Beginners guide to stock market

Beginners guide to stock market

Most Often, gold and stocks are the investment showgrounds that attracts Indian investors. If you are someone looking to invest in shares and stocks (Stock Market) in India, and are just about to start off, here are some of the basic things you need to understand as a newbie.

What is the stock market all about?

In India, there are two primary exchanges; the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). These are the only two exchanges in India where buying and selling of shares and commodities happen. Usually, there is a minor difference in the price of shares at the two exchanges. Your broker can guide you here in case you do not understand where to trade. 

What is the difference between primary markets and secondary markets?

When a company lands up in stock exchange with an initial public offer (IPO) it is known as the primary market. The secondary market is the place where actual trading of the shares takes place. The only purpose of an IPO is to list the stock or the company in the share market. Once the company gets listed, it starts trading in the secondary market. Buying and selling shares is largely like buying and selling any other commodity.

How are shares priced in the market?

The share prices of any company are directly proportional to the growth of the company. Usually, share prices go up when the company is growing very fast, earning very good profits or it gets new orders. Therefore, the price of a share is determined by demand & supply and growth of the company. Sometimes, some positive or negative rumors about the company affects its share prices. But this fluctuation is temporary and does not affect the position of the company in the stock market for the long term.

How much money you need to start investing in Stock Market?

Investors can start trading with even 1 share of the company. There is no minimum investment required  So if you buy a stock with a market price of Rs.100/- and you just buy 1 share then you just need to invest Rs.100. Of course, brokerage and statutory charges will be extra.

What do you need to get started?

PAN Card:

PAN (Permanent Account Number) is a primary requirement for entering any financial transactions in our country. The Tax Authorities assign this unique 10 digit Alpha-Numeric number assigned to an individual for calculating their tax liabilities

A Broker:

Brokers are the people who are authorized to buy and sell on the markets. One cannot just start trading in the stock market, without a broker. SEBI (Securities and Exchanges Board of India), which regulates the share markets provide license to the eligible individuals or agencies to trade in the stock market.

For buying or selling shares, an investor need to inform your broker about which share in what quantity you wish to buy at which price. If you are using an online trading system, you can set the price in the system at which you want to sell it.

Demat and Trading Account:

We cannot hold the shares in any physical form. It is the Demat account that will hold the stocks or shares in our name and the same will reflect in the stock portfolio. All the shares have to in a Dematerialized state or Demat state. For buying and selling shares, you need to have a Trading account. You need to open both Demat and Trading account simultaneously, in order to trade in the Indian Stock Market Once you have a broker or broking company, it will help you in opening Demat and Trading account

What are statutory charges?

Statutory charges are the government-imposed charges, just like GST or stamp duty that needs to be paid. These charges go to the government, not the broker. The fee charged by the broker is known as brokerage.

Bottom Line

Once you step into the stock market, the brokers or the brocking firms provide all this information to you, but knowing these things will help you in staying aware and invest carefully.

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What is the Trade to Trade Segment in Stock Exchanges?

Introduction

In an attempt to curb speculative trading, the exchanges move stocks to the “Trade to Trade”, “T2T” or “T” segment. The NSE and the BSE, do this in consultation with the Securities Exchange Board of India (SEBI).

The move is a part of  preventive surveillance measures taken by the exchanges to safeguard the interest of investors.

Criteria for Shifting Scrips to ‘Trade to Trade’ segment

·         The criteria for shifting scrips to/from Trade for Trade segment are decided jointly by the stock exchanges in consultation with SEBI.

·         This criterion is listed on their respective websites and reviewed periodically.

·         As on the review date, the security should have been in the 5% price filter band for at least 22 trading days. If a scrip does not meet this criterion, it cannot be moved to the “T” segment.

Impact on Trading

1. In this segment, no speculative / intraday trading is allowed.
2. Delivery of shares and payment of the consideration amount are mandatory.
3. Each trade has to result in delivery, even if you have bought and sold the shares during the same settlement cycle.
4. To sum up, in the ‘T2T’ segment:-

• If you buy shares, you have to pay the money and take delivery.
• If you sell shares, you have to give the delivery of shares and you will get the money.
• No netting off is allowed, which means if you buy today and also sell today, the sell position will go into auction, as you will not be able to give delivery, and you will have to pay a very heavy penalty.

Should one invest in stocks in ‘T2T’ segment or stay away?

·         It must be understood by traders, that because of the points listed above, the volume in these scrips is therefore all delivery volume, which is, in fact, a good measure of ‘true interest’ activity, to some extent.

·         A high delivery volume could mean that a large number of investors are willing to buy and hold the scrip.

·         The “T2T’ segment is not the worst segment for a scrip to be in. In fact, you are protected with regard to price movement and complete speculation.

·         The ‘Z’ group and not the ‘” T2T’ the group is the worst, and the one to be avoided. This was introduced by BSE in July 1999 and includes companies that have failed to comply with the listing requirements or have failed to resolve investor complaints or have not made the required arrangements with the depositories for the Demat of their securities.

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