Before investing your hard earned money in stock market, first you should understand how the stock market works in India.
How Does Stock Market Work?
Stock is a unit of proprietorship in a company. Every company is split into a number of shares and the possessor of a share owns a small percentage of the company.
Purchasing a share or stock of a company simply means you are buying a part of the company. Investors are able to buy the stocks of the company once the company share is launched in the market.
Stock represents a claim on the company’s assets and earnings. As you obtain more stock, your proprietorship stake in the company becomes much stronger. Shares, equity, or stock, all basically means the same thing.
The shares in the market are launched in the form of initial public offering (IPO). The price of IPO of a company is decided based on how much the company is estimated to be worth, and how many shares are being issued.
The stock market can be split into two main sections
◍ The primary market
◍ The secondary market
(i) Primary Market:
In this, the new issues are first sold through initial public offerings. Institutional investors typically purchase most of these shares from investment banks.
(ii) Secondary Market:
All succeeding trading goes on in the secondary market where participants include both institutional and individual investors.
How to Start Investing in Indian Stock Market?
STEP 1: Create your A/C yourself in a online discount broker website.
STEP 2: Keep PAN CARD & ADHAAR CARD ready for instant account opening online.
STEP 3: First choose to Open a Demat ,a Trading account & a commodity account(optional)
STEP 4: Pay the minimal fees (around Rs.500) for a new trading and demat account.
STEP 5: Now you can Trade in Equity segments and Buy and sell stocks on the same day.
Buying a stock is as easy as recharging your mobile or transferring money. If you’re sure about buying a share all you need is a laptop with internet connection, a bank account and some money in that account, obviously.
A good financial knowledge is the key for the success in the stock market. You need to understand the fundamentals before entering the stock world.
The fundamental requirements for purchasing a stock in stock market are:
(i) Stock Broker:
A person can’t go directly to a stock exchange and buy/sell stocks. Only members of the stock exchange can buy and sell the stocks and they are called the brokers. Every broker should be registered on the Securities and exchange board of India (SEBI). There are a number of brokers/ sub-brokers which you can choose for trading.
(ii) Saving Account:
Obviously you need a savings account for trading in the stock market.
(iii) Demat Account:
It’s very simple to open a Demat account. Now a day, the banks even offer you to open 3-in-1 account, i.e. all three Saving+ Demat+ Trading account by filling few forms just once. 3-in-1 account will save your timing a lot and I recommend you to open a 3-in-1 account if you want to start trading in the stocks.
Predicting the rise or fall of a particular stock or share is very difficult. The key to gain profit in the market is to create a diversified portfolio of stocks from different sectors and hold them for the long-term. It is generally seen that over a long period of time stocks as a whole tend to rise.