Investment in the share market has always been one of the most recommended advices when a person starts earning. Many great things are being said about this virtual market, and now and then we get to hear news about some guy who became a millionaire overnight, just because he had invested in the share market.
Well, that is not an exact representation of the stock market workings, and this news is likely to sow a seed of false hope in the mind of the investors. The stock market can be understood in the time, it demands time, knowledge, and experience.
Share market is still a new concept to a lot of people in India, as it is something that is not taught at the school level. Making it another reason why people feel so doubtful about investing their money in the share market online. But don’t worry; life is about learning and it is okay if you learn about a few things later in your life.
But, it is not rocket science as well; you just need some time in understanding the workings of the share market online if you are new to it. And there are lots of online platforms who are available 24×7 for your guidance. May it is a YouTube channel or the brokers themselves, you can learn about it from anywhere you like.
There are lots of things to learn in the share market online process, and starting from the basics is what we recommend and hence this article is something that is going to help you in understanding all about investing in share marketing online!
1. What is Share Marketing?
What is this share market is the most basic question that strikes an individual, so answering all your questions let’s see what is it!
The share market is nothing but a market where buying and selling of shares takes place. Just the way a traditional market exists in the normal world is the same way a share market exists in the virtual world and that is the internet.
Where is the share market?
Share market is a place that exists both traditionally and virtually. There’s no exact place where people buy and sell shares and securities, it happens mostly over the internet. But the main body to invest in share market India is the NSE (National Stock Exchange) and BSE India (Bombay Stock Exchange) which are regulated by the SEBI (Securities Exchange Board of India).
Earlier the trading of shares used to happen on calls and big offices with brokers screaming at top of their lungs was a common sight of share marketing. But now with the evolution of technology, everything is present online, there is few or no shouting and it’s all hassle-free.
What is the Stock Exchange?
Stock exchange and stock market are almost used simultaneously, but the stock exchange is present almost in every city of India, with few bodies being its head. The stock exchange is where the companies get listed, and then the further proceedings are done. It is a place that allows investors, brokers, sellers to meet in one place and make a deal.
Types of market
There are two major segmentation of the share market and are known as Primary and Secondary market.
A primary market is a place where the shares are floated for the first time. It allows the traders in reaching the freshly issued shares of the company. If you have heard of the term IPO, which means Initial Public Offering, and as the name says, the company has issued its shares to the public and wants to raise money from them in return offering them part ownership in the firm.
It is called a secondary market because second-hand securities and shares are bought and sold among the investors. This market is a place that is more active than the primary market because the issue of new shares is something that doesn’t happen every day, but the exchange of shares happens every second around the world. Secondary market increases the liquidity and marketability of the securities
Why it is important for the economy?
Share market is not just some unnecessary part of an economy; it plays a major and very important role in the development and growth of the economy.
The share market helps the companies in raising capital from the public, which otherwise wouldn’t have been possible without the share market. In the absence of a stock market, companies would have taken a loan from the banks, and in return pay interest on high rates within the allocated time, but raising money from the public has made it easy and less hectic.
The share market increases the investment process in the economy. Because when people don’t block their savings in the bank and start investing it in the stock, it regulates the flow of money in the economy, which ultimately results in GDP growth and increased personal wealth as well.
The stock market has market indicators known as Sensex which is an index of the market health. Just by observing the in indices, the health of an economy can be observed, if the market is booming or is under depression.
2. Why you should invest in Share Marketing?
To invest in the share market is the best decision one takes in their life. Because it is not a herculean task, the process of investment in the share market is easy and quick. With technology getting easy and fast, setting up your Demat account will take a maximum of 20-minutes of your life.
Just do your valuable researches in choosing the online broker or platform, as charges per transaction differ in different platforms! After you have decided just sign in and start trading and making profits. Do your research from the money-control website as it is the most reliable and accurate platform.
It moves up
The history has been a witness of recording an upward trend in the stock market around the world. The stock market has been present around the world from over 2-3 centuries, and in decades, the companies have witness growth, the growth was gradual and there were many ups and downs, but the long-term growth was always fruitful.
People who invest in the share market in India or anywhere around the world; have earned huge gains from the share market.
Investment in share market online is one powerful tool the country has offered to its enthusiastic investors. And any other investment is not likely to yield you the kind of return a share will give you. Because if you invest in other assets like building, land, or any other asset, you need to wait for a long time to receive some level of gain.
But if you invest in shares of a growing company, your profit will start rising from the moment you buy it, and the advantage of investing in the share market is that you can track your progress and growth online.
Helps to fight the inflation
Inflation can be your worst enemy without you noticing it. As the price of everything keeps on rising slowly and the investment that was made by you in the non-financial asset will yield you some profits that won’t feel like a lot.
But when you invest your money in the share market online, the prices keep on increasing by the passage of time, and if someone invested 10,000 in the share market, after 10 years the return or price of that share can go beyond 2 lakhs, isn’t it a great deal? Investment in fixed deposit is not going to give this much return on your investment.
The power of compounding can do wonders for the investors. And when you invest in the share market, your interest is calculated on the compound basis, which means a much better deal as profits.
The power of compounding is only available in these financial assets, and if you are a risk-averse person, then a fixed deposit is something that is recommended for you as it is safe, and the interest on it is calculated based on simple interest.
3. How does Share Marketing Work?
We read the basics of the share market in the above paragraph, now it’s time for some more in-depth knowledge about the share market workings. The process of share market starts with:
The company gets listed
The companies need to get listed first on any of the stock exchanges like BSE India is a major one in our country. When it gets listed in the primary market, IPO is done, here some big investors bids or buys a proportion of shares and then sells them furthermore in the secondary market.
Shares are distributed by the banks, brokers, and agents who are already registered with the stock exchange. The job of these brokers and agents is to sell more shares to the public, and it requires convincing skills. These market intermediaries are all present in the secondary market, as the shares have already been bought by the banks as an underwriter.
Now, that the shares have been sold to the public, the company has raised some money from the market. But the public invested in their shares in the agreement of some return, so now the company must enhance its performance and productivity, to provide a return to the investors.
The price of shares on stock exchange fluctuates so much why does that happen? The answer and logic of this dilemma is a simple law of demand. The law says when the demand for good rises, the price is also likely to rise with it.
The same happens in the stock exchange when the demand or buying of a particular company’s share starts increasing, the price of the share starts rising and vice versa.
What are the different products?
There are different types of financial products that are available for the investors on the Stock Exchange. The major financial products are:
Shares are the most basic product that is traded on the stock market. The shares represent ownership in a company but are bought to sell to another party at a higher rate.
Few people may have no idea about other financial products but are well aware of shares. Such is the popularity of shares in the stock market.
The best thing about investing in shares is you can handle and decide how much you want to or would like to spend on a company’s share and continuously check the market volatility which is the price fluctuations and sell your shares when you are making profits.
Mutual funds are another way of investment in share market. Because in mutual funds the investors’ money is channelized in the stock market. The benefit of investing in mutual funds is that the investors feel secure and the risk is lower in comparison with the self handled the trading account. It is one of the best and secure methods of indirectly investing in the stock market.
Derivatives involve buying or selling of the commodities. Commonly it is referred to as options trading or futures trading. This financial product is a complicated one, so it is recommended to first try and gain expertise in the shares trading, and then move on to invest in derivatives.
Bonds are a much easier and safer way of starting your investment journey in the share market. The bonds are considered safer because the interest rates are fixed and the date of maturity is also provided in advance, the risk involved here is very low, which allows more and more investors to save in bonds.
The interest rates and values fluctuate as per the market volatility but the investors have nothing to do with that. And even if the stock market makes huge profits, you will only receive your profits as mentioned in the plan.
4. What does SEBI do? What are the terms to be aware of before investing in the share market?
SEBI stands abbreviated for the term Securities Exchange Board of India. This is one supreme regulatory body that has been formed with the purpose of controlling the smooth functioning of the share market in India, by protecting the interests of the investors.
It was founded in 1992 by passing of the SEBI Act. It has been headquartered in Mumbai and has several regional and sub-regional offices in other cities of India.
The main functions of SEBI have included three major activities which are Issuer of shares, protector of investors, and to act as the financial intermediary. As an issuer of shares, it deals with helping the companies in issuing fresh capital in the market or IPO.
As a protector of the interests of the investors, SEBI has issued guidelines for safeguarding the interests of the investors because they play a major role in the working of the share market. And as an intermediary, SEBI allows the smooth transfer of shares between the buyers and sellers, and in case of any discrepancies, the regulatory body is responsible for taking care of the issue.
Few terms that an investor should be aware of before starting an investment in the share market online, are:
National Stock Exchange is a very popular term people use in the financial investment industry. But it is technical jargon, it’s a stock exchange as the name says, and it was established in 1992, and became the first dematerialized electronic exchange in India. NSE is the world’s 11th largest stock exchange in the world.
NSE allows the companies to trade which fulfills the minimum financial requirements and experience. And it handles a lot of other things, but for your basic understanding, it is a stock exchange where thousands of Indian companies are listed and their shares are traded every second.
Bombay Stock Exchange is one most renowned stock exchange in India. It was established in 1875, which makes it Asia’s oldest and world’s 10th largest stock exchange. This stock exchange was started by five brokers in the street of Bombay under a tree, decades later it got national recognition.
BSE has listed over 6,000 companies in India and witnesses millions of trading transactions every day. BSE India has listed securities which include shares, stock futures, stock options, index futures, index options, and weekly options of very reputed companies of India.
The curious people of India must have heard of this term Sensex when they listen to people talking about the share market. To have a better understanding of the term let’s begin with its non-abbreviated term Sensex stands for sensitive index. Sensex represents the performance of the top 30 companies in India.
The Sensex is India’s oldest stock market indices and is used for studying the economic conditions and developments of the country. And in the 21st century, the growth of Sensex has seen a tremendous rise, making India one of the fastest-growing economies in the world.
Nifty is another creation of the share market in India. The Nifty is a stock index used by the NSE, which has listed the top 50 companies in India. The nifty has shown the growth of these top 50 companies, in few digits. It also is an indicator of economic conditions and progress.
5. What are the things to keep in mind before buying shares?
The share prices and movements may excite you when you don’t have your money invested in them, but once when you invest your hard-earned money and without having the idea of when to buy or sell shares you see that your money hasn’t witnessed any potential growth, which can be disappointing.
So, to avoid this problem, here are a few things to keep in mind before buying the shares of a company.
The risk involved
You must have heard a guy stating mutual fund is subject to market risk, well he wants your good that’s why informing the investors in advance is a good action. There are risks involved in every investment you do, just the degree of variations differs. If you invest in a fixed deposit, the risk is almost negligible, but the return is also fixed. And investment in share market, the returns are high, but the chances of loss are equally present.
May it be investment through mutual funds or self-handling of the trading; the risk percentage is higher when the return is higher. So, if you are risk-averse then mutual funds are the best option for you as within that there are plans with different risk involvement offered to the investors.
Book value per share
Book value per share is something you will come across once you enter into the share market. It is important to gather these financial details before starting a serious investment, otherwise without proper knowledge chances of loss get higher. So, the book value per share is nothing but the price of the share as recorded in the books of accounts.
The book value of a share is usually lower than the market price of the shares. The book value of share gives an idea about what a company’s share actual worth is. It is a good ratio for finding out if the share prices are underpriced or overpriced.
Earnings per share
Earnings per share is one of the most used ratios for calculating the financial health of the companies. This ratio gives you an estimate or understanding of the earning of the company on every share issued by them. It is calculated on the basis of profit after tax divided by the number of shares issued.
EPS is a very powerful ratio, which will help you in calculating the return on your investments. For gathering the financial details of any Indian company, you can visit moneycontrol.com. Apart from EPS, you can also use the price-earnings ratio for a better understanding.
Dividend and yield
Earning from the share market online is the major objective of the investors, but the analysis of the company’s dividend policy and the amount is what plays a crucial role in the overall return. The companies derive profits from different sources it can be from capital appreciation or dividends.
A company giving higher dividends to its shareholders is likely to have a poor performance in the future as the working capital and reserves may not be sufficient for the smooth working and vice versa. There’s a dividend yield ratio that is used by the investors for calculating the approx return they are likely to get after buying shares at the market price.
Return on Investment
Another most important aspect to be taken care of before making an investment in the share market. Every investor enters the share market with the hope of having continuous earnings from the shares bought by them. There are several tools used by the financial analyst in calculating and concluding the financial health of the organizations, like return on net worth and return on capital employed.
Return on net worth gives an estimated understanding of the return an investor is likely to get. And return on capital employed will give the overall understanding of the profit that is earned by the organization from its operation.
6. How to start investing in the share market?
Look for a broker
Now that you have finally decided to start investing in the share market. The first thing you need to do is look for a broker to invest in share market India. Traditionally, you can approach a broker who sits in a broking firm or a bank. But that is one hectic task which requires a lot of effort from your side.
The share market in present online, and everything is present at the tip of your fingers, so is finding the broker. There are several brokers of share market present online like 5 paisa.com, Karvy and moneycontrol.com, etc. Do your value research before proceeding further with the Demat account.
Opening of your Demat account
After selection of the broker or a website, all you need to do is proceed with opening your Demat and trading account. For that, you need to upload some identification proof issued by the government, like a PAN card, Aadhar card, photograph, etc. The trading and Demat account allow you to get access to the big companies listed in NSE or BSE India.
Earlier opening of Demat and trading account was a two separate task, but now for the ease of the investors, both can be opened with the efforts of one.
Before adding money to the wallet provided by the broker’s website, you need to link your bank account. For that, you require to upload a picture of your canceled cheque and income statement, etc. It’s an easy step that can be done within few minutes and once you are done with all the formalities, a confirmation will be provided within the given time, and you can start trading from then.
The best part about the share market online is you can add and withdraw funds to your bank account whenever you like.
Invest and track progress
But before you invest your hard-earned money in the shares, do your value research of the company’s past performance and reputation. Do have a plan, before starting your investment journey. And read all kinds of guidelines, rules, and policies that the broker has because additional charges and taxes are deducted on your Demat account.
Try investment in the share market by buying a few shares of a company and track its progress for a few days, to get a better idea of how it works.
Examine and understand better
Understand the patterns and growth parameters of the stock market, and if you find a company performing better you can go on to investing more. But do keep in mind to diversify your portfolio, meaning you should invest your money in companies from different industries, like banking, telecommunication, FMCG, etc.
The diversification will reduce your chances of bearing excessive losses. It is always mentioned by the brokers to not keep all your eggs in one basket, and that is why portfolio diversification is recommended. You need to track the progress of your earning from the share market daily for clear understandings of the stock market working.
Facilities offered by Demat account
The Demat account stands abbreviated for the Dematerialization account, which is an electronic version of the traditional account, which allows you in managing your share market activities online and with ease.
The benefits and facilities offered by it are:
Transferability of shares
With the Demat account the main objective of share marketing online gets fulfilled. The easy of buying and selling shares can be done with few clicks and taps.
With the Demat account, you don’t just get to trade shares, but get access for monitoring, doing value research and you can do this via any smart device or laptop. The services offered are much quicker and National Securities Depository Limited (NSDL) keeps on adding more features for the better working and ease of the customers.
Loan and quick closing
The Demat account holders are capable of availing a variety of loan facilities; you can show your investment as a collateral and avail loan from your bank. The closing process is also an easy one, as you don’t have to run to your brokers all you need to do is go to the deactivate account option, and click on it. After all the formalities and verifications, the rest of the money will get transferred to your bank account.
Here’s how you can apply for IPO
You can apply for IPO online as well as offline. For online application, you need to have your Demat and Trading account. Once you login to your account, the details, and information about the freshly issued shares are displayed on your dashboard. You can choose the companies, and buy the shares by providing your UPI ID after the payment; you will receive the notification for the amount blocked in your account.
For offline payment, you need to submit an application to the designated center. You need to provide details of PAN, Demat ID, Name, and basic details with bidding price and quantity of shares. After submitting everything, you need to wait for the shares allotment process which may take some time.
7. Top Share Market Players
The top players of the share market are those companies who have marked their immense presence in the market, with their consistent performance and rising share price. A few top companies to invest in share market India are:
Reliance is a huge multinational company that was established in 1973 by Dhirubhai Ambani. The company started as a textile manufacturing company, and over time, the company has expanded its reach to every possible industry. Reliance industries are present energy-producing industries, petrochemicals, natural gas, textiles, banking, natural resources, media, entertainment, retail, music, software, and telecommunications.
The price per share of this conglomerate is above INR 2000, which is quite high. But to earn from share market online investment in such a great company is always recommended as it will yield you great profits.
Reliance has made and broken many records, as its share price has exceeded the government established company Indian Oil Corporation Limited; it is also one of the 500 fortune companies in the world. You can gain an insight into the share price fluctuations and all kind of financial details from moneycontrol.com
TCS stands for Tata Consultancy Services, which is an information technology, based multinational company. TCS was founded in 1968 by the name of Tata Computer Services. And today it has gained several recognitions like 11th position in the Fortune India 500 list, and 64th ranking in the Forbes World’s most innovative companies.
TCS is the subsidiary of the TATA group and by market capitalization, it is the second-largest company in India, with the share price of over INR 2,300 per share, and the rate keeps fluctuating every second. The shares are traded on both NSE and BSE India, and it contributes to the Sensex and nifty’s growth.
The details of its financial growth and future forecasts can be found on moneycontrol.com. Every new investor in the share market is suggested to invest in the shares of TCS to earn from share market online.
3. HDFC Bank
HDFC stands for Housing Development Finance Corporation, it was established in 1994 by Hasmukhbhai Parekh. This private bank emerged as the major and leading banks in India in terms of market capitalization. HDFC bank’s share price is around INR 1,100 per share.
HDFC bank provides all kinds of banking services like wholesale banking, retail banking, treasury, and loans for automotive, two-wheeler loans, few personal loans like, loans against property, loans for consumer, lifestyle loans, and credit cards; and has even launched online wallets as well.
The bank has shown rapid growth in the past few years and has opened many subsidiaries like HDFC securities, asset management, financial services, and depository and has the presence of other foreign countries as well. For the purpose of portfolio diversification, HDFC bank is always considered as the best option for the new investors to earn from share market online.
HUL stands for Hindustan Unilever Limited; it is a subsidiary of a British and Dutch company. HUL has a diverse variety of product lines, in the FMCG industry. The company was founded in 1933 in Britain, but as a result of the merger in India the company was renamed. The share price of HUL is INR 2,300 per share which is one pricy share.
The company has produced so many brands that have been a huge success, making it one of the top 100 most trusted brands in the world. This company has shown immense performance and played a grand role in the advancement of the economy. Its great performance has attracted thousands of investors and its shares are traded multiple times on both NSE and BSE India.
Infosys has always been a popular Indian multinational company. It was established in 1981 in Banglore, Karnataka by infamous N.R Narayan Murthy and other partners. The company is known for providing services like information technology, business consulting, and outsourcing services.
By the year 2019, Infosys became the second largest company in India after TCS in terms of market capitalization. The share price of the company fluctuates around INR 980 per share, which is an impressive figure for the first time investors. The new investors can earn from share market online by investing in the shares of Infosys or any other above-mentioned companies.
This was detailed information that will help you in getting started with your investment in share market. The share market online is making everything present on your small handheld device. There’s no need to panic when you don’t get a thing when you open the trading page or a website where the numbers keep on fluctuating.
Understanding of share market workings comes as you spend time with it, feel free in taking all the bits of help available around you because investing in the share market is one of the best decisions you are going to take in your life. Start your investment in share market from a young age. You are likely to go for the higher risk and profits that are going to benefit you a lot in the coming time.
It is always advisable to gain at least the working knowledge of the share market before investing your money. Always try to do the fundamental and technical analysis of the company and the industry it belongs to. You can also enrol yourself in the trading courses available online. If the interest sparks you can even become a full-time trader of the share market