First Steps to Investing in the Indian Stock Market

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Steps to Investing

Before we start discussing how to start investing or trading or your first steps to investing in the stock market, lets put out a statement – Investing in stock market is like building a relationship. You’d have to keen and deeply interested in it, know as much as you can about it and keep your head high throughout!

You will be excited right at the start, but all it needs is persistence, understanding and patience. This is pretty much any relationship might need as well! Right?

इस विश्लेषण को हिन्दी में पढ़ें

Now, since we have built this establishment, we can dig deep on first Steps to investing or trading and understand what are the potential aspects that you must take care throughout your existence in the stock market.

Step 1 – Get a PAN Card

The first and the foremost step of your journey towards the world of stockbroking is the necessity of a PAN Card. And getting a PAN card in India has never been easier before. All you have to do is:

  • Go to the NSDL website and register yourself by providing your details.
  • Arrange the requisite copies of the documentation including:
    • Identity Proof
    • Address Proof
    • Date of Birth Proof
    • 2 recent photographs
  • Dispatch these documents to the Income-tax PAN services office
  • Once your application gets processed, your PAN card is delivered to your residential address

So, that’s it! Once you get a PAN Card, you are eligible to apply for a Demat account, but before that, you need to choose a stockbroker.

Step 2 – Choose a Stock Broker

In order to choose a stockbroker who can later help you to trade in the stock market, you need to understand how the Indian stock market works. Basically, there are two types of stockbrokers – Full Service and Discount. There are multiple aspects that are crucial before you pin down on a particular stockbroker to go ahead with. These aspects include:

  • Brokerage charges
  • Trading platforms
  • Customer Service
  • Geographical coverage
  • Market research and recommendations
  • Trading Margin limits
  • Range of trading segments available
  • Background and trust factor

At the same time, you would need to be sure whether you are going to be a trader or a long-term investor.

You can refer this article about Top Stock Brokers in India for reference. Once you are sure to go ahead with a particular broker, the next thing you need to do is open a demat account.

If you find narrowing down a particular stockbroker, you can provide your details HERE. We will arrange a free call back to help you in that.

Step 3 – Apply for a Demat Account

Once you have finalized a particular stock broker of your choice, Bravo! Pat yourself on the back because it is one of the trickiest aspects of the whole journey. Now you just need to provide your contact details and pretty much any prominent stock broker will come back with a callback. You would need the following documents to open a Demat account with any SEBI registered stock broker in India:

  • PAN Card (the document from Step 1) with a valid photograph
  • Proof of Address
  • One recent photograph
  • Bank statement
  • Cancelled cheque

For NRIs, these additional documents are required:

  • Copy of RBI Approval through a PIS Permission Letter for the account opened with a designated bank.
  • Passport copy
  • Proof of his / her foreign address
  • Copy of valid visa

Once you have provided these documents to the stockbroker, it generally takes 1-2 business days to open a demat account. You might also be required to transfer money to your trading account to carry out transactions.

Step 4 – Start Studying

Yup! Before you put any capital out there on the market, it definitely makes sense to understand where you are going to put your money. There are so many resources you can rely on to start with. Some of those are listed below:

You need to understand that this step must be taken super seriously. Unless your basics are not correct, there is no point going forward from here. Make it a habit and get a hang of spending few hours a day regularly if you want to get anywhere as far as trading is concerned.

It will take some time, but trust us – this will help you to have strong foundations going forward.

Step 5 – Follow the Market Every day

Yes, once you understand the basics (as mentioned in Step 4), it will become relatively very easy for you to gulp and understand the market dynamics. For a start what you can do it, narrow down on a list of let’s say, 20-30 prominent stocks and start understanding their behaviour. You need to see how these stocks have moved in the past along with the present day movements.

There are so many ways you can track the market including:

  • Online resources
  • TV (just to see how it works, not recommended while taking trading decisions)
  • Newspapers (only to read  what experts have to say on specific subjects)
  • Paid online subscriptions

Once you start understanding the market nuances and even the basic level of hows and whys of market movements, you can move ahead into the practicals! Its time, you test yourself into the world of trading with whatever you have gained by now.

Step 6 – Create your FIRST Strategy

Since by now, you know that you are here for trading (high risk, high returns) and/or investing (low-risk, time taking income-producing stocks) – your strategy of stock picking and other related aspects will go with that thought in mind.

With your first strategy, there is a possibility that you will be nervous, under-confident and so on. However, as long as you believe in the ideas and study behind the strategy you have jogged down – stay invested in it. What is the worse that can happen?

If nothing goes your way, well you will definitely learn a lot. And at the same time, If all things go fine, you will end up making some money. So either way, there is something to gain for you. One thing to remember is – never let your emotions take over while taking a decision.

Try to be as objective as you can.

Step 7 – Keep Tracking & Learning

So once your capital reaches the market, then obviously need to track market movements as per your portfolio along with other potential opportunities. Be wary of any news related to the stocks you have invested in, any industry related changes, any corporate or management related changes, new entrants into the market, potential foreign threats or opportunities and a lot more.

Once you are there and reach an intermediate level understanding (if not advanced), you will actually go beyond all this and even start predicting on your stock performance based on your the technical analysis you come up with.

At the same time, do not get over worried in case of certain movements that may or may not impact anything. Once again, remember not to let your emotions take the front seat.

Mistakes to avoid in Stock Market:

  • Trading without planning or analysis
  • Over-attention to media – TV, newspapers etc
  • Putting all eggs in the same basket – spread your risks
  • Borrowing money for stock market trading – Never do that
  • Jumping on rumours
  • Skipping Step 4 above 🙂

In the end, we would like you to wish you all the best for a great future in the world of trading.

Still, have more questions to get clarified? Why don’t you send your details and we will arrange a Free call back for you!

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