{"menuItems":[{"label":"How share trading works","anchorName":"#guide"},{"label":"Step 1: Find a stockbroker","anchorName":"#step-1-find-a-stockbroker"},{"label":"Compare online brokers","anchorName":"#compare"},{"label":"Step 2: Sign up for a demat and a trading account","anchorName":"#step-2-sign-up-for-a-demat-and-a-trading-account"},{"label":"Step 3: Plan before you buy","anchorName":"#step-3-plan-before-you-buy"},{"label":"Step 4: Pick your stocks","anchorName":"#step-4-pick-your-stocks"},{"label":"Step 5: Order the stocks","anchorName":"#step-5-order-the-stocks"},{"label":"Step 6: Pay for your shares","anchorName":"#step-6-pay-for-your-shares"},{"label":"Next steps - Monitor the performance of your shares","anchorName":"#next-steps---monitor-the-performance-of-your-shares"},{"label":"How much does it cost to buy stocks?","anchorName":"#how-much-does-it-cost-to-buy-stocks"},{"label":"Risks of share trading","anchorName":"#risks-of-share-trading"},{"label":"Frequently asked questions about buying shares in India","anchorName":"#frequently-asked-questions-about-buying-shares-in-india"}]}
Order your stocks: Search for the company name or ticker code and set a market or limit order to buy
Pay for your shares: Ensure you have enough funds in your account ahead of the transaction
To buy shares in India you need to be over the age of 18, open a demat account and a stock brokerage account, but there’s a lot more to it than that. Luckily, with stock market activity surging in 2020, it’s never been cheaper or easier for Indians to start investing.
This guide will take you through the basics, including how to buy shares online, how much it costs and whether it’s a safe option for you. If you’re ready to start buying shares, you can select an online broker in the comparison table below.
How share trading works
As the name suggests, shares or stocks represent a “share” of a company. When you buy a share, you own a small part of a company. The price of your stock rises if the company is doing well and falls if it underperforms.
You make money from stocks the same as you would any other product – by selling for a higher price than what you initially paid. The difference between the buy and sell price will be your profit or loss.
Step 1: Find a stockbroker
To buy and sell shares, you’ll need to sign up with a stockbroker. You have two main options here – you can buy shares online using a share trading platform or use a full-service broker.
A full-service broker is a traditional brokerage firm or investment bank such as Goldman Sachs and Morgan Stanley. The main benefit is they do all the trading for you based on your instructions and they may offer advice. The downside is they charge a premium fee for their service, typically starting from US$25 per trade.
The cheaper option is to use an online broker and place the trades yourself. These charge anywhere from ₹0 to ₹30 per trade in brokerage fees.
Having trouble deciding which broker is right for you? There are dozens of share trading platforms available in India and the best option for you will depend on how experienced you are, whether you want to buy Indian or global stocks and how often you intend to trade. Check out the comparison table below for more details.
Compare online brokers
Take a look at Indian online trading platforms in the table below. Depending on what you’re after, it may save money to use more than one platform, for example, one for Indian shares and the other for another market such as US or UK stocks.
We update our data regularly, but information can change between updates. Confirm details with the provider you're interested in before making a decision.
Just to clear up any confusion, share trading platforms are technically brokers – only without the personal interaction. If you’re looking to buy shares online, you can use the table above to compare apps.
However, there are also a few ways you can buy shares without a broker at all:
Managed funds. You access shares without a broker by investing in a managed fund. These funds typically hold multiple company stocks which are selected by a fund manager.
IPOs. Some crowd-funding platforms allow you to buy shares when a company first lists on a stock exchange, called an Initial Public Offering (IPO).
Your company. Some firms offer their staff company shares as part of their employment contract. These are called employee share schemes.
Off-market transfer. It’s possible to inherit shares or be given shares by someone else without a broker. This is called an off-market share transfer.
Share purchase plan (SPP). Sometimes companies raise extra capital by selling new shares via an off-market share purchase plan. Typically, you invest in an SPP directly through the company itself.
Step 2: Sign up for a demat and a trading account
To sign up to a broker in India, you’ll need to be at least 18 years old. If you are less than 18 years old, you may still be able to sign up by submitting the necessary documents of either your natural guardians, like parents, or a court-appointed guardian.
You’ll then need to open a demat account and a trading account to start trading stocks and other listed securities in Indian stock exchanges, like the National Stock Exchange of India (NSE) and the BSE (formerly known as the Bombay Stock Exchange). A demat account holds the assets you have purchased, while a trading account is used to trade them.
Most Indian stockbrokers allow you to conveniently access both seamlessly. You may create a demat account and then create and link a trading account to it. Some brokers also offer a three-in-one account which links a demat, a trading and a banking account all through the same platform.
Registering for an account with a broker is usually free, however there are sometimes subscription costs or fees to transfer funds to your account. If you’re a new customer, you’ll need to provide the following information:
Your name, address, date of birth and contact details
Your Permanent Account Number (PAN)
Proof of ID
Bank account details
Depending on the broker you choose, it can take as little as a few minutes for your account to be approved or it can take up to a fortnight.
You may be asked to deposit a specific minimum amount in order to open an account although this isn’t always the case. In most cases, you’ll have the option of funding your account through RTGS/NEFT/IMPS transfer, Internet banking or debit card.
Step 3: Plan before you buy
Stocks can be a great investment, but they’re also pretty risky. The more companies you hold and the longer you can afford to have money locked into stocks, the less risky your investment is. So it’s important to have a timeline and some actions in mind if things change.
To build a plan, you’ll need to ask yourself the following key questions:
How much can I afford to invest in stocks?
How much can I afford to lose?
How long can my money stay in the stock market?
What will I do if prices start to fall?
What about if prices rise?
Once you can answer these questions, you can start mapping out the types of stocks you want to invest in. As a rule of thumb, the riskier the investment, the bigger your potential profit. Work out if you can afford to buy high-risk stocks (such as penny stocks) or if you should stick to safer long-term investments like blue chip stocks or index funds.
Step 4: Pick your stocks
With thousands of stocks to choose from, you’ll need to do some research around which ones match your investment goals. Bear in mind that it’s safer to have a diversified portfolio of stocks from different sectors and even countries to avoid major losses if one market falls.
You’ll often have access to market research, analysis and even stock recommendations through your platform, so use this info to help make an informed decision. The other option is to follow the buy, hold or sell ratings of top brokers such as Morgan Stanley, Goldman Sachs, UBS and Morningstar. Just keep in mind that even the experts get it wrong a lot of the time.
Here are a few tips to help you decide:
Do you trust the company? The best company to invest in is one that you both understand and trust. Pick a company that you believe will continue growing and can be trusted to use its profits wisely.
Do you use its products? Are you a fan of Apple or do you use Facebook every day? These could be good options because you’ll also be among the first to notice if the company starts underdelivering to customers.
Debt + profit levels. Are debt levels under control and is profit growth meeting exceptions?
Expansion. Does the company have plans to expand into new global markets or sectors? A growing company usually means a rising share price.
Dividends. Does the company pay a dividend? If not, are you expecting the company’s share price to rise?
Stock price. Is the stock overvalued? An expensive stock is where the share price has risen beyond its perceived value, which could mean it’s going to fall in the near future.
Ask an expert: How do you pick the right stocks?
Roger Montgomery CIO, Montgomery Investment Management
Only invest in quality companies. To identify a quality company search for a sustainably high rate of return on equity. High rates of returns on equity drive better long term returns for investors in those companies. A company that can sustain such returns usually has a sustainable competitive advantage.
Look for sustainable competitive advantages from a great reputation, geographic location, benefits from scale, technology, Patents, innovation or IP, the Network Effect or barriers to entry. Always remember the most valuable competitive advantage is the ability to raise prices without a detrimental impact on unit sales value.
.
Ask an expert: How do you pick the right stocks?
Eleanor Creagh Senior Market Strategist, Saxo Markets Australia
Do your own research (financial health, earnings, quality, potential growth etc.), believe in the business yourself and don’t buy a stock because someone gave you a hot tip.
Stick to your investment plan and risk manage – cut losers and allocate that capital elsewhere and let winners run.
Lastly, focus on building a balanced, diversified portfolio that can weather the economic cycle, over picking the next winning stock. No one is right all of the time! The power of consistency and compounding returns (compound interest – the 8th wonder of the world according to Einstein) over a long period of time is far greater than a get rich quick stock pick.
.
Step 5: Order the stocks
Once you’ve decided which stocks you want to buy and how much you want to spend, the next step is to order them. If you have a full-service broker, you’ll need to call or email them to place your trade. If you’re using an online broker, this part’s up to you.
Keep in mind that larger purchases may incur higher fees. For example, your platform may charge ₹30 brokerage to buy a smaller number of shares but will change the fee structure to 0.1% of the trade value when larger amounts are purchased.
Select your stocks by entering the company name or stock code
Enter the number of stocks you’d like to buy or the amount you’d like to invest
Choose your order type – you can usually opt to buy at the current price or use a limit order to pick a better price
Preview and confirm purchase
There are a few different ways that you can order your stocks, ranging from simple to quite complex instructions. The names tend to differ between brokers and not all offer the full range of options, but these are some of the more common types:
Market order. This is the most basic order type, where you buy or sell shares as soon as possible at the most current available price.
Limit and stop orders. This allows you to buy or sell stocks depending on a specific price. For example, if ICICIBANK’s share price is ₹570 but you want to buy at ₹560, you can set a limit order to execute once its price falls to ₹560 or lower. You can also set a “stop loss” to minimise losses by selling if a stock price falls below your buying price.
Trailing order. This is a type of limit order where the limit is based on a percentage change or a price difference from the market price. For example, Bharti Airtel (BHARTIARTL) has a price of ₹530 and you’d like to buy it for around ₹500, but only if it’s price dips temporarily rather than indefinitely. You could set a trailing price trigger of ₹500 with a stop value of 2%. This means your order would be triggered once BHARTIARTL falls to ₹500 and then placed only once it rises by 2% to ₹510.
Once you’ve entered all the specifics of your transaction, you’ll then get a chance to review the details before placing your buy order. If you place a conditional order (a non-market order), you’ll typically receive a notification by email or text message once the order has been carried out.
What are bid, offer and last prices?
Some brokers display the “bid”, “offer” (or ask) and “last” price of stocks. Think of these as similar to auction prices, where buyers and sellers are offering their best prices.
A bid price is the highest price any trader is offering to buy a company’s stock at that moment and the ask or offer price is the lowest price any seller is willing to accept. The last price is the most current price – and also the last price bidders agreed upon.
Although the last price is the stock’s most recent price, it’s not necessarily what you can expect to pay if you make a market order. Instead, you’ll be paying the latest bid price and you’ll get the ask price when you sell.
Step 6: Pay for your shares
The funds needed to pay for your shares will automatically be charged from the linked bank account that you selected in step 2. In most cases, you can fund your account using RTGS/NEFT/IMPS transfer, Internet banking or debit card.
If you’re using an online broker, you’ll need to have sufficient funds to cover the cost of any trade transactions you make, including fees that apply. The trade settlement period on the NSE and the BSE is two business days (commonly referred to as T+2), which means the shares you’ve bought will be reflected in your demat account two days after the transaction.
If you don’t have enough funds in your account by the time you’re charged, you’ll likely be hit with a hefty late fee.
Next steps – Monitor the performance of your shares
Congratulations, you’ve bought some shares! If you’ve bought Indian shares, you should receive an SMS and email confirming your transactions on the day you have traded.
Keeping your investment plan in mind, the next step will be to monitor the performance of your stocks. How often you do this will depend on your plan. For example, if you have a long-term investment strategy, you may only need to check in every few months. If you have a short or medium-term strategy, it may be a good idea to check each night or each week.
Pay taxes on profits
Yes, you do need to pay tax on any profits you make from shares, including dividends. Any income you make from dividends is automatically recorded by the Income Tax Department (ITD) and is included as part of your regular taxable income at tax time.
Profits that you make on capital gains – i.e. when you buy low and sell high – are only counted in the financial year that you’ve sold your shares. Your broker will usually send you a tax invoice with any profits that you’ve earned from stocks each financial year.
How much does it cost to buy stocks?
Share prices range from less than one rupee to thousands of rupees per stock; however, there are some rules around how much you need to invest.
Minimum investment
There is no minimum investment required to trade in Indian stock exchanges. So if Bharti Airtel (BHARTIARTL) has a share price of ₹530, you can even buy one share of BHARTIARTL stock if it’s your first time buying.
These rules change depending on which country a stock is from. For example, you can invest as little as a few cents into US stocks, even if it’s your first time buying. Some brokers also allow fractional investing where you can buy in fractions rather than whole stocks. So say Facebook is priced at US$200 a share, instead of investing US$200, you could buy one-tenth of a share for US$20.
Fees
These are the types of fees you may need to pay when you invest in stocks:
Broker fee. This is the fee charged by your broker or share trading platform every time you buy or sell stocks. Brokerage or commission fees are around ₹0-₹30 on most Indian share trading platforms.
Securities transaction tax (STT). This is a tax by the government when transacting on Indian stock exchanges. A regulatory tax of 0.1% is charged on both buy and sell sides when trading equity delivery. For intraday trades, the tax is calculated at 0.025% on the sell side.
Transaction charge. This is charged by stock exchanges on the value of your transactions. The transaction charge is 0.00345% per trade on both buy and sell sides.
Stamp duty. The stamp duty is 0.015% or ₹1,500 per crore of the transaction value on the buy side.
Goods and services tax (GST). A GST of 18% on brokerage and transaction charges is levied by the government on the services provided.
Securities and Exchange Board of India (SEBI) charge. A charge of ₹5 per crore by SEBI for regulating the markets.
Other fees. Depending on the brokerage and market you’re trading in, there may be other fees to look out for, such as currency conversion fee (for foreign stocks), account fees, custody fees (for US stocks) and inactivity fees. These are important considerations since any fees you pay your broker will reduce your earnings and impact how much you invest per trade.
Will your profits cover the fees?
Say you invest ₹1,000 in Company A’s stock with a broker fee of ₹10 a trade. Assuming that you bought no other stocks, you would need to pay a total of ₹21.19 in fees (₹20 broker fee to buy and sell + ₹1 STT + ₹0.03 transaction charge + ₹0.01 GST + ₹0.15 stamp duty).
To cover the fees you paid, you’ll need Company A’s stock price to rise by at least 2.12%. But if you’d invested ₹5,000, you’d only need its price to rise by 0.43%.
Risks of share trading
Before you start buying and selling stocks, be aware of the risks:
You can lose money. A company’s stock can plummet to zero in the worst case scenario. If you’ve invested in such a company, you could lose your entire investment.
Bankruptcy. Shareholders are usually the last to be paid when a company goes broke. When this happens, there’s a good chance that you won’t get your money back.
Emotional toll. Daily share market fluctuations can cause plenty of stress for investors. If you can’t handle the ups and downs, you may be better off looking for a safer and steadier investment option.
Unexpected problems. Even if you do a lot of research into a company, it’s simply not possible to predict the future. Natural disasters, terrorist attacks, bad company news and even changes in government policy can all occur unexpectedly and adversely affect the price of shares.
Lack of expertise. While investing in the share market sounds quite easy in theory, it can get quite complicated if you don’t know what you’re doing. First-time investors should be wary of getting ahead of themselves.
Getting in over your head.A final word of warning if you’re thinking of investing in shares: don’t bite off more than you can chew. Make sure to use your common sense and take a cautious approach – good advice no matter whether you’re planning on investing in shares, property or anything else.
Frequently asked questions about buying shares in India
This will depend on your brokerage platform. Some platforms will allow you to purchase a wide variety of exchange-listed shares and some will even allow you to purchase international shares. Research the different share trading platforms to see which stocks each provider allows you to buy and sell.
As mentioned above, there is no minimum investment required to trade in Indian stock exchanges. You can even buy one share of a listed company’s stock if it’s your first time buying.
The maximum value of shares you can buy online will again depend on your brokerage platform. Some platforms will have no maximum amount but will require you to have the necessary funds for your purchase in your trading account.
The time it will take for your buy or sell order to go through will depend on whether you lodge your order at market or at limit. For example, if you’re buying shares at market value, the order will be placed as soon as possible and the shares purchased at the best price available at the time. However, if you place your order at limit, you can stipulate the maximum price you are willing to pay and how long you will wait for the right market conditions to arise. The limit order will then stay on the market until your designated expiry date, and if it has not been executed by then, your order will be cancelled.
If you’re lodging a market order, your brokerage platform will most likely provide you with the opportunity to review and modify your order before submitting it. However, once it has been submitted, it will be processed as soon as possible.
If you decide to place a limit order and it has not yet been executed, you will be able to amend or even cancel the transaction.
Once you have purchased shares in a company, you literally own a small portion of that company. As the stock market fluctuates each day and the value of shares rises and falls, the value of your shares will similarly change. You’ll receive company reports and news updates so you can stay abreast of its performance and direction, while many companies will also pay out dividends (your share of the company’s profits or earnings) twice a year. It’s up to you to monitor the performance of your shares in line with your investment strategy and decide whether to sell, hold or buy more shares.
Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.
Kylie Purcell is the investments editor at Finder. She has a background in business and finance news with previous roles at SBS, Your Money, TVNZ, Switzer Group and The Adviser magazine. Kylie has a Masters in International Journalism and a Graduate Diploma in Economics. When she's not writing about the markets you can find her bingeing on coffee.
"
Learn the basics of what it takes for novices to get started in the investment world in India, including an overview of your options and what to watch out for.
How likely would you be to recommend finder to a friend or colleague?
0
1
2
3
4
5
6
7
8
9
10
Very UnlikelyExtremely Likely
Required
Thank you for your feedback.
Our goal is to create the best possible product, and your thoughts, ideas and suggestions play a major role in helping us identify opportunities to improve.
Advertiser Disclosure
finder.com is an independent comparison platform and information service that aims to provide you with the tools you need to make better decisions. While we are independent, the offers that appear on this site are from companies from which finder.com receives compensation. We may receive compensation from our partners for placement of their products or services. We may also receive compensation if you click on certain links posted on our site. While compensation arrangements may affect the order, position or placement of product information, it doesn't influence our assessment of those products. Please don't interpret the order in which products appear on our Site as any endorsement or recommendation from us. finder.com compares a wide range of products, providers and services but we don't provide information on all available products, providers or services. Please appreciate that there may be other options available to you than the products, providers or services covered by our service.
