A Beginner’s Guide to the Share Market in India: Understanding Fixed Deposits and NCDs with Acemoney

When we talk about the share market in India, many people feel it’s complicated—full of charts, numbers, and terms like “futures”, “options”, “IPO”, which seem confusing. But actually, investing is not magic — it’s just a smart way of growing your money step by step.

At Acemoney, we believe investing should be simple and accessible for every Indian. They should know how to make their money work for them. Whether you are a student, working professional, homemaker, or retiree, understanding investment options can help you achieve your financial goals, such as buying a house, funding education, or building a retirement corpus.

This guide is for beginners who have never invested, never opened a Demat account, or feel that the market is “shrouded in mystery.” By the end of this article, you’ll know how to start your investment journey confidently, manage risks, and build a balanced portfolio.

We will cover:

  • What the share market really means in India
  • How share trading works
  • Why people invest (and why many feel fear)
  • What fixed deposits are, and how corporate FDs differ
  • What Non-Convertible Debentures (NCDs) are
  • Which is better under what conditions
  • How to build a balanced portfolio
  • The path you can follow as a beginner
  • Mistakes to avoid
  • Final advice and next steps

Let’s begin.

1. What Is the Share Market?

1.1 The Basic Idea
The share market (also called the stock market or equity market) is a place where companies raise money by selling small parts of their ownership. That part is called a share or stock. to the public.
When you buy a share, you become a co-owner of the company (though in small measure). This means you share in its profits and growth — but also in its risks.

Example:
Suppose a company has 1,00,000 shares. If you buy 100 shares, you own 0.1% of the company. If the company grows, your shares increase in value. If it gives dividends (A portion of the company’s profits distributed to shareholders), you earn money as a shareholder.

Capital Growth Example:
You buy 10 shares at ₹100 each (total ₹1,000). A year later, the price rises to ₹150. Your investment becomes ₹1,500. That’s how wealth grows over time.

At Acemoney, we help beginners understand the real power of owning shares: even small investments can grow significantly over the years if invested wisely.

1.2 Why Companies Sell Shares
Businesses often need money to grow—maybe to open a new factory, launch a product, pay off debts, or expand exports. Instead of taking a huge loan from a bank, which means interest and repayment pressure, companies sell shares to the public. This gives them capital without immediate repayment pressure.
When you buy during the company’s initial sale (called IPO or initial public offering), you’re giving capital directly to the company. Later trades happen between investors, not with the company.
1.3 Role of Exchanges: NSE, BSE, MSEI
In India, trading happens on stock exchanges:

  • NSE — National Stock Exchange
  • BSE — Bombay Stock Exchange
  • MSEI — Metropolitan Stock Exchange of India

Once a company’s share is listed on these exchanges, you and I can buy or sell those shares through brokers.

Understanding this flow step by step makes things clearer.

  1. Company decides to raise capital
    They hire investment banks, prepare documents, get approvals from SEBI (Securities and Exchange Board of India), and announce an IPO.
  2. IPO / Primary issue
    The company offers shares to the public at a certain price. Early investors, institutions, and retail buyers can subscribe.
  3. Listing
    After the IPO closes, the shares begin trading on exchanges like NSE/BSE. Now, market forces take over.
  4. Secondary market trading
    You buy shares through your broker from someone who is selling. The company is not directly involved.
  5. Price movement
    Prices change based on demand and supply: if more people want to buy, the price goes up; if more want to sell, it goes down.
  6. Dividends & corporate actions
    Profitable companies may share a portion of profits (dividends) with shareholders. There can also be bonuses, stock splits, and buybacks.
  7. Exiting or selling
    You can sell your shares anytime (during trading hours), move profits, or cut losses.

Let’s talk about the “why.” Why leave a safe bank account and venture into shares?
3.1 Wealth Creation Over Time
Historically, equity returns over long periods tend to beat inflation, bank interest, and many other investments. Companies grow, profits increase, and markets reward consistency.
3.2 Dividend Income
Some companies reward shareholders by distributing profits as dividends. If you hold shares in good companies, you might get dividend checks.
3.3 Liquidity
Unlike fixed assets, shares are liquid—you can buy or sell fast. This gives flexibility.
3.4 Participation
You don’t need lakhs to own a part of big companies. With small capital, you can invest in big names like Reliance, TCS, HDFC, etc.
3.5 Beating Inflation
Money kept idle loses value—₹1 lakh today may buy fewer goods 5 years later. Equities help you at least try to stay ahead of inflation.

Many beginners view stock markets as risky, volatile, or even like gambling. That’s because early on, you see sharp ups and downs, market-making markets swing, stories of big losses, etc. At Acemoney, we always say: the market feels mysterious only because of ignorance, not because it is inherently mysterious. Here’s how you can remove fear:

  • Learn basic terms (what is P/E ratio, what is the market cap)
  • Start with small amounts you can afford to lose
  • Use stop-losses, good risk management
  • Think long term (5–10 years) instead of instant gains
  • Diversify—don’t put all in one stock or sector
Once you see how prices move, what influences them, and how to protect yourself, the “mystery” reduces greatly.

Every investment has two sides. The trick is balancing them wisely.
5.1 Types of Risks in the Share Market

  1. Company risk – The business may falter (bad management, losses, debt)
  2. Market risk – Overall market drops (economy slows, global events)
  3. Liquidity risk – Some stocks are thinly traded, hard to sell
  4. Regulatory risk – Government rules, tax changes, policies
  5. Sentiment risk – Emotions, rumors, news, herd behavior

5.2 How to Mitigate Risks

  • Research before investing
  • Don’t invest all money at one go — use staggered investing (SIP style)
  • Diversify across sectors, types of investments
  • Have an emergency fund separate from your investment fund
  • Use stop-losses, set exit plans

At Acemoney, we always stress that downside protection is as important as upside ambition.

Most Indians are familiar with bank FDs, but let’s lay down the basics clearly.

  • You deposit a lump sum amount for a fixed duration (say 1 year, 2 years, etc.).
  • The bank gives you interest at a fixed rate.
  • At maturity, you get your principal + interest.
  • It’s considered a safe investment (especially if with a reputable bank).

Example: You deposit ₹1,00,000 for 3 years at 7% p.a. You receive back ₹1,21,000 after 3 years
FDs are simple, reliable, and used widely in India, especially for conservative investors.

Beyond banks, many good companies or NBFCs also offer FDs — these are called corporate FDs.
7.1 Why They Might Attract You

  • Higher interest than bank FDs
  • Multiple tenure options
  • Payout choices (monthly, quarterly, cumulative)

7.2 What Makes Them Riskier

  • They are not insured by DICGC (which insures bank FDs up to ₹5 lakhs).
  • Their safety depends on the company’s financial strength, credit rating, and governance.
  • Some FDs have lock-in periods, or clauses that allow the company to defer interest.

7.3 How to Safely Use Corporate FDs

  • Choose only FDs with high credit rating (AAA, AA, etc.)
  • Check company’s history of paying interest / principal
  • Avoid companies that promise unrealistic rates
  • Use laddering strategy (invest in different maturities) so all money doesn’t come due at once

At Acemoney, we screen and recommend only those corporate FDs which meet strict safety criteria.

Think of NCDs as a bridge between fixed income and equities.

  • A company issues an NCD to borrow money from investors.
  • The company promises fixed interest (coupon) over a fixed period.
  • “Non-convertible” means you cannot convert it into shares later.
  • Some NCDs are listed, meaning you can buy/sell them on stock exchanges.

8.1 Secured vs Unsecured NCDs

  • Secured: Backed by assets or collateral. If the company fails, bondholders have claim over those assets.
  • Unsecured: No collateral; you depend entirely on company’s credit. Risk is higher, but returns are usually higher too.

8.2 Interest Payment Modes

  • Cumulative: interest accumulates and is paid at maturity
  • Non-cumulative: interest paid periodically (monthly, quarterly, etc.)

8.3 Liquidity
If listed and moderately traded, NCDs can be sold before maturity. But low volume may mean wider spreads or difficulty in selling. Always check the market activity.

Feature

Fixed Deposit (Bank / Corporate)

Non-Convertible Debenture

Expected Returns

5%–8% (varies)

8%–10% or even higher

Safety

High for bank FDs; moderate for corporate FDs

Depends heavily on issuer, but moderate to high if secured

Liquidity

Low (in many cases no active market)

Moderate if listed and traded

Risk

Low (for good banks / rated corporates)

Moderate (credit risk + interest rate risk)

Suitable For

Conservative investors

Those wanting fixed income with higher returns

Tax Treatment

Interest fully taxable

Interest taxable, capital gains tax if sold before maturity

If your priority is safety and peace of mind, FDs are usually better. But if you want higher returns and are comfortable with some risk, NCDs can be a powerful addition — when chosen wisely.

At Acemoney, we guide you on how much of your portfolio should go into FDs, how much into NCDs, and how much into equities — based on your risk appetite.

Putting your entire money in one product is dangerous. A well-balanced portfolio gives both growth and safety.
10.1 Sample Allocation (for a Moderate Investor)

  • 40% in Equity / Shares
  • 25% in Bank FDs
  • 20% in Corporate FDs / NCDs
  • 10% in Mutual Funds / ETFs
  • 5% in Gold or alternative safe assets

You can adjust this depending on your age, responsibilities, risk tolerance.
10.2 Rebalancing
Once in a while (yearly or half-yearly), check your portfolio. If equity has grown too much, you may sell some and invest in debt. Rebalancing keeps your risk in control.
10.3 Adding Diversity
Not just across asset types — also across sectors (banks, pharma, FMCG, tech), company size (large, mid, small), and geographies (if you invest in global funds).

Here’s a beginner’s roadmap:
  1. Educate yourself  Read blogs, watch tutorials. Acemoney’s blog section is built for this.
  2. Set financial goals  Why are you investing? Retirement, home, child’s education — define your time horizon.
  3. Open required accounts  You need: PAN card, identity proof, bank account, Demat & trading account.
  4. Choose a good broker  Look for credibility, low fees, good technology, transparency. Acemoney provides brokerage guidance.
  5. Start small  You can begin with as little as ₹500–₹1,000 in equities or choose safer FDs / NCDs.
  6. Invest gradually (SIP style)  Rather than a lump sum, invest regularly every month. This reduces timing risk.
  7. Track, learn, and grow Review performance, read quarterly reports, stay updated in news — but don’t panic with every headline.
  8. Scale as you gain confidenceOver time, increase the portions in equity or debt as per your comfort.

From my years at Acemoney, I’ve seen these repeated errors:

  • Going by “hot tips” or rumors
  • Putting most money in one stock or sector
  • Changing strategy too often
  • Letting emotions lead decisions (fear, greed)
  • Ignoring taxes and costs
  • Selling in panic during a downturn
  • Forgetting to diversify
  • Chasing high returns without checking risk

Avoid these, and you’ll save yourself many losses and regrets.

13.1 Example: Ravi’s First Investment
Ravi, a software engineer, started with ₹10,000 in a large-cap mutual fund. Over five years, even though the market was volatile, his amount grew consistently. He later added corporate FDs for safety.

13.2 Example: Priya and Corporate FD Mistake
Priya invested in a corporate FD offering 12% interest blindly. Later, the company ran into trouble and delayed payments. She learned to always check credit ratings and track company health.
Stories like these help remind us: returns are tempting, but safety and informed patience matter more.

Compounding is when your returns generate returns. That’s how money grows faster over time.

If you invest ₹1,00,000 at 8% interest per year, in 10 years it becomes ~₹2,15,000.
 If instead of withdrawing interest, you reinvest it, the growth becomes much more powerful in 20 or 30 years.

This is one of the biggest advantages of starting early. At Acemoney, we always encourage starting small and letting compounding do the heavy lifting.

Before you celebrate, know this:

  • Interest from FDs / NCDs is taxable under your income slab
  • Capital gains from equity: short-term vs long-term tax rules
  • Brokers charge transaction fees, brokerage, SEBI charges, GST
  • Always calculate net (after-tax) returns, not just headline percentages

Acemoney’s calculators often show net yield so you know exactly what you’ll get post-tax.

Markets evolve. What works today might need tweaks tomorrow.

  • Review your portfolio every 6–12 months
  • Learn from mistakes and successes
  • Read annual reports of companies you invested in
  • Stay updated with macro events (inflation, interest rates, global signals)
  • Be open to changing allocation slowly, not impulsively

Acemoney sends regular alerts and newsletters to help beginners stay disciplined

Here are distilled lessons from 20+ years in markets:

  • Start small. Learn steadily.
  • Invest only what you can afford to lose.
  • Don’t try to time the market. Instead, spend time in the market.
  • Always diversify. Don’t bet everything on one idea.
  • Use debt instruments like corporate FDs and NCDs to balance volatility.
  • Watch costs and taxes — they eat returns.
  • Be patient. Wealth is built over years, not days.
  • Keep learning, stay humble, respect risk.

If you’re ready, here’s what you can do next:

  1. Open your Demat/trading account (we at Acemoney can guide you)
  2. Choose your first small investment — maybe a blue-chip stock or corporate FD
  3. Track it regularly
  4. Gradually expand into NCDs, mutual funds, equities

Every step you take today moves you closer to financial freedom tomorrow. Your journey in investing doesn’t have to be mysterious or scary. With tools, knowledge, and a trusted guide like Acemoney, you can begin wisely, grow steadily, and enjoy the rewards of patience and consistency.

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