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This may be the best time for you to decide on shifting from traditional investment instruments to placing your funds in the stock market. Not only Indian bourses, exchanges across Asia are returning handsome money to investors. The icing on the cake for investors in India’s NSE or BSE is the recent upgrade of India’s sovereign rating by Moody’s owing to the reformist stance of the present government. To fetch gains from this ongoing festivity, it is time for you to get a demat and trading account and start investing. But how?
- Get a PAN Card
Indeed, one needs a PAN (Permanent Account Number) to open a demat account. PAN is a unique 10-digit alpha-numeric number assigned by the tax authorities for assessing tax liabilities.
- Get a Broker
A broker is the person authorised to buy and sell shares in the market. They can be individuals or companies that are registered and licensed by Securities and Exchanges Board of India (SEBI), the regulating body for share markets.
- Get a Demat and trading account
Next you need a demat and a trading account. Demat account is not normal savings bank account and has to be opened with a Depository Participant (DP). The stocks or shares are not held in physical form, rather they are stored in dematerialised form in a demat account. Alongside a few non-banking companies like Edelweiss Broking Services and Motilal Oswal Investment Services, many private and public-sector banks have made a foray into DP and brokerage services; hence a demat and trading account can be opened with any of them, the point to note is the difference between annual charges for maintaining demat account and the brokerage on transactions you execute through your trading account.
Along with a demat account, a trading account is opened which facilitates the buying and selling of shares. The demat and trading account are opened simultaneously.
Also, most Depository Participants, for instance, investment arms of banking companies, insist on having a savings bank account with the same entity so that transfer of money to and fro savings and the trading account is hassle-free.
Most services are available online with the facility to get demat, and a trading account opened via websites of DPs. A hard copy of your contract, however, in addition to self-attested copies of your documents while opening account, may still have to be executed. Completely paperless account opening is also enabled through Aadhaar. The regulator, SEBI, insists investors must perform due diligence ahead of opening account and trading securities as the market works on investors’ sentiments at any given point in time, high returns cannot be guaranteed by any intermediary.
- Depository
National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL) are the two depositories in India. These two have their agents in the form of Depository Participants through with whom the demat and trading account are opened.
Individual investors can leave it to their DPs as to which depositary participant, NSDL or CDSL, will eventually hold their shares under a unique identity number.
- Stock exchange
Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) are the two major stock exchanges in India and the buying and selling of shares takes place in these two exchanges. These is usually a slight difference in price of shares at the two exchanges, so you need to mention the exchange to your broker too.
- Read trading tips and guidelines
The tech-savvy generation of today can study trading tips and guidelines of their service provider on how to trade shares through the online trading platform. This will relieve you of the burden of making a call or sending a text message to your stock broker, who initiates the buy/ sell action on your behalf, at every single instance of buying/ selling a stock.
- Study the performance of the company and stay updated with the latest news and events
Having your account ready isn’t enough to make profits in the already matured stock markets of today where millions of investors, domestic as well as foreign, are eying better returns than from traditional savings like bank deposits. Rather than relying too much on tips and market analysis provided by brokers and other channels (which at times can be biased or superficial), it is advisable to rely on real performance credential of companies you have invested in or wish to invest in. Being informed of latest news like any change in management or formation of Joint Venture that can add value will take you a long way in the so-called ‘dalal street.’
If you do not have one, apply for your demat account today to benefit from the ongoing bonanza. market investment in India.
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