So,When was the last time you have heard of this term share market or stock market , maybe you have heard it from your friends , family, relatives, news channel , magazine ,newspaper the source can be any . However, when we were in schools colleges or even working , most of us are not aware about the basics of share market or stock market ..
To Understand the basics of share market first of all we need to know ,What is Share Market ? Here is the book definition which says : “Stock market or share market is a place where shares of public listed companies are traded ”.
There are two types of Share market :
Primary market – When a company registers itself for the first time to sell its shares and raise funds, it enters the primary market also known as initial public offering (IPO) . This is also called getting listed in a stock exchange. Once it gets listed in public domain on any exchange (NSE , BSE) people can trade .
Secondary market – Secondary market is the place where already listed companies trades/ sell stocks . Investor or trader can buy or sell shares in secondary market . This the place where most of the trading happens .Here any investor or trader can buy or sell his share at the current prevailing price of a share , depending up on his strategy .
In simple words, Just like in normal market the one who buys the product is consumer or buyer and the one who sells it seller, distributor ,retailer ,etc. So, basically there is an exchange (market) where traders, whether buyer or seller agrees to have an exchange of there respected securities .
A stock exchange helps Stock brokers (A stockbroker is an individual /organization who are given a license By Sebi (The Securities and Exchange Board of India) to participate in the securities market on behalf of clients) to trade company stocks and other securities. The stockbroker has the same role as an agent of some service offering company or individual .The Stockbroker acts as agent for buyers and sellers of securities, a commission is charged for this service .
A stock may be bought or sold only if it is listed on an exchange. The key difference is that a stock market helps you trade financial instruments like bonds, mutual funds, derivatives as well as shares of companies. A share market only allows trading of shares .
We will try to use less jargon for now so that basic knowledge can be developed even to the beginners in the market . Before we see how it works let’s check the history of Indian markets .
History of Share/stock Markets :
Indian market has a history that goes way back to the 1800s. Earlier, stockbrokers would meet around Banyan trees to conduct trades of stocks. However with the time and due to increasing brokers they had to relocate from one place to another . Eventually, In 1854 they relocated to dalal street and this is the place where the oldest stock exchange of Asia – Bombay stock exchange (BSE) is now located . In 1993 NSE (National Stock Exchange) was formed . From this we can now know that India has a very old legacy for investment & trading in market .
But it’s very unfortunate to know that even today less than 18 million out of total population of more than 1 billion in India participate in market securities .One of the reasons can be the lack of knowledge essentially needed for the market .But once you start, you will realize that the investment is not that complicated as it seems .
- Why there is a need of stock exchanges or share markets ?
- Why does a company list its shares in the open market (IPO- initial public offering)?
- What exactly happens after the company goes public?
- Why there is even need for investment , why someone should invest or trade at all ?
- What are the Types of investment available in market ?
- Who is SEBI (security & exchange board of India)?
- Who is a broker & what does it do ?
- Does investment in market really helps securing future ?
- Can you earn in market every day (Intraday trades) ?
What are the things to know before investing ? How do I actually make money from investing in stocks?
There are a lot of questions you might have in your mind right now , do not get worried , Now that you have started showing interest in learning about the market, one thing you have to keep in mind that it’s a process which takes time you .“ Patience is the key to unlock the future” .
Before we proceed we will do a quick recap of what we have understood till now :
- Stock exchange : platform that provides the facilities used to trade company stocks and other securities.
- A stock may be bought or sold only if it is listed on an exchange.
- Difference is that a stock market helps you trade financial instruments like bonds, mutual funds, derivatives as well as shares of companies. A share market only allows trading of shares .
- Two types of market : Primary & secondary
- Sebi is the regulator for the securities market in India. It was established in 1988 .
- Stock broker is an individual /organization who are given a license By SEBI to participate in the securities market on behalf of its clients .
- Indian market have two stock exchanges BSE (Bombay stock exchange ) & NSE (National stock exchange ) .Highest Margin Exposure