We all understand that a share in market parlance is part ownership in a company. So if a company has issued 100 shares and you own 1 share then you own 1% stake in the company. The big question is how to invest in shares and how to invest in share market? Let us also grasp what is stock market, how to invest in share market and how to buy shares in India. Let us also look at equity markets and how to buy shares in Indian equity market.
A stock market is a gathering of buyers and sellers of stocks in a single platform. Before BOLT was introduced in 1995, people used to trade standing in the trading ring. Nowadays, all trading happens in computer terminals at the broker’s office or on the internet. Share market and stock market is one and the same thing.
Before starting to invest in stocks, it is important to learn about what the share market is and how it works. It is where shares of different companies are traded. In India, there are two primary exchanges; the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).
Investment is a key to your safe and secured future. However, to overcome the impact of inflation, investments in plain old financial instruments does not seem to be adequate. To get something extra out of your investments, Share market offers the lucrative opportunity of purchase and trade of securities such as stocks and options. Angel Broking empowers every eager investor to understand the working of the share market by providing information on stock market basics, how to trade, types of financial instruments, and successful trading strategies that offer better returns for you to become someone more than a regular investor.
When a company comes out with an initial public offer (IPO) it is called the primary market. The normal purpose of an IPO is to list the stock in the share market. Once the share gets listed it starts trading in the secondary market. Buying and selling shares is largely like buying and selling any other commodity.
The market determines the price of the share. Normally, share prices go up when the company is growing very fast or it is earning very good profits or it gets new orders. As demand for the stock picks up more investors want to buy the stock at higher prices and that is how the price goes up. Price of share is determined by demand and supply.
Thousands of companies list their shares on the Indian share markets. From these, a few similar stocks are grouped together to form an index. The classification may be on the basis of company size, industry, market capitalization, or other categories. The BSE Sensex includes 30 stocks and the NSE comprises 50 stocks. Others include sector indices like the Bankex, market cap indices like the BSE Midcap or the BSE Small cap, and others.
How to purchase shares offline and how to purchase shares online? 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 telephoning your broker.
The broker helps you execute your buy and sell trades. Brokers typically help buyers find sellers and sellers find buyers. Most brokers will also advise you on what stocks to buy, what stocks to sell and how to invest money in share markets for beginners. They will also assist you in how to trade in stock market. For that service, the broker is paid brokerage.
Any person who is competent to enter into a contract can buy and sell shares in the market. You need to open a trading account with a broker and you can buy and sell shares in the stock market after the trading account is opened?
There is an important difference between the two. Trading account is where you execute your buy and sell trades. The demat account is where your shares are held in custody. When you buy shares in your trading account, your bank account gets debited and your demat account get credited. The reverse is true when you sell shares.
The fundamental difference is that trading refers to short term buying and selling of shares whereas investment refers to long term buying of shares. A trader normally tries to churn the money rapidly whereas the investor tries to buy a good stock in the sharemarket and waits for the stock price to appreciate.
Every order that is executed on the share market must be settled. Buyers receive their shares and sellers receive the sale proceeds. The settlement is the procedure wherein the buyers procure their shares and sellers receive their monies. The rolling settlement is when all trades have to be settled at the end of the day. In other words, the buyer must pay for his purchase and seller delivers the sold shares in one day on the share market. Indian share markets adopt the T+2 settlements, which means the transactions are completed on Day One and the settlement of these trades must be completed within two working days from Day One.
SEBI refers to Securities and Exchange Board of India. Because the bourses have inherent risks, a market regulator is required. The SEBI is provided with this power and has the responsibility of developing as well as regulating the markets. The basic objectives include protecting investor interest, developing the share market, and regulating it’s working.
Both equity market and derivative market are part of the overall stock market. The 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). The F&O market is based on an underlying asset like equity shares.
Fundamental analysis is about understanding the business of the company, its growth prospects, its profitability, its debt etc. Technical analysis focuses more on charts and patterns and tries to find out past patterns to apply for the future. Fundamentals are used more by investors while technicals are used more by traders.
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.
Statutory charges like GST, stamp duty and STT are imposed by either the central or the state government. The broker does not get these payments. The broker just collects these on your behalf and deposits it with the government.