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How to trade in Indian share market?

Stocks, mutual funds, and real estate are some of the popular forms of long-term investments in India especially for salaried individuals. As the stock market is associated with certain amount of risk and uncertainty, people tend to stay away from it. Also, you need to have certain amount of knowledge and information about the basics of the stock market.

Let’s check out some of the basics of the Indian share market.

  • You will need a PAN Card: Permanent Account Number (PAN) is a unique identification number that is assigned to individuals in India. PAN is a mandatory document that is required to conduct all the major financial transactions such as opening a bank account, buying or selling of a property, investing in share markets or mutual funds, among others. You can apply for a PAN card via the NSDL (National Securities Depository Limited) as well as through the UTIITSL (UTI Infrastructure Technology and Services Limited). The application for PAN can be submitted either offline or online. You need to provide address and identification proof for the same.
  • Open a demat account and trading account: In order to start trading in the Indian stock market, you need to have a trading account and a demat account. CDSL and NSDL are the two depositories in the country that provide demat as well as trading accounts to investors. A demat account works like a bank and holds shares in your name as you cannot physically possess them. Once you buy the shares of the company, it will reflect in your investment portfolio. In order to enable seamless fund transfer, the demat account is linked to the your bank savings accounts. Opening a demat account requires documents like PAN card as well as passport or driving licence as address proof. In addition, you will need a trading account to buy and sell shares in the stock market. Trading account acts as an intermediary which facilitates the buying and selling of the shares.
  • Basic Knowledge of the stock market: It is necessary that you keep yourself informed about at least the basic working of a stock market. Get familiar with frequently used terms such as small, mid, large cap, NIFTY, indices, NSE, BSE, 52-week high, etc. You can refer, as they provide a fundamental analysis of the companies listed on the markets. Moreover, first-time investors can take the help from a financial expert for the stock investment decisions. You should invest time in doing research about the company’s history, market share, future plans and even check its competition and more.

Types of stock trading

  • Long-term investment: As the name suggests, in case of long-term investment, the stocks are invested for a longer duration. When you invest for a long term, the stock grows along with the company and offers decent returns. Therefore, it is important that you should be patient and let the stock play its own course. Another advantage of investing for a long-term is that you don’t have to dedicate a lot of time on a daily basis.
  • Intraday trading: In case of intraday trading, the buying and selling of shares have to take place during the market hours. You have to settle all trades before the closing bell. The idea behind trading on a daily basis is to benefit from the price volatility and make a profit. One of the important things to remember while getting into intraday trading is to choose stocks that have high liquidity. However, you must decide when to enter and exit the market. Also, make sure you know about the stock and sector to which it belongs and keep a tab on its developments. Finally, you need to learn the technical analysis of the stock if you want to conduct successful intraday trading.

Things to remember while investing in stocks

  • Set a budget and use only surplus fund: Before foraying into the stock markets, get a clear idea about how much money can you afford to invest at one time. It is important that you understand and evaluate your current financial condition and know your future goals. It is strongly advised that you should use your surplus fund for investing in shares. The stock market is volatile in nature meaning - the rise and fall of the prices are unpredictable. Hence, it is better to invest only the excess funds.  Make sure your investments do not negatively impact your other financial priorities and make you feel burdened under commitments.
  • Have realistic expectations: Make sure you have realistic expectations from your stock investments. Past performance of the stock does not necessarily indicate how it will perform in the near future. Hence, it is important to understand the market before having huge expectations from the stock in which you have invested.
  • Avoid the herd mentality: Don’t get affected by the market noise about a particular stock and buy or sell a stock in a hurry. Avoid imitating stock-based investment decisions as they could not lead to good returns. Make sure you are not investing blindly in a stock without doing thorough research.
  • Factors affecting stock market: Inflation, elections, natural disasters, change in the interest rates, gold and oil prices, social unrest, and others are some of the important factors that affect the stock market resulting in the fluctuation of the share prices.


Final Thoughts

It must be noted that you need to take smart decisions and build your strategy if you want to be a successful investor. Stock market is not a gamble and it requires a lot of research and patience until you see decent returns. The volatility in the stock market is inevitable and hence a disciplined investment approach is a must in order to see good returns from the investments in the longer run. There is no shortcut to success and you have to put in the extra efforts to be a successful investor.

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