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A Correspondent in Mumbai | December 23, 2003

With the Indian stock markets booming, investors are rushing to the bourses.

But the small investor needs to exercise caution so that he does not lose out in this rally.

The Securities and Exchange Board of India, along with the National Securities Depository Ltd, is thus trying to aggressively promote amongst the investors, the need to be cautious.

The Sebi says that its vision is "to be the most dynamic and respected regulator globally" and "to protect the interests of investors in securities and to promote the development of, and to regulate the securities market."

In their latest attempt at investor education, the Sebi and the NSDL have listed the following Dos and Don'ts for investors:

DOs

  • Transact only through stock exchanges.
  • Deal only through Sebi registered intermediaries.
  • Complete all the required formalities of opening an account properly (client registration, client agreement forms, et cetera).
  • Ask for and sign 'Know Your Client Agreement.'
  • Read and properly understand the risks associated with investing in securities/derivatives before undertaking transactions.
  • Assess the risk-return profile of the investment as well as the liquidity and safety aspects before making your investment decision.
  • Ask all relevant questions and clear your doubts with your broker before transacting.
  • Invest, based on sound reasoning after taking into account all publicly available information and on fundamentals.
  • Give clear and unambiguous instructions to your broker/sub-broker/depository participant.
  • Be vigilant in your transactions. Insist on a contract note for your transaction.
  • Verify all details in contract note, immediately on receipt.
  • Crosscheck details of your trade with details as available on the exchange Web site (www.bseindia.com / www.nseindia.com).
  • Scrutinise minutely both the transaction and the holding statements that you receive from your Depository Participant.
  • Keep copies of all your investment documentation.
  • Handle Delivery Instruction Slips (DIS) Book issued by DPs carefully.
  • Insist that the DIS number are pre-printed and your account number (Client ID) is pre-stamped.
  • In case you are not transacting frequently make use of the freezing facilities provided for your Demat Account.
  • Pay the margins required to be paid in the time prescribed.
  • Deliver the shares in case of sale or pay the money in case of purchase within the time prescribed.
  • Participate and vote in general meetings either personally or through proxy.
  • Be aware of your rights and responsibilities.
  • In case of complaints approach the right authorities for redressal in a timely manner.

DON'Ts

  • Don't deal with unregistered intermediaries.
  • Don't fall prey to promises of unrealistic returns.
  • Don't invest on the basis of hearsay and rumours; verify before investment.
  • Don't forget to take note of risks involved in the investment.
  • Don't be misled by rumours circulating in the market.
  • Don't be influenced into buying into fundamentally unsound companies (penny stocks) based on sudden spurts in trading volumes or prices or non-authentic favourable looking articles/stories.
  • Don't follow the herd or play on momentum - it could turn against you.
  • Don't be misled by so called 'hot tips.'
  • Don't try to time the market.
  • Don't hesitate to approach the proper authorities for redressal of your doubts/grievances.
  • Don't leave signed blank Delivery Instruction Slips of your demat account lying around carelessly or with anyone.
  • Do not sign blank Delivery Instruction Slips and keep them with Depository Participant or broker to save time. Remember your carelessness can be very dangerous.

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