Beginner's Guide to Indian Stock Market Trading

Beginner's Guide to Indian Stock Market Trading

The Stock Market is one of the most lucrative opportunities available for anyone to grow their wealth. If you are new to investing and has a poor understanding of stock exchange terminology, then this guide is for you.

India has a stock exchange that is valued at trillions of US dollars, yet a very little portion of our population takes advantage of this huge cash flow. For a long time, the Indian stock exchange used to be dominated by career investment bankers and the corporate class.

But we have noticed that in the past 5 years there is an increase in people with diverse backgrounds, usually engineering, entering the stock exchange. Possibly due to the severe influx of engineering graduates and due to 2020 having the highest unemployment rates in India in over 3 years. So the high input of engineers into the profitable stock market is reasonable.

Unfortunately, India has poor investment-related resources available to the general public. While most amount to generalized advice and poor instruction, only a few programs are worth spending your time on which again are sadly sold to prospective learners at very high prices or fees.

India Shares & Investment is a venture with over 17 years of experience in the Indian stock exchange analysis and has helped thousands of prospective learners transition into this complicated industry with free educational materials and advice.

This article is directed at beginners to the Indian stock market and will include basic terminology and steps to start investing. To uncomplicate the complicated landscape of the stock exchange, one must learn the very basics. So let’s take you through them quickly.

What is a Stock?

A stock is also an investment. When a company has consumed it’s venture capital and the company has achieved a particular size, the next step for that company is to enter the public market to grow even bigger. This is when you hear that “a company has gone public”.

If we purchase a company’s stock, we are purchasing a small piece of that company, called a share.

We are then able to purchase a part of the company’s ownership for a small sum. In June 2019, IndiaMart.com, an online marketplace for wholesale businesses (like Alibaba.com), went public and their shares were sold at Rs. 1326/share. Today, the same shares are worth Rs. 2450/share. You can easily do the math to see the profit here.

Investors buy shares of a company that they estimate will go up in value. If it happens, the company’s stock increases in value which then can be sold for a profit.

Who is a Shareholder?

If you own stock in a company, you become a shareholder since you share the company’s profits.

NSE and SENSEX - The Indian Stock Exchange

Public companies like Tata Motors or Facebook sell their stock through a stock market exchange. In India, the most prominent exchanges are the NSE and SENSEX. Before you read any further, you must understand what they are and how they work. You can read our simple article about the Indian Stock Market.

Primary and Secondary Market Trading

Primary market is when the shares of a company are bought directly though a stock exchange. While a Secondary market is when the shares that were initially bought from the primary market will be traded over and over. For example, all shares from Cipla, an Indian pharmaceutical giant were sold and if you now want to purchase shares you will need to buy them from the previous owners of those shares through the exchange.

So which market is more profitable? The secondary market. You have an opportunity to bid shares at higher prices to new owners.

Buying and Selling - Trading

Hundreds of thousands of shares are traded daily with crores of cash flowing through computer terminals of the NSE and BSE. The prices of stocks are based on the volume traded and are volatile in nature depending on internal and external factors.

Internal factors include stock split, mergers, demergers, dividend distribution, scam or fraud, etc.

External factors can be anywhere from a recession or election results to a terrorist attack.

How Do I Buy Shares?

Only registered brokers can purchase or sell stocks in the Indian stock exchanges. If you are not a stockbroker, you can buy and sell stocks through them.

Where do I find a stockbroker?

Online, of course. There are SEBI registered online brokers with excellent online platforms to help you start trading today. There can be a lot of brokers online, but for a beginner, always choose the broker with the lowest charges.

Yes. There are *brokerage fees that you need to pay on trading that these brokers will do on your behalf. This is how brokers make money.

Since this is where many newcomers lose money - the brokerage fees and expenses involved in trading, we will recommend the following two trading platforms, Zerodha and AngelBroking. They have a good customer care system, enough learning resources to help you get started and low brokerage fees.

Recommended Online Trading Platforms for Indians

What Documents Do I Need to Start Trading?

1. PAN card (Apply Online)

2. Aadhar Card (Mobile number linked)

3. Bank account

How do I Learn to Trade?

Learning to buy and sell shares to make a good profit is an art.

This is the part where we do not have any easy routes. No matter what website you go to, what blog you see, the learning curve is a prominent factor and there is nothing that can beat hard work. Meaning to say, you need to read and learn as much as you can.

But there are certain ways to cut short the actual learning time. One such recommended resource is the book below by Andrew Aziz. Andrew was an amateur when he first decided to play with trading with some extra cash he had at hand. He purchased about 1,000 shares at Rs. 200 and sold for Rs. 400.

On his very first trade, he earned over Rs. 4,00,000 in just a few minutes. It was amazing luck. He had no idea what he was doing. But then, in a span of a few weeks, he lost the entire 4 lakhs making silly mistakes in trading. Today, Andrew who has a Ph.D. in Chemical Engineering has made millions through trading and is the #1 Author with Bestsellers on Amazon.

The book below is concise and practical. It’s penned for everyone to learn and understand. Take a look at the book below.

How to Day Trade for a Living: A Beginner’s Guide to Trading Tools and Tactics, Money Management, Discipline and Trading Psychology


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