How To Trade in the Indian Share Market

A comprehensive share market guide for beginners

Partial ownership in a company is termed as “Share” in the market language. So, when you own 1 share of a company that has issued 100 shares, it means you are the 1% stakeholder of the Company. Anyone can become a stakeholder but it is important to know how to invest in the share market and the shares. This article will discuss the nature of the stock market and how to invest in the share market, especially how to buy a share in India.

The stock market is where the buyers and sellers assemble in a single platform to sell stocks. People used to trade standing in the trading ring before the existence of Bombay Stock Exchange Online Trading (BOLT) the existence of BOLT in the year 1995. The pattern changed after the arrival of BOLT and these days all trading takes place online or through a computer terminal at a broker’s office. It is important to know that the share market and the stock market are the same things. 

Basics of Indian share market

It is important to learn the basics of the share market and its functionality before starting to invest in shares. India has two major exchanges namely, the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE), where the shares of various companies are traded. Investment is crucial for you to have a safe and secure future. Still, it is not acceptable to invest in plain old financial instruments, to overcome the impact of inflation. Share markets extend the remunerative opportunity of purchase and trade futures such as stocks and options.

Share trading in India

When the company has reached a certain level and the funding’s offered by venture capitals have worn out, the next object of the exercise for the company will be to become India’s biggest company. For that, the company has to go out to the public to raise funds, where they come to this agreement of selling the shares of the company to the public. The public will be able to become a stockholder by buying part ownership of the company for less than the amount of 10 rupees. With this arrangement, the owner is entitled to his dividends, every time the company earns a profit. For instance, the company has invested Rs 5 crore in the business and the commoner has invested Rs 10, the company owns the proportionate share to the particular person.

Equity shares

Equity shares are the certificates issued to the public involved in the trade by investing in a company. Equity shares are non-redeemable and are issued when the company is publicly listed and the people started to trade with the shares of the company. A public listing of a company means, the shares of the company becomes available in the market for equity shares. In India NSE and BSE are the two major marketplaces for equity shares.

Primary and Secondary markets for share trading in India

The Indian share market has two subdivisions in it, which are the Primary and the Secondary market. The primary market allows the public to directly buy the shares from the company that has been newly listed in the share market and distributes its shares. Whereas the secondary market allows the public to trade the shares bought off the primary market. Generally, the secondary market is much more profitable and bigger than the primary market. For instance, if you want to trade in the shares of a company, that has already sold out, by quoting a bigger amount you will be able to bid for the share from the new owners. The new owner of the share, who is willing to sell his shares to you can accept the payment and leave the investment.

Let us give you some valuable tips for share trading in India

Basic things that a stockholder should know are :

• Engage in trading only with intermediaries that are registered with SEBI / Stock exchanges.
• Provide clear and explicit instructions to your agent/broker/agent/depository person. 
• Hold on to the contract notes from your brokers and always insist on them. So that you’ll be able to verify its authenticity on the base website, in case of doubt with the transactions. 
• Always have transactions with the intermediaries through the normal banking channels to settle dues. 
• Research the credentials of the companies, their management, fundamentals, and their recent announcements, various disclosures made under various regulations before placing an order with the market intermediaries, through the information sources like business magazines, the website of Exchange and Companies, database of the data vendor and so on. 
• Never trade with any other unregistered intermediaries, unregistered brokers, or sub-brokers. 
• Never try to carry out any documents with any intermediary in the absence of a complete understanding of its terms and conditions. 
• Should never have blind faith in the reports of media on corporate developments. 
• Should never model themselves on the investment decisions of fellow investors. 
• Should not get deceived by the guarantees of repayment of your investments by way of post-dated cheques.