Although India's exchanges account for less than 3% of total world market value as of 2020, a closer examination reveals the same characteristics as any potential market.
This knowledge is essential for newcomers to the Indian stock market. We give the most fundamental requirements for beginning stock market investing, and also show you how to start trading in the Indian stock market. If you are new to the market and are perplexed, start small. In the long term, careful preparation and understanding will help you produce consistent earnings.
Fundamentals of the Indian Stock Market
The Indian stock exchange currently has two stock exchanges.
The BSE has been around since 1875. The NSE, on the other hand, was established in 1992 and began trading in 1994. Both exchanges, however, use the identical trading system, trading hours, and settlement method.
Almost all of India's major corporations are listed on both markets. The BSE is the oldest stock exchange, while the NSE is the largest in terms of volume. Both exchanges compete for order flow, which leads to lower costs, increased market efficiency, and innovation. The existence of arbitrageurs keeps the prices on the two stock markets fairly close together. In the next article, we will discuss more about how to start trading in the Indian stock market via these two stock exchanges.
Different Types of Trading in Indian Stock Market
In India, the two main categories are intraday trading and delivery trading. Intraday trading is trading on a single day. Before the market closes, an investor must close all positions. Any purchase or sale takes place in a single day.
Delivery trade is defined as trading that lasts more than one day. It is also quite safe. You can purchase stocks and keep them for longer than a day. Transactions take place the following day. In the event of delivery trading, the brokerage is quite expensive. However, the key advantage is that the risk of loss is much lower than in intraday trading.
The Trading Mechanism of India Stock Market
Trading at both exchanges takes place through an open electronic limit order book, with the trading computer matching orders. There are no market makers, and the entire process is order-driven, meaning that investors' market orders are automatically matched with the best limit orders. As a consequence, buyers and sellers maintain their anonymity.
An order-driven market has the advantage of increasing transparency by showing all buy and sell orders in the trading system. However, there is no guarantee that orders will be filled in the absence of market makers.
All orders in the trading system must be placed through brokers, many of which offer retail consumers internet trading. Institutional investors can also use the direct market access (DMA) option, which allows them to place orders directly into the stock market trading system using trading terminals provided by brokers.
Trading Time of India Stock Market
T+2 rolling settlement is used in equity spot markets. This implies that any trades made on Monday are completed by Wednesday. All stock market trading takes place Monday through Friday between 9:55 a.m. and 3:30 p.m., Indian Standard Time (+ 5.5 hours GMT). Shares must be delivered in dematerialized form, and each exchange has its own clearing house that accepts all settlement risk as a central counterparty.
Market Indexes of India Stock Market
The Sensex and Nifty are the two most important Indian market indices. The Sensex is the oldest equity market index, and it comprises shares from 30 BSE-listed companies. It was established in 1986 and offers time series data beginning in April 1979. The Standard and Poor's CNX Nifty is another index that comprises 50 equities listed on the NSE. It was established in 1996 and offers time series data beginning in July 1990.
Market Regulation of India Stock Market
Knowing the market regulation is important for traders, especially for those who have no idea how to start trading in the Indian stock market. The Securities and Exchange Board of India (SEBI), which was established in 1992 as an independent organization, is in charge of the general development, regulation, and supervision of the stock market. Since then, SEBI has continually attempted to establish market regulations that are compatible with best market practices. In the event of a violation, it has broad authority to impose sanctions on market participants.
How to Start Trading in the Indian Stock Market
If you want to start investing in the Indian stock market, here is a step-by-step approach. These are the basic prerequisites for getting started.
- Open a trading account on the stock exchange.
- Create a Demat account.
- Connect your trading account to your bank account for credit and debit transactions.
- Choose an investing broker. Check if the broker is registered with SEBI.
- Set your risk tolerance and begin investing.
- Choose low-risk items first.
- Diversify your portfolio gradually.
How to start trading in the Indian stock market: FAQ
What is the best way to invest money in stocks in India?
You may invest in the stock market in two ways: through capital appreciation or through dividends. People primarily buy in stocks in the hope of profiting from share price rise. Gains or profits from rising share prices might be enormous in the appropriate circumstances. However, this is not a given. If the firm performs poorly, a price decrease is always a possibility. That is why you must be certain of the firm in which you are investing.
Dividends are another method to profit from stock market investments. Many businesses pay out all or a portion of their profits to shareholders in the form of dividends. You can make a lot of money if you own a lot of dividend-paying stocks.
What are the best blogs or websites for Indian stock market analysis?
The following are some of the best blogs or websites for Indian stock market analysis:
- Trade Brains : It was launched in January 2017 and covers stock analysis, IPOs, fundamental and technical analysis, intraday trading, and other issues. Furthermore, on this site, you may read about +710 investing and trading essentials articles such as how to invest, where to invest, when to buy, when to sell, and much more.
- Fundoo Professor : Prof. Sanjay Bakshi runs this blog, which contains the opinions of a value investing and behavioral economics instructor and practitioner. This blog contains a lot of security and business analyses, as well as case studies. Furthermore, investment blogs dating back to July 2005 may be found in the archives.
- Safal Niveshak : Vishal Khandelwal and Anshul Khare operate this blog. With over 47,000 newsletter subscribers, Safal Niveshak has a sizable following of Indian stock market aficionados on their blog. They operate an outstanding Latticework of Mental Models blog series in addition to the Indian stock market analysis blogs.
- Get Money Rich : Get Money Rich (GMR) is one of the leading blogs on Indian stock market analysis, and it is operated by Mani, an engineering graduate with a passion for the stock market. This blog has various Indian stock analysis.
- Dr. Vijay Malik : Dr. Vijay Malik, a SEBI-registered research analyst, manages this blog. This site was founded in June 2014 with the goal of simplifying stock market investment for everyday people.
What Are a Few Tips for Trading in the Indian Stock Market?
- Determine the type of trading or investment you wish to perform: Trading is the short-term purchase or sale of stocks. To trade stocks, traders employ technical analysis. Fundamental analysis is required if you wish to invest for the long run. The first step should be to decide if you want to trade intraday or invest long term.
- Do not attempt to time the market: Buying cheap and selling high appears to be the ideal stock market approach. However, it is impossible to predict a stock's bottom or peak. Instead than attempting to time the market, concentrate on purchasing stocks that demonstrate value.
- Avoid groupthink: People frequently rely their choice to purchase or sell a stock on advice from peers or recommendations from others. If the overall market trend appears to be investing in a specific stock, they may purchase it as well. However, the markets may be incorrect. Never put your reliance on the opinions of others. Before you purchase or sell a stock, do your homework.
What is the Best Time in the Morning to Do Intraday Trading in Indian Markets?
Many experts believe that the best time to trade intraday is between 10:15 AM and 2:30 PM. Morning volatility often subsides by 10:00 to 10:15 AM, making it ideal for intraday transactions. Following this rationale, it is a good idea to square off your intraday holdings by 2.30 PM, far before the exchange's official square off timings. This manner, you may avoid becoming stuck needlessly during instances of significant volatility.
What Are Good Online Materials for Learning About Investing in Indian Stock Trading?
If you want to learn about stock trading in India, you must first master the fundamentals. There are various suitable online materials for investing in Indian equities, but the Performance Optimization Strategy With English Sessions by Surjeet Kakkar is one of the most thorough. It was created by skilled traders and covers a variety of trading styles such as day, swing, and positional trading, all of which are necessary for a complete trader in the Indian stock market.
Emerging markets such as India are quickly becoming engines of future growth. Currently, just a small portion of Indians' household savings are invested in the local stock market, but with GDP expanding at 7% to 8% yearly for the previous few years, but in the 6% range for 2018 and 2019, and a healthy financial environment, we may see more money enter the race. Perhaps now is the moment for international investors to really consider investing in India.