How To Invest in Share Market

This article gives an overview of the steps to follow to invest in the Share Market and the different ways you can do it.

Investing in the Primary Market

Individuals can invest in the Primary Market through IPOs or Initial Public Offerings. To do so you need your Trading and Demat accounts or you can also apply through your Bank Account. Based on the market sentiments, you get allotted a certain number of shares from the IPO. Once, the company receives the applications and counts them, they allot them to you based on demand and supply.

It is actually quite simple to apply for an IPO. It is done through a net banking process known as Application Supported by Blocked Amount (ASBA). Once you apply for an IPO, the money isn’t directly paid to the company but instead, the specific amount gets blocked by the bank from your savings account and is paid to the company when the shares finally get allotted to you. All IPOs follow this procedure. Once the shares are allotted to the trading account, they show up on the Stock Exchange and you can start trading them in a week.

Investing in the Secondary Market

The Secondary Market is typically the one referred to as the Stock Market. There isn’t an option to invest in the secondary market through your bank accounts, so having a trading and Demat account is necessary.

  • First, you have to log in to the trading account.
  • Then you should choose the specific share and the quantity you want to buy/sell.
  • Please make sure you have the funds in your bank account to facilitate the transactions if you want to buy the specific shares. Also, check the amount before you wish to sell the shares from your trading account.
  • Next is quoting a price at which you want to buy/sell the shares.
  • Now when the order is submitted to the exchange, you just wait for the buyer/seller to reciprocate your request.
  • The transaction gets squared off and the shares/money are transferred into your account.

Documents needed to open a Demat Account

  • PAN Card
  • Aadhaar Card
  • A cancelled cheque in your name from an active bank account
  • Your Passport-sized photographs

Identification proofs are necessary for trading/investing in the stock market in India. For KYC (know your client) purposes during opening an account with the securities regulator and SEBI.

Contact a Stock Broker

You can’t go directly approach the stock market to invest in securities. Investing in the share market is done through a Broker. They can be individuals or agencies authorized by SEBI to trade on the exchanges. Brokers will impose a certain percentage of brokerage fee for the help they give you for investing in securities in the market.

Get a Demat account

Now, you have to open a Demat account. The account reflects the stocks you have invested in like an electronic safe that can be accessed through your phone or laptop sitting at home. It is opened with the help of a registered Depositary Participant. Some banks also provide customers with the facility of opening Demat Accounts with them.

Trading Account

You need a trading account as well to start investing in shares. While a Demat account reflects the shares you own, a trading account is one with which you buy and sell securities of various companies in the exchange. The BSE and the NSE are the primary exchanges in India. Therefore, a good option is to open a trading account with a depository that gives the option of investing on BSE and NSE.

Buying and Selling

For someone to trade/invest in the stock market, you need to contact your broker and tell the number of shares you want to buy or sell at the price you want to. There are a few safeguards to be followed while investing in the stock market:

1. Acknowledge your investment necessities and come to conclusions accordingly.
2. Research and analyse properly and invest in shares that line up with your strategy.
3. Communicate the demands to your stockbroker. Review that the broker does it properly to avoid any blunders.
4. Check your stock portfolio at regular intervals.