How to Start Investing in Stock Market in India

In my early days of investing, I was constantly relying on stock tips from brokerage houses and so-called experts on TV channels, which unfortunately did not yield any profits. However, I soon discovered valuable and straightforward methods to identify excellent stocks.

Important Note: I do not endorse any specific stock. The stock names mentioned in this piece are merely for illustrative purposes to showcase the analysis process. Please make your own informed decision before investing.

Now, let me walk you through a comprehensive, step-by-step approach to selecting outstanding stocks and investing in the Indian stock market in 2023.

5 steps to invest in the share market in India for beginners

Step 1: Demat and Trading Account Opening

To start investing in the stock market, you need to open a demat and trading account. For the best service and low brokerage, I suggest opening an account with Zerodha, which is one of the best brokers in India. With Zerodha, you get a fixed Rs. 20 per trade on intraday trades and zero brokerage on stock delivery. Additionally, Zerodha provides excellent customer support and offers the best charts and tools for technical analysis. Open an account now and your account will be activated within 48 hours of completing the documentation. In some cases, the account can be activated on the same day.

Step 2: Funding Your Demat Account

Once your demat account is activated, link it with your bank account to transfer funds. You can use net banking, UPI, or NEFT to transfer funds from your bank account to your demat account. Your funds will be available for trading immediately after the transaction is complete.

Step 3: Selecting a Stock to Buy

It’s crucial to select a fundamentally strong stock to buy. You can conduct your own research to find out which stocks you like. In the later section of this article, I will explain 7 ways to filter and shortlist strong stocks. You can also explore a list of high dividend paying stocks.

Step 4: Placing a Buy Order

After selecting the stock, place a buy order in your trading account. You can buy stocks at the market price or set a limit price of your choice. Ensure you have sufficient funds to buy the stock; otherwise, your order will be canceled by the stock exchange.

Step 5: Checking the Portfolio Status

Check your order book and transaction history after placing your order. Your stocks will appear in the portfolio section of your demat account once your order is successfully executed. You can exit the position on the same day or do nothing to take the delivery of the stocks in your demat account.

Trading vs. Investing

Before delving into the step-by-step approach for picking stocks, it’s essential to understand the two different methods to make profits in the stock market. The first method is trading, which focuses on making daily profits irrespective of the rising or falling markets. Trading involves taking a long position, buying at a lower price and selling at a higher price when the market is going up, or shorting a position, selling at a higher price and buying at a lower price when the market is going down. To trade effectively, you need to learn technical analysis of stocks by understanding complex indicators such as reading candlestick chart patterns, moving averages, and stochastic oscillator to forecast the future price movement of the stocks.

Trading can be highly rewarding or loss-making because of the huge volatility in the stock prices. If you do not have a clear trading strategy, then it’s advisable to stay away from intraday trading. You can first learn how to do stock intraday trading in India.

The second method is value investing, which involves holding stocks for the long term. Warren Buffet, the legendary value investor, says, “If you aren’t thinking about owning a stock for 10 years, don’t even think about owning it for 10 minutes.” The biggest advantage of value investing is the power of compounding at play, resulting in exponential growth and creating huge wealth. By investing in good stocks and holding them for a long period of time, investors gain advantages such as dividends and stock splits.

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