Investing > How to Buy Shares in India

How to Buy Shares in India

India’s stock market is experiencing remarkable, record-breaking highs—with many investors jumping in.

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Updated February 22, 2022

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Have you ever been to India? 🇮🇳

If you haven’t, you’re missing out.

From the culture, religion, natural beauty, and cuisine to its incredible diversity in people and languages, it’s hard to overstate the importance of India—and it’s impossible to ignore it.

But aside from all of these wonderful contributions to the world, India also boasts a large (and quickly growing) economy, with a GDP of $2.869 trillion. Despite the woes brought about by the COVID-19 pandemic, the forecast for the future of the Indian economy is promising.

India is rapidly transforming, and the economic benefits have been apparent—with some even heralding India as the world’s next superpower. Put simply—if you have the idea of investing in the Indian share market, there are several indications suggesting you have the right idea.

And you’re not alone in this regard. India is a large, diverse country, so it comes as no surprise that it also has a robust, varied, and exciting economy. And the way that the share markets have recently been performing only serves as further proof of investors’ trust. In fact, the Indian share market has seen a record-breaking number of new investors.

PAN cards, unique identification numbers, Demat accounts—if you’re not particularly savvy with finances, it really is enough to make your head spin. But we’ll go over every step of the way that you need to take with you—and you’ll see that it really is quite easy to begin trading shares in India.

We’ll cover all of the important topics that you’ll need to succeed—what types of shares exist, how to make money in the market, and how to pick a good broker. So let’s roll our sleeves up and get down to business.

Ready? Let’s go!

What you’ll learn
  • What Are Shares?
  • What's the Benefit of Trading Stocks?
  • How to Open an Account and Buy Shares
  • Indian Stock Market Investor Eligibility
  • What to Look for in a Stock Broker
  • Types of Stocks
  • Creating a Successful Strategy
  • Indian Share Market During Covid-19
  • Buying Shares in India: FAQs
  • Get Started With a Broker

What Are Shares? 👨‍🏫

Shares represent a unit of ownership in a company, or in other words, a part of the company’s stock. When you purchase a share, you become the owner of a small part of the company in question. This gives you the right to vote in the company’s annual meetings, and the right to receive dividends, which are small, regular payments that a company pays out to shareholders.

If, for example, you buy a share of Page Industries, Hindustan Unilever, or Honeywell Automation, you become an owner of a small part of those companies. You can sell those shares at a later date if they’ve gone up in price, and by doing so, you’d be making a profit.

Shares are listed on share markets—and India has two of them: The Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). The NSE uses the Nifty index and has approximately 2000 companies listed, while the BSE uses the Sensex index, and has around 5000 companies listed on it.

So, how do you buy stocks? We’ll go over the specifics in the case of India later in this article, but the gist of it is: you do your research, find a stock you like, and buy it through a broker.

What’s the Benefit of Trading Stocks? 💡

Investing and trading in shares allows you to make profits in a way that putting your money away in a bank, saving, or even finding another job simply can’t compete with. The return on investment that you’ll get if you play your cards right blows everything else out of the water.

Investing in the share market helps protect your money from inflation, and it allows you to have a diversified source of income that is much more resistant to downswings in the economy. There’s no better way to work toward long-term goals than investing in the stock market—whether you’re aiming for a comfortable retirement, a better life for your children, or a new home.

There’s also something to be said about the less-visible benefits. You’ll gain a new skill set and a deeper understanding of how the economy works, as well as finances in general. And although this last point isn’t the most important one, it still holds true—investing in shares can even be fun.

Before we move on, let’s deal with the two main approaches that people take when buying shares. Both have their pros and cons, and a large part of being successful is determining which of these choices is right for you.

Investing in the Stock Market 💰

The first is generally referred to as investing, and it takes a long-term approach. You find a company that is performing well and that you believe will continue to grow and expand, and you buy shares in that company. If you were right, your investment will then be worth much more than it initially was—and you can use that money for whatever purpose you see fit. 

Investing goes at a slower pace and requires you to let your investments grow for years—preferably at least five. But it is much less risky, less stressful, and less susceptible to economic shocks. If you have a long-term goal, this is the way to go for you—particularly as the recent stock market boom will not last forever.

Day Trading Shares 📈

The second approach is referred to as day trading or intraday trading. This entails buying shares and then selling them—at a much more rapid pace. Traders seek to capitalize on short-term profits, so this method requires a lot more time and a consistent, hands-on approach. It is riskier, it can even be nerve-wracking—but this method also holds the potential for great profits.

Traders vary in their methods—some, such as intraday traders, buy and sell the same shares within a single day to profit off of the small price differences. Trading isn’t easy, and it isn’t for everyone—but if you’ve got what it takes, it can make you a lot of money. You will, however, need to find a broker that specializes in day trading.

How to Buy Shares (in India) 🇮🇳

So, now that we’ve covered the basics, let’s get down to brass tacks. Here, we’re going to go over every step that you’ll need to take in order to buy shares in India.

1.  Get a PAN Card 🎫

The first step toward buying shares is getting a PAN card. This can be done in a matter of minutes. Applying for a PAN card is done online, on the page of the Tax Information Network of India’s Income Tax Department.

Select the appropriate application type (form 49A for Indian citizens, and form 49AA for foreign citizens), and fill out all the fields. This includes your contact details, name, and date of birth.

After that, you’ll be redirected to a page where you need to submit the documents required for your application. You can either submit them digitally, via e-KYC and e-sign or forward the required documents physically.

Next, you’ll have to fill out some details regarding your address, source of income, and contact information. After this, you’ll need to enter details regarding your AO (assessing officer), which can be found on the same page.

Next, you’ll need to enter some information regarding the documents you’ve submitted, and you’ll have to upload your photograph and signature.

2. Open a Demat Account 🧾

A Demat account or a dematerialized account is used to store shares and other securities, such as bonds and ETFs. 

Once you have your PAN card, choose a depository participant, and fill out the account opening form. This will also entail filling out a KYC (Know Your Customer) form—which requires submitting proof of identity and address, bank account statements, and proof of income.

Once that is taken care of, you’ll have to go through the process of IPV (In-Person Verification). However, a lot of DPs now offer the option of carrying out this process via webcam or smartphone.

Once all of that is finished, you’ll get your unique Beneficial Owner Identification Number (BO ID), which you can use to access your Demat account. 

3. Open a Trading Account with a Brokerage 📂

Once your Demat account is open, you’ll have to open a trading account with a brokerage as it is impossible to buy shares in India without the use of a broker. Most stock brokers have application processes that can be completed from start to finish online, and the process usually doesn’t take more than 10 minutes.

Picking a good broker is essential. For Indian traders who are just starting out, Pepperstone is a great choice. Their CopyTrader feature is very popular, as it allows you to copy the trades of professional traders with proven track records.

A little further, we’ll take a deeper dive into the criteria that you should pay attention to when looking for a stock broker.

4. Link Your Trading Account to Your Bank Account 🔗

Once you’ve registered with a brokerage, you’ll have to link your bank account to the trading account you have with the brokerage in order to place orders. The process is quite simple and straightforward, and shouldn’t be too time-consuming.

5. Get Your UIN (Unique Identification Number) ✅

SEBI’s efforts to create a database that covers all market participants and investors mean that you’ll have to get a Unique Identification Number or UIN. This can be done via a Point of Service (POS) agent.

However, UINs are only required when you are purchasing shares with capital in excess of 1 lakh RS or 100,000 rupees.

6. Documents Needed to Trade Shares 🗂

The documents that you’ll need are:

  • A PAN card
  • Photographs
  • Aadhar card
  • Proof of address
  • Proof of income
  • A canceled bank cheque with your name on it

Who Can Invest in the Indian Stock Market?

Indian citizens over 18 years of age can freely invest in the Indian stock market. But what if you’re not an Indian citizen?.

You can still invest in the share market as a non-citizen, provided that you meet certain criteria. The Reserve Bank of India’s Portfolio Investment Scheme allows qualified foreign investors (QFIs) non-resident Indians (NRIs), and persons of Indian origin (PIOs) to invest in the share market.

The recent Finance Bill passed in 2020 has brought about new definitions for these terms—so let’s go over them one by one.

Qualified Foreign Investors or QFIs are individuals, groups, or associations that fit four specific criteria:

1. They are residents of a country that is a member of the Financial Action Task Force (FATF), or residents of a country that is a member of one of the groups that form the FATF.

2. They are residents of a country that has signed IOSCO’s MMOU (Multilateral Memorandum of Understanding), or a country that has signed a bilateral memorandum of understanding with SEBI ( Securities and Exchange Board of India).

3. A Qualified Foreign Investor cannot be a resident of India or registered with SEBI as a foreign Venture Capital Investor, or a Foreign Institutional Investor.

4. Qualified Foreign Investors should be set up with registered Qualified Depository Participants (QDP) which are registered by SEBI.

Countries Whose Residents Are Eligible to Invest as QFIs

AustraliaSlovakiaFinlandBelgiumGreece
AustriaCanadaSloveniaFranceGermany
United KingdomRepublic of KoreaPolandBrazilSpain
USARussiaHong KongSwedenPortugal
Saudia ArabiaJapanChinaOmanCyprus
EstoniaBulgariaMaltaLuxembourgNetherlands
SingaporeUAESwitzerlandSouth AfricaRomania
HungaryEstoniaMexicoLithuaniaItaly
Czech RepublicDenmarkFinlandIcelandBahrain
British Virgin IslandsIndia

What to Look for in a Stock Broker 🔎

We’ve said before that you have to choose a brokerage—but not just any broker will do. Brokerages are incredibly varied, and the difference between a good broker and a bad one can make or break your investments.

So, if finding a good broker is paramount, how do you know what to look for? We do—and we’re going to tell you. First of all, let’s deal with the different types of brokers available in India.

You can choose between traditional, or full-service brokers, and discount brokers. Full service-brokers generally charge a percentage of the trade value, whereas discount brokers charge a flat fee for each order. 

Full-service brokers offer a lot of additional assistance, research, and services such as wealth management and retirement planning, while discount brokers do not.

If you’re just starting out, you’ll probably want to choose a discount broker. But the criteria by which you judge a broker are the same in both cases—so let’s focus on that.

Safety and Price 🔒💸

First and foremost is safety. Unfortunately, the world of investing isn’t free from scams and shady dealing, so you’ll want to be absolutely certain that your broker of choice is legitimate. Find out if they are registered and regulated by the appropriate bodies, read customer reviews, and keep your ear to the ground regarding any past scandals.

The second most important factor is the price. When looking for a broker, make sure to keep in mind all of the fees and charges that you’ll be subject to. While some brokers are pretty transparent with their pricing, others aren’t—so this step might require a little bit of extra attention.

Range of Investment Opportunities ⚙️

Next, consider the suite of investments that the broker offers, as well as their minimum investment requirements. While you might be content with buying shares now, you might want to invest in different types of securities, such as ETFs and mutual funds down the line. As for the minimum investment requirements, that’s pretty self-explanatory—you’ll want to go with a broker that you’ll actually be able to use.

Platform and Usability 📱

Usability is also a big issue. When looking at a broker, pay attention to two key areas—the trading platform that they provide, and mobile app support. Some platforms are much more user-friendly and beginner-friendly than others.

The importance of good share trading apps is hard to overstate—some brokerages, such as Pepperstone, offer unique features such as copy trading. This is great for beginners as it lets you follow pro traders and copy their trades by pressing a button.

Customer Support and Education 🤝

When choosing a broker, check to see what the reviews say about their customer support. No one wants to deal with customer support—but sooner or later, you’ll need their help. A responsive, helpful customer support team can save you a lot of money—and a lot of nerves as well.

Last but not least, pay attention to the educational materials and news that a broker offers. These resources can go a long way in helping you become a more experienced, well-rounded trader—and having a steady stream of reliable news reports is quite handy when you want to keep up to date on market conditions.

Types of Stocks 🗃

Not all stocks are the same. And we’re not just talking about prices and stock symbols here—there are real, fundamental differences between stocks that have an effect on how they will perform, and that should affect your expectations.

First, let’s deal with common stock and preferred stock. Common stock is what you will mostly be working with—these are regular shares that give voting rights. Preferred stock, on the other hand, doesn’t offer voting rights, but guarantees a fixed dividend to buyers. Preferred stocks function more like bonds, so you’ll want to focus on common stock when investing.

Now that we’ve got that covered, let’s move on to something that’s a little more practical. Stocks vary in a number of ways. We’ll outline the most common categories and some of their traits down below.

To start, growth stocks differ from others due to their potential to grow in value—often much faster when compared to the market at large. 🚀 These are shares of companies that have above-average earnings and sales growth, but they can be more volatile than the average stock and pay little in the way of dividends—the potential for profit here is from capital appreciation.

Value stocks are more or less the opposite of growth stocks—shares of companies that are underperforming when compared to the stock market average. Put simply, these are undervalued stocks—if you find a stock that is selling for little, but the company is doing well, you’ve found a value stock. Finding stocks such as these depends heavily on your grasp of fundamental analysis.

These stocks are less volatile than growth stocks, easier to invest in, and more likely to pay dividends. If the market realizes that they are undervalued, these stocks will go up in price—allowing for significant gains. 📈

Dividend stocks belong to companies that are firmly rooted in their respective industries and that have a reliable track record of paying out and increasing dividends. They offer a great way of building passive income, but knowing how to invest in dividends is a skill of its own.

Further, blue-chip stocks belong to renowned industry leaders that are well-established and seen as safe investments. These shares are expensive, but they tend to pay out solid dividends, and they’re unlikely to drop in value when a crisis strikes the market, meaning that they’re often seen as a safe investment.

Penny stocks are the opposite of blue-chip stocks. These are shares that trade for less than $5 apiece, and they belong to companies that aren’t yet well established.

Penny stocks are risky—and there are a lot of pitfalls such as scams and pump-and-dumps when it comes to trading them, but the volatility that they exhibit does offer the chance for large profits to be made.

How to Create a Successful Investing Strategy (9 Steps)

Now that you know the basics about stocks and how to invest in the Indian share market, we’re going to share with you some tips that will help you become a successful investor.

1. Prepare Your Capital ➗

First and foremost, you’re going to have to prepare a certain amount of money to invest with. Make sure that this is money that you can part with for a long time—and that losing that money won’t have a dire effect on your finances.

You need to have a firm grasp of your monthly spending, a rock-solid budget, as well as an overview of all other expenses (credit card debt, mortgages, and other loans). Once you have that, you can figure out how much money you can set aside.

In the interest of making it easier to start off, we recommend setting aside a certain amount of money each month and then investing it. This helps alleviate some of the financial pressure of investing, requires a bit more of a hands-on approach, and serves as a risk management strategy, as it stops you from investing a lot of money all at once.

2. Figure Out Your Financial Goals 📅

The purpose of the stock market is to make money. This holds true for everyone—but at the same time, we all have different goals that we aspire to. Figure out what are your goals—and how much of a priority each one is.

Maybe you want to save for retirement or to invest in the real estate market which is likely to rise in value soon. Perhaps you want to build a source of passive income or save up for traveling. No matter what your goals are, you need to figure out how much money you’d like to make—and set a realistic goal as to how soon you can achieve them and in what order.

3. Assess Your Risk Tolerance 📉

Investing in the stock market is invariably risky. There is no approach that will entirely shield you from risk—but risk management is crucial nonetheless. Figuring out a level of risk that you’re comfortable with—and that works well for you is crucial.

The market as a whole is profitable in the long run. What this means is that if you’re a young investor, you have the time to recoup any potential losses—meaning that you can handle a lot more risk when compared to older investors. Investing in growth stocks and rapidly-changing industries such as the tech sector can pay off for you.

On the other hand, if you’re closer to retirement age, a more conservative approach generally works best. Those that are close to retirement will benefit from reliable, lower-risk investing strategies that offer lower returns, but aren’t as risky.

4. Pick an Industry 🏆

Knowing where to invest is crucial. As you continue on your investing journey, you’ll learn about fundamental and technical analysis, how to read companies’ statements, and how to analyze the underlying financials of a business.

But that requires time and patience. You’ll get there—but until you do, invest in what you know. If you’re familiar with a certain industry, or better yet work in the same industry, you’re much more likely to be aware of how certain companies within it are performing.

Stocks from different industries can vary quite a bit. Tech stocks are volatile and risky, but picking the winner in that arena could net you big returns. Investing in the auto industry is a far safer bet—but you’re unlikely to gain great returns on those investments.

5. Choose a Strategy 💭

You’re going to have to choose an investment strategy. In the broadest terms, figure out if you want to be an investor who focuses on the long-term, or a trader that focuses on the short-term.

Once that is done, zero-in on a particular strategy that suits you, and stick with it. Strategies aren’t simple blueprints that can be followed to success—they require trial and error, experimentation, and refinement if you want to succeed.

And there’s a lot of stock trading strategies to choose from. Growth-investing, value investing, dividend investing for the long-term, trading, scalping, and momentum trading for the short-term. Those who see themselves as environmentally-conscious will also want to look into socially-responsible investing.

6. Review Your Portfolio and Diversify 👨‍💻

You’ll want to regularly review your portfolio. If you’re a long term investor, this doesn’t have to be often—checking your portfolio once every month or even once every three months is perfectly fine if you invest in ETFs and mutual funds. If you invest in individual stocks, you’re going to have to pay attention to any important announcements regarding those companies.

You’ll also need to diversify your investments. Having all of your eggs in one basket is a great way to have them all break at once. If you put all of your money in a single industry, and it starts underperforming, you’re going to lose a lot of money. Pay attention to sectoral indices—they’re a nifty way of getting an overview of entire sectors.

The same goes for geographic diversification. If all your investments are focused on a single area, if it faces a recession, your investments will be at a huge risk. Just take a look at the Mumbai housing market—it saw a boom when levies got slashed. This was a localized occurrence, which is why your money ought to be spread out across different regions if possible.

Diversification also applies to asset classes. Shares have their purpose, but you shouldn’t ignore bonds, mutual funds, and ETFs either.

7. Keep on Learning 🎓

Investing works best as a long-term process. The stock market is large, dynamic, and complicated—but if you keep applying yourself and learning, eventually you will get a much better grasp of how everything works.

This not only makes investing a much less stressful thing, but it also lessens risks and opens up the opportunity for major gains. Once you have a solid knowledge of how to research a company’s stock, the possibilities you have become much wider.

Invest in yourself as an investor—and with enough effort, some years down the line, everything that now seems daunting and intimidating will be like second nature. You’ll come to find out that investing in stocks can even be quite fun.

8. Don’t Panic Sell 🚫

One of the most important rules when it comes to investing is avoiding panic selling. Recessions are inevitable—and the value of your shares is bound to come down at some point. Panicking and selling is a natural reaction to this—but you shouldn’t do it.

The market at large is profitable in the long run. If a company has solid fundamentals, it will bounce back, and the value of its shares will recover and reach new heights if the underlying business in question is healthy.

This process can be gut-wrenching and nerve-wracking—but a little (reasonable) faith will go a long way.

9. Don’t Neglect Your Personal Finances ⚠️

Investing can easily turn into an enjoyable hobby—and the profits that can be made are quite enticing. But don’t neglect your personal finances. Being frugal is fine—but penny-pinching to invest every possible rupee in the market isn’t a healthy approach.

Keep a separate budget for investing. Don’t dip into your savings, and always keep at least 3 months’ worth of expenses in an emergency fund. This will provide the necessary security that you’ll need to invest.

The Indian Share Market During Covid-19 

Before we move on to some frequently asked questions, let’s take some time out to talk about the state of the Indian stock market, and how it has been affected by the COVID-19 pandemic.

Unsurprisingly, the beginning of 2020 saw some rough times for the Indian market—with four of the BSE’s biggest single-day drops occurring in March. The largest one saw the benchmark reduced by 13.15 percent within a single day.

However, a combination of investor confidence and an influx of funds from foreign portfolio investors caused the markets to rally—and by November, the losses of 2020 were erased. Looking at the entire year, Sensex rose by 13.86%, while Nifty rose by 12.99%—and these aren’t sluggish returns.

We’re also experiencing a large rush of first-time investors who are eager to get into the market—with 6.8 million Demat accounts having been opened in 2020. There’s no question that the market is volatile—even though Sensex and Nifty are showing record numbers.

However, the real economy is suffering. So, is now the time to invest in the share market in India? In spite of all the present difficulties, yes. Solid investing strategies focused on the long term work regardless of market conditions—if you take the time out to educate yourself, and apply some caution, now is the perfect time to invest.

Buying Shares in India: FAQs

  • How do I Transfer My Demat Account from One Broker to Another?

    There is no way to transfer a Demat account from one broker to another. If you want to switch brokers, you’re going to have to open a new Demat account and transfer your shares to it before closing the old account to avoid maintenance charges.

  • How Do I Invest in the Indian Stock Market with Very Little Money?

    Thankfully, account maintenance charges and investment minimums are low in India—so there’s no difference if you have a lot of money or just a little.

  • How Can I Buy Shares Online Without a Broker in India?

    There is currently no way in which you can buy shares online without a broker in India.

  • How Can I Buy Shares of Tesla from India?

    Open an account with a foreign broker like Pepperstone, TD Ameritrade or Charles Schwab, or with an Indian broker that offers overseas trading.

Get Started With a Broker

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Best for

Active traders

Large investment selection

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Huge discounts for high-volume trading

Low fees

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All reviews, research, news and assessments of any kind on The Tokenist are compiled using a strict editorial review process by our editorial team. Neither our writers nor our editors receive direct compensation of any kind to publish information on tokenist.com. Our company, Tokenist Media LLC, is community supported and may receive a small commission when you purchase products or services through links on our website. Click here for a full list of our partners and an in-depth explanation on how we get paid.

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