Today we will learn How to Start Stock Trading & Investing in Share market & how beginners can start investing or trading. As a matter of fact Indians are making a rapid shift in their saving patterns from traditional instruments such as gold, real estate and Fixed bank deposits to alternatives like stocks.
In like manner more financial instruments are present now like Bonds, Mutual Funds, derivatives, Equity. As a begginer you might have this question on how to start stock trading and investing? But before you know how, you should first need to learn what is stock trading and investing. How stock trading and investing works in India? How you as a begginer can be part of this jouney of share market? Wether you can enter in stock or share market? Important things to know before you enter in to stock market? etc.
Growth of Stock Market or Share Market In India:
Recent data shows the number of demat accounts, opened in 2018 was the most in at least a decade at 4 million, a 13% increase from the previous year. However if you compare with the total population of India its still very low.
According to SEBI data, the total number of demat accounts rose to 34.8 million in 2018 from 30.8 million in 2017. It shows that a country with population of more than a Billion with median age of 27 years hold enormous potential.
One of the reasons can be the lack of knowledge essentially needed for the Stock market. We are living In a era of digitization, Internet users in India to reach 627 million in 2019, therefore this is the time to invest.
For this reason biggest question arises is how to start Stock Trading in shares & how to start investing in share market? Let us Begin a new journey and understand the in depth about –
What is stock trading?
What is stock market?
How to invest in share market?
How to buy shares? and Learn Basics of Stock Trading & Investing in India?
Difference between stock market and share market ?
“Stock market or share market is a place where shares of public listed companies are traded ”. Stock market brings buyers and sellers of stocks on a single platform. Indian market has a history that goes way back to the 1800s. Earlier, stockbrokers would meet around Banyan trees to conduct trades of stocks.
In 1854 they relocated to dalal street and this is the place where the oldest stock exchange of Asia – Bombay stock exchange (BSE) is now located . In 1993 NSE (National Stock Exchange) was formed. In India, there are two primary exchanges; the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).
Nowadays, all trading happens in computer terminals at the broker’s office or on the internet. A stock may be bought or sold only if it is listed on an exchange (NSE,BSE). The key difference is that a stock market helps you trade financial instruments like bonds, mutual funds, derivatives as well as shares of companies. Whereas share market only allows trading of shares. Share market and stock market is one and the same thing.
Why and How to start Investing in Share Market :
As an illustration assume for a while even If you are saving Rs. 10000 every month for 5 years keeping aside all other aspects like inflation, cost of living, expenses in medical, shopping etc. solely saving will grant you Rs. 6 lakh.
An average person job expectancy nowadays will be about 30 years if he is ready to work from the Age of 25 till 55 years (calculate yourself till how long you want to work). So within a period of 30 years the amount you would save will be around 36 lakh neglecting all other assumption of life like medical emergency, marriage, schooling of children, shopping, going for vacation etc. Not to mention the prices of property and land can we consider ourselves to be living peacefully if our only mode is saving not investing.
This is the reason primary reason to Invest money in share market. The NIFTY50 total return index delivered returns of 15.98% per annum during the previous 10 year period (as on March 29, 2019). There are stocks like MRF ,EICHER MOTORS ,PAGE INDUSTRIES who gave return of more than 100 % P.A.
This Reflects the Power stock market holds. It can manifold your money. This is the reason stock trading & investing is becoming popular day by day.
Owning a share is like holding a portion of the company. Suppose YES BANK issued 100 shares in total & you bought 10 shares than you own 10% of the company. These shares are then traded in the share market.
Primary and Secondary market in india ?
Primary market –
When a company registers itself for the first time to sell its shares and raise funds, it enters the primary market also known as Initial public offering (IPO). This is also called getting listed in a stock exchange. Once it gets listed in public domain on any exchange (NSE , BSE) people can trade.
Secondary market –
Secondary market is the place where already listed companies trades/ sell stocks. Investor or trader can buy or sell shares in secondary market. This the place where most of the trading happens. Here any investor or trader can buy or sell his share at the current prevailing price of a share ,depending up on his strategy.
Who decides share price in india ?
Price of share is determined by demand and supply. Just like normal vegetable market or any other market .The market determines the price of the share. When the company is growing very fast or it is earning very good profits or it gets new orders price of share tend to increase. As demand for the stock picks up more investors would buy the stock at higher prices and that is how the price goes up.
In like manner plunging revenues, Higher financing cost, Declining profit margins or something as simple Management misconduct or slumping sales can bring down the share price. So the price of a share goes up and down with financial condition of a company ,economy of a country and its market participants.
What are Stock Indices?
There are about 5,000 listed companies on the BSE, while NSE has more than 1,600 companies listed on its platform. From these, a few similar stocks are grouped together to form an index. This is done on the basis of company size, industry, market capitalization etc. The BSE Sensex includes 30 stocks and the NSE comprises 50 stocks. Similarly there are other indices as well. Let us see return of different indexes in last 1 year on NSE.
Who can buy and sell shares in the sharemarket ?
Any person who wants to enter into a contract can buy and sell shares in the market. However to do this you need to open a trading account with a broker like Asthatrade & you can buy and sell shares in the stock market after the trading account is opened. Trading account only allows you to trade intraday or day trading . Incase you want to hold your position you will also need DEMAT account.
As an illustration Suppose you researched in market and you think that due to certain policies made by government just now will impact the PSU banks in India. You checked the best banks among all by analyzing fundamentals and technical(what is fundamental & technical Analysis will learn later )of that company. You selected union bank(e.g) stock trading @ Rs. 90, now you can buy this share for a day (termed as intraday) or you can take delivery of the stock and keep it in your demat account. You can hold this position till you want . Assume it reaches Rs. 120 & you bought that @ 90 so Rs. 30 will be your profit per share.
What is offline Stock trading and what is online stock trading?
Earlier to buy and sell stocks you need to visit your stock broker’s office. After that people started call and trade . Now with the current revolution happened in telecom industry, thanks to Reliance Jio anyone can trade sitting from their home ,office or while shopping.
Online trading is all about buying and selling shares on the internet sitting in the comfort of your office or your home. You just need to log into your trading account and you can buy and sell shares. Offline trading is trading by visiting your broker’s office or by calling your broker.
What is the role of a broker in the share market?
A stock broker is your entrance to stock exchanges. Stock broker is the most important and essential part of share market. It’s a corporate organisation registered with SEBI & hold stock broking license. They provide services to an individual starting from opening of a trading & demat account.
The broker helps you execute your buy and sell trades. Some brokers will also advise you on what stocks to buy, what stocks to sell and how to invest money in share markets for beginners. Brokers act as a middleman or mediator between you and exchange.
To open your trading account you cannot go directly to (NSE) National stock exchange‘s office. You can look for broker online or nearby your local area. Just Like at Asthatrade which a discount stock broker facilitate you with easy hassle-free online account opening process.
Difference between trading account & demat account?
As an illustration suppose you buy a share of HDFC from your trading account through call to your broker or by using a terminal. Once bought and the transaction is completed the work of trading account is finished. This shares you bought will require a place to get stored, now this shares will get stored in your Demat account.
So whenever you want to sell your shares, you can easily sell those from your trading account and it gets debited from your Demat account. Trading account is where you execute your buy and sell trades. The demat account is where your shares are held.
There are two depositories offering you DEMAT account & there is no difference in terms of operation.
- National Securities Depository Limited (NSDL)
- Central Depository Services (India) Limited (CDSL)
A Depository is a financial intermediary which offers the service of Demat account. No you do not need to go to them directly for opening Demat account. Just contact your broker where your trading account is opened or you are about to open.
Difference between Stock trading and investing ?
Primarily trading refers to short term buying and selling of shares whereas investment refers to long term buying of shares. In stock market if you buy or sell shares or other financial instruments within the day ,it is termed as intraday trading or day trading . Day trading or intraday is kind of trading style in the market .
The basic intention of a trader is to benefit from the movements made by a stock within market hours in a day. Whereas the investor tries to buy a good stock in the sharemarket and waits for the stock price to appreciate with time. He holds his position in market for 2 ,5 ,10 or sometime forever.
What is SEBI(Securities and Exchange Board of India)?
SEBI refers to Securities and Exchange Board of India. In India SEBI (Securities and Exchange Board of India) is a Market Regulator.
Essentially SEBI primary objective is to protect the interests of people in the stock market and provide a wholesome environment for market participants.
Difference between equity market and the derivative market?
There are various segments available to trade in share market. Both equity market and derivative market are part of the overall stock market. Major difference lies in the products traded.
The equity market deals in shares and stocks whereas the derivative market deals in futures and options (F&O). A derivative is an instrument whose value is derived from the value of one or more underlying assets . This can be stocks ,commodities, metals, currencies, bonds, stocks indices, etc.
The financial derivatives in India has a long history. Derivatives are convenient way to speculate future price and garner the profits .Although it can be risky at times if no research been done .
How You can invest with little money in India in the share market?
Instead of keeping money in your bank account or spend it in market it is better to start investing early. 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.50/- and you just buy 1 share then you just need to invest Rs.50 (excluding Brokerage & Govt. taxes which is very minimal).
It completely depends upon your risk taking appetite. High risk & higher return as in any other business. But beware you might need to do lot of research if you are investing by yourself. For Beginners it is very important to learn the basics of stock market . If you are newbie in share market it is better to start with less and gradually with experience move ahead. Read good investing books, articles, blogs etc. to increase your knowledge.
Share Market Timings in India :
- 9 am to 9.15 am – Pre-market
- 9.15 am to 3.30 pm – Normal trading
- 3.40 pm to 4.00 pm – Post-market
- Internationally Referenceable Non-Agri Commodities – 9 am to 11.30 pm – during daylight savings time – March to November (9 am to 11.55 pm – November to March)
- Internationally Referenceable Agri Commodities (Cotton, CPO & RBDPMOLEIN) – 09.00 AM to 09.00 PM (9.00 AM to 9.30 PM – November to March)
- All Other Agri Commodities – 09.00 AM to 05.00 PM
” Somethings in life seems complicated and hard until, You make a start “. In other words you would never learn anything just by seeing it, You need to experience it. Therefore start by little & gradually you would know many aspects of stock trading and investing. A whole new world is waiting, you just need to enter.
If you have any suggestions or feedback, kindly leave it in comments.