How to invest in share market
How to invest in share market in simple words
What is Share Market ?
If XYZ company running its regular business but if xyz ltd want to expand & groww its business then cash flow required and if want to install new manufacturing plant & install machines and buy land then huge investment required for all this.
xyz ltd company has two options for raise capital first take loan from Bank or NBFC but loan has interest , 2nd option issue share to shareholders , issue share is easy for raiseing capital. if business groww well then all share holders earn good return and company has not required to pay any interest amount.
Company raise money from IPO
IPO means ? invest in share market
IPO – initial public offer
Company want to raise capital through IPO then company sell stake from issueing new share to public and if exiting shareholder of the company want to sell their stake in IPO is called OFS – offer for sale.
IPO Faq’s – how to invest in share market
frequently asked questions :
1.What is an IPO ?
- IPO means : initial public offering, company sell shares to the public.
2.What is an OFS in IPO ?
- OFS means : offer for sale, promotor or exiting investors sell shares to the public.
3.Pan card is mandatory for apply in IPO ?
- Yes, pan card is mandatory for appling an IPO, investor must ensure that they cross-check the pan details in IPO application.
4.How many days will an IPO remain open for the public ?
- the IPO window remains open for three to seven days. this can be extended by three days if the price band is revised.
5.How many IPO application can be made from one bank account using ASBA service ?
According to SEBI : an investor can make a maximum of 5 appications from one bank account per IPO using ASBA service.
How to invest in share market online ?
Basics Of Share Market
Share market has given a return of 13 to 18% in the last 10 years. Fixed asset class (FD) gives 5 to 6% return.
You made a fixed deposit of Rs 1 Lakh and you get 5% return on it.
You will get Rs 1,05,000 after 1 year but inflation is also very high, there is inflation of 4 to 5% + every year.
If you find things that are available for Rs 100 today, then after one year you will get Rs 105, so what is the use of your return of 5%? Therefore, if we invest thoughtfully in the share market, then we can earn very good returns in longterm.
What is Nifty 50 ?
India has two stock exchanges, a Bombey Stock Exchange (Asia’s Oldest) and the National Stock Exchange.
The National Stock Exchange (NSE) has an Index Nifty 50.
1952 companies listed on the NSE.
Nifty has group of 50 such companies which are market leaders in their sector and formed its group i.e. Index Nifty 50.
Ex: – There are many IT companies in the market but the leader is TCS & Infosys.
Nifty 50 Companies List
What is Sensex ?
The index of Bombey Stock Exchange (BSE) is Sensex.
There are 5439 companies listed on the BSE.
BSE has group of 30 such companies which are market leaders in their sector and formed its group i.e. Index Sensex.
Ex: – There are many banks in the market but the leader is HDFC Bank & SBI Bank.
Sensex 30 Companies List
How to invest in share market for beginners ?
How to know the right time of investment in the share market?
You have to invest by looking at the PE valuation of Nifty.
Nifty PE – Price Earning Ratio – If you look at the history of Aaj Tak, PE has moved in the range of 10 to 30. But not below 10 and not beyond 30 but in 2020-21 Nifty PE is go beyond 30+.
PE is in the range of 10 to 15, then the market valuation is cheaper.
PE is in the range of 25 to 30, then the valuation of the market is expensive.
Nifty PE who are successful investors in the share market invest more when the PE is 10 – 15 and when the PE is 25-30, they reduce the investment or book this time profit.
You must be thinking how much should I invest on PE now. That’s why you read the whole blog.
How can i buy share ? how to invest in share market ?
- Open a Demat and trading account.
- Log in to the trading account.
- Choose the share that you want to buy or sell.
- Ensure that you have funds in your account for buying and shares in your Demat account before selling.
- Determine the price at which you want to buy/sell.
- Complete the transaction by transferring shares/money and receive money/shares.
Research the company before investing
If you want make good returns in share market then don’t make investment decisions based on the stock price alone.
check the following :-
- Balance sheet of the company.
- Study business of the company.
- Check company products.
- Watch management interview & AGM – annual general meeting.
- Technical – Stock Charts.
- Fundamental of the company – ROE, ROCE,Profit growth.
- Favorable long term economics business.
How To Pick Right Stocks ?
If you want start investing, then you have to buy share first.
How to buy a good share? This is the biggest question, but this question will help you to make big wealth.
To become a good investor, it is very important to buy a good share. how to pick right stocks
Many people will tell you that this share is good, or there are a lot of video’s on YouTube which will tell you which share is good.
If you want to buy stock, then first you have to learn that which share is not buy.
How to identify bad share?
- The company whose management is not good or there are issues of corporate governace.
- The company’s track record is poor.
- The balansheet does not have some value.
- The company has less asset.
- The company does not give dividend.
- Financial performance is very high.
- The company depends more on the economic factor.
- The company should be very dependent on the policy of the government.
- This is some factor that you have to keep in mind.
What is value investing ?
There are two ways of investment.
Value Investing – Value investing is easy.
Example: – There is a mobile whose market value is Rs – 50,000 and you are getting 25 thousand in online sale, then you would like to buy that mobile? If you see value, then you will buy that mobile.
Value Investing means simple, the price at which the share is trading is higher than the intrinsic value of the share. The cash, reserve, asset and plant – machinery of the company is more than share.
ex: – The cash in the balansheet should be Rs. 500 per share but in share market price of share is Rs 400.
ex: – There is a cement company that wants to set up a new cement plant with an investment of Rs 5000 crore but if a cement company with the same capacity is trading at a market cap of 3000 crore in the share market, then this company will unlock value in the future, if you find share like this you make good money.
What is Growth Investing ?
Any stock is showing good profit growth at the quarterly (Q on Q) or year on year (Y on Y).
Generally growth stocks trade expensive because the market feel that the earning visiblity of the company is very high and the market also gives that share a price like earning in future. ex: – happiest minds, dixon tech, d-mart,etc.
What is the difference between growth vs value investing ?
The share in value investing seems to be of very low value and the price of share in growth investing looks expensive.
The PE multiple of a share in growth investing is 30,40,50,100 or more.
What is PE Multiple ?
Price means share price, Earning means EPS (earning per share) If you divide the share price by eps then you will get pe multiple.
Ex: – The share is trading at 1000 and the EPS of the share is 20, the share is trading at PE multiple of 50. Aggresive investors who track the market daily, trade, they like growth stock and Passive investor value stock.
Never invest all your money in one stock.
Buy equal weight in all sectors like IT, Infra,Pharma,PSU,Bank,etc.
why stock rates are fluctuate ?
Demand & Supply is the reason for the ups and downs in the share market.
Example: Suppose we go to Sabji Mandi and go to the buy vegetable and ask him to sambjiwala what is price of 1kg potatoes, he says Rs 30 kg, then we reduce the price of potatoes and say give Rs 25 kg, he says no, 25 is purchase price, then we say give Rs 26 kg then sabjiwala said not on your or my price i gave Rs 28 kg and then we buy 1 kg of potatoes for Rs 28 The price fluctuated here, later the price was fixed, it is called bargaining. The same happens in the share market.
When there is more demand in the shares, the share prices start increasing.
There may be some reason for high demand such as good performance of the company, good news in the market.
And when the supply of shares is high, the prices start falling. There may also be some reason for excess supply such as poor performance of the company, bad news in the market.
Why sensex is falling ?
When 30 shares of sensex have more supply than Demand, then sensex falls.
Why sensex is rising ?
when there is more demand from supply, then sensex index up.
Why Nifty is falling ?
When 50 shares of nifty have more supply than Demand, then nifty falls.
Why Nifty is rising ?
And when there is more demand from supply, then nifty 50 is up.
Trading is risky ?
If you want to make money by trading f&o in the share market, then by understanding the demand & supply with technical analysis, you can make good profit. But there is more risk in trading.
Note: – I did not cover the topic of trading in this blog. Trading is risky.
How to invest in share market online ?
What is Demat & Trading Account ? how to invest in share market ?
If you want to invest in the share market then it is necessary to have a bank account, demat and trading account.
The money that we have to invest in the shares market must first be in our bank account, then we will have to transafer that money to the trading account, then we can buy the shares. And there is a demat account to keep the purchased shares.
How to invest 50,000 in stock market ?
You have Rs 1 lakh but you have to buy shares worth Rs 50 thousand. You have to send Rs 50 thousand in trading ac from bank account, you can also use online payment method like UPI, NET-Banking and offline like cheque also.
Now you bought the shares of Reliance Industries worth Rs 50 thousand, but how will you get the shares purchased so that shares are kept in demat account. Earlier, share certificates were used in the era, now the era is digital, so shares are kept in electronic form in demat account.
Share Settlement Process ?
The shares you bought on Monday will not be deposited on Monday. Shares take time to accumulate in demat ac. The share settlement cycle in India is T + 2 days.
That is, the shares purchased on Monday will be deposited in the share demat account on Monday + Tuesday + Wednesday = Wednesday.
Shares purchased on Friday are not deposited on Sunday, Saturday + Sunday the stock market is closed, so the shares taken on Friday will be deposited on Tuesday.
And if we sold the shares, then it takes time for T + 2 Day to be deposited in the trading account. Then you can send money from trading account to bank.
How to invest in share market online in india ?
How to Open Demat & Trading Account ?
Visit any Broker Site like Zerodha, Groww, Paytm Money, etc.
Documents Required for open Online Demat & Trading account :-
- Pan Card
- Aadhaar Card
- A Cancelled Cheque from your Bank
- Proof of Address – Like Aadhaar Card
- e-sign through OTP – Mobile Number is linked to your Aadhaar no.
- Proof of Income – If you want open derivative and F & O account – not mandetory
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