In this day and age, only one thing seems to stand true: money makes money. The more cash you have, the more cash you’re seemingly able to generate; investments lead to strong financial growth, allowing you to not only build up your own personal wealth, but that of the economy as a whole.
This is perhaps even truer in a country such as India, which is already benefiting from an ever-growing economy. The more money invested into the country, the more it will continue to grow, and the more it grows, the more money it will generate. It’s a win-win situation!
Understandably, you might have an interest in how to buy shares in india; by taking advantage of the constant economic growth, you’ll be in a prime position to benefit from high returns.
Let’s take a look at how you can get started:
Most of the time, when you buy a physical item, you’ll simply head into a shop, pick out what you want and pay. Unfortunately, with stocks and shares, it’s just not that simple; you’ll need to consult a broker.
Brokers can be an individual, a company or an online agency – they’re qualified professionals who have an in-depth understanding of the stock exchange, including any legalities surrounding the purchase or sale of stocks.
The first thing you must do before you can start buying shares in India is to consult a broker.
Your broker will provide you with all of the information you’ll need to begin making targeted, informed decisions.
Once you’ve chosen your brokering platform, you’ll need to open your new accounts.
Understanding trading accounts
You’ll need to open two brand new accounts: a standard trading account, which is used to buy stocks and shares, and a Dem at account, which is designed to hold the shares.
Your trading account will be HOW you pay for stocks and shares. It isn’t like a standard debit card, where you just need to enter a PIN and the money will be sent; it’s more of a ‘middle-man’. Your trading account will serve as an account of all of your investments (or holdings), not just cash, and may also serve as a short-term record of your assets.
Your trading account will facilitate the purchase of any stocks or shares in India, though it will NOT be used to hold any stocks in your name – that’s what your Dem-at account is for.
‘Dem-at’ is simply a shortened version of ‘Dematerialized’. Don’t worry – it’s not as scary as it sounds.
Stocks and shares are not a physical commodity, so they don’t have a material form. You can’t just store them in a box or in a safe, which is why you absolutely need a Dem-at account.
When you buy stocks, they will be converted into a dematerialized state. It might sound complex, but it’s a very similar process to paying cash into your bank; they take the ‘physical’ form of the money, and convert it into a ‘dematerialized’ state.
The dematerialization process will not affect the value of your shares in any way! Your Demat statements, much like a regular bank statement, will display the acquisition or the loss of certain shares within a set time period.
You can open both the Demat and trading accounts when you speak with your broker of choice.
The next crucial step is to open a PAN card, which will serve as a sort of ID for yourself. A PAN card is absolutely essential for any kind of trading activity; it’s a 10-digit number that will be issued by the Income Tax Authorities that will allow them to identify you, track your sales and tax your earnings.
Your PAN card is needed whenever you need to open a new account, and in some cases, it may even be required to authorise high-value transactions.
So, you’ve opened both your trading and your Demat accounts, you’ve received your PAN card, and now you’re ready to make your first transaction.
First of all, you’ll need to identify which stock market to buy or sell on: the Bombay Stock Exchange, or the BSE, or the National Stock Exchange – NSE. It’s generally recommended to consider both options before you make a purchase – once you know how you’d like to proceed, you’ll need to inform your broker which stock you’re interested in, the quantity and which stock market to buy from.