How to invest in share market in India – Step by step guide

If you want to start or just starting to trade in stock market and really confused about how to make sense of it all, you have come to the right place. After reading this, you will have a good basic understanding of how to invest in Share market, account you will need to trade and some basics you should keep in mind while trading. In case you need more detailed information, you can find my clicking on the relevant link which I have provided in the article.

Share Market

Share market in simple terms means where you can buy and sell shares of public companies. In old days, there was actually a physical space where trading used to take place but not anymore.Now most of the trading place online How to invest in share market in Indiawhere buyer and seller order are matched online based on the asking price. To understand more about the stock market and what type of trade you can do on it, please read about basics of share market.

For doing trading, you would need to open account with a stock broker. Below you will find the details information about the document you will need to open the account with any stock broker.

What you need to open an account

  • PAN Card – That is a compulsory document which your broker will ask you before opening you account. It is a 10 digit alpha numeric number which is given by Income tax department. This will also be needed in case you want to file your tax return. So in case you don’t have it, apply for the same with IT Department.
  • Address Proof – You will need an address proof which can either be License, voter ID, Aadhar card or your passport. Any one of this would be enough for your address proof.
  • Income proof – If you plan to trade in intraday, you would need to submit your income proof for opening the account. Income proof can either be your ITR return, Form 16, Salary slip or 6 month of your bank statement. No minimum income proof is needed for open an account. This is just a required document which is needed for the KYC.
  • Bank Account – You will need to link a saving/current account from which you can pay while buying shares and in which the money will come when you sell the shares.

You can view the video to understand what you need to start trading

Selecting a Stock broker

For trading in stock market, you have to open an account with a stock broker. The stock broker takes position on your behalf in the market and make sure that you have the funds required to open the position. So you have to open a brokerage account with broker before you can start to trade. You can find list of Top 10 brokers in India here.

Choosing a good broker is really important as in the long term; your brokerage rate will decide whether you end up making profit or loss. Some of the good brokers in India are Angel broking, which is a full service broker. Apart from them, if you want to go with a discount broker, Zerodha and RKSV are two of the better broker. Talk to couple of brokers and then decide which will be the best fit for you. There is no single best broker for everyone and it will depend on the type of investor you are.

The broker will open a Trading and Demat account for you. Trading account allow you to buy and sell share in the stock market. Demat account can be thought as a bank locker where your stock are kept in digital format. This service is provided by CDSL and NSDL. You can find detailed information about Demat account here.

Buying and Selling Shares

Once you have opened your account, you can start trading in the market. You can broadly do two type of trading.

Delivery: When you buy shares and hold it for more than a day. No margin is provided by your broker on this and you have 100% of the money.

Intraday: When you buy share and sell it on the same day. Broker provides margin upto 10 times, so you can buy 10,000 worth of shares with only Rs 1,000 in your account.

Some of the broker will recommend you which stock to buy. Just make sure that you understand the rationale before buying any share and maintain a stop loss at which you will cut off your position. Apart from your broker, you will find multiple stock advisors which will provide you advisory for trading in stock market. Tread with caution while selecting any advisor.

In case you want to choose your own shares, you have to understand financial of the company and take a call based on your understanding on where the stock is going to go. Lots of traders use technical analysis while choosing a stock to trade in. Understand the positive and negative of both and decide based on your own understanding.

Other way to invest in Share Market

In case after reading all this, you feel intimidated and don’t feel you are comfortable trading on your own, you don’t need to worry. You can take part in stock market purchasing Mutual Funds. Mutual Funds can be thought of as a fund in which 1,000 of investor put in there money and the Fund investor invest on their behalf so they don’t have to worry about which stock to buy. Good thing with this is that your money in managed by a professional who work full time in managing your money.

In case you want to invest in MF, you can do so online by going to MF AMC or else you can just open a account with any broker. Most of them do provide the service of investing in stock market also.

Things to keep in mind while trading

  • Always choose a SEBI registered broker. All the brokers for which you will find the reviews are SEBI registered.
  • Tread with caution the advice you receive for your friends or family. Most of the time, they will not know what they are saying.
  • Don’t panic once you have taken a position. Analyze your trade before taking the position and make sure you follow with the stop loss and take profit which you have decided before taking the trade.
  • Don’t put all your money in buying stock. Stocks generally provide better return than other investment option but it is volatile at the same time and it is possible that when you need money, the market is giving you negative returns.

I hope this would have helped starter better understand the basics of share market. In case you still have some questions, please provide your details by clicking on the button below and we will call you and explain in detail.

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