Blog

Backstop: Types, Benefits, How It Works

Raising money is a crucial part of a business, but raising the required funds is not always easy. There may be cases when investors may not subscribe to all the shares offered to them, or the expected source of financing may fall short. In such cases, a backstop helps them in arranging the required amount.

In today’s blog post, we will give you an overview of backstop, how it works, its types, along with an example.

What is a backstop?

A backstop is a financial agreement in which an individual, organisation or institution agrees to provide support if a target funding activity falls short of its target. The support is provided through purchasing shares, providing funds, etc. It also helps a transaction proceed when the source of funding is insufficient. The parties involved in this process are known as backstop providers. Based on the agreement, the provider may be required to contribute funds, purchase securities or fulfil other financial commitments if stated conditions are met.

This is generally useful for companies when they need certainty about raising capital. This can also be used in rights issues, mergers, and acquisitions, etc., including other transactions where the requirement of funds is necessary. But this does not guarantee that every transaction will be successful.

Types of Backstop

The different types of backstop are as follows:

Financial Backstop: In this type of backstop, they provide only financial assistance through funds when the original funding arrangement is insufficient. This generally helps companies that are in the expansion phase and ned additional funds when the primary financial source falls short.
Underwriting Backstop: The underwriter backstop is commonly associated with share issues and other securities. According to this agreement, the backstop agrees to buy the securities such as shares, etc. that remain unsubscribed. However, this agreement contains certain charges and has a risk of holding securities that could decline in value.
Right Issue: A right issue backstop allows an existing shareholder to purchase additional shares in proportion to their holding, according to specific terms and conditions. But in this case, not every shareholder chooses to participate; however, it can help companies reduce the risk of falling short of their fundraising objective.
Debt Backstop: This agreement intends to provide financial support if existing sources of debt funding become insufficient. It can be useful for managing financial uncertainties, especially during acquisitions and large capital expenditure projects.
Liquidity Backstop: This backstop helps a company access cash when it faces a temporary shortage of cash to meet its expenses. Liquidity backstop helps organisations meet their near-term obligations without impacting their operations.

Key Features of Backstop

The key features of backstop are as follows:

Financial Safety: Backstop offers an additional layer of financial support that covers the funding shortfall when specific conditions are met.
Defined Agreement: To provide support, a predefined agreement is entered into by the institution that needs financial support and the backstop provider.
Reduce Uncertainty: Companies can work in an environment of greater confidence in meeting their fundraising targets if the investor does not subscribe to the entire issue.
Include Additional Charges: The backstop providers may charge additional fees in the form of a commitment fee to provide financial assistance.

How Does a Backstop Work

The backstop works in the following manner:

Identifying the Requirement of Funds: The company’s first step is to identify the need for capital for activities such as business expansion, debt repayment, or acquisition, etc.
Signing a Backstop Agreement: The next step is for the company to agree on a financial instrument, investor, etc. The agreement between the company and the backstop provides specifications for the amount of support, applicable fees, timelines, and conditions.
Start the Fund Raising Process: Initially, the company proceeds with its original fundraising plan, including issuing shares, going for a rights issue, etc.
Identification of Shortfall: After the required fundraising period ends, the company calculates whether it has raised the required amount or has a shortfall of funds.
Going with Backstop: If the agreement conditions are satisfied, the backstop will provide the shortfall of funds. This process may involve purchasing unsubscribed shares, providing additional funds, etc.
Completing the Transaction: Because of additional support by the backstoppers, the company may be able to meet its target funding and can proceed with planned activities.

Example of Backstop

Let’s understand the backstop through an example.

There is a company named ABC Limited that wants to raise 100 crore in order to establish another manufacturing unit. For this, the company decided to go for a rights issue. The company expects its shareholders who already hold shares to subscribe to the shares offered to them; however, there may be certain shareholders who do not participate in this rights issue.

To reduce this uncertainty, the company enters into a backstop agreement with a financial institution that agrees to subscribe to the shares if the fundraising target is not met. Now let’s see how the fundraising works.

Particulars	Amount
Total Target of Fundraising	INR 100 Crore
Amount Subscribed by the Existing Shareholders	INR 80 Crore
Unfunded Amount	INR 20 Crore
Amount Subscribed by Backstop Institution	INR 20 Crore
Total Raised Fund	INR 100 Crore

Hence, with the backstop, the company successfully raised INR 100 Crore.

Benefits of Backstop

The key benefits of a backstop are as follows:

Certainty in Funding: The key benefit of a backstop is that it provides greater confidence about fund availability. The companies can plan their business activities with they have a backup plan.
Reducing Risk: There are times when companies are unable to raise the full amount that they expect from investors. It can help the company cover the remaining amount and reduce the risk of falling short of funds.
Building Investor Confidence: The commitments by the backstop may reassure investors that a company has an arrangement in place to address a potential funding shortfall.

Limitations of Backstop

The key limitations of a backstop are as follows:

Additional Cost: A backstop provider may charge various types of fees such as commitment fees, underwriting fees, and other charges, etc. These types of expenses can increase the overall cost of raising capital.
Do Not Guarantee Success: A backstop only provides required funding at the time of shortfall; however, it does not guarantee profitability and success of the business. The other risks, such as operational and financial risk, remain the same.
Restrictions: The agreement between the backstop and the company might contain certain conditions under which the agreement comes into effect.

Difference between Backstop vs Underwriters

The key differences between backstop and underwriters are as follows:

Particulars	Backstop	Underwriters
Overview	It is an agreement that covers funding shortfalls and provides financial assistance to companies.	Underwriters are financial institution that manages the issuance and distribution of securities.
Objective	Its key objective is to provide additional certainty that a specific funding target can be met.	This facilitates the issuance and sale of securities to investors.
Fees	It involves fees such as a commitment fee or other charges.	This may involve fees including underwriting fees or a spread on the securities issued.
Application	This is generally applicable when a specified funding shortfall.	This is a continuous process during the issuance of securities.

Tax Consideration for Backstop

The tax treatment for different parties is as follows:

Party	Tax Treatment
Backstop Provider	This fee is generally taxable as business income under the applicable rules.
On acquisition of unsubscribed shares	Acquired shares are generally treated as capital assets, and on subsequent sale, applicable capital gains tax may apply.
Issuing Company	They raised the funds through the share offering, which includes the subscribed amount provided by the backstop, and it is generally not treated as income.
Exercising rights by existing shareholders	Subscribing shares through a rights issue does not generate any capital gain. It is applicable only when the shares are sold.

Conclusion

In conclusion, a backstop is a financial safety net that allows a company to manage a shortfall of funds in important financial transactions. This involves rights issues, securities offerings, etc. In such cases, there may be uncertainties related to the risk of falling short of the intended target. A backstop helps the company raise the shortfall amount. However, for their subscription, they charge fees, including additional costs, contractual conditions, etc. This is an important financial tool for the company; understanding how it works allows an investor to make informed investment decisions.

S.NO.	Check Out These Interesting Posts You Might Enjoy!
1	What is Commodity Valuation?
2	What is Auction Market?
3	What is MIS in Share Market?
4	What is Right Issue of Shares: Meaning, Examples, Features
5	What is Earnings Per Share (EPS)?

Frequently Asked Questions (FAQs)

What is the meaning of backstop?
A backstop is an agreement between the financial institution and a company in which it covers the funding shortfall when its initial fundraising process does not raise enough money. In such a case, the financial institution acts as a backup plan to raise money.
Name the different types of backstops?
The different types of backstops include financial backstops, underwriting backstops, debt backstops, etc.
Is there any fee charged by the backstop?
Yes, the backstop provider charges a fee in the form of a backstop fee or commitment fee to provide financial assistance.
When does the backstop agreement expire?
The backstop agreement generally expires after a specific validity period, or it can be voluntarily terminated by either party depending on the agreement conditions.
Who provides the backstop?
The backstop is provided by investment banks, financial institutions, institutional investors, shareholders, etc.

October 31, 2026

What Is TTM in Stock Market? Meaning & Formula

Looking solely at a company’s past profits is not enough before purchasing its shares. It is also essential to understand how the company has performed over the last few months. This is where TTM comes in. It helps you gain a better understanding of a company’s earnings, TTM EPS, and P/E ratio. Let’s explore what TTM is and how you can view it on Screener.

What Is TTM in Stock Market?

Suppose you are considering buying shares in a company. You might look at its annual report, but by then, the company’s latest quarterly results may have already been released. In such a case, the old data will not provide an accurate picture of its current earnings. This is where TTM comes in.

TTM full form in share market is “Trailing Twelve Months.” It looks at a company’s earnings over the preceding 12 consecutive months. For example, if results are available up to June 2026, the TTM period would include the four quarters from July 2025 to June 2026.

In TTM, “trailing” refers to looking back at a past period. The timeframe does not begin on a fixed calendar date; rather, it is determined based on the company’s most recently available financial results.

In India, the financial year runs from April to March, but the TTM period is not restricted to this cycle. For instance, when the results for the June quarter are released, the TTM data might cover the period from July to June.

How Does TTM Work in the Indian Stock Market?

The easiest way to understand TTM is to look at a company’s results from the last four quarters combined. In India, companies release their quarterly financial results on the NSE and BSE. Using these results, investors can estimate a company’s earnings over the most recent 12-month period.

Step 1: Look at the company’s latest quarterly results.

First, examine the company’s most recently announced results. For instance, suppose the company has released its results up to the quarter ending June 2026.

Step 2: Gather data for the last four quarters.

If you want to calculate the TTM for Net Profit, you need to take the net profit figures from the last four quarters.

Quarter	Net Profit
September 2025	₹80 crore
December 2025	₹100 crore
March 2026	₹120 crore
June 2026	₹140 crore

Step 3: Add the figures for all four quarters.

₹80 crore + ₹100 crore + ₹120 crore + ₹140 crore = ₹440 crore

In this example, the company’s TTM Net Profit would be ₹440 crore.

Step 4: Update the TTM when new results are released.

Suppose that upon the release of the September 2026 results, the company’s net profit is ₹150 crore. You would then remove the ₹80 crore from September 2025 and include the ₹150 crore from September 2026.

New TTM Net Profit = ₹100 crore + ₹120 crore + ₹140 crore + ₹150 crore = ₹510 crore.

In this way, the TTM period advances with each new quarter. Keep in mind that the TTM calculation should use comparable figures for the relevant metric, and the calculation must be based on the company’s published results.

How to Calculate TTM in Stock Market

When you’re trying to figure out TTM (Trailing Twelve Months), the biggest thing is simply getting your numbers from the correct timeline. If you want to check annual sales or profit against recent results, you can pick either of the two ways mentioned here.

Method 1: Using Quarterly Results

If a company has released all four quarters, calculating TTM is easy just sum up the data from every quarter.

Formula: TTM = Q1 + Q2 + Q3 + Q4

This method is useful for figures such as Sales and Net Profit. Data for all quarters must be based on the same accounting basis.

Method 2: Using Annual and YTD Numbers

If you’ve got the full figures for last financial year along with the Year-to-Date (YTD) data for this one, you can run this simple formula:

TTM = Previous FY + Current YTD – Previous YTD

Particular	Sales
Previous financial year	₹900 crore
Current year YTD	₹520 crore
Previous year matching YTD	₹450 crore
TTM Sales	₹970 crore

Calculation: ₹900 + ₹520 − ₹450 = ₹970 crore.

In this way, the sales for the first six months of the previous financial year are removed, and the sales for the first six months of the current financial year are included.

What Is TTM EPS? Meaning, Formula and Example

TTM EPS Meaning

When a company’s profit is growing, it is also important to know how much profit is being generated per share. This is where EPS or Earnings Per Share comes into play. When this is calculated based on the earnings from the previous 12 months, it is referred to as TTM EPS.

TTM EPS Formula

TTM EPS generally refers to the earnings per share over the trailing 12 months. Its calculation takes into account the company’s earnings and the weighted average number of shares for the corresponding period.

TTM EPS Example

Suppose a company’s profit for the last 12 months is ₹120 crore, and its weighted average number of shares is 10 crore.

Particular	Value
Profit for the last 12 months	₹120 crore
Weighted average shares	100 million
TTM EPS	₹12

In this example, the TTM EPS is ₹12. This means that over the past 12 months, the company has recorded earnings of ₹12 per share. This does not represent the dividend received by the shareholder.

How Is TTM Used to Calculate the P/E Ratio?

The fact that a share is priced at ₹500 does not, by itself, indicate whether it is expensive or cheap. To determine this, one must look at the price at which the company is trading relative to its earnings. The TTM P/E ratio is useful for this comparison. The NSE also defines the P/E ratio as the ratio of a share’s price to its earnings per share.

Example of TTM P/E Ratio

Suppose a company’s share is trading at ₹500 and its TTM EPS is ₹25.

P/E Ratio = Share Price / TTM EPS

₹500/₹25= 20

TTM vs Annual Results vs Quarterly Results

Comparison	TTM	Annual Results	Quarterly Results
Meaning	Financial data for the last 12 consecutive months	Data for the entire financial year	Data for one quarter that is, approximately 3 months.
Reporting period	The four most recent available quarters	April to March, the normal financial year in India	Such as April–June or July–September
Main purpose	Understanding the company’s recent financial performance	Reviewing full-year earnings and performance	Understanding recent changes and business performance
Update	It could change when the new quarterly results are released.	It is updated when new annual results are released.	Updated with the results of each new quarter
Example	July 2025–June 2026	April 2025–March 2026	April–June 2026
Limitation	A significant change occurring in a particular quarter might need to be investigated separately.	This does not include information on new quarterly results if they are released after the financial year.	In a seasonal business, a single quarter cannot provide an accurate picture of overall performance.

Advantages and Limitations of TTM

When looking at TTM (Trailing Twelve Months), it is important to understand one thing: while it helps in assessing a company’s earnings over the past 12 months, this figure alone is not enough to decide whether or not to buy the company’s shares.

Advantages of TTM

Helps in understanding recent financial performance: If a company’s profit was strong last year but has since declined, simply looking at the annual report might not reveal this shift. TTM (Trailing Twelve Months) data incorporates the most recent results.
Makes stock valuation a lot simpler: Whether a share costs ₹100 or ₹1,000, that price alone doesn’t show its true value. By checking the share price alongside TTM EPS (Earnings Per Share), you can easily see how the stock is performing against its actual earnings.
Avoids over-reliance on a single quarter: Sales can fluctuate significantly from one quarter to another. Looking at data for a full 12-month period helps investors avoid placing undue emphasis on the performance of any single quarter.
Enables comparison of company performance: By comparing the TTM sales and profits of two companies within the same sector, one can determine which business is generating higher earnings. However, factors such as the size of the companies and their respective accounting bases should also be considered.
Highlights shifts in earnings: If TTM profit is rising, it becomes easy to identify an improvement in the company’s earnings. One can then examine quarterly results to understand the specific reasons behind this growth.

Limitations of TTM

Past earnings do not guarantee future performance: TTM data reflects the last 12 months. If a company’s business is currently in decline, strong historical results will not provide an accurate picture of its future prospects.
Recent downturns may be masked: For instance, if a company earned a high profit in the early months of the year but saw its earnings drop over the last two quarters, the overall TTM profit might still appear robust.
One-time gains can distort results: If a company records a large profit from the sale of an asset, its TTM profit will increase. This does not necessarily mean that the company’s core, day-to-day business operations have improved.
Comparisons are not uniform across all sectors: Banks, IT companies, and FMCG firms have different business models and ways of generating earnings. Therefore, rather than directly comparing TTM (Trailing Twelve Months) figures across different industries, it is more useful to compare companies within the same sector.

Conclusion

A company’s TTM (Trailing Twelve Months) performance being strong can be a positive sign, but that alone is not enough to justify buying its shares. It is also essential to understand the sources of the company’s earnings and the changes taking place within its business. Ultimately, investment decisions should be based on an understanding of the data, rather than just looking at the figures themselves.

S.NO.	Check Out These Interesting Posts You Might Enjoy!
1	What is Commodity Valuation?
2	What is Auction Market?
3	What is MIS in Share Market?
4	What is Right Issue of Shares: Meaning, Examples, Features
5	What is Earnings Per Share (EPS)?

Frequently Asked Questions (FAQs)

What Is the Full Form of TTM in the Stock Market?
The full form of TTM is “Trailing Twelve Months.” It represents a company’s financial data for the preceding 12 consecutive months.
How Is TTM Calculated?
TTM is generally calculated by adding the relevant financial figures from the last four quarters.
What Does TTM EPS Mean?
TTM EPS indicates how much a company has earned per share over the last 12 months.
What Is TTM in Screener?
On Screener.in, TTM figures help in understanding a company’s recent sales, profit, and valuation.
Is TTM Better Than Annual Results?
TTM helps in understanding recent performance, whereas annual results provide information for the entire financial year. Both are useful.

October 31, 2026

Tax on Shares Received as Gifts: Rules for Investors

A gift of shares may cost the recipient nothing, but that doesn’t necessarily mean the tax question ends there. Imagine a father transferring shares worth ₹2 lakh to his daughter as a birthday gift. She hasn’t paid a single rupee for them, so does she owe any tax simply for receiving them? And what happens if she decides to sell those shares a few years later at a profit? The answers aren’t quite as straightforward as they might seem.

Under gift tax in India, shares received from a parent are generally exempt from tax at the time of receipt. However, selling those same shares later can bring capital gains tax into the picture. The original purchase price, the period for which the shares were held, and the circumstances of the gift can all affect the tax calculation. This blog explains the rules governing shares received as gifts, gift tax in India, when tax becomes payable, how gains are calculated, and what investors should know before transferring or selling gifted shares.

Are Gifted Shares Taxable? The Basic Principle

Receiving shares as a gift and selling them later are two different situations under tax law. For someone receiving gifted shares, the first question is whether tax becomes payable when the shares enter their demat account. The second is whether they will owe tax when those same shares are eventually sold for a profit. For example, suppose your father gifts you 100 shares that he bought for ₹200 each. You receive the shares without paying him anything. Since the gift comes from your father, it is generally exempt from tax at the time of receipt. Now, imagine you sell those shares later for ₹350 each.

You have made a profit, and that is where capital gains tax may come into the picture. The tax treatment of the gift and the tax on the eventual sale are two separate matters, each with its own rules. These are separate events, and understanding the difference can save investors from confusion when dealing with shares passed down by parents or other family members.

Here is how the distinction works:

When you receive the shares: The tax treatment depends on who gifted them, the value of the shares, and whether an exemption applies. Shares received from qualifying relatives are generally exempt from tax at the time of receipt.
When you sell the shares: Any profit from the sale may attract capital gains tax. The calculation generally considers the previous owner’s purchase cost rather than the market value on the date you received the shares.
Why both stages matter: An exemption when receiving a gift does not automatically make future profits tax-free. The original transfer and the eventual sale must be assessed separately.

Tax When You Receive Shares As A Gift?

A lot depends on who is sending the shares your way. In case your father has transferred equity shares worth ₹5 lakh in your demat account, then you are not taxed for simply having received them. Similarly, any kind of gifts from relatives as specified by the Income Tax Act, such as your spouse, parents, brothers, sisters, and others, are not subject to taxation.

However, in the case of gifts that have been received from a friend or someone else who is not related to you, then it becomes an entirely different scenario altogether. As per the provisions of section 56(2)(x) of the Income Tax Act, if the total fair market value of the gifts in a financial year is more than ₹50,000, the whole aggregate value is taxable as ‘income from other sources’.

There are exceptions, too. Shares received through a will or inheritance are generally exempt, as are qualifying gifts received on the occasion of your own marriage. Certain gifts from eligible institutions and other specified entities may also be exempt, depending on the conditions they meet.

Read Also: What is Angel Tax?

Tax When You Sell Gifted Shares

Selling gifted shares comes with its own tax rules. The original owner’s purchase cost generally carries over to the recipient, rather than resetting it to the market value on the date of the gift. The donor’s holding period also counts here, which can affect whether the profit is treated as a short-term or long-term capital gain.

For qualified listed equity shares, the holding period is generally 12 months for the gains to be classified as long-term. For transfers made on or after 23 July 2024, qualifying short-term gains are generally taxed at 20%, while qualifying long-term gains are generally taxed at 12.5% on gains exceeding the applicable annual threshold of ₹1.25 lakh. The actual rate and calculation depend on the security, transaction date and relevant tax provisions. Certain eligible shares acquired before 31 January 2018 may also qualify for the grandfathering provisions.

Tax for the Donor

Giving shares as a gift generally doesn’t mean the donor has to pay tax on shares at the time of transfer. There is one thing to watch out for, though. If you gift shares to your spouse or child, any income earned from them, including dividends and certain gains, can be clubbed with your own income under the applicable tax rules. So, even when the gift itself is exempt, the income it generates may still affect your tax liability.

Gifts to Different Recipients: A Quick Reference Table

Who receives the shares can make a difference to the tax treatment. This table gives a quick overview of what generally applies when you gift shares to family members or someone outside your family.

Recipient	Tax when receiving the gift	Clubbing risk
Spouse	Exempt	Yes
Minor child	Exempt	Yes
Adult child	Exempt	Generally no
Parents or siblings	Exempt	Generally no
Friend or non-relative	Taxable if the applicable gift threshold is exceeded	No, generally

How to Gift Shares: Step by Step

Transferring shares as a gift involves a few simple steps. Unlike inheritance tax, which concerns assets received through inheritance, gifting shares involves a direct transfer during the owner’s lifetime. Understanding the process can help you complete the transfer without unnecessary delays.

Check the recipient’s details: Get their demat account number and the relevant depository participant details.
Initiate the transfer: Use a Delivery Instruction Slip (DIS) or your depository’s online transfer facility, where available.
Check applicable charges: Confirm whether stamp duty and any depository or broker charges apply before completing the transfer, as these differ from the tax considerations associated with inheritance tax.

Reporting In Your ITR

When filing your Income Tax Return (ITR), report taxable gifts under the applicable income category and schedule, where required. If you sell gifted shares, calculate and report the resulting gains under the relevant Capital Gains schedule. Keep the donor’s original purchase records, transfer documents and other supporting details to establish the cost of acquisition and holding period. The types of taxes and reporting requirements depend on the nature of the transaction and the applicable ITR form.

Common Mistakes

A few minor errors while giving away shares might cause future tax-related problems. Here are a few tips that should be kept in mind before giving away or receiving shares.

Forgetting to maintain purchase details: Maintain purchase details of the donor for proper calculation of capital gains upon sale of the shares.
Forgetting clubbing provisions: Ensure that dividends or gains from shares given to a spouse or minor children may be clubbed with your income.
Not taking care of gift tax while receiving shares from friends: Don’t forget the ₹50,000 limit while receiving shares as gifts from friends.

S.NO.	Check Out These Interesting Posts You Might Enjoy!
1	Long-Term Capital Gain (LTCG) Tax on Mutual Funds
2	Tax on Gold Investment in India: Physical, Digital & SGB Explained
3	LTCG Tax on Mutual Funds – Rates & Taxation Explained
4	Tax-Free Bonds: Their Features, Benefits, and How to Invest
5	Why Do We Pay Taxes to the Government?

Frequently Asked Questions (FAQs)

I received shares from my father. Do I have to pay tax on shares?
Generally, no. Under gift tax in India, shares received from your father are exempt from tax at the time of receipt, regardless of their value.
A friend gifted me shares worth ₹1 lakh. Is that taxable?
Yes, generally, based on the type of tax, if the aggregate value of relevant gifts from non-relatives exceeds ₹50,000 in a financial year, the entire taxable value is subject to gift tax under Income from Other Sources.
How is the gain calculated when I sell gifted shares?
The gain is generally calculated using the original owner’s purchase cost, not the market value when you received the gifted shares. The applicable capital gains tax depends on the holding period and other relevant rules.
Does the person gifting the shares have to pay any tax?
Generally, no tax is payable on the gift transfer itself because the shares are gifted rather than sold. However, clubbing provisions may apply when gifting shares to a spouse or minor child, affecting the tax on share income.
How do I transfer shares to someone as a gift?
You can usually transfer shares through a Delivery Instruction Slip (DIS) or your depository’s online facility, subject to its requirements. Keep the gift deed, transfer records and purchase details and remember that types of taxes and applicable charges may differ depending on the transaction.

October 30, 2026

Stock Split vs Bonus Shares: A Practical Guide For Investors

Your shareholding suddenly doubles, but your overall investment value remains the same. So, what actually happened? This can take place because of corporate actions such as bonus shares and stock splits. Understanding the bonus shares meaning, the face value of shares, and stock splits overall can help you understand how these developments affect your holdings.

In this guide, we will explain the difference between bonus shares and stock splits, along with how to calculate bonus shares. We will also cover stock split calculations to help you understand how these changes affect your share quantity, share price, and overall investment value.

What Is A Stock Split?

When a company segregates its stock into multiple shares, effectively reducing the price of each share without changing the company’s market value, it is known as a stock split. Stock split calculation involves dividing existing shares into smaller units. For instance, when a cake is cut into smaller pieces, you end up with more pieces, but the total amount remains unchanged.

This can increase liquidity (the capacity to trade a stock with ease) and trading volume. However, a company’s value is not affected by a stock split; rather, it simply redistributes ownership into smaller, more affordable units.

Why Do Companies Split Their Stocks?

In a well-functioning market, a stock split does not affect a company’s total market value or an investor’s wealth. The individual ownership stakes, the fundamental value of a company and the total market capitalization are unaffected. A stock split changes the face value of shares without directly changing the overall investment value.

A stock split calculation helps investors understand how the number of shares and the price per share change after a split.

According to research, stock splits often lead to short-term abnormal returns, with companies experiencing an average 2%-4% increase in value around the split announcement. In other words, subsequent to a stock split announcement, the stock to be split is likely to be overpriced compared to its actual value.

What Are Bonus Shares?

Bonus shares meaning can be understood as when a company gives present shareholders free additional shares, depending on the number of shares they already hold. Bonus shares are generally supplied to reward investors, increase the number of shares available for trading and demonstrate confidence.

Bonus shares calculation helps investors understand how many additional shares they will receive based on their existing holdings.

Investors can learn how to calculate bonus shares by using the announced bonus ratio and their existing shareholding. Although these types of shares do not bring about a change in the shareholder’s investment value, they can make shares more reasonable by reducing the stock price after the issue. They are provided out of a company’s accumulated reserves, free reserves or retained profits.

Firms use bonus share issuance to make their shares more appealing to retail shareholders, to serve as a substitute for cash dividends, and/or to reflect the status of their financial standing. The basic formula for bonus shares calculation explains how bonus shares impact the number of issued shares by the firm. In simpler terms, firms distribute bonus shares to attract investments and reward shareholders.

Stock Split vs Bonus Shares: Side-by-Side Comparison

In order to clearly understand the distinction between stock split meaning and bonus issue, consider these differences based on the given parameters.

Parameter	Stock split	Bonus issue
Face value	Reduces proportionally to the split value	Stays unchanged
Number of shares	Increases	Increases
Share capital	Remains unaffected by the split	Increases because reserves are capital-funded.
Reserves	Remains the same (no capitalization of reserves)	Reduces as qualifying reserves (free reserves, securities premium) convert to share capital
Share price	Decreases in proportion to the split ratio.	Normally decreases in proportion to the bonus ratio.
Market cap	Normally remains unchanged after the split	Normally remains unchanged after the bonus issue.

A stock split or bonus issue affects the number of shares held and alters the price per share after the ex-date. An ex-date in this case is the first day on which the stock begins trading at its newly adjusted split price. But the value of the investment does not change immediately after that, assuming there have been no movements in the stock market.

It can have an effect on earnings per share and dividend per share, as the same earnings or dividends are now distributed across a different number of shares. Ownership and voting ratio of the company do not normally change.

A close analysis of bonus shares, stock splits, and face value of shares is quite helpful in comprehending these changes and calculating bonus shares or stock splits as well.

Getting to know how to calculate bonus shares helps investors estimate how many additional shares they may receive after a bonus issue.

Key Dates To Know

Investors need to know about some dates when a firm makes a stock split or bonus declaration. Announcement date is the date on which the company formally declares its corporate actions. The record date is the date on which the shareholder who will be eligible to get the benefit is recognized.

For bonus shares, the credit or allotment date is when the extra shares are allotted and credited to eligible investors’ demat accounts. These shares may take some days to appear, subject to the allotment and processing timelines. Once investors are aware of these dates, it can help them understand when they qualify and when they can expect the shares to appear in their accounts.

Tax Implications

In terms of tax considerations, bonus shares and stock splits vary; hence, investors must understand how each impacts the cost of acquisition and period of ownership. For bonus shares, the cost of acquisition is usually considered nil, and the holding period begins on the allotment date. However, in the case of a stock split, the original cost of acquisition is allocated to the higher number of shares available but with the same period of ownership. Upon disposal of the stocks, capital gains tax will be imposed based on the selling price and period of ownership.

Effect On Market Behavior

Stock splits, or stock bonuses, can influence the attitudes of the investor for a short while. The reduced price of the shares may make the stock seem cheap, hence more attractive to the investors. Nevertheless, such corporate moves cannot automatically improve the financial performance of the firm or generate any more value.

It is important for investors to look at many other things, like price adjustment and take into account components like the company’s earnings, financial health, and growth possibilities besides the stock price before investing.

Should You Buy A Stock Before A Split Or Bonus?

Long-term returns are subject to the company’s underlying business fundamentals, revenue growth and profit margins, not the number of shares it is divided into. Look for strong fundamentals, including the company’s debt levels, cash flow and return on equity.

Sometimes, announcements of splits or bonuses establish a psychological or liquidity boost, causing the stock price to rise prior to the record date because of increased retail participation. Nevertheless, this is speculative; prices can also scale down or sell the news once the action occurs.

Real-World Examples

Many renowned Indian companies have provided bonus shares or split their stocks. As an illustration, Infosys announced a two-for-one stock split in 2000, where it doubled the share count and reduced the face value from Rs.10 to Rs.5. In addition, Tata Consultancy Services announced a bonus share issuance in the ratio of 1:1 in 2018, where it issued one more share for every share held. Likewise, Reliance Industries has announced a bonus share issuance in the ratio of 1:1 in 2024. In a 1:1 bonus issuance, the share count is doubled while share prices become almost half of their previous price.

Common Myths

Two common misconceptions about stock splits and bonus shares are that receiving extra shares automatically increases an investor’s wealth and that a stock split indicates healthy company performance. In practice, bonus shares do not instantly increase the total value of your investment, as the share price usually adjusts after the bonus issue.

In the same manner, a stock split will make shares cheaper because of the reduction in the price per share, but this is not necessarily an indicator that the company is performing well financially. Investors need to analyze the earnings, financial position, and potential of the company instead of basing their analysis on bonuses or stock splits alone.

Read Also: What is Half Stock?

Conclusion

Stock splits and bonus shares increase the number of shares you hold, but they do not automatically increase your overall investment value. Understanding their differences, tax implications, and impact on share prices can help you make more informed investment decisions. Always evaluate a company’s financial health and growth prospects before investing. Download Pocketful for more market insights and visit the Updates section under any stock to stay informed about stock splits, bonus shares, and other important corporate announcements.

S.NO.	Check Out These Interesting Posts You Might Enjoy!
1	Cyclical vs Defensive Stocks: Key Differences
2	ROE vs Valuation: Understand the Difference
3	Growth Investing: Meaning, Strategies, Risks & Key Metrics
4	GTD Order Meaning: Full Form, Example & How It Works
5	What is Purchasing Power?

Frequently Asked Questions (FAQs)

Do I become richer when a company announces a stock split or bonus?
No, definitely not. A share split means that the number of shares that you own is increased by splitting the current stock holdings into smaller parts, whereas a stock bonus issue means that you will get more shares. The share price will be adjusted accordingly to maintain the same value of the portfolio.
What is the main difference between a stock split and a bonus issue?
A stock split entails increasing the number of outstanding shares by dividing them and decreasing their nominal value proportionally. On the other hand, a bonus issue includes granting additional shares to the shareholders from the equity reserves that are eligible for conversion to shares.
Do I need to buy the shares before a certain date to receive a split or bonus?
Yes. You must meet the company’s eligibility criteria, which are defined by the record date and applicable ex-date rules. In India, shares usually need to be bought before the ex-date to qualify. Before making a decision, it is important to look for the company’s official announcement and the applicable exchange dates.
How are split and bonus shares taxed when I sell them?
Tax on capital gains could be payable when one is selling bonus issue shares or split stocks. In the case of bonus shares, the acquisition cost is zero for shares allotted after 1 April 2001. In the case of split stocks, the initial purchase cost is spread to the additional number of shares issued as per the split ratio.
Is a split or bonus announcement a good reason to buy a stock?
Not on its own. A stock split or bonus issue is something that doesn’t automatically improve a company’s financial performance or increase the value of your investment. Consider the company’s profits, financial state, and potential for growth before you make an investment.

October 30, 2026

How to Sell Mutual Funds to Your Clients

When a client comes to invest in mutual funds, they often have several questions in mind such as which fund to choose, how much to invest, and what might happen if they incur a loss. As a mutual fund distributor, your role goes beyond merely selling funds; it also involves providing the right answers to these questions. Let’s explore how to engage with a client and help them make an informed investment decision.

Know Your Client Before Pitching a Mutual Fund

Before offering any mutual fund, sit with the client and ask simple questions to get what they’re looking for. Find out their reasons for investing, how much they earn, and when they’ll need the cash back. Getting these details upfront makes it clear what actually suits them.

Investment Goal: Find out why they want to save. Are they saving to buy a home, pay for their children’s school, or build a fund for retirement? When you know their main goal, picking the right option gets simple.
Investment Period: Find out their timeframe first. If they need cash back in just two or three years, walk them through short-term risks and exit penalties before pushing long-term options.
Risk Tolerance: Market dips don’t bother everyone, but some clients panic over any small drop. Have an honest chat about this early on so you don’t end up picking funds that stress them out.
Monthly Budget: Find out how much they can put away each month without stress. Don’t push a huge SIP on them right away; pick an amount they can stick with after taking care of their everyday expenses.
Existing Investments: If they already own mutual funds, take a look at what they have. They might not need another fund at all, or they might already own something that overlaps.
Need for Money: Find out if they might need quick cash in the near future. If that’s a chance, explain how long payouts take and break down any exit penalties or lock-in rules so there are no surprises.

How to Choose the Right Mutual Fund for Your Client

Once the client’s needs are understood, the next step is to select the right mutual fund. It is not enough to simply look at the returns a fund has generated; consider the following factors when making a selection:

Pick the Right Fund Type: Go with equity funds if your client is staying in for the long haul. For index tracking, look at index funds. Just line up their timeline and risk comfort before settling on any category.
Look Beyond Recent Returns: Don’t judge a scheme off just one good year. See how it held up against its benchmark over several years instead. And reminding them of past performance isn’t a promise of future gains.
Check the Riskometer: Always check the Riskometer first. If a client can’t stand big dips, don’t throw high-risk funds at them without making sure they get the downside.
Compare Expense Ratios: Fees vary across schemes. When you’re comparing two similar funds, check their expense ratios side by side. Show them why Direct plans cost less than Regular ones so they see where the money goes.
Know What the Fund Holds: You ought to know what stocks or bonds the fund actually owns. It makes it way easier to explain where their money is sitting and what might bump the returns up or down.
Check Exit Load and Lock-in: When explaining mutual funds to a client, their primary interest is often the potential returns. However, simply stating how much a fund has earned is not enough. The client must also be aware of the risks such as the possibility of a decline in value—and the costs associated with the investment.
Show What the Fund Has Actually Delivered: Present the fund’s returns to the client, but do not limit the data to a single year. Show performance over various timeframes and compare it against the relevant benchmark. This will give the client a clearer picture of how the fund has performed.
Talk About the Chance of Losing Money: If a client is new to mutual funds, show them what a market dip actually looks like. For instance, a ₹50,000 investment could temporarily slip down to ₹45,000. Ask them how they’d feel seeing that drop and check when they might need to withdraw their money.
Be Upfront About All Charges: Clients hate finding out about extra charges after they’ve already put money in. Walk them through the expense ratio and exit loads right at the start. When comparing Direct and Regular plans, lay out the cost difference clearly along with the support you offer.
Avoid Promising Fixed Returns: When clients ask how much their money will grow in a year, don’t throw out exact numbers. Tell them returns shift with market conditions and performance. Make it clear that while investments can grow, there is always a chance of losing money too.

How to Sell Mutual Funds Online

To sell mutual funds online in India, you must first complete the necessary certification and registration. Once this is done, you can explain various schemes to clients and assist them with investment transactions in compliance with the regulations.

Step 1: Clear the NISM Series V-A Test

You have to pass the NISM Series V-A Mutual Fund Distributors exam first. The test checks if you know your stuff when it comes to fund types, market risks, rules, and how selling works.

Step 2: Obtain Your AMFI Registration (ARN)

After passing the exam, apply for an ARN (AMFI Registration Number) through AMFI. You will need to submit the required documents and fulfill the registration criteria. You may begin your activities as a distributor only after receiving your ARN.

Step 3: Complete AMC Empanelment

Complete the necessary empanelment process with the Asset Management Companies (AMCs) whose schemes you intend to distribute. Each AMC may have its own specific procedure.

Step 4: Complete Client KYC

Check your client’s KYC before doing any trade. If it’s pending, get their paperwork completed first as per the rules.

Step 5: Suggest the Right Fund

Check your client’s target, investment timeline, and risk level before pointing them to a fund. Also, clearly show them the fund’s riskometer rating, expense fee, and exit rules.

Step 6: Execute the Transaction

Submit the transaction with the client’s consent. Ensure that the ARN and EUIN (where applicable) are correctly provided, and share the transaction confirmation with the client.

SEBI and AMFI Rules Every Distributor Must Follow

Besides guiding clients on investments, mutual fund distributors have to stay on top of their registration details and follow basic regulatory rules. There are a few key tasks you must complete on time to keep your practice running smoothly:

Maintain the validity of your ARN: Keep track of your ARN’s expiry date and ensure it is renewed on time. If an ARN expires, your distribution activities and commission-related operations may be adversely affected.
Provide accurate EUIN information: Whenever applicable, make sure you put down the right EUIN of the employee or relationship manager who actually talked to the client for each transaction. Entering wrong or partial details can quickly lead to compliance trouble.
Submit the Annual Declaration on time: Following AMFI rules, every ARN holder has to turn in a ‘Declaration of Self-Certification’ (DSC) right after the financial year wraps up. Be sure to file this within the given deadline, or any delay could hold up your commission payouts.
Complete the empanelment process with AMCs: Before distributing schemes offered by any AMC, ensure that you have fulfilled all their specific empanelment requirements. Simply holding an ARN does not automatically grant authorization to distribute schemes from all AMCs.

Conclusion

Finding clients isn’t the hardest part of selling mutual funds. What’s really tough is picking the right fund for each person. People almost never invest on day one, and no single fund works for everyone. So when you talk about a fund, don’t just share the upside. Be clear about the risks too. That way, clients can decide with confidence and won’t feel regret down the road.

S.NO.	Check Out These Interesting Posts You Might Enjoy!
1	Smart SIP: Meaning, How It Works, Benefits & Risks
2	Power SIP: Meaning, How It Works, Benefits & Risks
3	Mutual Fund Churning: Meaning, Causes, Risks & How to Avoid
4	Dividend Reinvestment Plan (DRIP): Meaning, Benefits & How It Works
5	What Is a Balanced Fund? Meaning, Benefits & Risks

Frequently Asked Questions (FAQs)

How can I start selling mutual funds in India?
You need to clear the NISM Series V-A exam first. After that, get your ARN number from AMFI and sign up with the fund houses you want to deal with.
How do I sell mutual funds online?
Pick a good online investment platform, explain the funds to your clients through it, and submit their orders once they agree.
Can I Sell Mutual Funds Anytime?
Open-ended funds generally offer a redemption facility; however, lock-in periods, exit loads, and specific scheme terms and conditions may apply.
How do I pick the right fund for a client?
Look at what they want to achieve, how many years they plan to stay invested, how much market drop they can handle, and what the fund charges as expense ratio.
Do Mutual Fund Distributors Earn Commission?
Yes, distributors can earn a commission in accordance with AMC policies on eligible investments made through ‘Regular’ plans.

October 29, 2026

Can Mutual Funds Give Negative Returns?

Mutual funds are a pretty popular choice for investors who are looking to grow their money using professional investment expertise. They offer a way to get into a whole range of different investments, like shares, bonds and other financial products. But, unfortunately, they don’t come with any guarantees – they don’t promise you’ll make a profit!
The question, Can Mutual Funds Give Negative Returns, is therefore important to understand before investing.

So, can mutual funds really give you a loss? Yes they can. Mutual fund investments can go down in value when the underlying stocks or bonds do poorly or when market conditions just aren’t good. The amount of the loss depends a bit on the fund’s investment strategy, the mix of stocks it holds, and how much risk it’s taking on overall.

Understanding why this happens is actually pretty useful for investors – it can help them make more informed decisions and not get spooked when the market gets a bit bumpy.

Can Mutual Funds Give You Negative Returns?

Yes, mutual funds can definitely generate negative returns over both the short and long term. The value of the fund – its Net Asset Value, or NAV – gets adjusted according to the market value of the stocks it holds in its portfolio.

If you put in ₹10,000 into a mutual fund and its value then fell by 10%, you’d be left with ₹9,000. That’s a loss of ₹1,000 – excluding any charges or taxes, of course.

Mutual fund losses can happen in lots of different places. Equity funds, for example, might fall if stock prices start going down. Debt funds might lose value because of changes in interest rates or defaults on loans, or because they’re having trouble selling their holdings. Hybrid funds might experience losses from the value of both their shares and their bonds.

The Association of Mutual Funds in India (AMFI) actually says that mutual fund schemes aren’t guaranteed-return investments – their values can go up or down depending on the market and how the underlying investments do.

Why Do Mutual Funds Give Negative Returns?

There are a whole bunch of factors that can cause a mutual fund to go down in value. And if you can understand these factors, you can get a better handle on the risks before you invest.

1. Stock Market Volatility – the ups and downs of the market

Equity mutual funds are all about investing in shares. So their performance is directly linked to how well the market is doing.

When the market drops because of worries about the economy, geopolitical events or weak company profits, the value of the shares in the fund can drop too. This can reduce the value of the fund as a whole and give you a negative return.

For example, say a fund has put a lot of its money into shares of banks. If the market thinks the banking sector is in trouble, the value of those shares will probably fall.

2. Interest Rate Changes

Interest-rate changes can really knock debt mutual funds for a loop. When interest rates go up, bonds that used to look pretty good may suddenly lose their appeal. Their value might even plummet, and that’s bad news for funds that hold onto them.

The impact varies depending on what kind of bonds are in the fund, when they’re set to expire and the fund-manager’s overall strategy. Funds that are super sensitive to changes in interest rates will probably see bigger price swings.

3. Credit Risk

Debt mutual funds often invest in securities issued by other companies and lenders. But if the borrower is having financial troubles or just can’t make payments on time, it can be a real problem for the fund. This is what’s known as credit risk. And funds that have invested in shakier borrowers will be in a tougher spot than those that play it safer.

If you’re investing in a debt fund, its a good idea to have a close look at the holdings and get a handle on the risks involved.

4. What Happens When The Underlying Investments Go South

A mutual fund’s performance is only as good as the investments it owns. And if those investments aren’t doing well, the fund probably won’t either. Let’s say you’ve got a tech-sector fund and all of a sudden tech companies are struggling – your fund will likely struggle right along with them.

Even if you spread your investments out across different sectors, there’s still no guarantee you’ll avoid every potential risk.

5. What Economic And Political Uncertainty Means For Your Mutual Fund

We all know that economic slowdowns , policy changes, inflation and global conflicts can really rattle the markets. They can affect investor confidence, business performance and the prices of assets. And if your mutual fund has invested in any of those affected securities, it may experience some pretty rough times ahead.

6. Watching Out For Investment Costs

Mutual funds have all sorts of expenses that come with managing the fund and keeping it running. Those costs get added right to the funds net asset value. Even if your investments are generating some decent returns, those costs can cut into your bottom line. And if the portfolio is performing poorly, the costs can just make things even worse.

Which Mutual Funds Can Give Negative Returns?

Different mutual fund categories have different risk profiles. However, no market-linked category is entirely free from the possibility of losses.

Mutual fund category	Why negative returns may occur
Equity funds	Falling share prices and weak corporate earnings
Small-cap and mid-cap funds	Greater price volatility and market uncertainty
Debt funds	Interest-rate changes, credit defaults and liquidity risks
Hybrid funds	Declines in equity or debt investments
Sectoral and thematic funds	Poor performance in a specific industry or investment theme
Index funds	Declines in the benchmark index being tracked

The possibility and extent of losses depend on the scheme’s investments and market conditions. Investors should read the scheme information document and review the riskometer before investing.

What Should You Do When Mutual Funds Give Negative Returns?

Seeing your investment value take a tumble can be a real source of worry. But selling off immediately usually isn’t the right move. Before making any changes to your portfolio take a step back and think about the following steps.

1. Get Your Investment Goals Back Into Focus

Take a look at what you were thinking when you invested in the fund in the first place. Was it for some short term expense, a big home purchase or something more long term like retirement?

Your investment horizon really matters. If you’ve got a long time before you need the cash, short term declines might not be the end of the world, even if there’s no guarantee things will turn around. But if you need that cash sooner rather than later, you need to ask yourself whether the fund is still a good fit for you.

2. Take a Look At How The Fund Has Been Performing

Compare the performance of the fund to its benchmark and how it stacks up against other funds in the same category over a decent time period.

One time a fund is underperforming might have one explanation, and another time it might be something different. You also want to take a look at the fund’s portfolio, investment strategy, the people in charge, and just how much you’re paying in fees. Don’t make a decision based on just the latest numbers.

3. Don’t Panic Sell

Market volatility can be pretty tempting to get out at the wrong time – when prices are low. But selling can turn a paper loss into a real one. Before you pull your units, think about your goals, your time horizon and just why the fund is underperforming. If the fund just doesnt suit your needs any more, maybe its time to think about something different.

4. Don’t Overstay Your Welcome with a Systematic Investment Plan

A Systematic Investment Plan lets you invest a set amount of cash at regular intervals – its a great way to get in the game even when prices are low, and your money can buy more units. But just because you keep chugging along with your regular investments doesn’t mean the market is going to suddenly turn around in your favour. Before you invest another dollar, do a reality check on the fund and your personal finances.

5. Spread the Risk Around with Diversified Investments

Investing in a few different asset classes and market segments is a smart way to mitigate risk. There’s no one-size-fits-all answer, so you’ll need to think about combining some equity and debt investments based on your goals and what your risk level is. The right mix will depend on your individual circumstances, and that can take some figuring out.

Diversifying can help you manage risk, but it won’t erase all your losses – unfortunately.

6. Take A Close Look At Your Portfolio Every Now and Then

Rather than reacting to every little market movement, take a close look at your investments on a regular basis. Ask yourself if your portfolio still aligns with your goals and risk tolerance. If you’re not sure what to do next, maybe its a good idea to grab some advice from a qualified financial adviser – they can help you make sense of things.

How to Reduce the Risk of Negative Mutual Fund Returns

Investors can’t eradicate market risk, but they can take steps to manage it.

Know Your Limits: Select plans according to your capacity to absorb losses.
Make a realistic time horizon for investment: It is best to refrain from engaging in the equity market with funds that must be available shortly.
Due Diligence Prior to Investment: Look into the investment goal, the portfolio, the fees involved and the risks prior to putting in your funds.
Diversification is Key: Refrain from placing all your eggs in one basket – diversify your portfolio among different sectors and asset classes.
Have an Emergency Fund: Ensure that you keep some extra money for unforeseen purposes – preferably separate from your investments in the market.
Review the Performance Periodically: Evaluate your investments on the basis of appropriate benchmarks and changes since your last evaluation.

Buying Mutual Funds on Pocketful: A Step-by-Step Guide

If you’re thinking about putting some money into mutual funds, Pocketful is a great place to start – they’ve got a load of schemes to browse through and ways to invest big or small.

Here’s how to get started:

Head over to Pocketful: Just pop over to the Pocketful Mutual Funds page – it’s where the magic happens.
Get an account: Follow the usual routine to get yourself set up with a new account – it’s pretty straightforward.
Get your KYC sorted: Fill in all the Know Your Customer details and get verified – this is a one-time thing, and you won’t have to do it again.
Start looking around: Take a gander at all the different schemes – what are their goals, what kind of risk are they carrying, what’s in the portfolio, how much does it cost, and how long is this for?
Time to pick a plan: Will you be investing a bit every month or all at once? Either way, make sure it fits with your overall cash plan.
Get familiar with the details: Read the scheme information documents – and don’t just gloss over it, take a good, hard look – because this is your money we’re talking about.
Get invested: Follow the instructions on the site and keep an eye on how your investments are doing.

You can also use the tools on the site to help you compare the different funds – these will give you some ideas, but don’t be fooled into thinking they’ll magic up a winning strategy.

And yes – before we go, be aware that using these comparison tools is a big help, but at the end of the day they won’t magically solve every problem – only you can do that.

Conclusion

Mutual Funds can give you a losing return because their value depends on the performance of what they’re invested in, and the state of the markets. Markets can be volatile, interest rates can go up and down, and there’s always a risk that someone won’t be able to pay back their loan. Economic uncertainty can all contribute to you losing money.

The main thing is to get a good handle on the risks involved before you put in your money, and make choices based on your own goals, how long you can leave your money locked up, and how much risk you’re willing to take on. Try not to make decisions based on short-term market movements, and review your portfolio from time to time.

If you’re looking for a Mutual Fund, you can take a look at options through Pocketful and compare them before you invest. Just remember, all investments carry risk, and no Mutual Fund can promise you a profit.

S.NO.	Check Out These Interesting Posts You Might Enjoy!
1	What is Trail Commission in Mutual Funds?
2	Best Silver Mutual Funds to invest in India
3	Best Brokers for Mutual Funds
4	Best Gold Investment Schemes in India
5	Best Money Market Mutual Funds in India

Frequently Asked Questions (FAQs)

Can Mutual Funds Give You a Losing Return?
Yes, they can. Mutual Funds can lose money when the things they invest in start to decline in value. Just how much you lose depends on what kind of fund you’re in, what’s in your portfolio, and what the markets are doing.
Can You Lose Your Whole Investment in a Mutual Fund?
It’s not impossible to lose a big chunk of your money in a mutual fund. How likely that is depends on which scheme you’re in. Don’t assume your money is automatically safe – take some time to understand the risks of a scheme before you put your money in.
Will Mutual Funds Ever Recover from a Market Crash?
Some of them might, if the things they’re invested in do well again. But don’t count on it happening – the outcome depends on what’s in the portfolio and how the market performs from then on.
Should You Stop Putting Money into a Mutual Fund When the Returns Get Bad?
Not necessarily. Take a step back and think about your goals, how long you can afford to keep your money locked up, and whether the scheme you’re in is still suitable for you. A Systematic Investment Plan (SIP) isn’t a guarantee that you’ll get a profit, or that you won’t lose money.
Which Mutual Funds are the Least Likely to Lose You Money?
The risk of a scheme varies depending on which one you choose. Some debt funds might be less volatile than equity funds, but they still come with risks – like the chance that a borrower won’t pay back their loan, or that interest rates will go up. Try to pick a scheme that matches your needs rather than relying on a label like “low-risk”.

October 29, 2026

What Is a Global Depository Receipt (GDR)?

Imagine a well-established company in India wants to expand its business globally; for this, it needs a huge amount of capital. Instead of looking for it from Indian investors, it decided to raise it from global investors. Yes, you heard it right a company can raise money from global investors through Global Depository Receipt or GDRs.

In today’s blog post, we will give you a complete overview of GDRs, along with how they work and their benefits.

What is a GDR?

The GDR full form is Global Depository Receipt is a type of negotiable financial instrument which is issued by a depository bank and represents shares in a company based in another country. This allows companies to access international investors without requiring them to purchase and hold the underlying shares directly in the company’s domestic market. The depository bank does not hold the underlying shares directly; a domestic custodian bank in the issuing company’s country holds them. The GDRs can be listed on an international stock exchange and are traded by investors. GDRs are useful for companies that want to expand their investor base internationally.

Key Features of a Global Depository Receipt

The key features of Global Depository Receipts are as follows:

International Trade: The GDRs can be traded on international stock exchanges, allowing companies to have access to international investors.
Underlying Shares: Each unit of GDR represents a specific number of underlying shares that are held by a custodian.
Foreign Currency Denomination: GDRs are commonly denominated in denomination of international currency such as USD due to this, the investors can easily participate in international market.
Depository Banks: GDRs are issued by the depository banks, whereas the custodian in the company’s country holds the underlying shares.

How Does a Global Depository Receipt Work?

The Global Depository Receipt works in the following manner:

Raising Funds: The first is that the company decides to raise funds to expand its business and for other purposes. For this, they issue GDRs to attract international investors.
Depositing the Shares with Custodians: The shares of the company are held by the custodian bank in its home country.
Issuing GDRs: An international depository bank issues the receipt representing the deposited shares, and each unit of GDR represents a specific number of underlying shares.
Offering to Customers: The GDR receipts are offered to international investors through exchanges as they are listed on exchanges.
Trading in GDR: The investors once the GDR are listed starts trading in them and get the return based on the performance.
Receiving Funds: In case of a primary offering, the company receives the funds raised from investors after applicable expenses.

Global Depository Receipts Example

Let’s understand the GDR through an example. There is an Indian company named ABC Limited that wants to raise funds from international investors to expand its business. The company decides to issue GDRs through an international depository bank.

Consider each GDR represent 5 ordinary shares of ABC Limited, and the company issues 2 lakh GDRs at 20$ each.

Particulars	Details
Number of GDRs issued by ABC Limited	2 Lakh
Representation of shares by each GDR	5 Shares
Total Number of Underlying Shares	10 Lakh
Price per GDR	20 USD each
Total raised fund	40 Lakh USD

The underlying shares are held by the custodian bank in India, whereas the international depository bank issues GDRs to investors in the international market. If the price of GDRs increases, the investor may earn capital appreciation by selling them at a higher price; along with this, they are also entitled to receive dividends declared by the company.

Benefits of a Global Depository Receipt for Investors

The key benefits of a global depository receipt for investors are as follows:

Access to International Market: The key benefit of GDRs is that they allow investors to invest in companies operating in different countries.
Diversification of Portfolio: GDRs allow an investor to diversify their investment across various companies and geographical regions. This reduces the dependency on a single country’s economic performance.
Capital Appreciation: Investors can earn capital gains when the market price of GDRs increases after purchase. It can be influenced by the underlying company’s financial performance, market demand, economic conditions, etc.

Benefits of a Global Depository Receipt for a Company

The key benefits of GDRs for a company are as follows:

Access to International Funding: The key advantage of GDRs for a company is that it can raise funds from international investors, which can be used for business expansion, debt repayments, etc.
Improved Visibility: Companies listing GDRs on international markets can increase the company’s visibility among overseas investors; this allows them to build goodwill across the globe.
Business Expansion: Companies can use the proceeds received from GDRs to expand their business, develop new products, strengthen operations, research and development, etc.

Limitations of a Global Depository Receipt

The key limitations of Global Depository Receipts are as follows:

High Cost: Issuing GDRs involves significant cost that includes depository bank fees, legal charges, listing fees, compliance cost, etc. Hence, issuing GDRs is not possible for small companies.
Liquidity Constraints: Not all traded GDRs attract investor attention, and lower trading volume may make buying and selling difficult for investors.
Dependency on International Market: The GDR prices are highly influenced by the global economic conditions, interest rates, and geopolitical events; therefore, if the company is not performing well, it can put its GDR prices under pressure.

Difference Between GDR and ADR

The key differences between GDR and ADR are as follows:

Particulars	GDR	ADR
Full Form	Global Depository Receipts	American Depository Receipt
Overview	Representing shares of a foreign company offered in the international market.	Shares of a foreign company issued in American markets only.
Market	All international markets, generally outside the US.	Issued only in the US market.
Currency	Can be issued in all currencies, including the US dollar.	Issued only in US dollars.
Depository Bank	Any international depository bank.	Only a US depository bank.
Listing	On any stock exchange in the world.	It is listed only on US stock exchanges.

Important Points to Consider Before Investing in GDRs

The key factors that an investor should consider before investing in GDRs are as follows:

Financial Performance: The financial performance of the company plays a key role in deciding the pricing of its GDRs. Therefore, before investing, one must check the company’s revenue, profitability, cash flows, debt level, etc.
Currency Exchange Rates: GDRs are traded in foreign currency, whereas their underlying shares may be denominated in another currency. Hence, the exchange rate can impact the value of the investment and its returns.
Liquidity: Before making any investment in GDRs, one is required to check the liquidity, as low trading volume makes it difficult for buyers and sellers to execute their trades.

Conclusion

On a concluding note, Global Depository Receipts allow a company to easily raise funds from the foreign market and to explore opportunities beyond its home country. Investment in GDRs offers various benefits such as access to global investing, capital appreciation, dividend income and portfolio diversification. However, GDRs also come with certain risks, including volatility, currency risk, liquidity risk, and higher costs. Therefore, it is advisable to consult your investment advisor before making any investment in GDRs, as it also carries risk.

.NO.	Check Out These Interesting Posts You Might Enjoy!
1	Ulcer Index: Meaning, Formula, and Uses
2	Inflation-Indexed Bonds in India: Benefits & Risks
3	Junk Bonds: Meaning, Types, Risks & Ratings in India
4	Continuous Compounding: Formula, Example & Benefits
5	What is Reinvestment Risk?

Frequently Asked Questions (FAQs)

What is the full form of GDR?
GDR refers to a Global Depository Receipt, which is a financial instrument issued by a depository bank representing a share of a company based in another country.
Name the Indian companies issued GDR?
The Indian companies that have issued GDRs are Reliance Industries Limited, Larsen and Toubro Limited, Tata Steel Limited, Mahindra and Mahindra Limited, etc.
Can an Indian company issue more than one GDR?
Yes, an Indian company can issue more than one GDR in different countries and at different times depending on its needs.
Can an investor earn a dividend from a GDR?
Yes, investors may receive dividends distributed by the companies issuing GDRs.
What is the objective of issuing a GDR by companies?
GDRs are issued by companies to raise capital from international investors. Through this, investors can directly purchase the shares of foreign companies on their domestic exchange.

October 29, 2026

5 Best Timeframes for Scalping

Looking to make trades in the Indian stock market? This method is known as scalping. In this a seller sells his position within minutes to make profits out of the small price movements. To make profits in a small time frame you need to have the right chart settings as this is the most important part in scalping. In this blog we will talk about what a scalping time frame means and how to choose the time frame for scalping.

Scalping and Time Frame Meaning

Scalping is a trading technique where you buy and sell stocks very quickly. You aim to make a small profit from small price changes. You do this multiple times a day and positions are not held overnight.

Chart timeframe tells you the time duration of a single candle that you want to monitor on your screen. For example, a 1‑minute candle shows price moves during one minute. A 5‑minute candle covers five minutes of price action in one block.

You should not get confused scalping with other types of trading style as Intraday trading usually means holding a trade for a few hours on the other hand swing trading means holding a trade for days or weeks. Scalping is much faster where you might hold a trade for thirty seconds.

It helps the traders in understanding the chart timeframe before making their next move. Chart setting determines how much time you require to think and react. A fast chart means you need to make split-second choices.

Feature	Scalping	Intraday Trading	Swing Trading
Holding Time	Seconds to minutes	Few hours	Days to weeks
Number of Trades	Very high (10 to 50+)	Medium (2 to 5)	Low (1 to 3 a week)
Effort Needed	Very high focus	Moderate focus	Low focus

5 Best Timeframes for Scalping

Many traders wonder what chart to use. Here are five popular options.

1. The 1-Minute Chart

This is the fastest setting. Every minute gives you a new candle. It suits highly experienced traders who can think fast. The benefit is that you get many trading chances. The drawback is that there is a lot of fake noise and false signals.

2. The 2-Minute Chart

This one is slightly slower than the 1-minute chart. It gives you a little more time to read the trend. It suits traders who want fast action but with slightly less panic. The benefit is a smoother chart. The drawback is it still requires constant screen staring.

3. The 3-Minute Chart

Many modern traders use this setting. It sits right in the middle of fast and slow. It suits intermediate traders. A big benefit is that it filters out the crazy 1-minute noise. A drawback is that you might miss the very early entry points.

4. The 5-Minute Chart

This is a favorite for many beginners. A new candle forms every five minutes. It gives you enough time to plan your entry. The benefit is clear trends and strong support levels. The drawback is that you will get fewer trading signals in a day.

5. The 15-Minute Chart

Scalpers use this mostly to check the main market trend. You do not place quick trades here. Instead, you look at the 15-minute chart to see if the market is going up or down. It suits everyone as a guide. The benefit is a very clear picture of the day. The drawback is that it is too slow for actual scalping entries.

Timeframe	Speed	Noise Level	Effort Needed	Good for Beginners?
1-Minute	Very Fast	High	Very High	No
2-Minute	Fast	High	High	No
3-Minute	Moderate	Medium	Medium	Maybe
5-Minute	Slow for scalping	Low	Moderate	Yes
15-Minute	Very Slow	Very Low	Low	Yes (for checking trend)

Scalping Time Frame Examples in Simple Rupees

Scalping time frame examples, in rupees, can help illustrate. Let us look at some math. These are examples using Indian numbers. They do not expect actual profits.

Imagine you buy 100 shares of a stock at Rs 200. You sell them two minutes later at Rs 202. You made a gross profit of Rs 200. But trading is not free.

You have to pay charges. A discount broker might charge Rs 20 to buy and Rs 20 to sell. That is Rs 40 total. Then you pay STT, exchange charges, and GST. These taxes might eat up another Rs 15.

Your total cost is Rs 55. From your Rs 200 profit, you keep only Rs 145. This shows why scalpers need a high win rate.

Let us look at a risk-to-reward example of 1:2. You place a fixed stop-loss of Rs 1 below your buying price. Your target profit is Rs 2 above your buying price. You risk Rs 100 to make Rs 200.

Item	Calculation	Amount
Buy Price	100 shares at Rs 200	Rs 20,000
Sell Price	100 shares at Rs 202	Rs 20,200
Gross Profit	20200 minus 20000	Rs 200
Brokerage	Rs 20 Buy and Rs 20 Sell	Rs 40
Govt. and Exchange Taxes	STT, Exchange fee, GST	Rs 15
Net Profit	200 minus 55	Rs 145

1-Minute vs 5-Minute Chart

Let us compare two imaginary traders on the same day. Amit uses a 1-minute chart. Rahul uses a 5-minute chart. They have the same capital and trade the same stock.

Amit sees a lot of fast movement. He trades 15 times in two hours. He makes some profits and some losses. His total brokerage and taxes are very high because of the 15 trades. His stress levels are through the roof.

Rahul waits patiently for the five‑minute candles to form. Rahul receives signals. Rahul takes three trades in those two hours. Rahul’s brokerage costs are much lower. Rahul feels more relaxed.

This simple example shows that faster is not always better. The number of trades, signals, charges, and stress can differ heavily based on your chart setting. Remember, this example is a story and not a result anyone should expect.

Key Factors To Consider While Choosing a Timeframe for Scalping

How do you pick the right one for yourself? You should look at a few personal factors.

Time You Can Give to the Screen: Scalping requires focus. You cannot look at your phone. Take your eyes off the screen.
Risk Appetite: Fast charts mean you will see price changes. You need to be ready to accept losses quickly.
Volatility: Stocks that are heavily traded change quickly. Stocks that are not active will not move enough for timeframes.
Experience Level: New traders should start with a chart. Traders who have experience can manage the 1-minute chart.
Costs and Charges: More trades mean fees. If your money is limited, taxes and fees will reduce your profits.
Using a Timeframe to Confirm the Trend: Smart traders use a multi-timeframe strategy. For example, they look at the 15-minute chart to spot the trend. Then they use the 1-minute or 5-minute chart to enter the trade.

Best Time of Day and Where Can You Scalp in India?

The Indian stock market has specific timings. The pre-open session runs from 9:00 AM to 9:15 AM. You cannot really scalp here. Normal trading happens from 9:15 AM to 3:30 PM on the NSE and BSE.

The best time is usually the first hour. Between 9:15 AM and 10:15 AM, the market is highly volatile. Prices move fast. The midday period is usually slow and flat. Then, the closing hour from 2:30 PM to 3:30 PM gets busy again.

Where do people scalp? They pick liquid stocks like Reliance or HDFC Bank. Many also trade index derivatives like Nifty and Bank Nifty options. Some trade commodities and currency.

How To Choose and Use the Best Timeframe for Scalping

The beginning might feel a bit confusing. Just go through these steps to get into the flow of scalping and pick the timeframe.

Understand Your Goal and Your Ability to Handle Risk: Figure out how much money you are willing to lose on one single day before you start using your trading app. Write that amount on a piece of paper. Keep looking at that paper. It helps you stay calm. It stops you from making bad decisions.
Start With a Timeframe: Look at a 5-minute or 15-minute chart first. Don’t rush into the 1-minute charts. The 1-minute charts are too fast. Can make your head spin. Start slow, get comfortable, then move on.
Practice on a Demo or With a Small Quantity: Try paper trading first. That means pretending you’re trading with real money but using fake cash. If you do use money, buy only one or two shares. This way you can feel the market’s speed without risking much.
Set a Stop Loss Before Every Trade: Never ever place a trade without putting a stop loss in place. A stop loss is like a safety net. It automatically closes your trade if it goes against you. It protects your money. Keeps you from losing more than you planned.
Keep a Trade Journal: After each trade, write down why you made it. Mention which timeframe you used, what you were thinking, and how you felt during the trade. Did you get nervous? Did you feel confident? This journal helps you learn from your choices.

Review Your Results Weekly: Every weekend, go back and read through your journal. Look for patterns. Which chart setting made you feel calm? Which one gave you the results? Use that to improve your week’s trading.

You can also use the 1 percent risk rule. This means you never risk more than 1 percent of your total trading capital on a single trade. It is a very easy way to control your losses per trade.

Common Mistakes People Make While Scalping

Even smart people make mistakes when they trade quickly. Stay away from these problems.

Choosing a short timeframe: Doing it without enough practice can be confusing. Many new traders pick the 1‑minute chart. The speed of the market on this timeframe makes new traders feel lost.
Trading too much: Doing 30 or 40 trades each day because you are bored or want too much money.
Not paying attention to Brokerage and Other Costs: Taking profits that don’t even pay for the trading fees.
Trading Without a Stop Loss: Hoping a losing trade will magically turn into a winning one.
Chasing Losses: This is called revenge trading. Trying to win back a loss immediately almost always ends badly.
Trading in Low Volume Stocks: Scalping illiquid stocks means you might get stuck in a trade with no buyers.
Ignoring News and Event Days: Trading during the RBI policy or Budget day can wipe out your account due to crazy price spikes.

Simple Tips To Make the Most of Your Scalping Time Frame

You can improve your routine with a few easy habits. Keep things clear.

Set a Daily Loss Limit: When you hit the Daily Loss Limit, X shut down the laptop. Rest for the rest of the day.
Stick to One or Two Timeframes: Do not keep switching between charts and 3‑minute charts while trading. Stick to one or two Timeframes.
Trade Only Liquid Indexes: Focus on Nifty 50 Liquid Stocks where you can buy and sell in a second.
Avoid Trades During Big News: Stay away from the market before a news announcement.
Stay Calm and Follow Your Plan: Treat trading like a boring business process,s not like a thrilling movie.
Use Trusted and Regulated Platforms: Make sure your broker has a fast and reliable app.

Conclusion

Choosing the chart setting can take time and patience. Scalping is a technique that can help you in generating profits in minutes but do remember that with every trade you make there is also a possibility of incurring losses. This technique requires patience and experience so increase your knowledge daily and be aware of all the things that can minimise your profits. Do not rush the chart setting process, rather take your time and then move forward with your next move.

S.NO.	Check Out These Interesting Posts You Might Enjoy!
1	Best Scalping Trading Platforms in India
2	Best Indicators for Swing Trading
3	Scalping vs Swing Trading: Which Strategy Fits You Best?
4	What is Scalping Trading Strategy?
5	Top Indicators Used By Intraday Traders In Scalping

Frequently Asked Questions (FAQs)

What is the best timeframe for a beginner to scalp?
I recommend starting with a 5‑minute chart. It gives you time to think, plan, and react without the extreme noise of a 1‑minute chart.
Can I use multiple timeframes while scalping?
Yes. Many successful traders use a 15-minute chart to check the main market direction and a 3-minute or 5-minute chart to enter the trade.
Is scalping profitable in the Indian stock market?
It can be, but it is very difficult. You need strict discipline and low brokerage costs. Remember that a SEBI study found 93% of individual F&O traders lost money recently.
How much capital is needed for scalping?
You can start learning with just a few thousand rupees by trading one or two shares in the cash market. Do not trade large amounts until you are fully confident.
What is the biggest risk in scalping?
The biggest risk is revenge trading and paying high brokerage fees. Taking too many trades can quickly drain your capital through taxes and losses.

October 28, 2026

Feeder Fund: Meaning, How It Works, Benefits & Risks

A feeder fund collects money from investors and invests it into another fund. This fund is known as the master fund. This then invests in pool of shares, bonds or other securities.

This type of fund can help the investors gain access to overseas markets easily. The investment is usually through a domestic mutual fund. While this is the basic, it is important to understand what is feeder fund in proper details now. So, read this guide to know more.

What Is a Feeder Fund?

The feeder fund meaning is simple when you follow the money. You invest in the feeder fund, but it usually does not build its own portfolio of individual securities. Instead, it invests most of its assets in a master or underlying fund.

The master fund manages the actual portfolio and takes investment decisions. Its gains or losses are reflected in the feeder fund’s NAV after accounting for expenses and other applicable factors.

In India, many international mutual fund schemes use a feeder or Fund of Funds structure. AMFI includes both overseas funds and Fund of Funds among recognised mutual fund scheme types.

How Does a Feeder Fund Work?

A feeder fund uses a two-level structure. Investors enter through the feeder fund, while most investment activity happens at the master fund level.

The process generally works like this:

Investors put money into the feeder fund.
The feeder fund pools these investments.
It buys units of the selected master fund.
The master fund invests according to its stated strategy.
Gains or losses affect the feeder fund’s NAV.
Investors redeem feeder fund units when they want to exit, subject to scheme rules.

This structure allows one master portfolio to receive money through different feeder funds. It can also help centralise portfolio management.

What Is the Difference Between a Feeder Fund and a Master Fund?

The feeder fund provides the route through which investors enter the structure. The master fund is where the underlying portfolio is generally managed.

Feature	Feeder Fund	Master Fund
Main role	Collects investor money	Invests pooled money
Direct securities	Usually limited	Holds the main portfolio
Investor access	Investors buy feeder units	May not be directly available
NAV	Driven largely by underlying fund	Driven by portfolio securities
Purpose	Provides access	Runs the strategy

For example, an Indian feeder scheme may invest in a US-based master fund. Investors can invest in rupees while getting exposure to companies listed abroad.

Franklin Templeton’s Franklin U.S. Opportunities Equity Active Fund of Funds is one current example. It invests at least 95% of its assets in Franklin U.S. Opportunities Fund.

Feeder Fund vs Fund of Funds: Are They the Same?

A feeder fund and a Fund of Funds, or FoF, are closely related but not always the same. A FoF is a broader category that invests in other funds rather than directly in securities.

A feeder fund usually channels most of its money into a specific master fund. A FoF may invest across several mutual funds, ETFs or strategies.

Basis	Feeder Fund	Fund of Funds
Typical structure	Mainly one master fund	One or several funds
Main purpose	Access a specific strategy	Combine underlying funds
Portfolio decisions	Mainly made by master fund	FoF manager may allocate across funds
Common use	International or specialised exposure	Asset allocation, gold, international or multi-manager

In India, a feeder fund may operate as a Fund of Funds scheme. Always read the Scheme Information Document instead of relying only on the scheme name.

What Are the Advantages of Feeder Funds?

Feeder funds can be useful when they provide access to a wide range of markets and strategies. It is something that will help you to add the to your wealth portfolio creation. Some of the key advantages that you should know are as follows:

1. Access to International Markets

An international feeder fund can provide exposure to overseas companies through an Indian mutual fund. You invest in rupees and do not need to select foreign stocks yourself.

This can be useful if you want geographical diversification within your overall portfolio.

2. Professional Fund Management

The master fund is managed by a professional investment team. This may help when the strategy needs specialised knowledge of another market or asset class.

However, the feeder fund remains dependent on the underlying fund’s investment decisions and performance.

3. Easier Diversification

Some feeder funds provide exposure to countries, sectors, or investment styles with limited representation in India. This helps with the diversification and can help you with building a growing portfolio.

What Are the Risks of Feeder Funds?

The investment in the feeder fund is totally a great deal. But just like any other investment plan, there are certain risks that you should know of. The key ones to know are as follows:

1. Layered Costs

The feeder fund has its own expenses, while the underlying fund also incurs expenses. AMFI notes that FoFs can have expenses at both levels, subject to regulatory limits.

This means you should consider the overall cost rather than looking only at one expense ratio.

2. Currency Risk

Overseas feeder funds are affected by currency movements. A stronger rupee can reduce returns when foreign assets are translated back into rupees.

A weaker rupee can have the opposite effect. Currency movement therefore adds another variable to your returns. AMFI also identifies exchange-rate movements as a risk for international funds.

3. Underlying Fund Risk

Poor performance, concentration or changes in the master fund can affect the feeder fund directly. You are relying on another fund for most investment decisions.

Therefore, checking only the feeder fund’s past returns may not be enough.

4. Investment Restrictions

International mutual fund schemes can have some restrictions at time. This will include the mode of investment and also the plan. So, you should check the limitations as well before starting.

There can be some charges or limitations as well that should be taken into consideration as well.

How Are Feeder Funds Taxed in India?

Taxation depends on the feeder fund’s underlying assets. An international equity feeder fund will have different taxation that yous should know.

From FY 2025-26, Section 50AA mainly covers mutual funds investing more than 65% in debt and money-market instruments. It also covers funds investing at least 65% in such debt-oriented funds.

For a typical unlisted international equity feeder or FoF outside Section 50AA, units held beyond 24 months generally become long-term capital assets. LTCG is taxed at 12.5% without indexation. Gains on units held for 24 months or less are generally taxed at the applicable slab rate.

Feeder/FoF Type	Holding Period	General Tax Treatment
International equity feeder/FoF	Up to 24 months	STCG at applicable slab rate
International equity feeder/FoF	More than 24 months	LTCG at 12.5% without indexation
Debt-oriented feeder/FoF covered by Section 50AA, bought on/after 1 April 2023	Any period	Deemed STCG, taxed at applicable slab rate
Qualifying domestic equity-oriented FoF	As per equity fund rules	Equity taxation may apply if conditions are met

Ensure that you check the taxation policy well before you actually start.

What Should You Check Before Investing in a Feeder Fund?

Do not choose a feeder fund only because the underlying market has recently performed well. The master fund deserves the same attention as the feeder scheme.

So, if you are an investor planning to invest the same, the key checkpoints to know are as follows:

Start by checking the investment strategy first.
Check the investment options you have.
Ensure to analyse the past performance and also the returns.
See if there are different sectors and segments that you can check.
Check the expense ratio before you select one.
Understand how currency movements can affect your returns.
Review the tax treatment applicable to the fund.
Look for the options like SIPs and lumpsum.
See if there is any entry or exit load.
Know the lockin period, if any.
Understand the overall risk level of the fund.
Check if your goals, time, and expectations match with the fund.

Conclusion

The feeder funds are great when you wish to invest in the broader market. But when you plan to invest in one of these, you would need to check all the details well. From the nature of the investment to the policy and taxes, everything needs to be considered to ensure you make the right call.

For further details and support, you can open an account with Pocketful. This will help you to stay updated with the changes and also the latest information to ensure that the investment grows.

S.NO.	Check Out These Interesting Posts You Might Enjoy!
1	Smart SIP: Meaning, How It Works, Benefits & Risks
2	Power SIP: Meaning, How It Works, Benefits & Risks
3	Mutual Fund Churning: Meaning, Causes, Risks & How to Avoid
4	Dividend Reinvestment Plan (DRIP): Meaning, Benefits & How It Works
5	What Is a Balanced Fund? Meaning, Benefits & Risks

Frequently Asked Questions (FAQs)

What Are Feeder Funds?
Feeder funds collect money from investors and invest mainly in another fund called the master fund. The master fund manages the underlying portfolio.
Is a Feeder Fund a Mutual Fund?
It can be. In India, many feeder schemes are structured as Fund of Funds mutual fund schemes investing in an underlying domestic or overseas fund.
Are Feeder Funds Risky?
Yes. They carry market risk and the risks of the underlying master fund. International feeder funds also carry currency and country-specific risks.
Is a Feeder Fund the Same as a Fund of Funds?
Not exactly. A feeder fund generally channels most assets into a specific master fund, while a FoF may invest across multiple funds.
Can Feeder Funds Invest in Foreign Markets?
Yes. International feeder funds are commonly used to give investors exposure to overseas markets through an Indian mutual fund structure.

October 28, 2026

Jio IPO Platforms Listing: Jio Platforms Shares Debut at 21.36% Premium

The wait is finally over. Jio Platforms has hit Dalal Street, and it came in swinging. The shares listed at a 21.36% premium over the IPO price, handing allottees a healthy gain on day one. The issue price was ₹1,119 per share. A 21.36% premium puts the listing price at about ₹1,358. That’s roughly ₹239 extra on every share, before brokerage and taxes.

For a ₹30,213 crore issue, that’s a big deal. Large IPOs rarely list with this kind of pop. It tells you how much investors wanted a piece of India’s biggest digital and telecom business.

Jio Platforms IPO Details at a Glance

Here are the numbers that matter, in one place.

Particulars	Details
Company Name	Jio Platforms Limited
IPO Issue Size	₹30,213 crore
IPO Price Band	₹1,065–₹1,119 per share
Final Issue Price	₹1,119 per share
Indicative Listing Price	₹1,358 per share
Listing Premium	21.36%
Stock Exchanges	NSE and BSE

The issue was priced at the top of the band. That usually happens when demand is strong across investor categories, and that’s exactly what the subscription period showed.

What the 21.36% Listing Gain Means for You

If you got an allotment, congratulations. Let’s put the gain in real rupees.

Say you were allotted 12 shares at ₹1,119. You paid ₹13,428. At the listing price of ₹1,358, those shares are now worth ₹16,296. That’s a paper profit of ₹2,868 on day one.

Remember, that’s before brokerage, exchange charges and tax. Sell within a year and the profit counts as short-term capital gains, so you’ll pay tax on it.

Didn’t get an allotment? Don’t chase the stock just because it popped. Buying at ₹1,358 is a very different bet from buying at ₹1,119. Look at the valuation first.

Why the Jio Platforms IPO Matters

Think back to 2016. Mobile data was expensive, and most Indians used it sparingly. Then Jio arrived with cheap data and free calls, and the whole market changed almost overnight.

Today Jio is far more than a SIM card. It runs mobile networks, home broadband, enterprise services and a growing set of digital platforms. Its huge subscriber base is the foundation for all of it.

That’s why this listing feels different. Investors aren’t just buying a telecom company. They’re buying a seat in India’s digital story.

What Could Drive Jio’s Growth From Here

5G & Profitability: Jio have implemented 5G. Now they can monetise it. More high value packages will increase each customer’s revenue.
Home Broadband: JioFiber & JioAirFiber are entering an underpenetrated market. As people begin to stream, use Smart TVs and work from home more their demand for high speed internet has increased.
Enterprise & Cloud: Businesses require connectivity, Cloud & Cyber Security. This can be used as a way to generate profit from outside of customer recharge.
Artificial Intelligence: Long term bet. Having a strong network & data structure in place gives them an advantage. This is a very nascent market so depends on execution on how much profit they will make.

Risks Investor Should Watch

A strong debut feels great, but it doesn’t make a stock risk-free. Keep these in mind.

Valuation: A 21% pop raises expectations. Earnings now have to catch up with the price.
Competition: Airtel and Vi aren’t standing still. Price wars can squeeze margins fast.
Heavy spending: 5G, broadband and data centres need huge capital. Returns on that spending will take time.
Market mood: Interest rates, FII flows and global cues can move the stock regardless of how Jio performs.

Jio IPO: Should You Hold or Sell?

There’s no one right answer. It depends on why you applied.

If you came in for listing gains, booking part or all of your profit is a fair call. A 21% return in a few days is nothing to complain about.

If you believe in Jio’s long-term story, holding makes sense. Many investors do a bit of both: sell enough to recover their capital and let the rest ride.

Final Thoughts

The Jio IPO listing gave investors exactly what they hoped for: a strong 21.36% premium and a confident start on the exchanges. It’s a landmark moment for India’s primary market.

But listing day is just day one. What matters now is whether Jio can turn its scale, 5G network and new bets into steady earnings growth. Keep an eye on the quarterly numbers, not just the share price.

Frequently Asked Questions (FAQs)

What is the Jio IPO listing price?
Jio Platforms listed at about ₹1,358 per share, a 21.36% premium over the issue price of ₹1,119.
How much listing gain did Jio IPO investors make?
Around ₹239 per share, or 21.36%. On 12 shares, that’s a gain of roughly ₹2,868 before charges and tax.
What was the Jio IPO price band?
The price band was ₹1,065 to ₹1,119 per share. The final issue price was fixed at the upper end, ₹1,119.
Where is Jio Platforms listed?
Jio Platforms shares trade on both the NSE and BSE.
Is Jio Platforms a good long-term investment?
It has strong growth drivers in 5G, broadband, enterprise services and AI. But valuation, competition and heavy capex are real risks. Weigh both before you invest.
Who owns Jio Platforms?
Jio Platforms is a subsidiary of Reliance Industries, which holds the majority stake. Global investors such as Meta and Google also hold stakes.

October 28, 2026

Blog

What is a backstop?

Types of Backstop

Key Features of Backstop

How Does a Backstop Work

Example of Backstop

Benefits of Backstop

Limitations of Backstop

Difference between Backstop vs Underwriters

Tax Consideration for Backstop

Conclusion

Frequently Asked Questions (FAQs)

What is the meaning of backstop?

Name the different types of backstops?

Is there any fee charged by the backstop?

When does the backstop agreement expire?

Who provides the backstop?

What Is TTM in Stock Market?

TTM in Share Market

How Does TTM Work in the Indian Stock Market?

Step 1: Look at the company’s latest quarterly results.

Step 2: Gather data for the last four quarters.

Step 3: Add the figures for all four quarters.

Step 4: Update the TTM when new results are released.

How to Calculate TTM in Stock Market

Method 1: Using Quarterly Results

Method 2: Using Annual and YTD Numbers

What Is TTM EPS? Meaning, Formula and Example

TTM EPS Meaning

TTM EPS Formula

How Is TTM Used to Calculate the P/E Ratio?

TTM vs Annual Results vs Quarterly Results

Advantages and Limitations of TTM

Advantages of TTM

Limitations of TTM

Conclusion

Frequently Asked Questions (FAQs)

What Is the Full Form of TTM in the Stock Market?

How Is TTM Calculated?

What Does TTM EPS Mean?

What Is TTM in Screener?

Is TTM Better Than Annual Results?

Are Gifted Shares Taxable? The Basic Principle

Tax When You Receive Shares As A Gift?

Tax When You Sell Gifted Shares

Tax for the Donor

​Gifts to Different Recipients: A Quick Reference Table

How to Gift Shares: Step by Step

Reporting In Your ITR

Common Mistakes

Frequently Asked Questions (FAQs)

I received shares from my father. Do I have to pay tax on shares?

A friend gifted me shares worth ₹1 lakh. Is that taxable?

How is the gain calculated when I sell gifted shares?

Does the person gifting the shares have to pay any tax?

How do I transfer shares to someone as a gift?

What Is A Stock Split?

Why Do Companies Split Their Stocks?

What Are Bonus Shares?

Stock Split vs Bonus Shares: Side-by-Side Comparison

Key Dates To Know

Tax Implications

Effect On Market Behavior

Should You Buy A Stock Before A Split Or Bonus?

Real-World Examples

Common Myths

Conclusion

Frequently Asked Questions (FAQs)

Do I become richer when a company announces a stock split or bonus?

What is the main difference between a stock split and a bonus issue?

Do I need to buy the shares before a certain date to receive a split or bonus?

How are split and bonus shares taxed when I sell them?

Is a split or bonus announcement a good reason to buy a stock?

Know Your Client Before Pitching a Mutual Fund

How to Choose the Right Mutual Fund for Your Client

How to Sell Mutual Funds Online

Step 1: Clear the NISM Series V-A Test

Step 2: Obtain Your AMFI Registration (ARN)

Step 3: Complete AMC Empanelment

Step 4: Complete Client KYC

Gifts to Different Recipients: A Quick Reference Table