How to Buy Shares Online in India?

In order to buy shares online in India, you need to understand the nuances of digital trading. The first step, however, is to have a demat account with an online broker.

Step 1: Getting a PAN Card

In order to start investing in a stock market, it is mandatory to acquire a Permanent Account Number (PAN) card. In India, the utilization of this ten-digit alphanumeric identification number is obligatory for all financial transactions. This also includes opening a Demat and trading account. A PAN card application can be submitted offline or online via a variety of authorized channels.

Step 2: Open a Demat Account

A Demat account is a secure digital repository where your shares are held in a digital format. It facilitates the storage, monitoring, and administration of your investments. You must approach a Depository Participant (DP) authorized by the Central Depository Services Limited (CDSL) or the National Securities Depository Limited (NSDL) in order to establish a Demat account.

Step 3: Open a Trading Account

You will additionally be required to open a trading account with a stockbroker. You are able to place purchase and sell orders for stocks on the stock exchange using this account. A trading account can be established with the broker of your choice.

Step 4: Register with a Broker/Brokerage Platform

Select a brokerage platform or reputable broker that is registered with the SEBI and provides an online trading platform. An online broker offers services to buy shares since you cannot buy them directly from the stock market. A broker serves as a middleman in the financial system, connecting you to the stock market.

Step 5: Depository Participant or DP

A financial institution authorized by the depositories (NSDL or CDSL) to establish and handle Demat accounts on behalf of investors is a Depository Participant (DP). Upon establishing your Demat account, you will be required to choose a DP that corresponds to your investment preferences and requirements. Some DPs also offers free demat account without AMC which reduces the cost in many terms.

Step 6: The Need for a Bank Account

Linking a bank account to your Demat and trading accounts is necessary in order to facilitate the transmission of funds for stock market transactions. This enables investors to make deposits into their trading accounts as well as withdraw dividends or profits.

Step 7: Get your Unique Identification Number (UIN)

SEBI mandates an investor to acquire a Unique Identification Number (UIN) from the stock exchange. NSDL-appointed Point of Service (POS) agents provide you with a UIN. This UIN is associated with their PAN card and is mandatory for all transactions on the stock market.

Step 8: Buying and Selling Shares

After your accounts have been established, you can utilize the broker's online trading platform to place buy and sell orders. When you submit a buy order, the stock exchange matches it with an equivalent sale order. The quantity of shares you bought is credited to your Demat Account upon settlement.

 

Types of Trading Orders to Buy and Sell Stocks

When placing a buy or sell order in the stock market online, there are typically 3 types of orders.

1. Market Order

In a market order, the broker is directed to purchase shares immediately at the going rate on the stock market. However, because stock values are volatile and can vary in milliseconds, the price at which investors place a market order to purchase or sell shares of a firm may not match the order that is executed.

2. Limit Order

Investors specify the price and the quantity of shares they want to purchase or sell in this kind of trading order. The order is only carried out when a share's price drops to the required amount. The deal is made.

3. Stop-loss Order

Investors hedge against potential losses when purchasing or selling by putting in a conditional counter-order or stop loss order. It has a trigger price that is referred to as the stop-loss trigger price. For example, you can put a (sell) stop-loss order with Rs 91 as the stop-loss trigger price if you purchase a stock for Rs 100 and can withstand a maximum loss of 10%. The sell transaction will be initiated if prices drop below this specified level.

Conclusion

The process of how to buy stocks in India online may seem challenging but it is very seamless. This is why lakhs of people establish their first Demat and trading accounts each year to begin investing in stocks. The sole reason is the returns that investing in equity shares offers, which are higher than many other instruments.

Remember that investing needs study, dedication, and a long-term perspective. Start small, educate yourself, and let the stock market help you. The process of online stock trading in India will help you in this process.

Disclaimer: This blog is posted solely for educational purposes. The securities mentioned are examples and not recommendations. It is based on various secondary sources from the internet and is subject to change. Kindly consult an expert before making any related decisions.