Beginners, who want to invest in the stock market in India, keep looking for suggestions everywhere and there are people who share their opinions across. However, such investments need proper guidance and information from some credible sources. In order to help the beginners who are planning to invest in stocks in India, here is a guide mentioning some important steps and recommendations:
1. Get a PAN card:
PAN or Permanent Account Number is one of the basic requirements for those who want to begin with any financial transaction in India. PAN card has unique 10 digits alpha-numeric number. This number is unique to every individual having a PAN card. Also, the tax authorities assign this card to people in India so that they can access their tax liabilities. Apart from investing in bank accounts, this card is required to open a bank account, invest in mutual funds, or even file the income tax returns, etc. So, getting a PAN card comprises the first and foremost step towards initiating the investment in the stock market in India.
2. A Broker is required:
Individuals have no direct access to the stock market. In order to buy or sell stocks as well as shares, we need a channel. These channels or the authorised people who can directly buy or sell shares are termed as brokers. A broker is a term which can refer to an individual or a company as a whole. Also, there are some online agencies which act as brokers. These are all registered and issued the licence by the regulatory body of the share market in the country which is SEBI or Securities and Exchanges Board of India. So, getting a reliable, authorised, and licensed broker from SEBI constitutes the next important step.
3. Get a Trading and Demat account:
Demat account has the record of all the shares which are in the name of the account holder and it is reflected in the stock portfolio of the same account. Shares are not to be held in physical forms rather they are in the Demat state. And Demat accounts stores the shares, be it selling or buying, either of the activities is reflected in the Demat account. Every time you buy a share, it will be updated on the portfolio of the account and there are no physical certificates for the same.
In order to facilitate the buying and selling process, there is another account which is called as the trading account. Usually brokers take care of these accounts as well. Since, the trading as well as Demat accounts are used simultaneously, brokers, be it an individual, an online firm, or a company, opens it for the investor.
4. Depository Participant:
The two depositories present in the country are NSDL or National Securities Depository Limited and CDSL or Central Depository Services Limited. The agents of these two depositories are the Depository Participants. They are the ones who give an account to hold the shares which are held by you. This is different from the Demat and Trading accounts as they have the information regarding the number of shares and buying as well as selling activity records respectively. However, the Depository Participants hold the shares purchased by you as well as resale the shares sold by you. The broker takes care of this as well, nevertheless, it is required that you have the basic information regarding the same.
5. UIN for big investments:
People who want to trade above Rs. 1, 00, 000, need to get UIN or Unique Identification Number.
Whenever you buy or sell the shares, you need to inform your broker for the same, specifying the quantity as well as the prices of the shares. And this process of buying and selling in India takes place at two exchanges namely Bombay Stock Exchange and National Stock Exchange.