A must-read beginner’s guide to the Indian Stock Market

Health and wealth are two of the most important aspects. As regular exercise and a prudent diet areessential for leading a healthy life, stable investment and suitable options are important for creating wealth. The best and most exciting place to build wealth is the Indian Stock Market. Before you start frowning because the market is not for everyone and is too complicated for an average person, hear this out. 

Yes, the Stock Market can be risky and intimidating, but once you understand the basic concepts, investing in stocks offline or the best Stock Market app is easy as counting your fingers. We have created a simple guide to begin your journey in the stock markets. 

What is Stock Market?

Every registered company has shares, usually owned by the company’s owners and other shareholders. To expand and run their business, companies need capital. One of the ways to access money is by selling shares in the market. Once a company has sold its shares via initial public offering (IPO), theyget further traded. This Share Trading happens in the market

What constitutes the Stock Market?

Itcomprises various players – individuals and institutions – some play key roles and other supporting roles to facilitate trading. There are two market players: one that ensures smooth Share Trading and the other who directly participates in trading.

Market facilitators

SEBI: The Securities and Exchange Board of Indiais the market regulator. It frames laws, monitors daily operations and protects the interest of investors. 

Exchanges:They are marketplaces where everyone gathers to trade shares. There are two most popular stock exchanges: the Bombay Stock Exchange and National Stock Exchange. Besides these, there are other exchanges dedicated to trading commodities: MCX, NCDEX and IEX.  

Brokers: They are members of stock exchanges and your first point of contact if you want to buy or sell shares. Usually, they manage your Trading Account to place buy or sell orders.

Depositories: They are the ones who hold the shares you own through Demat Account. Even the best Stock Market app offers them.Here, the broker links your Trading and Demat Account to ensure a smooth trading experience.  

Other players play supporting roles like clearing corporations, technology providers, etc., who handle back-end processes, but you probably never interact with them ever.

Market participants 

Retail investors:Individuals like you.

Domestic institutional investors:Indian corporate firms who invest in the markets. They could be Insurance companies, Mutual Funds companies, banks, or even your broker. 

HNIs:High net-worth investors are wealthy investors who trade in large amounts. They can also be Indian corporations. Some investment instruments unavailable to retail investors may be available to them. 

FIIs or FPIs: Foreign Institutional Investors are the set of institutional investors who are incorporated outside India. 

What do you need to invest in?

The three basic things you need to trade in the Stock Market are Demat, Trading, and Bank Accounts. These offer a gateway to Stock Markets. Most banks have their broking arm, whichhelps you open Trading and Demat Account. Instead, pick your choice of broker. 

What are the costs associated with trading?

Before you make your first trade, understand how much it costs you. All the market facilitators mentioned, chargean amount for every trade. It depends on what you are buying or selling, but usually, it is limited to a few rupees or 2% of the total transaction amount. The government also charges a small securities transaction tax for every trade. 

What to buy? 

Here, you are spoilt for choices. There are numerous stocks to pick from; there are Exchange-Traded Funds or Commodity and Stock Derivatives. For a beginner, the best option is to invest in ETFs. They are an instrument that tracks an index, for example, Nifty50 or Sensex, which then tracks the movement of some of the most popular stocks. They are less volatile and comparatively less risky. 

If you want to dabble in stocks directly, start with shares of companies owning those brands you are most familiar with, viz., the tea brand you buy every month or motorcycle brand that you see on the road often. Then, read more about the stocks traded in the market and widen your investments after understanding their businesses. 

Disclaimer – ICICI Securities Ltd. (I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. – ICICI Venture House, AppasahebMarathe Marg, Prabhadevi, Mumbai – 400 025, India, Tel No : 022 – 6807 7100. I-Sec is a Member of National Stock Exchange of India Ltd (Member Code :07730), BSE Ltd (Member Code :103) and Member of Multi Commodity Exchange of India Ltd. (Member Code: 56250) and having SEBI registration no. INZ000183631. Name of the Compliance officer (broking): Mr. Anoop Goyal, Contact number: 022-40701000, E-mail address: [email protected]. Investment in securities market are subject to market risks, read all the related documents carefully before investing. The contents herein above shall not be considered as an invitation or persuasion to trade or invest.  I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. The contents herein above are solely for informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments or any other product. Investors should consult their financial advisers whether the product is suitable for them beforetakinganydecision. The contents herein mentioned are solely for informational and educational purpose.

 

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