How To Analyse Stocks

Introduction

India has been rapidly growing in terms of economy and GDP in the last decade, with the current GDP being $2.62 trillion. In spite of the pandemic and economic crisis, India has managed to stay afloat and even see a rise in share values.

Recently, the Indian share market has been getting numerous new investors. Businessmen and salaried employees are looking towards shares to grow their money and keep a nest egg for the future. Arguably, investing in shares makes your money grow the fastest, even with its risks and apprehensions.

Yet, if you are new to the share market, understanding how to do online trading and which shares to choose can become a bit taxing.

How to Buy Shares Online in India

To start buying shares online, you must possess certain documents and follow some steps. Here’s how you should proceed.

Get a PAN Card

A permanent account number or PAN is a 10-character alphanumeric identifier issued by the Indian Income Tax Department. You must obtain a PAN card before you start your trading journey.

Government regulations require you to have a PAN card before you can make financial transactions in the share market. It assesses your tax liability. A PAN card can be obtained by visiting a centre or applying online. If you have a valid Aadhaar card, you will get a PAN in a couple of days. 

Open a Demat Account

The second step towards investing in shares online is opening a demat account. A demat or Dematerialized account has the records of the shares you hold in a dematerialized or electronic format. 

You can open a free Demat account through any authorized bank, financial institution, or broker, with valid documents and ID proofs. After your online Demat account is active, you will receive a Demat Account Number. This unique number is essential to buy or sell shares.

• You can deposit and withdraw money in this account, just like a bank savings account.
• The number of shares you buy or sell will also be credited or debited in this account.
• A Demat account can only be opened with a Depository Participant (DP), who has to be registered with National Securities Depository Limited (NSDL) or Central Securities Depositories Limited (CSDL), or both.

Start a Trading Account

Next, you must open a trading account to buy and sell shares in the stock market. This account is required, in addition to the Demat account, to buy shares online in India. You will also get a unique Trading Account Number, which must be provided while buying shares online.

Get Registered with a Broker

Shares cannot be purchased directly from stock markets; you need a broker to handle the transaction. This broker can be an individual or a brokerage platform or agency that acts as a financial intermediary between you and the stock market.

A stock market broker must be certified by the Securities Exchange Board of India (SEBI), the market regulator. Needless to say, all this is futile if you do not have a bank account. Your Demat and Trading account must be linked to your bank account for transactions.

Obtain a UIN

Unique Identification Number of UIN is mandatory by SEBI for stock market investors. You can get a UIN through NSDL, for share transactions amounting to one lakh Indian rupees or more. You can transact for lesser amounts even if you do not have a UIN.  

Once you follow through with all these steps, you are all set to purchase shares. The shares you order for purchase will be matched with a similar sale order in the stock exchange. Then, it will be settled and credited into your Demat account. 

Now that you know how to buy shares online in India, the next question is which shares to invest in and how to determine the suitability of a company’s shares. 

How to Research Before Buying Shares Online

For a beginner, deciding which shares to trust and putting money into them is a confusing task. With over 7,000 companies listed in the National Stock Exchange, selecting the ones that will benefit you the most can be daunting.

Thus, you need to do complete research before taking the plunge. There are a few aspects to consider when you wish to determine whether a share is worth investing in.

• The company’s fundamentals: Research the company’s performance in the last five years, including figures like earnings per share, price to book ratio, price to earnings ratio, dividend, return on equity, etc.
• Future relevance: Check if it is equipped to survive a few years down the lane.  Analyze whether people would still find the products or services relevant, as this will give you an idea of future performance.
• Uniqueness: Does the company have any unique features to set it apart from competitors? Will it survive the rat race through innovation and technology?
• Financial performance: Check whether the company is in debt or has lost the money of its investors in the recent past. Past trends tend to predict what may happen in the future, although this is not always the case.
• Stability: You don’t want to invest in shares, only to find out the company has gone out of business. Research whether the management is efficient, operations are stable, and the higher-ups are qualified. 
• Popularity: If you want to make quick bucks and withdraw, you can go for popular shares that feature in the news. However, steady and less-hyped shares often give better returns in the long run. Choose mid-cap companies for higher returns and do not get into the game for a short period of time.

Start Investing in Shares Online!

Buying shares online involves quite a few rules and SEBI-mandated regulations. However, once you get the details under your belt, this is the best place to let your money grow. Simply ensure that your financial partner in trading is reliable and your trading app is efficient. Another key aspect to keep in mind is that your share purchases are not based on whims or fads, rather they must be grounded in research and foresight.