When people decide to start their investment journey, one option for them is the stock market, and a person with a basic knowledge of NIFTY and SENSEX can do well by making the right decision in stock selection.
Investing and trading in stocks would be a goal towards accumulating retirement funds, achieving other financial milestones. Trading in stocks can be also be a good idea for businesses to accumulate financial capital and boost their business growth over time.
Also read: How to start a Demat account in India
The introduction of electronic trading has made the scope of trading open to anyone with a Demat account. That would be the medium used for trading stocks and shares through online platforms.
In order to start trading and investing in the Indian stock market, one needs to initiate the following steps.
Step 1 : Find the right broker
In the Indian Market, the most popularly used platforms for stock exchanges are:
National Stock Exchange (NSE) : The largest stock exchange platform in India
Bombay Stock Exchange (BSE) : first established in 1875, the BSE is the oldest stock exchange platform in all of Asia
Especially for retail traders, to get access to these stock exchanges they will need to register with brokerage firms or Depository Participants (DPs), which requires careful selection because they are ultimately, the medium of all investing activites such as buying, storing and selling stocks in the Indian stock market.
Also read: How to invest in mutual funds
It is recommended to open a Demat and trading account with a SEBI authorised DP, such as Upstox or Zerodha, where the brokerage charges are minimal. One can also start trading and investing in stock market by opening a Demat account with any bank.
Step 2 : Have the required documents ready
For trading in stocks, it is mandatory to open a Demat account to keep a record of the positions digitally. This is also important for DPS as they mediate the process of your eligibility. So make sure you have the following documents ready while opening a trading account,
Permanent Address Proof
e-KYC such as linking Aadhaar card to your trading account online—availing the need to scan your Aadhaar card manually
Additional details like annually income range maybe asked.
Step 3 : Do some company background research
Now, when it comes to buying a share of a company, you should do a thorough background research of the company. Find out the pros and cons to rule out inconsistencies. Consider,
The revenue model they have integrated
Their peers and market pool ratio.
Step 4 : Diversify your portfolio
As an active investor in the stock market maintaining a diverse portfolio widens your reach to other sectors and balances the outlook of your reach. It is recommended to invest in large-cap companies for stable yet small returns. This also applies for mid-cap and small-cap companies, accordingly you should assess and measure like how many stocks you need to invest in and manage your expectations as you monitor the performance of the various stocks in your portfolio.
Keep in mind that the stock market is lucrative. If you invest and generate high returns, you need to notice which principle made that trigger and follow a strategy of your own in order to better understand how the stock market works.