How To Invest In Share Market In India

Stock market investments are among the best ways to build your wealth over time. But for a common man investing in the stock market is not that easy.

However, you can easily start investing in the share market if you do little research and understand the fundamentals to pick the right stock.

Let’s go in detail to understand how to invest in stock market in India if you are a beginner.

How To Invest In Share Market In India 2022

#1. Define Your Investment Goal

Always have clarity about your investment goal before you start investing in the share market. Because you would have to follow a specific strategy to accomplish your goal.

Whether you are investing long term to create wealth or you are trying the stock market just for fun. Be clear in your goal.

If you are giving it a try to have fun or to learn about it. Make sure that you start with small amount and don’t get emotional with market ups and downs.

You are not alone, most people start this way.

However, if you are serious about Goal-Based Investing, Fix your goal first, it can be anything like buying a new house, a new car, your marriage or children’s marriage, high education or retirement.

You can see each goal has a different time frame and time frame matters a lot when you invest in the share market. You can easily decide how much return you want for your time frame and for how long you have to keep your money invested.

#2. Find a Stock Broker

You can’t invest in stock exchange directly. You need a broker who provides you a platform to invest in the share market.

Stock brokers are authorized companies or individuals that are allowed to buy or sell shares in the stock market. Brokers are authorized by SEBI (Securities and Exchanges Board of India) which is the stock market regulatory body in India.

Brokers are of two types – Full-Service Broker and Discount Broker.

1. Full Service Broker

These are traditional brokers who provide research and advisory services to their clients along with investing and trading in the share market. 

They also offer further services like wealth management, investing in currencies or commodities and individual consulting based on your financial goals.

Examples of full service brokers are Motilal Oswal, ICICI Direct, Sharekhan, Angel Broking and the list is long.

Motilal Oswal

Since full service brokers provide you in-depth research and advice, they invest huge amounts on research teams and thus charge very high brokerage such as 0.55% of per executed order. 

For example, if you are buying shares worth Rs. 10,000 you have to pay Rs. 55 as a brokerage.

If you don’t have any knowledge of the stock market and you don’t want to learn yourself you can go with a full service broker. 

2. Discount Broker

Discount brokers on the other hand provide investing platform at a highly cheaper price. They don’t provide you any research advisory facility, they only give you the platform to buy or sell your shares.

If you have a deep interest in the share market and you want to learn on your own, then a discount broker is an ideal choice for you. 

First of all, you don’t have to pay a hefty amount as a brokerage. Secondly, when you are not getting any tips, you will research your own that will improve your knowledge and in the long run you will become a better investor.

Discount brokers normally charge Rs. 20 per executed order from their clients.

Examples of discount brokers are Zerodha, Upstox, and 5paisa.

#3. Demat and Trading Account

Once you have finalized the right broker, you need a demat and trading account to start your stock market investment. 

1. Demat Account

In the old days, you had to get a physical certificate of shares purchased from your broker and you had to submit it back to the broker when you sold them.

But nowadays, everything is digital. You won’t get a single physical paper for your every deal. Everything is in the dematerialized form. 

That’s why the account that holds your shares or mutual funds in your name, is called Demat account. 

In other words, when you buy a share and keep it with you for a few days or months, that share is preserved in your demat account. When you sell it, the share again gets removed from your demat account.

2. Trading Account

You can buy and sell shares using a trading account. Unlike Demat account, Trading account doesn’t hold your shares, it just performs a deal (buy or sell) on your behalf. 

When you open an account with any broker, then open a demat-cum-trading account so that you can use both accounts from one place. You can read the details difference between demat & trading account here

#4. Finding the Right Stocks

You should be strong in stock research if you don’t want to lose your hard earned money. 

The easiest way for a beginner to pick a stock is by start noticing companies around you. Start observing things you use in your regular day to day life. It could be handwash, soap, toothpaste, biscuits, packed juice, anything that you come across and you feel satisfied with their products or services.

Find out the parent company of that product and check that is listed in the stock exchange or not. 

If listed, then search about their last 5-7 years performance, their sales, profits and financial reserves, that will give you a better understanding that the company has strong fundamentals if you find most of the stuff positive.

You must consider the 4 pillars to analyse a profitable stock as given below –

#1. Profitable Business

You must check if a company’s business has been profitable in the last 5-10 years or not. To check the profitability of a business, you should learn financial ratio’s analysis.

You can understand the current ratio, fix ratio and cash ratio to get more clarity about the profitability of a company’s business.

#2. Healthy Financials

Healthy financials of a company depends on two things –

  • Less dependency on loans
  • Fast cash inflows to meet regular capital needs

Again analysing financial ratios will help you understand healthy financials.

#3. Business Growth

You can’t expect better returns if a business is not growing. You must check the last 5 to 10 years of data to understand how much a company’s business grew.

#4. Valuations of Stocks

Another important aspect to get profitable returns is to evaluate if a particular stock is currently undervalued or overvalued.

An undervalued stock means that stock is performing at less price than its actual worth, such stock gives you gains in future when stock performs better.

An overvalued stock is when a stock is performing at a higher price than its actual worth, you should avoid such stocks.

For example, if you use Aashirwad flour at home and like to have Yippee instant noodles, then you can search for ITC company’s details because these are ITC products. 

You can check out their financial details to understand how the company has grown in the last 5 years. You can Google about the company’s details or you can use any online portal such as moneycontrol or ET Money to check out the past data of any stock company.

Let’s start with share prices of ITC in last 5 years –

Now you can see that ITC’s current share price is low as compared to its past years performance.

So low price could be a profitable deal for a value investor but we have to look at other factors as well.

You can analyze company’s current assets, liabilities,  reserves and surplus to get some idea about company’s financial performance.

But this is not the only thing to finalize the stock, you have to analyze other factors such as current ratio, cash ratio and many more terms before shortlisting the stock.

Check outUpstox review 2022

#5. Investing in Stocks

There are multiple ways to invest in stocks. Let’s discuss them one by one.

#1. Direct Shares

Once you have done research, you can directly invest in the shortlisted stocks. You can buy and sell your selected stocks through your trading account. 

#2. Mutual Funds

If you are still not interested in taking risk of direct investment in stocks, you can invest indirectly in stocks via mutual funds.

Mutual funds let you invest your money in stocks indirectly. Because you don’t invest in stocks instead you invest in units made up of bundle of stocks.

#3. Exchange Traded Funds (ETFs)

ETFs are a combination of mutual funds and stocks. You can invest 95% in mutual funds and 5% in direct stocks. Unlike mutual funds, ETFs prices are more volatile as similar as a share price fluctuations during market hours.


Investing in the stock market is easy if you do your homework and learn different strategies to evaluate profitable stocks. 

Always start small and pick popular established companies whom you find stable and fundamentally strong. 

Never go for expert advice broadcasting on TV or similar mediums, and trust your own instincts. Keep on learning and getting better in stock evaluation, that would lead to profitable investing in share market.

About Raghav

Raghav is an investment analyst with a commerce education background who loves to write & share his investment ideas.

Leave a Comment