How to Buy Shares In Stock Market
The question of ‘how to buy shares’ has many answers. Of all the ways of buying shares, purchasing shares via online channels is an extremely cost-effective alternative. In particular, if you are adequately aware of the stock market trends and strategies then there will be no need of approaching your stockbroker for the facilitation of the share market trading in India.
If you want to know everything regarding how to buy shares online in India, then you need to approach a stockbroker who provides online share market account services. A share market broker is a useful resource that comes handy right from opening a demat account for buying shares to guiding you in taking sundry investment decisions. Below are the steps that will explain you how to buy shares using demat account.
If you want to buy shares, you need to possess a demat account for which you have to associate yourself with a stockbroker. As a pre-requisite, the share market broker must provide the online share market trading facilities and should be registered with SEBI.
Once you have opened a demat account, you can start buying shares with the margin money available in your demat account. You can also check out your broker’s exposure limit that enhances your trading capacities.
While buying shares using demat account, you should evaluate the company’s fundamentals and take your broker’s suggestion.
Some Useful Terminology – Basic Terms of Share Market
Now that you know how to buy shares, here are few of the widely used terms that you’ll get to hear while buying shares.
Margin Money – It refers to the amount available in your demat account for the purchase of securities.
Brokerage – This is nothing, but the commission or fee charged by the broker in lieu of the services rendered to you.
Exposure Limit – When you have the option of buying a greater value of stocks than the amount available in your demat account, it is called exposure limit. For instance, if you have a capital of Rs.10000 and your broker provides you five-time exposure, it would mean that you will be able to purchase stocks of worth up to Rs.50000.
Share And Share Market – A share is a part of the ownership of the company that has been divided into small parts. And a share market is the place where buying, and selling of these shares is done. This trading, when done online without being physically present in a stock exchange like BSE and NSE, is termed as online trading and can only be done with a demat account.
Index in the Share Market – Index can be explained as a group of leading shares of a stock exchange, acting as a representative denoting the direction of the entire stock market. Two major indices of the Indian share market are Sensex and Nifty, consisting of 30shares of BSE and 50 shares of NSE respectively.
Stock Exchanges – A stock exchange is a physical share market where the bulk of the share trading takes place. Two of the leading stock exchanges of India are the National Stock Exchange(NSE) and the Bombay Stock Exchange(BSE). BSE is Asia’s first stock exchange.
Depository Participant or DP – A DP can be any organization providing financial services like a bank, a broker or a financial institution, and is authorized by the two governing Depositories of India, i.e. NSDL (National Securities Depository Ltd.) and CDSL (Central Depository Services India Ltd.). They are like agents of the depository and customers need to open their demat accounts with a DP.
Depository – A depository is the responsible organization to maintain investor’s securities like stocks, bonds, mutual funds, etc. National Securities Depository Ltd. (NSDL) and Central Depository Services India Ltd. CDSL) are the two depositories in India.
Demat – Demat stands for dematerialization which is the process of conversion of physical shares into an electronic form. These dematerialized stocks are maintained in a demat account that needs to be opened with a DP, just like we manage our money in an account with a bank.
Share Broker – A share broker is a member of the stock exchange who can buy or sell shares in the share market either on his behalf or in behalf of his customers. He levies charges on the customers for the services he provides. A share broker can also be a DP.
Margin Trading – Margin trading refers to the trading of the shares with a larger amount of money that is present in the trader’s account. The exchanges have an institutionalized method of purchasing of shares out of capital through the futures market.
Alpha and Beta – Alpha of a stock is the risk-adjusted measure of the active return on any investment. It is the return in excess of the compensation for the risk borne, and is commonly used to assess active manager’ performances.
Precisely, this indicates the individual performance of a stock under the risks involved. Beta of a stock describes the correlated-volatility of an asset with respect to the volatility of the benchmark that asset is being compared to. In short, this number gauges the movement of the asset and in turn the market risks.