What is Buying and Selling in a Share Market?

Buying and selling shares in the stock market is easy, provided you know and abide by the simple rules and regulations that have been laid down by the Securities and Exchange Board of India (SEBI) . Let’s get started.

Obtaining your Aadhaar and PAN card is mandatory in order to be able to invest in the share market in India. These documents are necessary for a seamless KYC procedure, a step that precedes opening your account with SEBI, the market regulator that governs all transaction in shares.This aside, you’d have to furnish a cancelled cheque along with a six-month bank statement, as mandated by SEBI.

You’d not be able to directly trade shares over the stock market; you’d have to get yourself a broker for the purpose. These brokers can be individuals, full-time brokerage providers (agencies) or companies, for that matter, registered with and licensed by the SEBI to trade over the stock exchange.Brokers will charge you brokerage fees in lieu of the services they provide.

Once you have arranged yourself a broker, next up is opening a trading and demat account. While a demat account serves to hold and store your securities (along with other crucial documents) in an electronic format, a trading account helps you to transact (buy and sell) in these shares over the stock market.

As a buyer, you’d have to bid in order to procure shares at the best available price while the seller ‘asks’ (the best price that a seller accepts) in order to sell the securities at a specific price. It is when the ‘bid’ matches with the ‘ask’ that a transaction can be carried out and both orders executed.

Prior to transacting in shares, you’d have to intimate your broker about the number of shares that you wish to purchase and the price at which you’d want the transaction to be carried out. Stated below is a brief guide to buying and selling shares in the stock market:

• Understand the purpose behind an investment.
• Decide your goal, figure out your risk appetite and devise an investment strategy. Probe into stocks that are likely to complement your investment objectives and fit within your risk-taking abilities.
• Don’t try to time the market. The fundamental principle here should be to spend considerable amount of time in the market so that you have the leverage to discern when prices fall, something that should propel you to buy shares.
• That being said, don’t be in a rush to sell off securities the moment prices increase. The idea here is to stay invested for the long haul. This way, your strategy would be likely to yield higher returns while mitigating market extremes at the same time.
• Cross-check with your broker to make sure there is no miscommunication regarding the number of shares you’d want to buy and the price at which you’d want them.
• Regular monitoring of your portfolio is necessary; this way, you’d be able to figure out the optimum mix of stocks at any given point in time, thereby keeping investment-risks in check.

Now that you know the entire process, kick-start your share market investing right away!

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.