A BEGINNER’S GUIDE TO ENTERING THE STOCK MARKET IN INDIA

7 Jan 2020

Stock market – one of the most sought-after platforms for income generation in the world. Millions of traders around the world try their hand at this highly competitive and volatile market, engaging either in day trading or mid-long term holding. For the uninitiated, the stock market can seem pretty daunting and it is easy to get overwhelmed by the chaos and aggressive dynamics. However, there is really nothing to worry about as long as you know your basics and have a well-researched risk management strategy in place.

While the stock market can get the best of even the most experienced stock market traders, this doesn’t deter beginners from entering this competitive market. One should not, under any circumstance, start trading without preparation. It is absolutely important to have a good understanding of the budget to work with, followed by a thorough evaluation of the various stocks and analysis of market trends. Estimation can only lead to fast cash depletion. It is advised that you work with an investment advisor, especially when you are placing your first steps in the stock market.

As you gain experience in the market, you will be able to define your own trading or investing style and this will help you to plan your goals accordingly. Like any business, stock market trading requires some preparation before you can proceed with income generation.

For stepping into the stock market, you will need to have your PAN card, AADHAR card and a bank account with enough funds.

There are various steps involved to start trading in the stock market. The steps are as follows

Open a DEMAT Account

The first and foremost step for trading in stock market is the opening of a DEMAT account. Securities and Exchange Board of India (SEBI) has made it mandatory for every trader and investor to have a DEMAT account where securities can be kept in dematerialized form.

DEMAT accounts can be opened through almost all nationalized banks as well as brokers. Different DEMAT accounts are required for all the exchanges, so first decide the exchange in which you would like to trade. NSE and BSE are the two most prominent stock exchanges in India.

Each exchange has an individual depository, where DEMAT account is opened. You cannot directly approach a depository and is thus generally done either through your bank or broker.

Open a TRADING Account

After your DEMAT account is opened, you need to get your trading account with a stockbroker. There are various brokers available and you can shortlist one based on the brokerage charge and services offered. You need to have your basic KYC documents, namely, PAN card, AADHAR card, and cancelled cheque for opening your DEMAT as well as Trading account.

All the trades that you will do in the market with be processed through your broker, so the selection of broker should be done very carefully. You need to pay brokerage on every trade irrespective of your profit or loss.

Risk Profile Analysis

Risk Profile Analysis evaluates your capacity of taking risk after analyzing your income from various sources and liabilities. Many people avoid this step and end up either in debt or in huge financial troubles. You need to plan your investment goals and analyze your risk appetite. There are various companies which are providing Risk Profile Analysis for free. The best way to get this done is to approach investment advisors who will not only analyze your risk appetite but also provide the best route to take when it comes to investing your money in the stock market.  

Selection of Market Segment

Stock Market offers many segments to trade and invest – Equity, Derivatives, Commodities, Options, Futures, etc. The segment should be picked up based on your knowledge and experience as well as your risk appetite. If you are a beginner with no experience and knowledge it is better to take the services of a SEBI registered investment advisor who can guide you on trading and investing in the market. This initial handholding is required to plan your move smartly for managing your risks in a better manner.

Start Investing

Once you are done with the above four steps you are ready to trade. Now all you need to do is transfer the margin amount from your savings account to your trading account and start placing orders with the help of your broker. If you are planning to trade Intraday, your broker will give you a trading limit of leverage which will be far more than your initial margin money.

Your advisor will give you trading signals and recommendations which will help you in selection of stocks and trading.

After you complete all the above steps, you are finally ready to step into the world of stock market.

SEBI is the governing body for stock markets, so you must make sure that your broker as well as advisor is registered with SEBI. In case of any complaint, you can approach SCORES (SEBI Complaint and Redressal System) and report your issue.

HAPPY TRADING!!

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As On 29th February, 2020
Beginning of month Received during the month Resolved during the month Pending at the end of the month Reason for pendency
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