Introduction
In the Share market, a share represents a unit of ownership in a company rather than a physical object. Companies may issue any number of shares to fulfill their financial needs. To purchase or sell securities, one must contact a broker or an exchange. Share prices fluctuate based on the market’s supply and demand for stocks.
Types of share market
Share market can be classified into two types, namely the Primary and Secondary Markets.
| PRIMARY MARKET | SECONDARY MARKET |
| Before a company is listed on the stock market, it enters the Primary market. The aim of this entry is to raise capital, and when a company offers its shares for the first time, it is referred to as an Initial Public Offering (IPO). | After shares are sold in the primary market, they are traded in the secondary market. This is where transactions, known as trades, take place within a stock exchange. Investors buy and sell shares among themselves at prices they agree upon. Typically, a broker serves as the intermediary to facilitate these transactions. |
Why invest in share market?
As the esteemed Warren Buffet once said, “Investing is about spending more money now to receive more in the future.” While ‘investing in shares’ is considered risky by some, research indicates that long-term investments in the right stocks can be an effective way to outpace inflation. Moreover, it may even surpass gold and real estate as an investment choice. Consequently, selecting the appropriate shares for investment can yield profitable returns for traders.
How to Invest in Share Market?
- To invest in the stock market, opening a Demat and trading account is mandatory.
- Next, sign in to your Demat and trading account and select the shares you want to purchase or sell. Ensure that your account has sufficient funds to complete the transaction. You will also need to provide the required documentation. Once verified successfully, your account will be activated.
- Choose the price at which you wish to buy or sell shares, and then await the fulfillment of that order by a buyer or seller.
- Upon completion of the transaction, you will receive either shares or funds for the stocks you have bought or sold.
How does the share market work in India?
Investors can profit from stocks in two ways: through long-term and short-term investments. Long-term investments are known as equity investments, while short-term investments are referred to as debt investments.
The stock market in India enjoys popularity among both retail and institutional investors. International investors are particularly drawn to the Indian stock market because of its high returns, especially in the primary markets.
The Indian Stock Market is a financial marketplace where a variety of securities, such as equities, bonds, ETFs, and derivatives, are traded on exchanges at prices set by market demand and supply. The Securities and Exchange Board of India (SEBI) regulates these stock exchanges. India’s two principal stock markets are the National Stock Exchange of India (NSE) and the Bombay Stock Exchange (BSE).
The share market is an organized, regulated and centralized forum that brings together investors and companies. Its primary purpose is to raise finances for business expansion through the sale of shares.
What Is Traded on the Share Market?
There are four types of financial instruments that are traded on the stock exchange. They are as follows: –
- Shares – It represents a unit of equity ownership in a company. Investors holding a company’s share are known as shareholders.
- Bonds – Bonds are issued by a company to raise capital from the public. Bonds represent loans made to the issuer. Instead of going to a bank, the company acquires money from the investors who buy its bonds. It pays its investors a fixed rate of return.
- Mutual Funds – Mutual funds are companies that pool money from multiple investors and invest the money in a mix of securities like stocks, bonds and short-term debt.
- Derivatives – Derivatives are financial instruments that derive their value from an underlying asset like shares, currency, commodities etc. Futures & Options are common examples of derivative instruments.
investment in Indian Share market?
There are two methods to invest in shares. The first is by participating in an Initial Public Offering (IPO), which typically requires an investment of Rs 2 lakh or greater.
The other way is by subscribing to the follow-on public offer (FPO). In this case, you need to have an investment amount of at least 1 lakh rupees.
Upcoming IPO is a list of the companies you can choose from and invest in after completing your due diligence and performance analysis of the respective companies.
As a shareholder, you are entitled to receive annual dividends based on the profits your company generates. Additionally, you possess voting rights to elect board members or make key corporate decisions, such as mergers and acquisitions.
The price of a share changes every day in the stock market depending on demand and supply for that particular company. The price at which it changes is called the closing price.
Which are the fundamental entities available in Indian Stock Markets?
In September 2021, the market capitalization of Indian stock markets surpassed Rs 260.78 lakh crore, ranking it among the largest stock markets worldwide. Despite having fewer listed companies than the USA or China, Indian markets are comparatively more liquid and provide a vital funding source for corporations aiming to scale up their operations.
The stock market is comprised of three main segments: primary markets, secondary markets, and stock exchanges. Stock exchanges are accessible to investors year-round, whereas primary markets are available exclusively during Initial Public Offerings (IPOs). The National Stock Exchange (NSE) stands as the largest in India, boasting a market capitalization exceeding ₹2.27 trillion.
The Bombay Stock Exchange (BSE) boasts a market capitalization exceeding Rs 3.4 trillion crores, establishing it as the largest stock exchange in India. Additionally, there are numerous smaller stock exchanges throughout the country, including those operated by states such as Gujarat, Tamil Nadu, and others.
The stock market has played a crucial role in India’s economy from its early developmental stages. It offers an effective system for capital distribution to corporations and aids in the establishment of new businesses within the nation. The market is experiencing growth, marked by numerous new companies entering the public domain.
Beginner’s Guide to the Indian Share Market
When buying shares, consider the dividend income the company distributes. Assess the company’s fundamentals and how it has enhanced its performance over time. It’s also crucial to evaluate whether the stock is currently overpriced or undervalued.
For a newbie, there are many things to learn and do when you start trading in the share market. Here we will discuss the basic principles and the process of buying and selling shares.
Individuals who engage in the buying and selling of shares are known as share traders. When they buy shares, they acquire the rights to a portion of the company’s assets and earnings for a period. During this period, they may receive dividends derived from the company’s profits.
There are three types of shareholders:
1) Face Value: These shareholders buy shares at their face value, which means the company’s price at which they were offered to them, which gives no future benefits.
2) Direct Benefit: These shareholders get benefits such as coupons that offer extra dividends over and above their face value or get other benefits such as an annual meeting with top-level managers where they get to voice their opinions directly to them.
3) Growth Option: These shareholders also get dividends, but in addition, they get extra benefits such as the opportunity to participate in a new program called the Guaranteed Growth Plan. Under this plan, they will vote on customers that will receive a more significant percentage of its profits.
Example of Share Value in Indian Stock Market
The price, or value, of a share is contingent upon the overall value of the company and the number of shares it has issued. If Company A generates more profit than Company B, then Company A’s shares, and consequently your share in Company A, will be more valuable.
Stock prices fluctuate based on public perception of a company’s potential and the actions of its competitors. These prices are recorded daily in newspapers or through online trading platforms, with the most crucial update occurring at the end of each trading day when the stock market closes.
The closing price determines the profit or loss you would have incurred if you had purchased a share at the beginning of the day and sold it at the end; this reflects the day’s trading outcome.
Wrapping Up
The Indian share market is a fascinating field for all investors. It is a great place to invest your hard-earned money and earn excellent returns on them. The Stock Market is a great way to add to your wealth and investments. It provides a massive scope for trading in shares and capital markets, not limited to anyone.
What is a stock exchange?
A stock exchange is a marketplace for trading various financial instruments, such as stocks and derivatives. It facilitates the purchase and sale of shares and other securities.
The Securities and Exchange Board of India (SEBI) regulates the activities in the stock market.
The main stock exchanges in India are the NSE and BSE, and currently, there are seven recognized stock exchanges in the country, according to SEBI.
What are Sensex and Nifty?
In India, the two primary stock markets, the NSE and the BSE, each have an index to gauge market performance. The Sensitive Index, or Sensex, serves as the index for the BSE, while the Nifty is the index for the NSE.
The standard trading hours for the NSE and BSE stock markets are from 9:15 AM to 3:30 PM. There is also a pre-opening session from 9:00 AM to 9:15 AM, and a post-closing session after 3:30 PM that continues until 4:00 PM. The stock markets are closed on designated days, referred to as stock market holidays, such as Holi, Republic Day, and Eid. Additionally, the share market is not operational on weekends.
How to Make money in a stock market?
As a novice in stock market trading, it’s essential to couple discipline and patience with extensive research on the markets before commencing with trading shares. The temptation of substantial earnings is ever-present, but one should always consider the stock market’s volatility before deciding whether to retain or sell their stocks. To improve at stock market trading, one needs to grasp the array of financial instruments such as shares, ETFs, Futures & Options, and the different opportunities available in the stock market, including order types like intraday, delivery, and margin trading.
Best Stocks List For Invest in 2024
| Stock | List |
| TVS Motor Share Price Target 2024, | Invest Now |
| NTPC Share Price Target Forecast of 2024 | Invest Now |
| NALCO Share Price Target for the year 2030 | Invest Now |
| RattanIndia Enterprises Share Price Target | Invest Now |
| Coal India share price target 2050 | Invest Now |
Share Market Basics – Important Terms
Now that you have an idea of what the share market is, let’s take a look at some of the common, yet important terms that are used by traders and investors.
- Demat Account: A demat account is a digital account that’s used to store securities like shares, bonds and mutual fund units electronically.
- Stockbroker: A stockbroker is an intermediary entity between a trader or investor and the stock exchange. The broker executes buy and sell trades on the stock exchange on behalf of the trader or investor.
- Trading Account: A trading account is an electronic account provided by a stock broker. Traders and investors can use the account to buy and sell shares and other securities on the stock exchange.
- Portfolio: A portfolio is a collection of assets that an investor has invested in. It can either be composed of multiple types of the same asset class or different asset classes altogether.
- Index: An index is a collection of stocks listed on the stock exchanges. It is used to measure the performance of the stock market as a whole or just a certain section of it.
- Sensex: Sensex is a broad market index created by the Bombay Stock Exchange (BSE). It comprises 30 of the top companies in terms of market capitalization listed in the BSE. The index constituents are from multiple major sectors and industries of the economy.
- Nifty: Nifty is a broad market index created by the National Stock Exchange. It is made up of 50 of the top companies in terms of market capitalization listed in the NSE. Similar to Sensex, Nifty also constitutes stocks from major sectors and industries of the economy.
- Bullish Market: If the prices of stocks have been rising for a period of time, the market is referred to as a bullish market.
- Bearish Market: If the prices of stocks have been falling for a period of time, the market is referred to as a bearish market.
- Opening Price: The opening price is the price at which the first trade of an asset gets executed in a trading session.
- Closing Price: The closing price is the price at which the last trade of an asset gets executed in a trading session.
- Bid Price: The bid is the highest price that the buyer of an asset is willing to pay. The details of the list of bids can be viewed for any asset through the stockbroker’s trading portal.
- Ask Price: The ask is the lowest price that the seller of an asset is willing to sell. The details of the list of asks can be viewed for any asset through the stockbroker’s trading portal.
- Dividend: Companies may occasionally distribute the profit that they generate to their shareholders. This distribution of profit is known as a dividend. Dividends can be in the form of cash or additional shares.
- Derivatives: Derivatives are unique financial instruments that derive their value from the value of an underlying asset. Just like shares, derivatives can be freely traded on the exchanges. There are two primary derivatives available for trading – futures and options.
Conclusion
To begin trading or investing in shares, it’s necessary to open a Demat and Trading account. Bajaj Broking, known for its reliability, offers some of the most competitive brokerage rates in the industry. Don’t have a Demat account yet? Open one today and dive into share trading immediately!
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