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How to Do Online Trading in Indian Stock Market

How to Do Online Trading in Indian Stock Market

With the rising digitalization in the world where you can do any transaction in a few minutes from your computer or smartphone. In the same way, the share market has also evolved from the traditional way of investing in a digital way of investing. Buying shares is an easy task if you have a basic knowledge of share market investment. There are tons of websites and apps available in the market that makes your task easy but you have to do proper research before registering yourself, providing your essential documents, or investing your hard-earned money through the broker’s website or the app.

The procedure of Online Trading in Indian Stock Market

Here are the steps you are required to follow to do online trading in Indian stock market: 

  1. PAN (Permanent Account Number): The first step to investing in Indian stock market through online mode is obtaining a PAN card. As per the government regulation you need to provide your PAN card before making any investment or any financial transactions. A PAN card will be used as valid identity proof and to assess your tax liability. 
  2. Demat Account or Dematerialized Account: In the Demat account the physical shares held by you are converted in an electronic form because the conversion of share certificate into Demat is compulsory for trading in the Indian stock market. You need to open a Demat account and obtain a unique Demat account number. This number has to be mentioned while buying or selling shares. A Demat account is just like your bank account, where shares sold or purchased are credit and debit in your account. 

Open account only with the registered Depository Participant (DP) that can either be registered with NSDL (National Securities Depositories Ltd.) or CSDL (Central Securities Depositories Ltd.) or both. 

CDSL (Central Depository Services Ltd.) is promoted by HDFC Bank, State Bank of India, Bank of Baroda, Bank of India, and BSE. 

  1. Trading Account: For trading, you need to open a trading account. This account is used to purchase and sell shares in the stock market. The trading account has replaced the traditional open outcry method used for communicating trade orders. The benefit of opening a trading account is that you don’t have to visit the broker’s office or bank. Through one trading account, you can access stock exchanges like BSE (Bombay Stock Exchange) and NSE (National Stock Exchange of India Limited), and MSEI (Metropolitan Stock Exchange of India Limited). 

Follow these steps to open a trading account: 

  • Choose DP (Depository Participant). 
  • Submit a trading account opening form. 
  • Do KYC (know your customer norms).
  • Go through the verification process. 
  • Sign the agreement copies. 
  • Trading accounts will be opened that can be assessed through the computer, mobile, or through call. 
  • Registration with a Broker or Brokerage Platform: You cannot purchase shares directly from stock markets, you need the services of a broker. Brokers are the member of the stock exchange and act as the link between you and the stock market. The broker with whom you are registering should be certified from SEBI (Securities Exchange Board of India). 
  • Bank Account: You need to have a bank account to purchase shares online. Your Demat Account and Trading Account are linked to your bank account. You have to make the order through Trading Account. Then your broker will forward the transaction for settlement in the stock exchange. After the settlement the shares will be transferred to your Demat Account within 2 working days, all the necessary will be debited from your bank account. 
  1. Unique Identification Number: SEBI (Securities Exchange Board of India) has made it compulsory for investors to get a UIN (Unique Identification Number) when you are trading in the capital of Rs. 1 lakh or more. If you are trading below the amount of Rs. 1 lakh then you don’t require UIN. 

Importance of Research and Knowledge of Stock Market

Trading in the stock market is an easy task because of tons of trading apps and websites available on the internet. But before trading, you need to have proper knowledge and research of the market and to find out what to buy. Therefore the first of investing in the stock market is not opening a Demat account but is to research, read, and get knowledge and skill in the share market. You can get share market knowledge from different sources like courses, websites, and videos available on the internet.

There are many YouTube channels from where you can learn to trade in the Indian Stock market that too free of cost. There is lots of information and resources on YouTube to learn whatever you want and it is the best platform to learn about the stock market, finance, and business.  

First try to learn from free knowledge available on the Internet before investing in paid courses or subscriptions.

Financial Knowledge for Investing in the Stock Market  

It will be better if you have basic financial knowledge. You need to understand the financials of a company before investing in the stock market like PE ratio, Book Value, Return on Equity, Return on Capital employed, Debt/Equity ratio, Earning per share, etc. These financial terms will help you to analyze the basics of financial terms and ratios of the company. 

Written by Hardik Tokas

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