Learn how to Start Investing in the Indian Stock Market: A Professional Way to Profit

How to Start Investing in the Indian Stock Market: Generally, equity shares and commodities like gold and silver are the most famous and common options for investing in India. If you want to do investment, then the first question that comes to your mind

“How to Start Investing in the Indian Stock Market?”

In this article, we tried to give complete information on Investing. That will definitely help the new investors in India.

We all are aware of the power of compounding. Investing is one of the great examples of application compounding. In India, so many people are aware of the stock market and actively precepting in the stock market. If you also want to start investing don’t lose this opportunity. Here we will discuss all from scratch.

In front of a crowd just say “Aj market kaisa hai?” means “how is the market today?”. Then so many people come towards you and start giving you free advice. They will tell you “buy this share”, “sell this share”, “tomorrow market will open positive” and more. Even they have no idea about investing and the stock market.

So many people are misguiding people regarding the stock market. If you decide to start investing on your own then you are in right place.

What is Stock Market/ Share Market?

Before understanding the stock market or share market you should know what is
shares. To start or grow any business there is a Capital requirement. The company is divided into many parts that we called shares that are sold to investors called shareholders.

Imagine there is a person called Mr. A who owns a company called ABC the valuation of the company is 50 lacs and now Mr. A wants to grow his business but Mr. A does not have 50 lacs so he hires an investment bank to raise funds through IPO. Where face value is predefined by the company. Investors having a positive approach to the company will buy these shares and Mr. X will get his 50 lakh rupees for business and the shareholders i.e. Investors will get shares of the company.

how do shareholders earn Profit?

A shareholder can profit in two ways initially when companies grow is cash flows increase and the market value of the company increases this is called share price which will give you a capital gain. another way in which a shareholder gain profit is through corporate actions. corporate actions generally consist of dividend payouts, bonuses, right issue, and splits

What is NSE & BSE?

Whenever you want to trade or exchange shares you would require a market. A place where buyer and seller can do transactions. In India National Stock Exchange and Bombay stock exchange provide that platform.

The 2 most popular markets in India is National Stock Exchange and Bombay Stock Exchange. Other than these two Kolkata stock exchanges, Pune stock exchange, Madras stock exchange, etc are also stock exchanges but are less popular. These exchanges are regulated by the securities exchange board of India.

The aggregate up and down of companies in the National Stock Exchange is denoted by Nifty and similarly, Sensex represents the Bombay Stock Exchange.

Comparison between National stock exchange and Bombay Stock Exchange

National Stock Exchange and Bombay Stock Exchange both are located in Mumbai at the Dalal Street.NSE was founded in 1992 the chairperson of NSE is Girish Chandra Chaturvedi and the CEO is Vikram Limaye. NSE is a private body. BSE was started in 1875,  the founder of  BSE is Premchand who was a successful businessman of the 19th century.  Its Chairperson is Vikramajeet Sen and CEO of Bombay Stock Exchange Ashish Kumar Chauhan.  Bombay Stock Exchange is not only India’s but Asia’s oldest stock exchange.

National Stock Exchange was the first to implement computerized technology since its opening in 1992. Getting inspired by a National Stock Exchange, BSE also implemented modern technology in 1995.

There are around 5400 companies on the Bombay Stock Exchange and around 1700 companies on National Stock Exchange. This difference between the numbers of companies listed is due rules of the Bombay Stock Exchange and the National Stock Exchange. Relatively Bombay Stock Exchange has easy rules to get listed on Exchange comparatively to National Stock Exchange. That’s why there are fewer companies on NSE than BSE.

BSE is already a public listed company while NSE is a private limited company.

The turnover of the National stock exchange is much higher than the Bombay Stock Exchange. Around 80% of shares are traded on National Stock Exchange.  Globally  NSE ranks 10th and 11th.

For long-term investing in the Indian stock market, you could follow BSE as more new companies are listed there and chance more that they will grow in the future, and for short-term investing or trading you should use National Stock Exchange as their services are more and volume traded is also high.

If you want more information to understand the meaning of Nifty and Sensex then we already write a brief article on this topic you can check it out. That will definitely help you to Start Investing in the Indian Stock Market.

Why should you start investing in the Indian Stock Market?

The stock market provides some of the best investing opportunities comparatively.

The stock market was always been in a long run since the past. If you buy a good company or purchased stock based on value investing in your 20’s-30’s and hold it till its business is ongoing, you would get a fantastic return. Because here you are giving your investment time to grow and the power of compounding will work for you.

Following are some Bold reasons to invest in the Stock Market.

  • To beat the inflation
  • If you invest, money work for you
  • You can start with little money, as money is required to buy Pizza.
  • You don’t need to be a Genius. You don’t need to be a rocket scientist.
  • Stocks are easy to invest in
  • Less tax deduction
  • You can create a second income source
  • Power of compounding
  • Invest for Retirement plans
  • Invest in Dividend stocks for a steady income source

If you want more information on “Top Reasons why should you invest in Stock Market?” then you can read this article.

How to start investing in the Indian Stock Market?

If you want to Start Investing in the Indian Stock Market then there are mainly two methods which are described below.

1) Investing through Primary Market (IPOs)

If any company require funds to run or expand their company then they have two option. Either they will take loans from banks or share stakes with their partners.

But if they take a loan from a bank then they have to pay high interest on that funds.

If they distribute their shares with their partners then they don’t need to do so. They have only distributed their profit to their shareholders.

Company promoters can either sell their stakes off-market or on market. If promoters are ready to sell their stakes off-market then you can buy their shares by contacting them.

Or If a company is listed on the open stock market then you can buy shares with the help of stockbrokers.

Before that company must be listed on the stock market. The process of listing the company on the stock market called is “Initial public offering(IPO)”. Simply you can invest your money in the primary market with the help of IPOs.

If you want to buy shares from the primary market then you have to subscribe IOPs. Those IPOs remain open for 3 days. Here is a complete guide on how to apply for IPOs.

READ MORE – Helps to Start Investing in the Indian Stock Market

How to Increase Chances of IPO Allotment? Not Getting IPO Allotment

Things to Check before Applying for IPOs. For Short and Long Term Both.

2)Investing through Secondary Market

A place where shares are exchanged on daily basis is called a secondary market. After the process of IPOs company list on the secondary market. In the secondary market, there are transactions occurred between the customers and not the company. The secondary market has two components mainly the spot market and the futures market.

Things Require before you Start Investing in the Indian Stock market.

Before start investing in the share market, you need a few requirements, I will mention them first. Here are a few things you will require to start investing.

  1. Bank account
  2. Demat & Trading account
  3. Computer/Laptop/Mobile
  4. Internet connection (As usual)
  5. Some documents like identity/address/income proof

First, you need to open your Demat and trading account (all in one). You need the following document to open an account

  1. PAN Card
  2. Aadhar Card
  3. Bank statement/Canceled cheque/ Passbook
  4. Passport size photo

Now the big question is where to open Demat and trading account, we will discuss it in the upcoming paragraph

Some advice before you start investing

When people come to the stock market they come with a lot of dreams and desires. They want to make lakh of rupees in few days, which is not true.

You may hear 100’s of people make huge wealth from the market while 1000’s of people do not.

90% of people lose money in the stock market while 10% of people make huge money from the market. To become part of 10% here are some cautionary points.

Clear your “High-interest” debts

It is very important to clear your all high-interest debts before start investing. If you have taken any personal loans, credit card dues, etc then first clear them all because their interest may be higher than your profit return. If you make an investment in the market and you get a good return but you are paying all profit to fill your debts then that does not make any sense. So clear your debts before entering the stock market.

Invest only when you have extra surplus fund

If your parent give you money for tuition fees, or you have to do your daughter’s marriage next month or any other reasons. If you invest this emergency money in the stock market or any other asset then it is not good. May your investment can give you negative results for short period.

So always remember never to invest your emergency fund in the stock market. Always invest money when you have a surplus amount of money.

Keep extra cash in your hand

Always remember never to invest your all money at the same time. Keep some cash in your hand for some emergency purpose. When you keep some cash in your hand you feel financial freedom.

You have seen that the best investment opportunity comes when the market falls or generally there is a period of decision that time the valuable companies are available at cheap price for less than what they act what their value is. This is the point where value investment comes. But it is hard to predict whether when the will recession come in the unlikely event that is going to hit the stock market, so you should always keep extra cash with you to invest add search for golden opportunities.

Diversification of investment products

The stock market is not the only financial instrument that we have. Out of your surplus cash that you have decided to put for investment try to diversify in indifferent instruments like fixed deposits, mutual funds, bonds, cryptocurrencies, etc to reduce the risk. to start investing in the Indian stock market?

Steps to start investing in the Indian stock market?

Step 1: Fix your investment goal

It is very important to start any work with a defined goal. it is also applicable in terms of investment. Know what you want.

Do you want to increase your saving by beating inflation? Do you want a passive income from dividends? Or do you just want to invest for fun along with creating wealth?

Step 2: Start reading investing books.

We all want to know more about the stock market share market and for this, we are ready to dedicate our time also but before directly reading books on the share market you should first know about the basic principles of money and principles on which the share market is based upon.

No doubt books are the best way to learn stock market investment. But if you want to learn it by watching some entertaining movies then here is a list of Top Stock Market Movies & web series.

If you directly start to know what is how to buy the shares, which company to invest coma which is the best share, which company is worst or with excellent future, how price varies in stock market etc then there are more chances that you’re fundamentals won’t be clear as much.

Before reading about share market you should understand how money work, how currency values parse appreciated or depreciated, how economy work, how compounding work, what is the effects of saving, you should know about every detail related to money and this is the most important thing you should know. For this the best book that would give you insight about money are

1. Rich dad poor dad by Robert Kiyosaki

This book will tell you how rich people become rich, how to rich become, How rich people think, how rich people work every day, what rich people do differently than money gets attracted to them.

2. Think and grow rich

This book will give you confidence that you could also become a millionaire one day, you can also become successful one day and you can achieve what you want. This will be a filthy good book for motivation.

3. The Dhando investor

This book will tell you how the Gujarati people migrate to America and successfully created the business there even when they do not have much capital with them. This book will also tell you how business is started, how it become successful and how you can also find such companies in share market which will become successful in upcoming future. As the author of the book is Indian the content and examples discussed in the books are very much related to Indians.

4. learn to earn by Peter lynch

Every trader in the stock market should take this book. It tells How to pick the share, how to differentiate between good and bad company, how to find a new company and all the confusion that beginner has are covered in this book.

There are more than 100 decent books available to learn investing. I suggest some books become a master in investing for beginners.

If you want more brief information on the top investing books then you can check this article.

Step 3: Fundamental Analysis for investing in the stock market

Generally, you have heard that the famous long-term investor has invested in the company only after doing its fundamental analysis. The biggest investor in the world like Warren Buffett, etc invest only after doing fundamental analysis. But you would always think about what is actually fundamental analysis?

We will learn what is fundamental analysis? In how many ways fundamental analysis is done? What is being analyzed in fundamental analysis?

There are basically two types of people in the stock market

1 trader

Traders basically observe the movement of the stock price on the chart and make buying and selling regularly.

2 investor

Investors who not just look at the price of the company but considered the business plan of it while investing.

While the process of understanding the business of companies is called fundamental analysis. The fundamental analysis simply means looking at fundamental that is business, profit, studying the present condition of the company, and predicting the future growth of the company. Every investor should make a fundamental analysis of the company before investing.

Fundamental analysis of a Company is done on two bases quantitative analysis and qualitative analysis.

1 Qualitative fundamental analysis

Here we analyze things, which cannot be quantified or cannot be denoted in numbers. For example, how is the business model of a company? How are the services of companies? Our services are goods or bad? Does the company have any competitive edge over competitors? How is the management of the company? What are the plans of companies for their growth? What is the brand image of the company etc?

In qualitative analysis, our main goal should be to understand more about the company and its business plan. The main drawback of qualitative analysis is it can vary from person to person.

2 Quantitative fundamental analysis

The main part of quantitative analysis is understanding the balance sheet and financial statement of a company.  In the financial statements the balance sheet, income statement, and cash flow statement are studied for analysis. Financial ratios were also seen in quantitative analysis which tells more about the financial health and profitability of a business.

Example price to earnings ratio, debt to equity ratio, return on equity, return on capital employed, return on assets, return on equity, price to book ratio, and many more such ratios.

In quantitative analysis, you learn hard facts about the company because in this we analyze every factor based on numbers. There is a similarity of opinion regarding quantity analysis of a company.

If you want to become a good investor you should understand fundamental analysis in depth. In long-term investment, you only profited when the company you have invested in becomes profitable and it becomes valuable concerning time.

Step 4: Technical Analysis for investing in stock market

In the history of the stock market, the study of technical analysis is most liked by the investors. Reading and interpreting technicals for stock analysis is comparatively easier than fundamental analysis.

Here we will learn more about what is technical analysis? what is the basic theory of technical analysis? who developed technical analysis? and how does technical analysis work?

What is technical analysis?

When we trade in the stock market we just look at the price of it and trade. And in short term, we can earn spectacular income through differences in stock prices. But in short term the price of shares changes rapidly, so how do we get an idea about at which price we should buy and sell. Exactly to solve this problem technical analysis helps us out. With the help of technical analysis, we studied the price history of a particular stock and predict the future movement.

what is basic theory of technical analysis?

The basic cover the three basic assumptions of technical analysis are

1 Market discounts everything

at any point in time, the price of the share price of the company is already discounted with all the news regarding it.

2 Stock prices move in trend

It assumes that every share price always rises or falls in trend and assumes that the prices will move in the current trend further. Trends are defined in the short term, medium-term and long term. This train is also classified as an uptrend, downtrend, and sideways trend.

In an uptrend the share price rises in a particular pattern.

In a downtrend, share prices decrease in a particular pattern.

While in sideways trend the price remains in a range.

3 History tends to repeat itself

Technical analysis assumes that in stock market history is repeated. This means that if the share price of the company in the past changes in a particular pattern then there is more chance that this time also the prices will change in the same pattern. It is believed that prices are changed due to the emotions of investors and traders.

If you want to use technical analysis then these 3 points are the key assumptions to it and you should also consider them.

Who developed technical analysis?

Technical analysis was first considered by Joseph di la Vega in 1688 in his book confusion of confusions. But the technical analysis was initially started by Japanese rice businessman Honma Munehisa in 1755 in his book the fountain of gold. In today’s world, the modern technical analysis theory is based on the Dow theory which was published in 225 Wall Street Journal editorial article by Charles Dow.

How to use technical analysis? In technical analysis, three major things are considered. Historical trend, Candle Chart or line chart, and technicals of stocks. Always remember in the stock market we cannot predict the future. There is a Limitation of the technical analysis as it only tells the most probable moment of stock prices and not the actual moment.

Step 5: Choose Stockbroker

To invest in the stock market or to buy shares or sell shares or even trade in the stock market or exchange you would require a broker who will provide you with a DP account and a trading account. There are so many stockbrokers available in India you have to choose very wisely. Mainly there are two types of stockbroker.

  1. Discount broker
  2. Full-service broker

Full-service broker

Full-service brokers are the broker who provides you some advice and research for investment and trading. They charge more brokerage and charge per trade than Discount brokers. A full-service broker generally provides the stock advisory facility, margin money, investment in IPO, and portfolio management services. They also charge very high brokerage.

Some examples of Full-service brokers are ICICIDirect, HDFC Sec, Sharekhan, Motilal Oswal, etc

Discount broker

This broker does not provide any advice to their clients, they are a “do your self” type broker. Discount brokers provide low brokerage and low charges compare to full-service brokers. They have high-speed and decent trading platforms.  Unlike full-service broker discounts, brokers charge very low brokerage. Moreover, they provide only a share trading platform and low brokerage. They Did do not provide any of the services that full-service brokers provide.

How to choose a best broker.

1 stockbrokers reputation

Get reviews about your broker. Find out its reputation, its trustability, how many active clients do broker has, and also the happy active client. You can also check when the broker is introduced in the market, its history, and service review.

All the information can be access at www.sebi.gov.in

2 Brokerage charge

The second most important thing you must consider is how much brokerage the broker is going to charge you for your trading. try to choose a broker who takes low brokerage and provides good service.

3 Software provided

Having user-friendly trading software is essential. Most of the brokerage trading company has their own trading software. Choose to try to choose a broker who provides you good and user-friendly trading software.

4 3 in one account

Three in one account means saving account, Demat account, and trading account at the same place or with the same broker. Most banks provide 3 in one account but they charge a heavy brokerage. Example ICI bank, HDFC Bank, SBI bank, etc.

5 Margin facility

Most of the brokers try to provide margin. If you want to trade shares by giving a low price then you should choose a broker who provides a high margin.

Examples: Zerodha, Upstox, 5-PAISA, Groww, etc

I highly recommend going through a discount broker (like Zerodha). It will provide you low brokerage and a high-speed platform.

How to Open an Account in Zerodha?

Documents required to open a Demat account at Zerodha.

Following are the documents required to open a Demat and trading account at Zerodha. I’ll suggest you to maintaining soft copies of all these documents. 

  • PAN CARD
  • Aadhar Card
  • Canceled cheque/ Bank statement
  • Your Signature on a chunk of paper
  • Passport size pic

*Non-compulsory– Earnings proof:  It’s necessary to submit earnings proof if you want to work in Futures and options – Equity, Commodity, and Currency pairs. You may submit Form-16, IT acknowledgment copy, 6-month Bank statement, or your newest salary slip as proof. Anyways, ignore this doc in case you are planning to invest only in equity, not in derivatives, commodities, or currency.

Account opening charges

  • Demat and Trading Account: Rs 200
  • Commodity Account: Rs 100

(Notice: That is the Revised account opening expenses up to date in FEB2021 by Zerodha)

If you wish to trade in both, then you might want to pay an account opening cost of Rs 200+Rs 100 = Rs 300.

Now, there are two methods to open a Demat and trading account at Zerodha:

  • On-line
  • Offline

With the help of the following online method, you can open your account with Zerodha only in15 minutes if in case you have all the required documents.

Open your Demat account at Zerodha

Direct link

Click here

Here you will find a complete guide on how to open an account at Zerodha. That will help you to Start Investing in the Indian Stock Market.

Step 6: Start researching common stock and invest.

This is a very important step in investing. If you can find good stocks then your 50% of the work done. If you are a beginner in the stock market then you can start investing with blue-chip stocks.

If you don’t know what is Bluechip stock then here you will get complete information on Blue Chip Stocks in India for long-term Investment. I will give some names of Bluechip stocks below.

  • 1. Reliance Industries Ltd
  • 2. HDFC Bank
  • 3. Hindustan Unilever (HUL)
  • 4. Tata Consultancy Services (TCS)
  • 5. Asian Paints
  • 6. ITC
  • 7. Infosys
  • 8. Housing Development Finance Corporation Ltd (HDFC)
  • 9. Eicher Motors
  • 10. ICICI Bank

You can also start investing with Monopoly Companies shares. Here is a list of the Top 10 Indian Monopoly Companies. That will definitely help you to Start Investing in the Indian Stock Market.

Step 7: Have a good exit plan

This is always good to have an exit plan. There are two ways to exit from the market either by profit booking or cutting loss.

There are some scenarios when you sell your stocks. When you complete your investment goals, or when you badly need funds, or when you find better stock to invest in, or when the company contently making losses.

Always keep a good exit plan before start investing.

How to buy Share on Zerodha?

Buying shares on Zerodha is very simple. “Swipe to buy feature” is really satisfying😃

Step 1: Log in to your Zerodha Kite application. Add funds to your account. Go Market watch. Add stock you want to buy.

Start Investing in the Indian Stock Market

Step 2: Click on the stock you want to buy. Here I take the example of Reliance share. Then click on Buy.

Step 3: Type the number of stock quantities to want to buy. Here we discuss the topic on Long term investment so we will select CNC (Cash and carry). If you want to do intraday trading(Same day buy and sell) then you can select MIS (Margin Intraday Square Off)

Step 4: After selecting CNC select market order, If you want to buy shares on the current market price or you can select a limit order if you want to buy the stock at a specific price. You can select order at your convince.

Step 5: Keep other settings as they are. Then simply swipe right to buy stocks. Congratulation you successfully buy your first share very easily.

Your purchased share will visible in your position portfolio on the same day. The next day you can able to see it on your holding portfolio. After a period of two days, the share will completely be transferred to your Demat account.

Common Investing Mistake

When an investor starts investing in Stock Market then he do lots of beginner mistakes. I personally do some mistakes I correct them all. I write a brief article on “Top 8 Common Investing Mistakes that Every Beginner should Avoid” which you can check out.

Here are some bold points from that article. That will guide to start investing in the Indian stock market.

  • Investing with a lack of knowledge
  • Ignoring the diversification of portfolio
  • shifting from one strategy to another
  • Investing when the cycle is turned
  • Investing more in Penny Stocks without research
  • Inflation is not taken into consideration
  • Following crowd and market gurus
  • Stop loss is not predetermined

What are the best Investing Strategies?

Any strategy is no right or wrong. You have to choose your strategy according to your risk-taking capacity, age, and goals.

1. Value Investing
2. Growth Investing
3. Conservative Investing
4. Income Investing
5. Aggressive Investing

What is Value Investing?

Value investing is an investment strategy that seeks to make a profit from figuring out undervalued shares. It’s primarily based on the concept that every share has intrinsic value, i.e. what its actual price is.
By fundamental analysis of share, we can decide what this intrinsic value is. The idea in value-investing is to purchase shares that trade at a big low cost to their intrinsic values (i.e. they’re cheaper than their true price). As soon as we purchase an undervalued share, the share value ultimately rises in direction of its intrinsic value and makes a nice profit for us within the course.
Value investing is basically easy, although requires effort to implement. The analysis process focuses on discovering out the intrinsic value of a share and the first tool for researching share is named fundamental analysis.

If you want brief information on value investing click here. You can easily Start Investing in the Indian Stock Market.

What is the difference between trading and Investing?

a)Investing: Here individuals buy stocks and hold for the long-term period in the hope of profit. Usually, this time period may be 6 months, 1 year, 5 years as per the decision of the investor. Here investors buy undervalued shares and hold for the long term or buy growth stocks and wait until the share gives enough profit.

b)Trading: Here individuals buy shares for a short period of time. Mostly this strategy is followed by intraday traders and swing traders. Mainly traders focus on small price fluctuation.

Hope you like this article on “How to Start Investing in the Indian Stock Market”. If I miss any important point then without hesitating comment below I will definitely look at that.

Don’t forget to share with your friend. Your one share can enrich their knowledge. That will satisfy our aim of spread investment awareness all over India.

Thank you!

Happy Investing!

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Yadav Patle
Hello, I am Yadav Patle. Civil Engineer by education. Stock market investor. I can guide you to start investing in a very simple language. Want to know more click here.

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