Share & Stock Market Fundamentals

Guide to invest in share market in India

This website, www.whyShares.Com is about how to invest in the Indian Share market and make money in the long term. We have several pages that explain the basics of how to enter share market in india. We explain how to register a Demat Account and how to buy and sell shares online using Demat Account. We explain about the techniques of identifying the shares for long term investment in India and many other tips on how to make money in the share market in India.

Is investing in shares gambling?

There is a misconception that investing in Shares is like gambling. This is not true at all, no way is investing in shares gambling. Please note that we are talking about investing in shares for long term and not trading in Shares and derivatives, which is a different thing altogether and is explained in our page about Derivative Trading in Futures and Options. It is mostly in Share Trading where people lose fortunes and the stories about lost fortunes in share trading which scares people away from the wise choice of investing in shares.

Investment in shares for long term benefits

Our website is not about Share trading, but about encouraging people to make long term investment in good shares of Companies in India which will appreciate in value more than the value of Bank deposits or investments in Properties or in Gold. Investment in shares are for long term benefits and will serve as a very good source of income when you retire. We have several pages explaining the ins and outs of Indian Share Market and how to find the best Indian Companies to invest in.

The thing to understand is that the share value of good companies keep on rising as the years go by. There are instances when the stock market crashes, but these crashes are only temporary and the stock market index will start rising again and become more valuable than before the crash. To illustrate this we have below graphs of the actual values of the best known stock market gauge in India, the BSE SENSEX (Bombay Stock Exchange Sensitive Index). The BSE SENSEX index is a daily value obtained by adding the daily share price of 30 best companies in India who are judged to be well managed and stable (some companies share values are given more weightage).

We have below two graph charts of the BSE SENSEX index values, the first one on top is showing the BSE SENSEX index values from 2010 till 2015 May. You can see the jump in the SENSEX index during 2015 when it almost touched 30,000. The second graph of the BSE SENSEX shows the historical BSE SENSEX index values from 1991 till 2011 and shows when did the big crashes of BSE SENEX happened with the reason.

BSE SENSEX index values 2011 to May 2015
BSE SENSEX index values from 2010 to May 2015

BSE Sensex 1991 to 2011 explaining it ups and downs
BSE Sensex 1991 to 2011: Crash Report

This year till 1st May 2015, with a new stable Government in India, the SENSEX almost reached its historical high of 30,000. On 22 January 2015 the SENSEX crossed 29,000 for the first time, and soon the SENSEX is expected to go past 30,000. The days ahead are good for the stock market in India.

The lesson learnt from looking at the above BSE SENSEX graph or charts is that there are periodic crashes in the stock market, which at the time of the crash is catastrophic, and makes world headlines. This makes many people to think that investing in stock or share market is very risky and better avoided. After the stock markets crash or bubble burst, it starts rising again and within a year or so, will surpass the higest value prior to the crash. This gradual rise in share prices is not world headlines like when there is a fall. So there is always this tendency in news reporting to shout about negative news, but is silent when the times are good. The Share Market in India will always rise and surpass the highest values that were prevalent before any crash.

Biggest stock market crashes in India

In the map above 'BSE Sensex 1991 to 2011: Crash Report' you can see all the major crashes that happened in the BSE SENSEX over a period of 20 years from the year 1991 to 2011. The crashes never stopped the upward journey of the Indian Share Market. In hind sight, these are small dips in in the constant rise of the Indian share market values over the years, but at the time the dip happened, it was a major crash of the Indian Stock market which hit headlines in all news channels and newspapers in India.

The first of the biggest stock market crashes in India happened in 1992, when the Big Bull of those days, Mr. Harshad Mehta, unleashed the biggest scam of all in the BSE SENSEX's short history till then. In the year 1992 the SENSEX more than doubled from around 2,000 in January 1992 to a high of 4,462 and crashed to a low of 2,529 in August, 1992. It was a traumatic experience at that time for those who had invested in the stock market, this author included. But as can be seen from the graph above and table below, the SENSEX recovered this blow and continued to rise over the years.

The next big crisis of the SENSEX was in 2008 when the world markets crashed. In 2008 the high and low of the BSE SENSEX was 21,206 and 7,697. This was a very critical year for the economies all over the world, but as you can see the SENSEX recovered even from this global crisis, and is today in 2015 at its highest peak hovering near 30,000. You can expect the SENSEX to continue to rise over the years. Those who lose money in the share market are those on the lookout for a quick buck, but the slow and steady investors in the share or stock market always make money.

BSE SENSEX index history, values from 1991 to 2014

The table below shows the Opening and closing value of the BSE SENSEX for each year starting from 1991 till today in 2015. The high and low values of each year is also given. There is a steady rise in the the average value of the top shares in India represented by the BSE SENSEX.

BSE SENSEX index history 1991 to 2015

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