Most of the trading in the Indian stock market takes place on its two stock exchanges: the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). The BSE has been in existence since 1875. The NSE, was founded in 1992 and started trading in 1994. Both exchanges follow the same trading mechanism, trading hours, settlement process, etc. There are 7,000 + stocks listed on the BSE which is the larger of the two exchanges in terms of number of companies listed. However, only 3,000 of these stocks are actively traded.
How to Start Stock Investing?
To start investing in the stock markets, you need 3 types of accounts – Trading Account (to place buy/sell orders), Demat Account (to hold your shares in dematerialized form), and a Bank Account (for fund transfers).
Trading Account
An account similar to a bank account, to be opened with a ‘stock exchange registered stock broker’. This account is used for placing orders in the stock exchange (i.e. to buy/sell shares).
Demat Account
An account where shares are held in a dematerialized form (i.e. electronically instead of the investor taking physical possession of certificates). The demat account is required to receive/transfer shares when you buy/sell shares through your trading account.
Bank Account
Your regular savings or current bank Account should be linked to your trading account. The Bank account is required to transfer/receive money when you buy/sell shares through your trading account.
Typically, if you sign up with a stock broker, they will guide you on not only the opening of the trading account but also the demat account and linking of your bank account. Just like banks provide you with the facility to open and maintain saving accounts, in the same way the Depositories* provide the facility to open and maintain demat accounts. In India, the government has mandated two entities –National Securities Depository (“NSDL”), and Central Depository Services (India) (“CDSL”) – to be the custodian of dematerialized securities.
Most big stock brokers register themselves as a Depository Participant (“DP”) who act as an agent of the Depositories to make its services available to the investors. Effectively both your trading account and your demat account is maintained by your stock brokers (mostly through setting up of 2 different entities). In case of some stock brokers, they use the depository services of other bigger financial institutions or custodians and only provide the front end trading account. As an investor, no one approach is better than the other for you, as typically, it takes the same amount of time for shares to be deposited and withdrawn from the demat account in either case.
To open a trading / demat account, follow the following process:
- Approach a BSE and NSE registered stock broker.
- Fill up the KYC form provided by the stock broker.
- Attach the required documents – (i) identity proof and (ii) address proof.
- Produce the original PAN card during account opening.
- For Derivatives segment (i.e. futures and options market), 6 months account statement of your existing bank account is required.
- One cancelled cheque of the bank account you want to link to your trading account.
- 3 passport size photographs
What you should look at before opening Demat and the trading account schemes:
- Account Opening Charges: This is the fee charged at the time of opening demat and trading account.
- Account Maintenance Charges: This is the annual fee charged to maintain demat & trading account.
- Brokerage Charges for Intraday transaction: If you take a position (buy) on a stock and release (sell) that position before the end of that day’s trading session, it is described as intraday trading. The brokerage charges for intraday transaction are very nominal (mostly between 0.02%-0.05 % on the total cost of transaction).
- Brokerage Charges for transaction requiring delivery: If you buy a share and hold it beyond that trading session (i.e. for a term longer than one day) or when you sell a share you own and do not buy it back during a single trading session, the transaction qualifies as a delivery based transaction as the name of the owner of the share is changed with the Depository. The brokerage charges are higher in this case as additional processing is required (mostly they range between 0.08%-0.55% on the total cost of transaction).
- Brokerage Charges for Futures and Options transaction: The Brokerage fees applied on the transaction in the Futures and Options segment (mostly varies 0.02 – 0.05% on the total cost of transaction for futures and Rs 25 – Rs 100 per lot for option contracts).
- Apart from the brokerage charges, you may want to consider the software/ technology provided by the stock broker for online trading and if the stock broker has a good service standard for call and trade facility (to enable you to place orders over the phone).
These days, most big commercial banks provide trading and demat account services and link it to your savings account. Although their brokerage charges are slightly higher than specialized stock brokerage firms, unless you are a regular/ heavy volume trader, you should open your trading and demat account with your bank itself. For high volume traders, there are many specialized stock brokers to choose from.
A comparison of brokerage charges for some popular ones is given below:
The big advantage of having an account with a Bank (like HDFC, ICICI etc) is that they typically provide a three-in-one-account (i.e. savings account, trading account and demat account are all linked to each other). Having all these accounts linked to each other ensure that you get a completely paperless mechanism for trading. In addition, this ensures smooth and real time transfer of money to and from your bank account. On the other hand a specialized broking firm will typically provide you with a demat account and a trading account. The trading account is then linked to your bank account for transfer of funds. In this case, the transfer of funds is not real time and can take anything between one to three days.
For heavy volume traders, it is advisable to open your account with a specialized brokerage house. Not only do they have an extremely low brokerage rate but also offer fixed monthly brokerage schemes for heavy traders. Under these plans, the brokerage firm charges you a fixed sum every month and enables unlimited trading for the whole month. If you are an F&O trader implementing advanced option trading strategies, your brokerage charges will surely rack up to an amount much higher than the fixed monthly charge plans offered by most discount brokers. In such a case you may be well advised to switch over to an unlimited monthly brokerage plan.
Looking for a Stock Broking Account? Tell Us Your Preferences and Contact Number In The Message Box Below:
*A Depository refers to “An organization that facilitates holding of securities in the electronic form and enables DPs to provide services to investors relating to transaction in securities”.
Here you can find the account opening forms of some of the banks and brokerage houses:
axisdirect.co.in
midoffice.motilaloswal.com
hdfcsec.com
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Really nice post
How much amount of money is required to start investing in Stock ?
Any amount is good amount. You could start with Rs. 100 too. The important thing is to start.
I made a decision to start investing in stock .So to open Trading,Demat and saving, which would be a prefer option – ICICI Direct or HDFC Securities ,etc .
I would go with ICICI Direct. Although it depends on how much you plan to trade (in terms of value). If it is over 15-20 lacs, you may want to consider a discount brokerage too.
Very good blog for beginners like me, I am an engineer and want to start investing in stock market. I already have a HDFC bank account and planning to open demat account with that, please suggest me whether its a good choice?
Perfect that is. Go ahead and good luck!
Thanks for the information. It was most helpful.
Very helpful. Thanks. Will call you soon.
sir i want to know how to start a business. How to open trading account and demat account with sbi how much invest in accounts
Visit any SBI Branch which deals with trading accounts. They will help you.
Nice article and thanks for share this information.
Good thanks for sharing very useful. now a days trader and investors are more interested in quality advice than stock brokers.
Sir I am mechanical engineer and i am not aware of share market. but i really wanted to invest in share market. what will be the total minimum cost i need to start this business. along with bank account. I am really looking for your guidance. you may consider me as aa below ground level in share market.
Good explanation. Which is the best share broking company in india.
I like that you describe each of basic terms and every points and I get a better knowledge about stock market.
IM New and want to trade in share maerket. Please give me any advice where and when to invest money right place. I have no experience about trading.
email me your query!
After reading this article I found Discount broker in India like Samco which is best broker in India I must says. Because they charge very less i.e. just Rs: 20/trade only. Also they have good online trading tools etc.
how to sell and puerches
I want open a demat acount by online wich trade daily sell and purchase ok
why u prefer ICICI over HDFC inspite of HDFC having low btrokerage charges??
I like the ease of keeping things at one place, plus the overall back-end management. Brokerage charges are the same for both, just call them and negotiate well :-). Anyways . . You shouldn’t look at full service banks for brokerage rates really. Feel free to call our office if you are looking for the cheapest broker.
i am an mechanical engineer and i want to enter in share trading business,but i am new to this so i would like to know that, how do i start with it?
also i have an demat account with motilal oswal.
also what kind of share tdrading i should go for.
please can u guide me.
Hi Venkatesh, I will write in to you soon.
Hello sir! I am a student and want to invest in stock market. So plz guide me.
Great information..! This is excellent information about start stock investing. All account information is good and very knowledgeable. I got great process details about to open a trading / demat account with you. Thank you so much for sharing this information.
hello sir,
i like to enter into share market, what are the other requirements do i need a UIN number and how can i get it?
Hello sir,
As I am a student and fresher to the stock market and share brokerage.
So can you please guide me how to open an account for this and start trading for the same.
As I want to know you that I want to startup with an low level trading so suggest me in that manner.
I have an account with Tradeplus online(Discount broker). I kinda feel they are good. Should i continue with them or should i open an account with banks like HDFC, ICICI Direct, Etc… Please guide me on which is better…
Thanks.
sent you a mail
I want to open an account but i cant choose the best broker.please, suggest me
Call me on 41517078, lets discuss exactly what you are looking from a broker.
Great post! Extremely helpful for the stock market beginners. Thank you sir.
i am newer to share market, i would like to invest in share market, request you to kindly advise me the procedures,
Check your email
I am new to share market.kindly tell me how to open trade and demat account and minimum amount for investment.
Call our office at 011-41517078
I am a student and i want to invest in share market. I am new in this field and dont know the basic. Pls advice me frombasic
Call 011-41517078
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how to open demat account from out side india ie from dubai.
Ive sent you a mail, please check.
Who should I register for trading can u plse tell me how should I find broker to invest .
Call – 01141517078 and to speak to someone for this.
To invest around 10 lakh should i i go for discount broker or icici is ok.how is samco
Please call Radhey Shyam on 011 – 41517078. He will understand your exact requirement and trading style and suggest accordingly.
Just a small thing, of SBI,HDFC and ICICI which would be better for a three in one considering that I am not gonna do that intraday thing and the annual maintenance cost is currently something i would like to be on the lower end and also the software they provide for it which is better? or if there is a software at all
I wanted to know which bank should i go for considering that i won’t be doing the intraday trading and i will be doing it more of a side thing aside from my studies and maintenance charge is something i would like to be on the lower level. Also if we are going with a bank then do i need to contact the stock broker or not. Also the software who provides it the bank or the broker?
And the blog is the best for newcomers since i searched a lot and this was the first time that i felt that i understood anything at all because most are based on other countries and are not India specific.
They can suggest you all stock advisory firm in India. Really good work sana team.
All the best!
Thank You
Nice blog, very interesting to read
sir i wan to know how to start
i am newer to share market, i would like to invest in share market, request you to kindly advise me the procedures,
Dear Sir,
i am from bahrain, working for 2 years. i would like to start trading. so kindly advice me.
Sent you a mail.
Hi, I sent you a mail earlier also. I started investing last three years from 2019.
At present invested approx 35 lakhs.
Plz guide me how to send my details to you for advice. And for further investment.
I am following you on twitter ftom quiet sometime.