How to Buy and Sell Shares Online in India - Investment in Securities in Stock Market

If you want to buy or sell any security (shares debentures) you have to first approach a registered broker or sub-broker and enter into an agreement with him. The investor has to sign a broker-client agreement and a client registration form before placing an order to buy or sell securities.

Digitalization & Online System of Buying and Selling of anything has made our life easier. Now, there is another world exist which is known as virtual world. In this virtual world, everything is available whether making a friend, buying and selling anything, and so on. This also makes online trading much more easier and replaced the traditional paper work. Thus, all the trading centers spread all over the country have been brought onto one trading platform that is the stock exchange on the computer.

Now, screen-based trading or online trading is the only way in which you can buy or sell shares. Shares can be held either in physical form or an electronic book-entry form of holding and transferring shares can also be adopted. This electronic form is called dematerialized form.
It has been made compulsory to settle all trades within 2 days of the trade date, i.e., on a T+2 basis, since 2003.


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The Procedure of buying and selling shares online:
  1. If you want to buy or sell any security (shares debentures) you have to first approach a registered broker or sub-broker and enter into an agreement with him. The investor has to sign a broker-client agreement and a client registration form before placing an order to buy or sell securities. There are so many brokers available such as ShareKhan.com, ICICIdirect.com, hdfcsec.com and so on. He also has to provide following details:
  • PAN number
  • Date of Birth and Address
  • Educational Qualification
  • Occupation
  • Residential Status, Indian or NRI
  • Bank Account Details
  • Depository Account Details
  • Name of any other broker with whom registered
  • Client code number in the client registration form.
The broker then opens a trading account in the name of investor that is in your name.

  2. Now you have to open Demat Account or beneficial owner account with a depository participant for holding and transferring securities in the Demat form. You will also have to open a Bank Account for cash transactions in the securities market. Demat Account is also known as Dematerialisation Account, this account will help you to hold, buy and sell shares online.


 3. Then you need to place an order with the broker to buy or sell shares. You should give clear instructions about the number of shares and the price at which the share should be bought or sold. The broker will then go ahead with the deal at the above-mentioned price or the best price available. After that, an order confirmation slip is issued to you by the broker.


4. The broker then will go online and connect to the main stock exchange and match the shares and best price available.


5. When the share can be bought or sold at the priced mention, it will be communicated to the brokers terminal and the order will be executed electronically. The broker will issue a trade confirmation slip to the investor that is you.


6. After the trade has been executed, within 24 hours the broker issues a contract note. This note contains the details of the number of shares bought or sold, the price, the date and time of the deal, and the brokerage charges. This is an important document as it is legally enforceable and helps to settle disputes/claims between the investor and the broker. A unique order code number is assigned to each transaction by the stock exchange and is printed on the contract note.


7. Now you have to deliver the shares sold or pay cash for the shares bought. This should be done immediately after receiving the contract note or before the day when the broker shall make payment or delivery of shares to the exchange. This is called the Pay-in day.


8. Cash is paid or securities are delivered on Pay-in day, which is before the T+2 day as the deal has to be settled and finalised on the T+2 day.


9. On the T+2 day, the exchange will deliver the share or make payment to the other broker. This is called Pay-Out day. The broker then has to make payment to the investor within 24 hours of the Pay-out day since he has already received payment from the exchange.


10. The broker can make delivery of shares in the Demat form directly to the investor's Demat Account. The investor has to give the details of his Demat account and instruct his depository participant to take delivery of securities directly in his beneficial owner account.


All trading in securities is now done through the computer system. Since all systems are computerised, this is mainly done to eliminate problems like theft fake transfer delays and avoid paper works associated with shares or debentures.




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