How to Buy shares Online in India?

If your goal is capital appreciation through the highest returns from the market, then you must consider investing in stocks and securities. Long term returns from shares can range up to 16%, thus allowing you the opportunity of wealth creation. As an investor, you can invest in a wide range of asset classes, like gold, real estate, and mutual funds.

But, it has been historically proved that stock markets offer the best returns. You must, however, understand the basics of the stock market before investing your hard-earned money in shares. Investment in shares is often fraught with the risk of high market volatility, and expertise in the market will prevent you from taking unnecessary risks.

In the present digital age, you can purchase shares online at the click of a mouse. Here are the steps required to buy shares online:

1. Getting a PAN card:

Obtaining a Permanent Account Number (PAN) is the first step towards any trade in the stock markets. According to government regulations, you have to provide your PAN before making any financial transactions. PAN is a 10-digit unique alphanumeric number allotted to you. A PAN card also acts as a valid identity proof. PAN is used by the government to assess your tax liability.

2. Open a Demat Account:

Before purchasing shares online, you have to compulsorily open a Demat Account.

  • A Demat account is also known as a Dematerialized account. Here, the physical shares held by you are dematerialized or converted in an electronic format.
  • Once you open an online Demat Account, you will be provided with your unique Demat Account number. This number has to be quoted while buying or selling shares.
  • A Demat Account is quite similar to your bank account, where you have the option to deposit and withdraw money. The number of shares purchased or sold is accordingly credited or debited in your account.
  • Here, you must remember that you can only open a Demat Account with a Depository Participant (DP). A DP can either be registered with National Securities Depository Limited (NSDL) or Central Securities Depositories Limited (CSDL), or both.

3. Open a Trading Account:

The next step is to open a Trading Account.

  • A trading account is used to purchase and sell shares in stock markets. Once you have a Demat Account, and want to purchase shares online, you need a Trading Account.
  • While purchasing shares online, you have to quote your unique Trading Account number.

4. Register with a Broker/ Brokerage Platform:

  • As you cannot purchase shares directly from stock markets, you have to use the services of a broker. A broker is a financial intermediary, acting as the link between you and the stock market. Market regulator, Securities Exchange Board of India (SEBI) certifies brokers in India.

5. You’ll also need a Bank Account:

  • You cannot purchase shares online without having a bank account. Your Trading Account links your Demat Account with your bank account.
  • If you want to purchase online shares, then you have to make the requisite order through your Trading Account. The broker will then forward the transaction for settlement in the stock exchange. Post settlement, the shares will be transferred to your Demat Account within two working days, while the necessary charges, or purchase costs, will be debited from your bank account.

6. Get your Unique Identification Number (UIN):

  • To create a database of all Market Participants and investors, SEBI has made it compulsory for investors to get a UIN. You can get a UIN through Point of Service (POS) agents appointed by NSDL.
  • You must, however, note that a UIN is only required when you are trading in capital of Rs 1 lakh or more. If you want to purchase online shares below the amount of Rs 1 lakh, you don’t require UIN.

After following the five steps listed above, you are now all set to purchase shares online. Once you place a purchase order, it will be matched with a similar sale order in the stock exchange. After settlement, your Demat Account will be credited with the number of shares purchased.

Conclusion

Thus, for purchasing shares online, you have to follow SEBI-mandated rules. You must always remember to choose a trusted financial partner for trading in stock markets. IIFL’s Demat and Trading Account provides you with award-winning research on over 500 stocks. Among the few brokers in India to provide Demat services of both NSDL and CSDL, IIFL provides the industry’s best trading platforms along with a customized portfolio analysis.

Open Demat Account at IIFL