When you place an order to buy stocks, you need to have adequate funds at your disposal. Lack of funds can be a roadblock in order placement, and in the worst-case scenario, you may have to let go of the order.
Not anymore! Kotak Securities brings to you a smart way of stock market investing - Normal Orders. So, what is it and the benefits? Let’s find out.
It is a facility where you can buy stocks by paying a fraction of the total order amount. You can pay the remaining balance in T+2* days. This is the default order type while making any equity purchase. Let’s understand it with a numerical example. For instance, you want to buy 100 stocks of a company at Rs. 1500 each under simple cash trade.
Under normal circumstances, you need to pay Rs. 1.5 lakhs upfront to execute the order.
However, under Normal Orders, you need to pay only a fraction of the amount (20%), i.e., Rs. 30,000 while placing the order. You get T+2 days to arrange and pay the remaining amount, which in this case is Rs. 1.2 lakhs. Note that the upfront margin payment of 20% differs from stock to stock.
This is a significant benefit under Normal Orders. You can execute the order even if you don’t have the full amount required at your disposal. There can be occasions when you may run short of cash. However, Normal Orders give you the necessary time to arrange for the shortfall.
The upfront margin under Normal Orders is as little as 20% of the total amount, which is light on your pocket. Once you pay the upfront margin, you have T+2 days at your disposal to arrange the remaining amount.
If you cannot pay the remaining amount in T+2 days, you need to pay interest daily from T+3rd day. However, you need to pay interest only on the outstanding amount, and not on the entire amount, as per your chosen plan. In the meantime, Kotak Securities will initiate pledging of your shares which need to be confirmed by T+7th day. If you don’t pay the full amount by T+2, you can still continue holding the shares till T+7. If you pledge your shares by T+7th day, you can continue holding it further till T+60 days.
On the other hand, if you don’t confirm the pledge, your position will get squared off on the next working day.
*T+2 days: The on which the stock is purchased is referred to as ‘T’ day. T+2 settlement means 2 working days after T day. Which means, if a stock is bought on Wednesday, the payment has to be made by Friday. Similarly, if the stock is bought on Friday, the payment has to be made by Tuesday.
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