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Frequently Asked Questions

What is the Stock market?

The stock market or stock exchange is a marketplace (mandi) where individuals and institutions can buy and sell stocks/securities of listed companies. ‘Securities’ or ‘Stock’ refers to equity shares that offer ownership in a company.
The activity of buying and selling stocks is also known as trading in shares.
When you buy a stock, you get ownership of the company in proportion to your investment. Additionally, you become eligible to receive a proportionate share of the company’s profit in the form of ‘dividend.’
The Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) are the leading stock exchanges in India. Other prominent stock exchanges are Calcutta Stock Exchange and NSE IFSC.
In India, stock trading of publicly listed companies dates back to 1875, when a couple of traders gathered under a banyan tree and traded physical share certificates of the companies. Now, with digitization, stock trading is just a click away.
At Paytm Money, with 100% paperless account opening and digital KYC, you can become investment-ready within minutes.

How Does A Stock Market Work?

Like a common marketplace, in a stock market, buyers and sellers negotiate on prices and trade stocks.
The stock market involves two types of trades: Intraday and Delivery.
Intraday means ‘during the same day’. In intraday, a trader buys and sells on the same day without taking delivery of the stocks bought. He/she uses real-time charts to keep a close eye on the stock price movements. The aim is to take advantage of short-term price fluctuations.
In delivery based trading, the trader buys the shares and holds them in his/her Demat Account for a long time. Here, the stock delivery is done after two days, once the procedure of share transfer is done.

How Is A Company’s Stock Price Determined?

The process to identify the stock price begins from the time when a company decides to get listed to raise a large amount of capital. It hires merchant bankers/underwriters to start off the Initial Public Offering (IPO) process. These entities study the company’s current performance, analyze its assets and liabilities, and project its future performance.
They may arrive at a fixed price or a price band at which to offer the IPO. Once the IPO is through and shares are allotted to investors according to their application. Post that, they get listed, and then the market forces i.e. demand and supply enable stock price discovery.
If the sellers (supply) are more than the buyers (demand), then the stock price falls due to excess supply. On the other hand, if the buyers exceed the sellers, the stock price rises due to excess demand.

Types Of Stocks

Stocks are of different types based on factors like the size of the company, dividend payment, industry, risk, volatility, and fundamentals, among others.
  • Based on Ownership
  • Based on ownership, there are two types of stocks - preferred and common stocks. Preferred stocks guarantee stakeholders a fixed dividend. Owing to this, these stocks aren’t much volatile. However, preferred stocks do not give voting rights to stakeholders. When we refer to stocks in general, those are common stocks. The majority of stocks are issued in this form. In this, you get voting rights and can be a part of the major decisions of the company. Even though prices of these stocks are highly volatile, you get to enjoy long term capital growth.
  • Based on Market Cap
  • On the basis of market capitalization, stocks can be large-cap, mid-cap, and small-cap.
    Large-Cap companies have a market capitalization of more than Rs. 20,000 crore. On the other hand, Mid-Cap companies have a market capitalization of Rs. 7,000 crore-Rs. 26,000 crore. Lastly, Small-Cap companies have a market capitalization of less than Rs. 7,000 crore. These are new players in the sector who are looking to establish themselves.
  • Based on Dividend Payments
  • When a company earns profits, it has two options- either to retain it with itself or pay it off in the form of dividends to its stakeholders. Accordingly, there are two categories of stocks- income stocks and growth stocks.
    Income stocks regularly pay huge dividends to shareholders even though their growth rate is low. Growth stocks pay you lower dividends and the frequency of paying dividends is also irregular. These companies invest their profits in growth opportunities instead of distributing it off to shareholders as dividends.
  • Based on Price Trends
  • In terms of pricing, stocks can be cyclical or defensive.
    Cyclical stocks are highly price-sensitive to economic trends and broader economic news or data such as GDP or inflation.
    Defensive stocks are the ones that defend the otherwise falling market trend. These stocks will usually rise at a time when broader markets are in the red zone and vice versa.

Benefits Of Investing In Stock Markets

Investing in the stock markets can be rewarding in ways more than one. Markets have always passed the test of time, they have risen in value over a period of time, even though individual stock prices fluctuate daily. Here are a few advantages of investing in stocks:
Grow with the market leaders - Investing in companies that showcase stable growth and clock higher profit every quarter may help you to build long term wealth. Also, investing in sectors that add to the country’s economic growth would increase the value of your investment over a period of time.
Enjoy liquidity - Stocks are highly liquid assets. You may sell them off easily and convert them to cash at any given point of time.
As opposed to this, in real estate, finding a buyer may become an uphill task. It could take months to cash in the investment made in a property.
Trade without hassles - With the Paytm Money app in your smartphones, hassle-free stock trading is just a click away.
Additionally, you can research the markets, create customizable watchlists, explore market movers, and enjoy a host of other features in a simple and convenient manner from the comfort of your home.
Start Small - Investing in stocks does not require huge amounts of money. Besides, you get a lot of flexibility to invest as per your needs and growth opportunities. In fact, you can start with smaller amounts and later step-up your investments.
At Paytm Money, you can start a weekly/monthly SIP in your preferred stocks and we will buy stocks on your behalf.
Earn regular income - With stocks, you get a chance to earn regular income in the form of a dividend. It can help fund a retirement or pay for even more investing as you grow your investment portfolio over time if it is reinvested in the market.

Stock Market Players

Stock markets have various kinds of entities like daily traders who usually trade intraday and pocket daily profits, retail investors who prefer taking delivery, and foreign investors among others. Stockbrokers enable these entities to conduct smooth transactions.
Given below is a brief overview of the key players:
  • Traders
  • A stock trader holds a stock for a short period intending to make profits by continuous buying and selling of stocks. A trader often holds stocks for a day or a week. Trading is timing the market and generating the profit out of price fluctuations.
  • Retail investors
  • An investor looks at the company fundamentals rather than technical charts and the intention of a retail investor is to generate profit by the principle of buy and hold for a longer-term. They research the business to understand its structure and revenue yielding mechanism and stay with the company during its ups and downs.
  • Foreign Institutional Investors (FIIs) and Foreign Portfolio Investors (FPIs)
  • FIIs and FPIs are entities that reside outside India. These can be both traders and long term investors. They trade in a large volume on a daily basis. FIIs include foreign trust funds, pension funds, government institutional funds, and other individual traders.
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Registered with Pension Fund Regulatory and Development Authority (PFRDA) as NPS ePOP (269042019).
SEBI Reg No. Broking - INZ000240532; Depository Participant - IN - DP - 416 - 2019 , Depository Participant Number: CDSL - 12088800,
Trading and clearing member of NSE (90165, M52073) and BSE(6707).

Registered Office: 136, 1st Floor, Devika Tower, Nehru Place, Delhi - 110019.
Operations Head office: The Hub, 8/2, Sarjapur Main Road, Ambulipura Village, Varthur Hobli, Bengaluru - 560103.

Investments in securities markets are subject to market risks, read all the related documents carefully before investing
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Investments in securities market are subject to market risk, read all the related documents carefully before investing.

We collect, retain, and use your contact information for legitimate business purposes only, to contact you and to provide you information & latest updates regarding our products & services. We do not sell or rent your contact information to third parties. Please note that by submitting the above mentioned details, you are authorising us to Call/SMS you even though you may be registered under DND. We shall Call/SMS you for a period of 12 months.

Attention to Investors:"No need to issue cheques by investors while subscribing to IPO. Just write the bank account number and sign in the application form to authorize your bank to make payment in case of allotment. No worries for refund as the money remains in the investor's account.

Prevent Unauthorized Transactions in your demat account ; Update your Mobile Number with your Depository Participant. Receive alerts on your Registered Mobile for all debit and other important transactions in your demat account directly from CDSL on the same day

Prevent Unauthorised transactions in your account; Update your mobile numbers/email IDs with your stock brokers. Receive information of your transactions directly from Exchange on your mobile / email at the end of the day "

KYC is one time exercise while dealing in securities markets - once KYC is done through a SEBI registered intermediary (broker, DP, Mutual Fund etc.), you need not undergo the same process again when you approach another intermediary.

"Attention Investors!"

1. Beware of fixed/guaranteed/regular returns/ capital protection schemes. Brokers or their authorized persons or any of their associates are not authorized to offer fixed/guaranteed/regular returns/ capital protection on your investment or authorized to enter into any loan agreement with you to pay interest on the funds offered by you. Please note that in case of default of a member claim for funds or securities given to the broker under any arrangement/ agreement of indicative return will not be accepted by the relevant Committee of the Exchange as per the approved norms.

2. Do not keep funds idle with the Stock Broker. Please note that your stock broker has to return the credit balance lying with them, within three working days in case you have not done any transaction within last 30 calendar days. Please note that in case of default of a Member, claim for funds and securities, without any transaction on the exchange will not be accepted by the relevant Committee of the Exchange as per the approved norms.

3. Check the frequency of accounts settlement opted for. If you have opted for running account, please ensure that your broker settles your account and, in any case, not later than once in 90 days (or 30 days if you have opted for 30 days settlement). In case of declaration of trading member as defaulter, the claims of clients against such defaulter member would be subject to norms for eligibility of claims for compensation from IPF to the clients of the defaulter member. These norms are available on Exchange website at following link:
https://www.bseindia.com/static/investors/ Claim_against_Defaulter.aspx

4. Brokers are not permitted to accept transfer of securities as margin. Securities offered as margin/ collateral MUST remain in the account of the client and can be pledged to the broker only by way of ‘margin pledge’, created in the Depository system. Clients are not permitted to place any securities with the broker or associate of the broker or authorized person of the broker for any reason. Broker can take securities belonging to clients only for settlement of securities sold by the client.

5. Always keep your contact details viz. Mobile number/Email ID updated with the stock broker. Email and mobile number is mandatory and you must provide the same to your broker for updation in Exchange records. You must immediately take up the matter with Stock Broker/Exchange if you are not receiving the messages from Exchange/Depositories regularly.

6. Don't ignore any emails/SMSs received from the Exchange for trades done by you. Verify the same with the Contract notes/Statement of accounts received from your broker and report discrepancy, if any, to your broker in writing immediately and if the Stock Broker does not respond, please take this up with the Exchange/Depositories forthwith.

7. Check messages sent by Exchanges on a weekly basis regarding funds and securities balances reported by the trading member, compare it with the weekly statement of account sent by broker and immediately raise a concern to the exchange if you notice a discrepancy.

8. Please do not transfer funds, for the purposes of trading to anyone, including an authorized person or an associate of the broker, other than a SEBI registered Stock broker.

9. Pay applicable upfront margin of the transaction value to trade in cash market segment.

10. Investors may please refer to the Exchange's Frequently Asked Questions (FAQs) issued vide circular reference NSE/INSP/45191 dated July 31, 2020, NSE/INSP/45534 dated August 31, 2020, NSE/INSP/45850 dated September 28, 2020 and vide notice no. BSE 20200731-7 dated July 31, 2020, BSE 20200831-45 dated August 31, 2020 and BSE 20200928-45 dated September 28, 2020, and other guidelines issued from time to time in this regard.

11. Check your Securities /MF/ Bonds in the consolidated account statement issued by NSDL/CDSL every month.

12. Precautions for clients dealing in Options

Clients/investors dealing in options, are advised to avoid practices like:

a) Sharing of trading credentials – login id & passwords including OTP's.

b) Trading in leveraged products like options without proper understanding, which could lead to losses.

c) Writing/ selling options or trading in option strategies based on tips, without basic knowledge & understanding of the product and its risks.

d) Dealing in unsolicited tips through Whatsapp, Telegram, YouTube, Facebook, SMS, calls, etc.

e) Trading in “Options” based on recommendations from unauthorised/unregistered investment advisors and influencers.