What is Share Market?
Are you a newcomer to the stock market? Well if so, then no need to worry. Here I will take you to the depth of the stock market, so take few minutes to read.
So, the Share Market is a place where the buying and selling of shares of a listed company take place on the Stock Exchange such as NSE/BSE. Share Market allows you to trade shares of a listed company whereas, in Stock Market, one can trade-in other financial instruments like Stock's Derivatives, Bonds, Mutual Funds, as well as Equity Shares of the listed companies.
India's major Stock Exchanges are the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). On these stock exchanges, one can trade in the stocks of the listed companies. So, basically, it's a place where buyers and sellers meet.
Now get further into the Stock Market to discuss more it. There are two types of market in India which are Primary Market and Secondary Market.
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| Stock Exchange in Mumbai |
1. Primary Share Markets
The Primary Stock Market is the platform where the company gets listed itself on the exchange for raising funds through Initial Public Offering (IPO). After the IPO, the company issues the share to the allottee, and after that one can deal in the shares of the same company.
The Primary Stock Market is the platform where the company gets listed itself on the exchange for raising funds through Initial Public Offering (IPO). After the IPO, the company issues the share to the allottee, and after that one can deal in the shares of the same company.
2. Secondary Market
Once the share's allotted to those who applied for the IPO, their securities then traded in the Secondary Market, where the shareholder has the opportunity to either hold the shares or exit from their investment by selling their shares. The buy and sell transaction doesn't directly trade on the exchange but through the brokers or any other institution that provide these facilities. The brokers may have different plans to provide trading.
Once the share's allotted to those who applied for the IPO, their securities then traded in the Secondary Market, where the shareholder has the opportunity to either hold the shares or exit from their investment by selling their shares. The buy and sell transaction doesn't directly trade on the exchange but through the brokers or any other institution that provide these facilities. The brokers may have different plans to provide trading.
[ Also read, Who are Brokers in Share Market?]
What is traded on the Stock Exchange?
There are few financial instruments that are traded on the Stock Market. These are Equity shares, Bonds, Derivatives, and Mutual Funds. Let's discuss each of these individually.
There are few financial instruments that are traded on the Stock Market. These are Equity shares, Bonds, Derivatives, and Mutual Funds. Let's discuss each of these individually.
1. Shares
A share is an instrument that you can buy/sell or hold for profit in the long term. When you buy a share of a particular company, you become a stakeholder of the company till you have the shares. It means if a company earns profit overtimes, shareholders can be entitled to dividends.
2. Bonds
It is an instrument by which a company raises funds for a period of time through the investors. The company pays a sum amount of interest at a rate fixed by them. These amounts have to be paid off in a timely with interest.
It is an instrument by which a company raises funds for a period of time through the investors. The company pays a sum amount of interest at a rate fixed by them. These amounts have to be paid off in a timely with interest.
3. Mutual Funds
Mutual Fund is a key financial instrument of the share market. It's an investment that is not done directly by the individuals, but their funds are invested in the market indirectly. There are a variety of instruments like equity, debt, or hybrid funds and there are few. The funds are collected by the number of individuals and their aggregate then invested. These funds are managed by the professional fund manager.
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Mutual funds issued to individuals have a certain value, just like the shares. when you invest, you became the unit holder in that scheme. They also get the revenue, if their investment earns revenue.
4. Derivatives
The price of the shares of a listed company keeps changing, it's not stable. For a trader, it is difficult to fix the price of the share at one particular price. So, for the risk-takers, there are derivatives that come into the picture. These derivatives are Futures and Options. Where you can enter into the agreement b just paying the premium amount. In derivatives, you have to work according to the lot size of the share, but in equity, you can even buy a single share as well.
The price of the shares of a listed company keeps changing, it's not stable. For a trader, it is difficult to fix the price of the share at one particular price. So, for the risk-takers, there are derivatives that come into the picture. These derivatives are Futures and Options. Where you can enter into the agreement b just paying the premium amount. In derivatives, you have to work according to the lot size of the share, but in equity, you can even buy a single share as well.
Summary
A Share Market is a place where an investor/trader buys/sells the shares of a company that is listed on the Exchanges to earn profit.
There are two major Exchanges in India. These are
1. National Stock Exchange (NSE)
2. Bombay Stock Exchange (BSE)
But these shares are not directly traded on the exchange. First, we need to get a trading+ Demat account to buy and sell the stocks of a company.
There is a number of brokers available in India in which you can get your account open and can do investing and trading.
The list of major Brokers are
Zerodha
Upstox
Angel Broking
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