Most Often, gold and stocks are the investment showgrounds that attracts Indian investors. If you are someone looking to invest in shares and stocks (stock market) in India, and are just about to start off, here are some of the basic things you need to understand as a newbie.
What is stock market all about?
In India, there are two primary exchanges; the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). These are the only two exchanges in India where buying and selling of shares and commodities happen. Usually, there is a minor difference in price of shares at the two exchanges. Your broker can guide you here in case you do not understand where to trade.
What is the difference between primary markets and secondary markets?
When a company lands up in stock exchange with an initial public offer (IPO) it is known as the primary market. The secondary market is the place where actual trading of the shares takes place. Only purpose of an IPO is to list the stock or the company in the share market. Once the company gets listed, it starts trading in the secondary market. Buying and selling shares is largely like buying and selling any other commodity.
How are shares priced in the market?
The share prices of any company are directly proportional to the growth of the company. Usually, share prices go up when the company is growing very fast, earning very good profits or it gets new orders. Therefore, price of share is determined by demand & supply and growth of the company. Sometimes, some positive or negative rumours about the company affects its share prices. But this fluctuation is temporary and does not effects the position of the company in stock market for long term.
How much money you need to start investing in Stock Market?
There is no minimum investment required as you can even buy 1 share of a company. So if you buy a stock with a market price of Rs.100/- and you just buy 1 share then you just need to invest Rs.100. Of course, brokerage and statutory charges will be extra.
What do you need to get started?
PAN (Permanent Account Number) is a primary requirement for entering any financial transactions in our country. It is unique 10 digit Alpha-Numeric number assigned to an individual by the Tax Authorities for calculating their tax liabilities
Brokers are the people who are authorized to buy and sell on the markets. One cannot just start trading in stock market, without a broker. They can be individuals, companies or agencies that are registered and licensed by SEBI (Securities and Exchanges Board of India), who regulates the share markets.
For buying or selling shares, you need to inform your broker about which share in what quantity you wish to buy at which price. If you are using an online trading system, you can set the price in the system at which you want to sell it.
Demat and Trading Account:
One cannot hold the shares in any physical form. It is you Demat account that will hold the stocks or shares in your name and the same will reflect in your stock portfolio. They have to in Dematerialized state or Demat state. For buying and selling of shares you need to have a Trading account. Both Demat and Trading accounts are opened simultaneously for investing in shares in India. Once you have a broker or broking company, it will help you in opening Demat and Trading account
What are statutory charges?
Just like GST or stamp duty are imposed by the government, there are statutory charges that needs to be paid. These charges are charged by the broker/broking firm but goes to government. Charges of the broker are known as brokerage.
Although, all this information is provided to investor by the broker, but knowing these things will help you in staying aware and invest carefully.