Fundamentals of Share Market
Share is nothing but the ownership of the company divided into small parts and each part is called as Share or Stock. A person carrying the share of a company holds that part of ownership in that company. A person holding maximum shares has maximum ownership, like directors, chairman etc.
Share Market
A Share market is the place where buying and selling of shares take place. Nowadays due to internet and advanced technology, buying and selling of shares take place anywhere in
country’s economic barometer (a guide to economic growth).
Online Trading Systems
Stock markets like NSE and BSE enable trading of a company’s stock. First let us understand the Working of a Share (stock) market To learn more about how you can earn on the stock market, once has to understand how it works. A person willing to buy/sell shares can do themselves using online trading
systems. When the buy order of the shares is communicated to the exchange [either NSE {National Stock Exchange} or BSE { Bombay Stock Exchange}]. The order stays in the queue of exchange’s other orders and gets executed if the price of that share comes to that value. The shares purchased will be sent to you either in physical or in Demat Format.
Rolling Settlement Cycle (RSC)
RSC means when you will get your shares in your Demat account or in physical form. In a rolling settlement, each trading day(T) is considered as a trading period and trades executed during the trading day (T) are settled on a T+2 basis i.e., trading day plus two working days.
What is Demat Account and Why it is Required ?
Securities and Exchange Board of India (SEBI) is a board (corporate body) appointed by the Government of India in 1992 with its head office at Mumbai. One of its function is helping the business in stock exchanges and any other securities market.
Demat (short from of Dematerialization) is the process by which an investor can get shares (also called as physical certificates) converted into electronic form maintained in an account with the Depository Participant (DP).
DP could be organizations involved in the business of providing financial services like banks, brokers, financial institutions etc. DPs are like agents of Depository.
Depository is an organization responsible to maintain investor’s securities (securities can be
share or any other form of investments) in the electronic form. In
organizations called NSDL. (National Securities Depository Ltd.)
Demat Account
Investors wishing to open a Demat account has to go to a DP and open the account. Opening the Demat account is an simple as opening a bank account with any bank. As you need a bank account to save your money, make cheque payments etc, likewise you need to open a Demat account if you want to buy or sell stocks.
All shares you possess will show in your Demat account. So you don’t have to possess any physical certificates. They are all held electronically in your Demat account. As you buy and sell the shares, accordingly yours hares will get adjusted in your account.
Is Demat account must ?
The market regulator, the Securities and Exchange Board of India (SEBI), has make it compulsory to open a Demat account if you want to buy and sell shares. So a Demat account is a must for trading and
investing.
How to start to open a Demat account ?
You have to approach a DP to open a Demat account. Most banks have DP participants; you may approach them.
A broker and a DP are two different people. A broker is a member of the stock exchange, who buys and sells shares on his behalf and also on behalf of his customers.
Following are the documents required to open a Demat account
When you approach any DP, you will be guided through the Formalities of opening an account. The DP will ask to provide some documents as a proof of your identify and address.
Below is a list but you may not require all of them :
PAN card, Voter’s ID, Passport, Ration Card, Driver’s License, Photo Credit card Employee ID card, IT returns, Electricity / Landline Phone bill etc.,
Do you need any shares to open a Demat account ?
No. You do not need any shares to open a Demat account. A Demat account can be opened with no balance of shares. And there is no minimum balance to be maintained either. You can have a zero balance in your account.
How much does it cost to open a Demat account ?
The charges for account opening, annual account maintenance fees and transaction charges vary
between various DPs. After successfully opening the Demat account, the DP will allot “Beneficial Owner Identification” Number, which you will need to mention for all your future transactions.
If you want to sell your shares, you need place an order with your broker and give a ‘Delivery Instruction’ to your DP. The DP will debit your account with the number of shares sold. You will receive the payment from your broker. If you want to buy shares, inform your broker about your Depository Account Number, so that the shares bought are credited into your account.
