Share market, also referred to as equity market and stock market, is the collection of buyers and sellers of stocks representing ownership claims on business organizations. These include securities listed on a public stock exchange and stocks that are privately traded.
A stock exchange, also referred to as security exchange and bourse, is a facility where stock brokers and traders are enabled to buy and sell securities like shares, bonds and other financial instruments. Stock exchanges like NSE and BSE also offer facilities to issue and redeem such securities.
Securities that are traded on a stock exchange include stocks issued by listed companies, derivatives, unit trusts, bonds and pooled investment products. Stock exchanges function as a continuous market with buyers and sellers making transactions at a central location. Most stock exchanges use electronic trading platforms where buying and selling of shares takes place in seconds, replacing open outcry system.
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SEE ALSO: What Is Share Market?
As a beginner, the process of investing and trading in stock markets might seem complicated as it demands opening a certain set of accounts and the procedure is a very tedious one.
You must follow the below mentioned steps to invest in share market:
To invest in share market, you must have permanent account number or PAN card. The Reserve Bank of India RBI, has mandated possession of PAN to make financial transactions in India. This applies to stock markets as well. Previously, Aadhaar was also compulsory to trade in the share market. Aadhaar is no longer compulsory.
Your PAN card must be error free. If you already have PAN card but with errors, you must apply and get the errors rectified at the earliest to invest in the share market.
Below mentioned are the steps to apply for PAN card:
Following documents are generally accepted as identity proof: Voter ID, Aadhaar Card, Valid Passport, Valid Driving License, Ration Card and so on.
Following documents are generally accepted as address proof: Bank Passbook, Telephone Bills, Gas Connection Bill, Electricity Bill, Water Supply Bill, Property Tax Assessment and so on.
For further details, you can refer to https://www.incometaxindia.gov.in/Documents/documents-required-for-pan.pdf
If your PAN card has mistakes, then you must follow the steps below:
Refer https://www.incometaxindia.gov.in/Documents/documents-required-for-pan.pdf for more details.
Stock markets are not a place / website where one can just walk in / log on and start buying and selling shares. Stocks can be bought and sold only through stock brokers. Securities and Exchange Board of India, SEBI, has authorized /licensed individuals and organizations for stock broking. The stocks can be bought and sold only through these authorized bodies/individuals.
There are a lot of authorized stockbrokers and you must select the most suitable broker based on convenience. It is advisable to select the broker who charges just commission and not the one who charges a certain percentage on each transaction. You can check the list of SEBI licensed brokerage firms at https://www.sebi.gov.in/sebiweb/other/OtherAction.do?doRecognisedFpi=yes&intmId=31.
After connecting with a stockbroker, the next thing you must do is open a Demat and trading account. Demat account is an account that allows investors store shares in electronic form. Demat account must be quoted on all transactions to enable electronic settlement of trades. Each shareholder has a dematerialized account for trading. Access to the dematerialized accounts is enabled through internet password and transaction password.
Whenever you buy and sell shares, the number of shares will be credited and debited respectively to and from the demat account. Shares would be stored in digital and dematerialized format. Do Note that shares are not issued in the physical form anymore.
Whenever you buy or sell shares in the share market, the number of shares will be credited and debited to and from your Demat account.
Demat account is similar to bank account. You can store shares in demat account. This process of selling and buying shares is done by stockbrokers through demat account.
Your demat account must be linked to a bank account. When you buy shares, money is debited from the bank account and when you sell shares, the money is credited to the bank account. The money is debited or credited on the basis of number of shares bought or sold. If you don’t have a bank account, you must follow the below mentioned steps to open a bank account:
All investors that are involved in a single transaction of more than Rs 1 Lakh would have to quote unique identification number or UIN. If you are planning to be a prominent stock market investor and expect deals of large amounts, then you must have a unique identification number. Without UIN, you are not allowed to place transactions worth more than Rs 1 Lakh.
You must follow the below mentioned steps to obtain UIN:
Take along the original and a photocopy of any one of these documents.
After completing formalities and documentation, you can start trading, which is buying and selling shares. The trading in Indian share market is enabled through a stockbroker.
You would have to inform your stockbroker about the name of the company, entry price and the total number of shares that you wish to buy. For example, if you want to buy 1,000 shares of ABC company at Rs 500, which currently is trading at Rs 450, then you can inform your stockbroker to buy 1,000 shares as soon as the price hits Rs 500.
Another example of this would be: if you want to sell your 1,000 shares of the same company ABC at Rs 700 which is currently trading at Rs 600, then you can inform your stockbroker to sell the shares the moment they hit the Rs 700 mark.
If the buy or sell order breaches expiry date, then your stockbroker would cancel the order and let you know on the same. You would have to replace the order once it expires.
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