. Here are some of the key features of equity delivery

Ownership and Transfer of Shares 

Equity delivery involves the actual ownership and transfer of shares. When you purchase shares through stocks delivery, you become a partial owner of the company. The shares are held in your demat account, and you have the right to participate in company decisions through voting rights.

Long-Term Investment

Equity delivery is primarily geared towards long-term investment objectives. Unlike intraday trading or short-term speculation, where shares are bought and sold within a single trading day, stock delivery involves holding shares for an extended period. Investors aim to benefit from the potential growth and value appreciation of the shares over time.

Potential for Dividends

As a shareholder, you are entitled to receive dividends declared by the company. This can provide an additional source of income for investors, particularly if they invest in dividend-paying companies.

Voting Rights

Holding shares  grants you voting rights in company matters. Shareholders can participate in annual general meetings (AGMs) and vote on significant corporate decisions, such as mergers and acquisitions, changes to the company's articles of association, and the appointment of directors. This allows shareholders to have a say in the company's direction and governance.

Conclusion

Equity delivery is a vital component of stock market investing, providing investors with the opportunity to become long-term shareholders in companies they believe in. It involves the purchase and sale of shares with the intention of holding them beyond the trading day, allowing investors to benefit from potential price appreciation, dividends, and voting rights. 

Unlike intraday trading, stock delivery focuses on the fundamental analysis of companies and their long-term prospects rather than short-term market fluctuations. Now You can experience the power of seamless stocks delivery trading with blinkX advanced trading platform.