What is Badla Financing in Share Trading. Understand Badla System in Stock Market.
Understand What is Badla Financing in Share Trading or Badla System in Stock Market.
What is Badla Financing in Stock Market?
“Badla” in share trading means something in return. It is a system to carry-forward. Badla is the charge, which the investor pays to carry forward his position.
Using the “Badla” tool or system, an investor in Stock Market in India can take a position in a scrip without actually taking delivery of the stock. He can carry-forward his position on the payment of small margin.
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What is Undha Badla?
In the case of short-selling the charge is termed as ‘undha badla‘.
Benefits of Badla Financing in Share Trading
The “Badla System” or the Carry Forward (CF) System Serves 3 Needs in Share Trading:
- Quasi-hedging: If an investor feels that the price of a particular share is expected to go up or come down, he or she can trade in the share without giving or taking delivery of the stock and take advantage of the volatility of the stock.
- Stock lending: If the investor wants to short sell without owning the underlying security, he can easily borrow the shares for the broker or stock lender in return of some charge.
- Financing mechanism: If the investor wants to buy shares without paying the full consideration, he can borrow money from a financier. A financier can lend money to the investor to buy shares. This system is called “Vyaj Badla” or “Badla Financing“.
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FAQs: Badla Financing
What is Badla Financing?
"Badla" means something in return or charge. Badla Financing is the charge paid by an investor to carry forward his position. It is a hedge tool for investors to take position of a scrip without actually taking delivery of the stock.
What is meant by Badla Trading?
Badla trading is a kind of margin trading that involves buying of stocks with borrowed money. Here the Stock Exchange plays the role of intermediary that offers the loan at interest. The interest rate is calculated of the basis of demand for the underlying stock and a maturity not greater than 70 days.
Who pays Badla Charge?
The Buyer pays the Badla Charge to the Seller to carry forward a transaction from one settlement period to another.
What is VYAJ Badla?
Vyaj means interest. Vyaj Badla was a financing system in Gujarati state of India.
Conclusion
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