Stock market in India for beginners- basic requirements

Stock market in India for beginners- basic requirements

If you are a beginner in the stock market then there are certain basic requirements that need to get fulfilled before an individual can start the process of buying, holding and selling shares. This blog provides basic information regarding buying and selling of shares in the market. However, the blog is not an advice to you on what type of shares to buy or what should be your investment strategy.

In stock market one should start with 3 basic things, which is needed.

Demat Account

Demat account is similar to your Bank Account, but the difference is that a bank account holds cash whereas a Demat account holds shares. When shares are bought, they get deposited into the buyers Demat account and when they are sold, they are reduced accordingly. Shares which get deposit or reduce from the Demat account are electronic shares. If anyone wishing to trade in shares, it is compulsory to trade only in Demat shares. Physical shares cannot be traded.

Advantages to have Demat shares are-

Open Demat account through GCL Securities Pvt. Ltd. after filling up the required form and providing identity and address proofs. GCL Securities provide free of cost Demat account and no maintenance charges.

Trading Account

A Trading account is required in case when an individual wishes to trade, i.e. buy and sell shares in the stock exchange. The two main stock exchanges in India are the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). You can open a trading account with GCL Securities Pvt. Ltd. after filling up the required forms and providing required information asked. The actual trading can be done by phone, internet or using transaction slips that are provided at the time of opening the account. Buying and selling with the internet is absolutely convenient. There are options to specify the price at which to buy or sell and it is easy to track the status online.

There is a brokerage charge that is incurred for both buying and selling of shares. Besides government levies like the Securities Transaction Tax (STT) will be incurred on such transactions.

Bank account

To carry out financial transactions bank account is required, which is used in trading of shares. This is where the money on sale of shares will be credited or money for buying shares will be debited from. For this you only need to open a normal saving bank account.

Trading process

When you are well organized with Demat account, Trading account and Bank account, then you are ready to start with trading. Though, Demat account, Trading account and Bank account can be with with the same organization, but it is not necessary that the same organization offers the additional service of bank account. Therefore bank account can be opened from a different organization providing banking service. The following example of buying and selling using a Trading account on the internet illustrates the convenience of having the Demat account, Trading account and Bank account with the same organization.

Buying shares: When an individual wants to buy a share, he/she logs into the Trading account and specifies the details like the Company name, no. of shares to buy and the price at which to buy. Depending on this information, the required amount from the Bank account is set aside for this trade. When the desired price is reached, this trade is executed and the amount (after adjusting for charges) is debited from the Bank account and the shares are credited into the Demat account.

If the Bank account had been with a different organization, then for carrying out this trade, it would have been necessary to move the amount into the Trading account.

Selling shares: When an individual wants to sell a share, then the person has to log into the Trading account and specifies the details like the Company name, no. of shares to sell and the price at which to sell. Depending on this information, the required no of shares from the Demat account is set aside for this trade. When the desired price is reached, this trade is executed and the shares are debited from the Demat account and the amount (after adjusting for charges) is credited to the Bank account.

In case the Bank account is being operated from another organization, then after this trade, it would have been necessary to move the amount from the Trading account into the Bank account.

It is important to note that as per the charges that are imposed by the Bank, the Demat account service provider and the Trading account service provider will charge an amount along with additional government taxes like STT and Service Tax. Before opening account it is better to ensure that you agree the terms and fee details of the service providers and also you are aware of the transaction costs involved with each transaction.

Gcl, one of the India's leading diversified Financial Services Group, is promoted by a family having decades of experience in financial market. Start trading online in Indian Share Market with Gcl.