The Share Market is very risky. You will lose all your hard-earned money. Why do you have to gamble and lose all your money?

Most of the Indian middle-class families might have witnessed such conversations. Indian parents, mainly 90s parents, are doubtful about stock market investments. According to ICICI Direct, the total number of Demat accounts has now surpassed 16.2 crore, showing a 4.24% increase from the previous month and a 34.66% rise compared to last year.

Everything is a challenge until you delve deeper into it. That said, you have to learn about stocks before investing in them. Today, with numerous online platforms and trading apps, online trading in the share market has become a cakewalk, but only if you know the stock terminology.

Warren Buffett is a living example of a successful and educated value investor! Share trading is not simply investing when stocks are high. You need to research, think, and invest. To succeed, you must first understand the fundamentals and learn the share market step-by-step. This blog outlines the points to start with while learning about share market investment in India.

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What Is The Share Market?

The share market, often referred to as the stock market, is a platform where shares of publicly listed companies are bought and sold. It allows companies to raise capital from investors and allows you to invest in these companies. When you buy a share, you're purchasing a small piece of ownership in the company and getting profits.

For example, your favourite snack company sells shares to the public. You buy 10 shares, meaning you now own a small part of the company. If the company does well, your shares increase in value, and you can sell them for a profit. If it doesn’t, the value of your shares might drop.

However, investing in the share market also comes with risk, as the share market fluctuates based on various factors, such as economic conditions, company performance, and market trends. Learn the basics of stock market trading, then start by investing the bare minimum amount. Once you master the market, you can begin to play big games.

“Investing should be more like watching paint dry or watching grass grow. If you want excitement, take INR 67100.84 ($ 800) and go to Las Vegas.” - Paul Samuelson.

How To Learn Online Trading Of Shares In India

The internet era has made stock market investments simple and more straightforward. Share market learning has also become more accessible, offering several online and offline options. You can now trade stocks and earn significant returns from the comforts of your home. Here are some of the ways to do it:

Take Online Courses

Take some online courses to understand the basics of stock market trading. Many courses/videos are available on numerous websites like Udemy, Seekho, etc. Numerous applications train people to be successful stock market traders. They teach everything from the basics to every term of stock marketing.

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Take Expert Advice

Study about successful investors and find a mentor if possible. You can get advice from any financial advisor or stock market veteran in your circle who has fundamental and technical knowledge of the subject.

Books and Articles

Books can be an excellent way to gain knowledge. You can begin with beginner-friendly titles like "The Intelligent Investor" or "Common Stocks and Uncommon Profits." Books enlighten you on the things that should be avoided as a beginner. They are cheap, and a lot can be learned at a low cost.

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Steps To Start Online Trading In The Indian Share Market

Are you eager to dive into the Indian share market but unsure where to start? You're not alone; stock market trading begins with choosing an appropriate broker and opening a demat account. Here are the detailed steps for how you can do it:

Source: Elearn Markets

Choose A Stock Broker

A stock broker is a registered corporate entity with a stockbroking licence, which is issued by SEBI following due diligence. A stockbroker serves as a gateway to your investments. The broker must abide by the guidelines set forth by SEBI. Be cautious at all times when selecting a stockbroker. Some of the criteria for choosing stock brokers are

• The booking platform's ease of use
• Efficiency of customer support system 
• Access to ready reports like profit and loss report, Tradebook, Tax P &L
• Security Features
• Broker fees
• Broker’s net worth

Some of the top stock brokers in India are Groww, Zerodha, Angel One, Upstox, and ICICIdirect. Comparing the number of active clients, Groww tops the list. Or, if you need a detailed list of brokers, you might be interested in Seekho’s video on Konsa Broker Sarvashresth. Isn’t it exciting? You’ll get to know SEBI’s guidelines and some tips to relieve yourself of brokerage charges! 

Open A Trading Cum-Demat Account

It is an online bank account specifically for electronically holding shares. All transactions of buying and selling stocks are done through this. Open a trading-cum-Demat account with your broker. You have to hand over power of attorney to the broker so that your demat account will be automatically credited or debited whenever you do any trading activity. To open a Demat account, here’s a process to follow: 

• Documents such as identity proof, PAN card, and address proof should be submitted as KYC (Know Your Customer) documents.
• Submit application 
• Deposit the minimum amount
• Await for the demat and trading account approval
• Activate your share trading account using the allocated username and password.
• Once activated, change your allocated password for security upon first login.
• You must fund your stock market trading account through NEFT, RTGS, IMPS, Payment Gateway, or cheque/DD route.
• Once the amount is credited, you can start trading.
• A share or security appears in the order book when it is traded. You can change or cancel it until it displays as "pending." After the order is finalised, no alterations can be made.
• You can use limit order to automate the process of buying and selling shares when they reach a certain price point. 
• Always cross-check trading, amount transaction, and the price after trading. 

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How Stock Orders Fluctuate

Knowing stocks and quotes is essential for making wise decisions in the stock market. This information helps you trade more profitably and steer the stock market more efficiently. Numerous factors can cause fluctuations in stock prices mentioned below:

Demand And Supply

This is the most fundamental concept in economics: when there is a high demand for a stock and a low supply, the prices of that stock increase. 

For example, a popular Indian tech company, TechNova Ltd, has just launched a revolutionary smartphone. Due to the buzz around the product, many investors want to buy TechNova shares.

• Shares available (Supply): 1 lakh shares
• Investors wanting to buy (Demand): 5 lakh shares
• Price before demand surge: ₹500 per share
• Price after demand surge: ₹700 per share

The high demand (5 lakh shares wanted) compared to the low supply (1 lakh shares available) pushes the price up from ₹500 to ₹700 per share.

Economic Reports

Stock prices are seen to be influenced by macroeconomic factors like interest rates, inflation, and unemployment. For example, the Reserve Bank of India (RBI) announces a decrease in interest rates, making loans cheaper for businesses and consumers. This is seen as a positive sign for economic growth.

• Stock: Bank of India
• Price before RBI announcement: ₹150 per share
• Price after RBI announcement: ₹180 per share

Investors expect that lower interest rates will increase borrowing and spending, which could boost the profits of banks like Bank of India, leading to a rise in the share price from ₹150 to ₹180.

Company Performance

The financial health of a company plays a significant role in determining its stock price. Earnings reports, new product launches, or positive news about the company can drive stock prices up. At the same time, negative news or loss in the financial year can lead to a decline in stock prices.

For example, Tata Motors releases its quarterly earnings report showing a significant increase in profits due to high sales of a new electric vehicle (EV).

• Earnings last quarter: ₹200 crore
• Earnings this quarter: ₹400 crore
• Price before earnings report: ₹350 per share
• Price after earnings report: ₹450 per share

The strong earnings report doubles the profit, causing investors to buy more shares of Tata Motors, driving the price up from ₹350 to ₹450 per share. On the flip side, the stock price might have dropped if Tata Motors had reported a loss due to production issues.

• Reported loss: ₹100 crore
• Price before earnings report: ₹350 per share
• Price after earnings report: ₹280 per share

A loss decreases investor confidence, resulting in the stock price falling from ₹350 to ₹280 per share.

Market Sentiment

Other than fundamental factors, Investor emotion, economic reports, and geopolitical events can sometimes play a role in moving stock prices. 

For example, a major international event, such as a geopolitical conflict, causes global markets to become volatile. Even though Infosys has strong fundamentals, the overall market sentiment is negative.

• Price before the event: ₹1,000 per share
• Price after the event (due to negative sentiment): ₹900 per share

Despite Infosys being a solid company, investor fear due to the geopolitical conflict leads to a drop in the share price from ₹1,000 to ₹900 per share. Conversely, if India wins a major trade deal that boosts investor confidence in the economy:

• Price before news: ₹900 per share
• Price after the news: ₹1,050 per share

Positive sentiment pushes the price up from ₹900 to ₹1,050 per share, even if there’s no immediate change in the company’s fundamentals.

How To Trade Effectively In Indian Share Market As A Beginner

Effective trade management will boost your potential to earn profits through successful investing. You can control your trading strategies by understanding how stock prices fluctuate, recognising the significance of bid and ask prices, and using limit orders wisely. Below are some of the things you should check while trading stocks.

1. Educate Yourself: Before starting with trade, it's crucial to learn the stock market basics. Understand key terms like stocks, shares, market indices (like Nifty 50 and Sensex), and how the market operates. Resources like online courses, books, and market news can be helpful. To learn all stock market terms in detail, watch Seekho’s video on the Stock Market ke term sikhe asaani se on our app.
2. Start Small: As a beginner, it’s smart to begin with a small investment. This approach allows you to gain experience without putting too much of your capital at risk. Focus on a few stocks rather than spreading yourself too thin across multiple investments.
3. Do Your Research: Before buying any stock, research the company thoroughly. Look at its financial health, market position, and future prospects. Keep up with market news to make well-informed decisions. Websites like Moneycontrol, Economic Times, and Yahoo Finance provide free access to financial statements and key ratios.
4. Diversify Your Portfolio: Don’t put all your money into one stock. Take your investments across various sectors to minimise risk. For example, you might invest in both technology and healthcare stocks.
5. Stay Calm and Patient: The stock market can be volatile, with prices going up and down. Don’t panic during market dips; patience is vital. So invest in the long term rather than for quick profits. Need help in finding long-term stocks? Watch Seekho’s video on Long-Term Stocks Kaise Dhunde and get important parameters on the way!
6. Monitor Your Investments: Regularly check how your stocks are performing. This doesn’t mean obsessing over daily price changes, but it’s important to stay informed about the companies you’ve invested in.
7. Learn from Mistakes: Mistakes are part of your learning process. If you make a wrong trade, don’t be discouraged. Analyse what went wrong and use it as a lesson to improve your future trades.

Risk Management Strategies While Trading

Stock trading can be exciting and profitable but comes with a fair share of risk. To succeed and protect your investments, it's vital to implement a risk management strategy. The following are a few steps to managing risk in the stock market.

• Set a Budget: Only invest money you can afford to lose. Set aside a specific amount for trading and stick to it. This way, you won't risk money that you need for essential expenses.

• Stop-Loss Orders: A stop-loss order automatically sells a stock if its price falls. This helps to minimise your losses if the market turns against you. For example, if you buy a stock at ₹100, you might set a stop-loss at ₹90 to minimise potential loss. However, it does not guarantee that the sale will be executed at a specific price, especially in a volatile market. 

• Understanding Market Conditions: Stay updated on market conditions, such as economic indicators, interest rates, and geopolitical events that could influence stock prices.

• Have a Trading Plan: Before making any trade, have a clear plan in place. Know your entry and exit points, the amount you're willing to risk, and your profit targets. You’ll stay disciplined and reduce impulsive decisions.

• Avoid Overtrading: Follow your trading plan and refrain from executing too many trades in a short time. Excessive trading might result in higher transaction costs and a greater risk of losses.

Conclusion

Research is the cornerstone of successful trading. Before entering stocks, it is essential to have a clear view of the stock market and online trading. The key to success here is informed decision-making and effective trade management. By understanding key concepts like Stock orders, market sentiment, and risk management, you can easily navigate the complexities of the stock market.

Check out Seekho’s Zero to Hero Trading Strategy video on our channel to elevate your online trading game. We streamline new videos daily to boost your stock market knowledge with valuable tips and tricks. Subscribe to our app now and stay engaged—your trading success starts here! 

Disclaimer: The information provided in this blog is for informational purposes only and should not be considered financial advice. Always conduct your research or consult a professional financial advisor before making investment decisions. The authors at Seekho are not responsible for any monetary losses or damages.