How to Buy shares Online in India?
As an investor, you can invest in a wide range of asset classes, like gold, real estate, and mutual funds. But, it has been historically proved that stock markets offer the best returns. If your goal is capital appreciation and earning the highest returns from the market, you can consider investing in stocks and securities. If you invest in shares for the long term, you can earn returns that range up to 16%, thus allowing you the opportunity of wealth creation. However, before starting in the share market, you must understand the stock market basics.
The Basics of buying shares online in India
In the present digital age, you can purchase shares online with just a few clicks. Here are the steps required to buy shares online:
1. Getting a PAN card
Obtaining a Permanent Account Number (PAN) is the first step towards trading in the stock market. PAN is a 10-digit unique alphanumeric number allotted when you register yourself for the PAN card. A PAN card also acts as valid identity proof. The government uses PAN to assess your tax liability and is a compulsory document while opening your demat account and trading account.
2. Open a Demat Account
Before purchasing shares online, it is mandatory to open a Demat Account. A Demat account is also known as a Dematerialized account in which physical shares held by you are dematerialised or converted in an electronic format.
Once you open an online Demat Account, the broker will provide you with your unique Demat Account number. This account number is important as it is quoted while buying or selling shares. A Demat Account is similar to your bank account, where you have the option to deposit and withdraw money. The number of shares purchased or sold is credited or debited in your account accordingly.
You can open a Demat Account with a Depository Participant (DP). A DP can either be registered with National Securities Depository Limited (NSDL) or Central Securities Depositories Limited (CSDL), or both.
3. Open a Trading Account
The next step is to open a Trading Account. A trading account is used to purchase and sell shares in the stock market. Once you have a Demat Account to hold the shares virtually, you need a Trading Account to complete the buy and sell transaction. While purchasing shares online, you have to quote your unique Trading Account number.
4. Register with a Broker/Brokerage Platform
You cannot purchase shares directly from the stock market, and you have to use the services of a broker. A broker is a financial intermediary, acting as the link between you and the stock market. The Securities and Exchange Board of India (SEBI) is the regulatory body that certifies brokers in India.
5. The need for a Bank Account
Your trading account requires a bank account to link with the Demat account. Only after you provide a bank account can you purchase shares online.
If you want to purchase online shares, you have to make the requisite order through your Demat and Trading Account. The broker will then forward the transaction for settlement in the stock exchange. Once settled, the shares will be transferred to your Demat Account within two working days. Furthermore, the necessary changes, or purchase costs, will be debited from your bank account.
6. Get your Unique Identification Number (UIN)
To create a database of all Market Participants and investors, SEBI has made it compulsory for investors to get a UIN. You can get a UIN through Point of Service (POS) agents appointed by NSDL.
You must, however, note that a UIN is only required when you are trading with a capital of Rs 1 lakh or more.
After understanding the six steps listed above, you are now all set to purchase shares online. Once you place a purchase order, it is matched with a similar sale order in the stock exchange. After settlement, your Demat Account is credited with the number of shares purchased.
Conclusion
The most important factor before you start trading is opening a Demat and trading account. Therefore, you must always remember to choose a trusted financial partner for trading in shares. IIFL’s Demat and Trading Account provides you with award-winning research on over 500 stocks. Among the few brokers in India to provide Demat services of both NSDL and CDSL, IIFL provides the industry’s best trading platforms along with customised portfolio analysis.