What is BSE? How to start trading in Sensex?

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Many individuals are attracted to the world of the Stock market as the investments have enormous potential to generate high returns. Though the stock market offers exciting benefits, beginners need to understand its basics and conduct proper market research before beginning their investment journey. Different financial instruments are traded daily on the stock exchanges in India.

About BSE and Sensex

BSE, one of the major stock exchanges in India provides a safe and transparent platform for trading securities like shares, bonds, mutual funds etc., of the companies listed. Existing stockholders or potential investors take important financial decisions based on BSE live information about market conditions.

Investors need to assess the performance of different companies before they can make investment decisions. But a large number of companies are listed on BSE and keeping a track of the performance of all these stocks is practically impossible. Different indices are used by BSE for depicting overall market sentiment. Sensex, the benchmark index of BSE comprises of top 30 companies from different sectors based on their excellent financial performance and stability.

What is the role of BSE portfolio of 30 stocks? 

  1. By analysing the Sensex graph, one can find about the companies and sectors performing well. This data and information about market trends help investors take well-informed wise decisions and do better in the world of stocks. Sensex increases or decreases based on the performance of underlying stocks.
  2. It helps individuals analyse the direction in which the Indian economy is heading.

How are the constituent companies of Sensex selected?

  1. Indian companies must be listed on BSE.
  2. large-cap companies with higher free-float capitalisation
  3. The buying and selling of its stocks should be easy (most traded stocks)
  4. The companies must derive their major revenue portion from the core industry activities.
  5. Properly balanced sector weight in alignment with the equity market.

What are the different ways to invest in Sensex?

  1. One can invest directly in all these companies after viewing the Sensex graph by dividing their investment capital among them proportionately as per their weightage on Sensex.
  2. Take the route of an index fund or ETF based on Sensex.

Retail investors can invest in an Index fund mimicking Sensex because the capital requirement is comparatively less. Also, there is no requirement for active management as fund managers automatically readjust the constituents as per changes after semi-annual rebalancing.

How to start trading on BSE?

  1. The First step is to select a reliable and reputed broker. Choose a broker based on the services provided, brokerage fees, securities you want to trade in etc.
  2. Interested traders need to make a Demat account and trading account with BSE brokers.
  3. Trading account is linked with a bank account to make transactions. Using the broker’s trading platform, one can begin investing and trading.

Conclusion

It is important for all to conduct due diligence before investing in the stock market. Beginners should try to understand the basics and keep enhancing their knowledge by reading online resources, newspapers and business magazines and watching business news. 5paisa is a reliable discount broker that helps investors and traders to buy or sell different securities like shares, mutual funds, derivatives etc. Investors can open all in one account today to begin a fruitful investment journey.