I am from India, how do I start investing in the Indian stock market? How can a beginner invest in shares in India?
Previously entering the stock market was very annoying only because of all the paperwork. You had to go to a stockbroker, submit all the required documents then fill up the forms that included complicated terms and even after completing all these things the stockbroker would take a lot of time to open the account.
If you want to know the basics of stock market then click here.
After all these hassles, you still had to contact your broker to place an order.
Now things have changed you can open an account easily from your house sitting in the comfort of your chair.
Moreover, with the increase in the competition among the brokerage firms, the brokerage (stockbroker fees) has gone down significantly, even to a flat fee of only 20 rupees per trade.
How to enter the share market?
The most important thing to enter the stock market is pan card. This is required for taxation.
If you want to open an account online that your mobile number should be registered with your Aadhaar card your e-kyc. Aadhaar is mandatory for you to open an account. All your information is also available on your Aadhaar card so it becomes hassle-free.
Previously big traders who used to trade with more than 100k rupees as capital at one time needed to have a UIN (Unique Identification Number).
But now you as small retail trader can trade with more than 100k rupees by leveraging your money, and you don,t need that UIN as it is already mentioned in your aadhar card.
Bank account statement
For future and option trading you need to provide your bank statement.
You cannot directly buy or sell shares directly from the stock exchanges like NSE or BSE. There are people who are authorized to buy or sell shares from the stock exchanges by SEBI (The Securities and Exchange Board of India). You need to open an account there to get started.
You need to find a good stockbroker, who is reliable, provides proper services and software and also charges low brokerage and provides good services for technical analysis.
There are two types of stockbroker:
- Discount broker. (Recommended)
- Full-service broker.
Discount brokers charge very low brokerage fees (flat 20 rupees on all trades) but at the same time provides all the necessary tools that you need. The only downside is they generally have very few offices all over India.
Two of the most popular discount stockbrokers in India are:
Full-service brokers provide much more services than discount brokers although they charge more on brokerage than discount brokers. They have offices all over India, you can go there if you need any help.
Popular full-service brokers in India are:
Open a Demat and a Trading account.
This stockbroker is going to open two types of account on your behalf.
Demat account – Previously you could physically hold the shares you bought from the market in form of certificates. Now you cannot hold the shares physically, you need the Demat account to hold the shares in a demat state.
The shares that you will buy from the market will be stored on your name in this account and will get reflected in your portfolio.
Once you buy the shares, you need to sell them sometimes later to get the profit, You can hold shares for as much time as you want.
To sell the shares from your demat account you need to sign a POV ( Power of Attorney).
Trading account – This account will be opened together with the demat account. Trading account helps you to buy and sell shares from your demat account.
You as a retail investor will never have to worry about these, the stockbroker will take care of this.
You don’t need to worry about other things like Depository Participant i.e NSDL and CDSL which stands for National Securities Depository Limited and Central Depository Services Limited. This will be taken care by your broker.
It’s going to take the maximum of 2 working days to set up your account by the stockbroker except that the POV form needs to be signed and mailed to the stockbroker and you need to send an In-Person Verification (IPV) to your broker.