1. Get a PAN card
In order to buy shares, the first is to get a pan card. A Permanent Account Number (PAN) is the primary prerequisite, to invest in the stock market and buying shares. It is a unique 10 digit Alpha-Numeric number assigned to an individual by the Tax Authorities for assessing their tax liabilities. In India, the first thing you will need to be able to invest in shares in India is a PAN card, so get it first.
2. Find a Good Broker
The second step to buy shares is to find a broker. Transacting over stock exchange without the support of an intermediary is not an option. Numerous firms are offering you services when it comes to buying and selling of stocks or shares. It is worth spending some time on zeroing down a broker before you start buying or selling stocks. A broker is mandated to be registered and licensed by the Securities and Exchange Board of India (SEBI) – retains the right to allow you to buy and sell shares over the stock exchange. These brokers can be individuals or other online agencies as well.
3. Get a Demat and Trading Account
The third step to buy shares is to create a Demat and Trading account.Once you have a broker, you will now need a Demat and Trading account. You cannot hold shares in physical form, they have to be in a Dematerialized state, thus a Demat account does that for you. It will store the shares in your account in your name. The buying and selling of shares will also require a Trading account. It acts as an intermediary that facilitates the buying and selling. Usually, your broker takes care of all this. Whether you approach a broking firm, online agencies, or an individual broker.
4. Depository Participant
In order to buy shares, the fourth step is to select a depository participant. There is also a Depository Participant that you need to be aware of. There are two depositories in India: NSDL ( National Securities Depository Limited) and CDSL (Central Depository Services Limited).
These depositories have their agents in the form of Depository Participants who will provide an account to store the shares. However, it is not the same as a Demat and Trading account as in Demat it shows the number of shares you hold and the Trading account reflects the selling and buying occurred in your account. Depository Participants will hold the shares you bought and release those shares you sold. A depository could be a financial institution, broker, or any other entity that is responsible for the eventual transfer of shares.
5. UIN - If You Want to Invest Big
In order to buy shares, the fifth is to get a UIN number. In case you wish to invest big, for instance, if you want to trade for Rs. 1,00,000 or more at a single time you will need a UIN or Unique Identification Number.
6. Choose the Right Share and Purchase
In order to buy shares, the sixth step is to select the right shares and purchase. To buy and sell shares, you need to inform your broker about which share, the quantity, and at what price you wish to buy the shares.
For instance, if you wish to buy 20 shares of Reliance Industries Ltd when it reaches Rs. 895, you have to inform the broker : Share: Reliance Industries Ltd., Quantity: 20, Price: 895.
Online brokers usually have customer care numbers where you can place your order if you do not have access to the internet. Further, when the share reaches that price, a transaction will be made on your behalf. However, the buy and sell orders remain valid only up to a certain time frame, usually the same day or the next. If the buy or sell price is not reached during that time frame, the order is cancelled and you need to place a new order.
The buying and selling take place in 2 exchanges: BSE (Bombay Stock Exchange) and NSE (National Stock Exchange) the only two exchanges in India. You need to mention the exchange to your broker, as there is usually a minor difference in the price of shares at the two exchanges.
Thus, for purchasing shares, you need to follow SEBI-mandated rules. You must always remember to choose a trusted broker for trading in stock markets. Choose the method of investment based on your long-term financial goals, and make the right to buy and sell decisions after considering the market movement and the price of the share.
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