Should you need additional funds for your Smallcase rebalance ? I tried rebalancing today and got this notification3 min read

What does this mean ? What is the solution ?

Answer


As per SEBI’s peak margin Norms, when you sell stocks from your demat,
only 80% of the sale value will be released and can be used for further
transactions on the same day while the balance 20% credit will be
available for transactions the next day.

Let us understand this better with an example. We have a 10 stock
portfolio and the below image shows the constituents of the portfolio
prior to a rebalance.

SELL LEG


The total value of sell orders (stock a & stock b) is Rs 12,540
As per the margin rules, on the very same day, you shall only receive 80%
of the total sale value which is Rs 10,032 while the balance 20% will be
credited the next day. This means that you have only Rs 10,032 to
complete the purchase of new additions to the portfolio, ie. stocks x & y.

Solution

  • Kindly ensure you have 8-10% of your Smallcase investment’s current
    value readily available in your broker account as buffer funds. This will
    help you ensure a smooth , hassle free rebalance every time.
  • You may have these funds invested in liquid instruments like
    LIQUIDBEES and use them as and when required.
    Important Note
    There could be other scenarios of a fund crunch like in case of some of
    your sell orders being stuck in upper or lower circuits.
    This will require you to add additional funds temporarily and click repair
    order to be able to execute the buy orders.
    In case you do not wish to add additional funds in such scenarios, you
    may wait for those stocks to come out of circuits and then repair your
    order to complete the process.
    Kindly read this article to know more about how to manage circuit stocks

If you have any further doubts or questions, please send an email to support@weekendinvesting.com

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June 17, 2022 by Weekend Investing
by Weekend Investing

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