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2. Stock markets are venues where buyers and sellers meet to
exchange equity shares of public corporations.
Stock markets are components of a free-market economy because
they enable democratized access to investor trading and exchange
of capital.
Stock markets create efficient price discovery and efficient
dealing.
What is Stock Market?
3. How to Invest in the
Share Market
You cannot buy or sell directly on the stock market. For this, you
have to go through brokers who are authorised to trade on the
market or stock brokerage companies that allow you to trade using
their platform.
4. To begin investing, you have to open a trading account with a broker or a stock
brokerage platform. A trading account is where you actually “trade” or place buy
or sell orders.
The broker or the stock brokerage platform opens a demat account for you. A
demat account holds the financial securities in your name.
These two accounts are then linked to your bank account.
To open a trading and demat account, you need to provide Know Your Customer
(KYC) documentation that includes verification via government-authorized
identity cards such as the PAN card or your Aadhar.
Most brokers and brokerage platforms now have an online KYC process that
allows you to open an account in a couple of days by submitting your verification
details digitally.
Once open, you can trade with your broker or brokerage company online via a
portal or offline via phone calls.
5. Cost to Invest in the Share Market
Transaction costs: All brokers are paid a brokerage, which is a fee they take to facilitate a trade
for you. With the advent of discount brokers, these costs are quickly shrinking. Apart from
brokerage, they also collect taxes and dues paid to the government on each transaction, such
as the Securities Transaction Tax (STT), SEBI charges, Goods and Services Tax (GST), among
others.
Demat charges: While your broker or brokerage platform opens your demat account for you,
they do not operate it. Demat accounts are operated by central securities depositories such as
NSDL or CDSL, under the government’s jurisdiction to safeguard your interest. You are
expected to pay nominal annual charges (typically collected by your broker or the brokerage
platform) to maintain your account. These charges range anywhere between INR 100 to INR
750.
Taxes: You pay a percentage of your profit from your investments to the government as taxes.
For stocks, if you hold them for longer than a year, you pay long-term capital gains tax, which is
10%, and if you hold for less than a year, you pay short-term capital gains tax, which is 15%.
Both of these tax rates change based on cess or surcharge charged by the government.
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