How to invest in shares with only Rs. 5000?
Introduction to Stock Market Investing
The enticement of earning handsome returns has attracted people from all walks of life to invest their savings. However, most people miss out on the fact that losses have an equal probability. Apart from patience and discipline in investing, you also require a good amount of research and understanding of the market to earn a consistent income.
Also, you do not need a casket full of money to start investing. In fact, as a beginner, it makes more sense to start with a small amount and increase your investment amount gradually as you gain more understanding of the finer aspects of investing/trading.
What is stock exchange?
The stock exchange is a trading platform where buyers & sellers meet to complete the purchase/sale of financial securities such as stocks, bonds, currencies, etc. Stock exchanges act as a forum for price discovery.
The National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) are the two major electronic exchanges in India.
An index can be thought of as a collective report card. In an army of more than 5,000 listed stocks on the exchange it becomes impossible to track each and every stock to decide if the market is up or down for the day. An index simplifies this by bringing together a selected group of stocks to gauge the performance of the market. Indexes can be classified in terms of market capitalization, sectors, momentum or any other suitable criteria.
The S&P BSE Sensex or Sensitive Index is a market-capitalization weighted index representing a basket of thirty most active, liquid & representative stocks on the Indian bourses. It was first compiled in 1986 with a base value of 100.
The other widely tracked bellwether, The S&P CNX Nifty 50 Index is also a market capitalization weighted index of the fifty largest & the most-liquid blue chip Indian securities listed on the NSE. It was first compiled in 1996 with a base value of 1,000.
Both the markets operate five days a week and are closed on weekends & national holidays. Trading is done on the automated computerized mode of trading also known as BOLT (BSE’s Online trading) and NEAT (National Exchange for Automated Trading) system. The online trading system has facilitated the traders with more transparency, efficiency, automatic order matching, and speedy processing of the transactions in comparison to traditional trading systems.
The SEBI was established in 1988 but received the status of an autonomous body only in 1992.
SEBI is the regulatory body that oversees the developments which take place in the Indian markets. The primary duty of the market watchdog is to safeguard investor interest. The SEBI has framed a set of regulations, by-laws and surveillance systems so as to provide the end-users with safety and transparency while dealing in securities.
So here in this module, as the name suggests, we will guide you step by step to start investing in the stock market. Therefore in the next section, we will discuss the essential prerequisites to start trading or investing in India.