Equity in Cash

Equity means buying a share in a company.

If we buy equity in cash, it generally means that we pay the entire amount of our stake upfront and the volatility doesn’t have to be managed by providing extra funds as margins.

For example, if a person buys 100 shares of a company at a price of INR 200, then he will pay 20k and 100 shares will be credited to his account.

Now, there is no time boundation on these shares and they can be held till the time a person wants to depending upon his outlook and horizon on that piece.

If a stock goes up to 500 and the entire holding is sold, 100 shares will be debited and a person will get a credit of 50k in his account giving him the benefit of 30k over an initial investment of 20k.

If the company performance goes otherwise as expected and the share price comes down and an investor wants to book their loss, they can do so by selling the shares. The amount of the transaction will be credited and the shares will be debited in the corresponding demat account.

The hallmark of this feature is that market volatility doesn’t have to be manager by an investor and the stock can be held till the target price, irrespective of the short and medium term movements.