How do I start investing in the Indian stock market? (Complete Beginners Guide)

6 min read
How do I start investing in the Indian stock market? (Complete Beginners Guide)

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A 60-year-old man resides in the sleepy town of Amalner in district Jalgaon, Maharashtra. His father owned a large farmland in the 1970s. The father’s untimely death in 1980 left the four sons to lead different paths in their lives. They sold the land and divided the proceeds of Rs.80,000 equally among themselves. Mohammed Anwar Ahmed (60), the youngest of the four, then aged 27, was married for two years and had a year old son. On parting with his brothers, he was at crossroads and did not know the path he should choose for himself as all the working life he had worked on the fields. His one brother left the Amalner while the two started their own shops.

In 1947, Chairman of WIPRO Ltd. and philanthropist Azim Premji’s father Mohammad Hussain Hasham Premji set up the company’s first plant here to manufacturer vegetable ghee, vanaspati, and refined oils. It was then called Western India Vegetable Products Ltd. and had got listed on the stock exchange in 1946. Over the years many residents of Amalner worked at the plant and several residents were shareholders of the company. In 1966, Mr.Azim Premji became Chairman of the company.

As Mohammed sat near a tea shop in Amalner, a young stockbroker from Bombay (now Mumbai) named Satish Shah stopped to ask a question. This meeting would change the life of Mohammed Anwar Ahmed. Satish Shah had come toAmalner to buy as many shares as he could on behalf of some clients in Bombay. The question that Satish Shah asked was: “Do you know anyone here who owns shares in that factory?” pointing to the WIPRO plant. Mohammed replied that the owners of the factory stay in Bombay. In short 15 minutes, Satish explained to Mohammed, how owning a share could make one a part owner in the company. This made Mohammed inquisitive and the meeting lasted for 30 more minutes.

Mohammed helped Satish Shah go door to door to collect shares from willing sellers (in very small towns nearly everyone knows each other) and for himself bought 100 shares of Rs.100 face value, thus investing Rs.10,000 from the total of Rs.20,000 that he had. The rest, he invested in starting a trading business.

From then on Mohammed started to think himself as part owner of WIPRO (and rightly so) and vowed never to sell a single share till Mr. Azim Premji is at the helm.

As a result, his initial investment of Rs.10,000 grew to over whopping Rs.534 crores.

He had invested in 100 shares at face value of Rs.100 in 1980. The initial investment was Rs.10,000. In 1985 and Those shares are now valued at approx Rs.534 crores

He is now retired and donates freely to charity from the dividends he receives. His foreign educated children often advise him to sell the shares but he has kept his vow of not selling a single share till Mr.Azim Premji is the working Chairman.

Not just Wipro but if you would’ve invested just 10,000 Rs. in Infosys in 1993 you could’ve got in 2017? It’s 2.9 Crore Rs. I have a list of fundamentally strong stocks which delivered best returns:

This is a lesson — both in patience and conviction.

If you have patience and conviction then the Stock Market is the best place for you to invest to get good returns.

So let’s get started with your first investment.

Quick steps to follow:

1) Pan Card and Adhar Card

You must have valid PAN card and Aadhar Card with you in order to open your demat account for investments. It’s now mandatory!

2) Choose a stockbroker and open your demat account.

Demat account is just like your savings account. You put your money in your savings account whereas you put stocks ( or securities) in your demat. It is suggested to open zero brokerage demat accounts like Upstox. Because:

  • They open the account within a day, 100% paperless.
  • Zero brokerage for delivery trades.
  • Backed by Ratan Tata and Tiger global.

You can open the account here

You can also read:  Which Demat Account is best in India and Why?

3) Learn to analyze the stock on your own or hire an investment adviser.

This is where 80% of new investors make mistakes, they just open their demat account and BUY/SELL without proper knowledge. Analysis of financial markets is either fundamental or technical. Fundamental analysis focuses on financial statements in assessing the condition of a company and in predicting its future performance. Technical analysis focuses on a stock’s historical price pattern, as portrayed on charts, to predict future price movements.

Learn Fundamental Analysis here
Learn Technical Analysis here
Learn Fundamental + Technical Analysis here.
If you don’t have time to read then hire SEBI Registered investment advisor here.

See sample analysis here

4) List out any 20 stocks you like:

Make a bucket of 20 stocks that you want to trace every day, In the stock market, the experience will be your best weapon and techniques will be your armor. You can take out your favorite companies like TCS, Infosys, Tata Motors etc.

5) Give 15 minutes and read a financial newspaper Daily:

If will happen for 20–30 days that you won’t understand the terms. It’s good because you are starting from ground zero level but, after a month or two you will feel a change within you. You will able to understand terms and jargons that traders/investors use for their trades. Once you will become familiar with these words you will become addicted to reading a new paper daily.

You can start with BusinessLine, Business Standard or Mint.

7) Try ‘Virtual Trading’ and track your profits:

Some of the websites like moneybhai and moneypot offer a free virtual trading platform where you can do real-time trading from your virtual money. Take a print out of your ‘gain loss statement’ and see your progress. Take a pen and page and draw it. It will give you a feel that yes! I know where my money is heading and how much progress I have made.

Also Read: Decoding Technical Analysis for Traders & Investors.

8) Watch Movies related to stock market investments:

You believe it or not but after watching these movies you will fall in love with the financial market and will make every attempt to make yourself ‘The most successful Trader/Investor of the world’

Top 5 Best Finance, Stock Market Movies:

a) Inside Job (2011)
b) The Big Short (2015)
c) The Wolf of Wall Street
4) Margin Call
5) Floored (2009)

9) You must know about the risk involved:

As I mentioned, stock market investments involve substantial risk of loss and are not suitable for every investor. You may lose more than your original investment if you will take it as a simple gameplay. The impact of seasonal and geopolitical events like Brexit, US elections, Demonetization, Rexit, etc or even COVID-19 already factored into market prices.

For every investment, Company analysis is very important. The company has lots of things to observe, See the financials, concentrate on ratios and margins, compare with peers, study about promoters, keep an eye on liquidity, make sure you know the debt, know future plans, forecast the scope, speak up with indicators and press BUY button. That’s how your wisdom will save you from massive destruction.

It seems very hard but you continue to enjoy when you learn it.

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Akshay Seth
Medium | Linkedin

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