How to Buy Stocks in India: Online (Part-2)

How to buy stocks in India online - image2

How to buy stocks in India? One can do it online from the comfort of home. How? This is what we will read in this article.

Online trading has made stock investing even more endearing. Why? Because investing online means, person is buying & selling shares on their own. It gives more control.

There are no physical brokers involved these days in a share trade. Earlier, investing in stock market was not possible without a broker.

This was like one of the negatives of share-trading in our good old days. But now, there is no outside intervention.

Moreover, brokers were less interested to deal with customers whose investing capacity was smaller. But today, people can buy shares in India online even with Rs.500. How?

Before we see how to buy stocks online, lets first briefly touch three important topics:

  1. Why everyone does not buy shares in India?
  2. Is it safe to buy stocks online?
  3. How buying shares online is advantageous?

(A) Why everyone does not buy shares in India?

How to buy stocks in India online -1 Fear Risk

The ease with which one can buy shares makes it likeable. The affordability factor makes it even more likeable. If it is so, why everyone does not buy shares in India?

Frankly speaking, a lot of people are afraid of stock investing. Why? Because of the risk of loss.

There is a common phrase we hear about stocks, “stocks are risky”, is it true? There is a point worth remembering about stocks:

“Stocks themselves are not risky”. Our lack of know-how about stocks, makes it risky.

There are people who are making fortunes from stock investing. These people have acquired skills that other do not know. What the know? They know how to screen stocks.

What means by screening stocks? Identification of fundamentally strong companies, available at undervalued price levels.

Majority find stocks risky because, they do not know how to screen stocks. Hence on their part, they take a wise decision of staying away from stocks.

Their decision is wise because to invest in stocks, one must first learn how to screen stocks.

(B) Is it safe to buy stocks online?

How to buy stocks in India online -2 Safe Online

There are two parts of this question. Let me break it down for more clarity.

Is it safe to buy stocks? Yes, if one knows how to screen good stocks.

Is it safe to buy them online? Yes, fully safe. Just go with a reliable share trading platform.

Online share trading platforms are safe and convenient to use. Still many people hesitate to buy and sell shares online. Why?

Because in India, many people are still not at ease with online money transactions. People who are not so internet savvy, hesitate to buy shares online. But these days, online money transfer has become extremely safe.

But more than the fear of online money transfer, people do not resort to online share trading thinking that it is only for techie’s. But this is not right.

Actually stock trading is so simple that any one can use it. These days more people are consuming online contents regularly, hence slowly the deterrence towards “online trading” is also fading away.

The fact is that, buying shares online is simple. If one knows how to read and write emails, buying shares online is as easy. It is just a matter of first couple of transactions, after that, the hesitation will vanish.

(C) How buying shares online is advantageous?

How to buy stocks in India online -5 Seamless Transactions Speed

When people used to buy shares through brokers, lump-sum investment was more prevalent. Every month people (small investors) used to save money. As soon as decent savings got accumulated, people used to approach brokers for stock purchase.

But that process had some disadvantages. It used to take time to accumulate savings. Buying stocks through brokers also used to take few days.

The disadvantage was not only time delay. It was also difficult to time the market that way. How?

It was not necessary that, when money is ready, that is the right time to buy stocks. And, when it’s time to buy stocks, people may not have money left for investing.

But when people started buying shares online in India, timing the market and savings planning became more manageable. How? Because investing in shares in small-small amounts became feasible.

In a way, the control completely came in the hands of the investor. There is no doubt that online investing is far more seamless than orthodox investing style.

It is also true that everyone cannot buy stocks on their own (independently). But online share trading eliminated even this limitation. How?

A new and a more evolved world of systematic investments was born. If one cannot time the market, systematic stock purchase is a more reliable alternative.

Online share trading facilitates investors to buy stocks systematically. Small amount of money can be diverted each month to buy shares online. Investing systematically allows people to take advantage of dollar cost averaging.

When share price is low, more shares are purchased. When share price is high, less shares are purchased.

As a result of this, long terms results are averaged and optimised. Possibility to face big losses gets reduced in systematic investing.

In stock market, average long term returns can be very dear.

Now I think, we are ready to know about how to buy stocks in India online. So can we go ahead and start buying stocks straight away? No.

Preparatory works needs to be done before one can buy his/her first stock. What is the preparatory work? Lets read further…

#1. Preparations to buy stock online…

Initial arrangements shall be made to make oneself ready for online stock purchase.

Initial arrangements means, opening the following accounts:

  • Online Banking Account.
  • Online Share Trading Account.
  • Demat Account.

These are three mandatory accounts, which in combinations contributes towards buying and selling of stocks online. How?

How to buy stocks in India online -4 Bank Trading Demat Accounts4

Let’s see how these three (3) accounts interact with each other during buying and selling of stocks.

Buying Stocks Online:

  • Place the “buy order” in trading a/c
  • Trading a/c pulls desired funds from bank a/c.
  • Share is bought from stock market.
  • The bought shares are transferred to Demat a/c for storage.

Selling Stocks Online:

  • Place “sell order” in trading a/c.
  • Trading a/c pulls shares stored in ones demat account.
  • Share is sold in stock market.
  • The funds so received from selling is transferred to ones bank a/c.

Almost all banks these days can offer all the above three accounts as a package.

Approach any bank like HDFC, ICICI, Axis, SBI, etc and they will be more than happy to open these accounts for you in one go.

Do not worry about the charges, they are bare minimum (few hundred rupees maximum).

These days there are platforms like FundsIndia, Scripbox which can also be used to buy stocks, mutual funds, bonds, IPO’s etc. They are equally good.

#2. The process to buy stocks online…

Once the online share trading account is ready and fully functional, the investor can take the next step of buying stocks online.

Generally stock trading can be done in India between 9:30AM to 3:30PM, from Monday to Friday.

In India we have 2 main stock exchange, BOMBAY STOCK EXCHANGE (BSE) and NATIONAL STOCK EXCHANGE (NSE).

So lets try and brush-up the important steps involved in buying stocks online:

#2.1 Login

Log into your online trading account. Visit the online portal of your trading account. To log-in, enter the user name a password. Make sure to memorise these important login details.

After logging in one can start the process of stock buy and sell.

How to buy stocks in India online - 1

#2.2 Research

Once you are logged into your trading account, the next important question will be, “which share to buy“?

What can be done if one does not know what to buy. Knowing the name of company whose stocks can be purchased is essential. How to know it? Do your stock research. It is also called stock screening.

Stocks research deals with two mains things:

  1. Study of stocks whose business fundamentals are strong.
  2. Analysis of the above stocks, to find which is available at undervalued price levels.

How to do this stock research? There are two ways:

How detail fundamental analysis is done? By studying stocks balance sheets, income statements & cash flow statement. Here in getmoneyrich we also provide a tool which helps users to do a detailed fundamental analysis.

How to buy stocks in India online - 2

#2.3 Buy

To buy stocks, put a buy-order in trading account and wait for the order execution. Setting up a price-limit to buy stocks is a good habit.

What is “price limit”? Suppose a stock is trading at Rs.101, and the price limit you have put is Rs.100. In this case the share will not be bought till the price falls to Rs.100.

It is also important here to know about “share trading charges“. On all transactions, the trading account will charge brokerage charges, taxes & duties etc. Approximately these charges are @0.5% of buy order value per transaction.

Steps to be followed to buy stocks are as follows:

  1. Select the Option “Buy” from menu.
  2. Select the name of stock to be purchased.
  3. Enter the quantity of stocks to be purchased.
  4. Select the option of “Limit Price”.
  5. Enter the Limiting price at which stocks to be purchased.
  6. Place the order by pressing “Place Order” button.
How to buy stocks in India online - 3

#2.4 Sell

How to sell stocks online? The process of selling is same as buying stocks.

One needs to put the sell-order by specifying the following two numbers:

  • Number of stocks to sell, and
  • At what price to sell.

The only difference in selling as compared to buying stocks is that, you do not need to book any funds. Selling is a shade easier & faster than buying stocks. But one can sell only those stocks that one holds in their demat account.

Share trading charges (brokerage, taxes, duties etc) will be applicable for all sell orders (like buy orders).

Steps to be followed to sell stocks:

  1. Select the Option “Sell” from menu.
  2. Select the name of stock to be sold.
  3. Enter the quantity of stocks to be sold.
  4. Select the option of “Limit Price”.
  5. Enter the Limiting price at which stocks to be sold.
  6. Place the order by pressing “Place Order” button.
How to buy stocks in India online - 4

Conclusion…

These days buying stocks online in India is as easy as sending emails. This is in a way both advantageous and disadvantageous. How?

As stock purchasing can be done online using mobile apps, the transactions happens fast. There is minimal delay and zero wastage of time in trading.

But this speed of executions also brings forth an inherent risk. What? People may be tempted to buy & sell stocks carelessly.

It is important to remember that, internet, mobile apps, online transactions are great tools. But they will work in our favour only if we use them judiciously.

So my suggestion to my readers is to always follow the below rules for stock investing:

  • Never buy stocks without research.
  • Try to develop your own method of stock research.
  • Target should be to buy only fundamentally strong stocks at undervalued price levels.

4 thoughts on “How to Buy Stocks in India: Online (Part-2)

  1. Delisted Shares Reply

    Nice post Sir….
    Very helpful tips , I am a beginner in stock market.

  2. S C MISHRA Reply

    Want to buy shares every month on systematic investment basis.What should be the time of purchase in every month?

    • Mani Post authorReply

      If the idea is to keep buying shares systematically for a prolonged long duration, you can choose any date in a month. The criteria’s are more personal than market linked. I will do it first thing in a month for myself.

Leave a Reply

Your email address will not be published. Required fields are marked *