Who Can Invest in Indian Stock Market
Indian stock markets have evolved substantially in the last 20 years in terms of risk management, operations, and even penetration. However, retail participation is still fairly low. But it is picking up given the improvement in technology and infrastructure.
Indian investors are veering around to the view that only stocks can generate wealth in the long term.
But what should be the minimum amount required to reap maximum benefits? what is the eligibility? what stocks to invest in? how to choose?
For better clarity on all these questions, read on.
Minimum Amount Needed to Invest in Share Market
There is no minimum or maximum amount to invest in Indian stock markets. It depends on which stock or ETFs (exchange-traded funds) you want to invest in. For instance, the price of a share of company A could cost you Rs 100, while a share of company B could cost Rs 1,000.
Depending on your financial bandwidth, you, as an investor, can start your investment in the stock market.
The Indian stock market is predominantly represented by two stock exchanges that facilitate the platform for trading (buying and selling) of shares. These are:
- National Stock Exchange (NSE), which has over 2000 companies listed on it. The index used here is Nifty. It represents 50 companies.
- Bombay Stock Exchange (BSE), which has around 5000 companies listed on it. The index used here is Sensex. It represents 30 companies.
The company stocks that are traded on these exchanges range from as low as Re 1 to as high as Rs 70,000.
Also, note that the broker involved in carrying out the transaction will charge you brokerage charges. They will also charge certain taxes mandated by the Government of India.
Thus,
Quantity of Share = Capital / (Share price + brokerage fees + taxes)
For example:
A share of Company A is Rs 20. And you have Rs 1,000 (capita) that you want to invest. Then, you may not be able to purchase 50 shares of company A as you thought. This is because, with Rs 1,000 you will be required pay taxes and brokerage fees (if any) and margins (if any). So taking into the additional charges, you may be able to purchase 47 or 48 shares of Company A.
Companies | Type | Bidding Dates | |
| Regular | Closes Today | ||
| SME | Closes 26 Nov | ||
| SME | Closes 26 Nov | ||
| Regular | Closes 26 Nov | ||
| SME | Opens 25 Nov |
Can NRIs Invest in the Stock Markets? Can Foreigners Invest in the Indian Stock Markets?
Indian stock markets are specifically for Indian citizens to trade. But there are ways for foreigners to invest as well.
Portfolio Investment Scheme (PIS), developed by RBI, allows eligible entities, such as foreign institutional investors (FIIs), non-resident Indians (NRIs), persons of Indian origin (PIOs) and qualified foreign investors (QFIs) to invest in stocks and convertible debentures of Indian companies.
NRIs and PIOs are eligible to trade stocks and convertible debentures of Indian firms through a registered broker.
Who are NRIs and PIOs as per the Finance Bill, 2020?
| Who is an NRI? | Anyone who has been in India for more than 182 days during a financial year and more than 365 days during the preceding four financial years qualifies as an NRI. According to the Finance Bill, 2020, this period is reduced to 120 days if the total annual Indian income of such an individual is more than Rs.15 lakh. |
| NRIs can continue to enjoy non-resident status if their presence in the country is 60 days or more but less than 182 days in any financial year, even if their stay in India during the past four financial years is more than 365 days | |
| Anyone, who has been deputed overseas for more than 6 months, also qualifies for non-resident status in India | |
| Who is a PIO? | A foreign citizen of Indian origin residing outside India and has held an Indian passport at any time or who himself or his father or grandfather was a citizen of India |
Qualified Foreign Investors (QFIs)
At the beginning of the year 2012, the government of India gave a new year gift to the stock markets. It allowed Qualified Foreign Investors (QFIs), including overseas individuals, to invest directly in Indian stock markets.
QFIs shall include individuals, groups, or associations that follow below mention guidelines:
- Resident in a country that is a member of the Financial Action Task Force (FATF) or a country that is a member of a group that is a member of FATF and
- Resident in a country that is a signatory to IOSCO’s MMOU or a signatory of a bilateral MOU with Securities and Exchange Board of India (SEBI).
- A QFI should neither be a person resident in India nor should be registered with the SEBI as a Foreign Institutional Investor (FII), sub-account, or Foreign Venture Capital Investor.
- Also, QFI should be set up with a SEBI registered Qualified Depository Participant (QDP) to commence activities. The QDP shall provide inter alia custody services.
Residents of the following 45 countries shall be eligible to invest as a QFI as per the definition by SEBI guidelines.
| Australia | Belgium | Canada |
| Czech Republic | Finland | Greece |
| Iceland | Republic of Korea | Malta |
| New Zealand | Poland | Russia |
| Slovakia | Spain | UAE |
| Austria | Brazil | China |
| Denmark | France | Hong Kong |
| Italy | Lithuania | Mexico |
| Norway | Portugal | Saudi Arabia |
| Slovenia | Sweden | United Kingdom |
| Bahrain | Bulgaria | Cyprus |
| Estonia | Germany | Hungary |
| Japan | Luxembourg | Netherlands |
| Oman | Romania | Singapore |
| South Africa | Switzerland | USA |
** It is important to note that unless appropriately authorized (or exempt) by the regulations in the relevant jurisdiction, Indian brokers would not be able to provide their services to foreign investors.
What is the Minimum Age to Invest in the Indian Stock Markets?
As such there is as such no age restriction for investing in the stock markets of India.
It’s just that you should be more than 18 years old to create a Demat account and a trading account. To open your Demat and trading account a PAN card is a must. And you can only apply for a PAN card if you are18 years or older.
Investing in the stock market for minors/under 18 years of age
Even if your age is less than 18 years, it is still possible to open Demat and trading accounts. You can do so by submitting the documents of your guardian.
You can open a Demat and trading account at a brokerage in the name of a minor by the natural guardians (like parents) or the court-appointed guardian.
After verifying all the necessary documents, the depository participant will allow you to trade in Indian stock markets.
Can a Student Invest in Stock Markets in India?
Yes. If the student is more than 18 years old, then he will be treated as a regular investor. If he is a minor, then the rules for minors will apply.
Can I Invest in the Stock Market in India Without a Stockbroker?
Any person who wishes to invest in Indian stocks, cannot go directly to the stock markets to buy or sell shares. Buying and selling of stocks have to be done through stockbrokers. It can be online (like Groww) or offline.
A stockbroker is an individual or a financial institute, licensed and authorised by SEBI to trade in stock markets. They also have direct access to the share market. They can act as your agent in share transactions of companies.
A stockbroker can also offer additional services like advice on stocks, debentures, government bonds, and listed property trusts, and non-listed investment options. For the services provided, stockbrokers charge a brokerage fee.
Also, a stockbroker can plan, implement, and monitor your investment portfolio, conduct research, and help you optimize your returns in stock markets.
How to Invest in Stocks Without a Demat account?
Having a trading and Demat account is mandatory to invest in the Indian stock markets.
The first step is to choose a stockbroker.
Next, open a Demat and a trading account in which the stocks would be electronically linked to your portfolio.
The trading account is similar to your bank account, which needs to be opened with a stockbroker. This account is used for placing orders in the stock markets i.e. to buy or sell stocks.
A Demat account is where stocks are held in a dematerialized form (i.e. electronically instead of physical possession of certificates by investors). It is required to receive or transfer stocks when you buy or sell stocks through your trading account.
Follow these steps to open a trading / Demat account:
- Approach a stockbroker registered with BSE and NSE
- Fill up the KYC form
- Attach the necessary documents: identity proof and address proof
- Produce the PAN card during the opening of the account
- One canceled cheque of the bank account you want to link to your trading account and
- Recent passport size photographs of yours
So, if you meet all the above criteria, don’t stop yourself from investing in the Indian stock market.
Always remember an investment decision should not be based on market ups and downs or its speculation. So, avoid investing in a company merely because the stock prices of a particular company are increasing exponentially or the price is too low and you expect it to surge. Make data-backed decisions.
Happy Investing!
Disclaimer: This blog is solely for educational purposes. The securities/investments quoted here are not recommendatory.