Imagine you wanted to shop for an occasion like, a party or prom. Would you directly buy it from the company? You will go to some outlets and shopping complexes or visit a few clothing applications. In the end, you decide and choose the dress you like and buy it from a certain market either offline or online.
Share market works similarly. It is a platform where the buying and selling of a company’s shares are listed. This is basically the medium through which interested inventors invest and companies make their share public to get investors.
Stock Market & Share Market are they two different terms?
This question might get a little tricky. Might be yes or no, the share market is just a part of the stock market. Investing in the share market is restricted to investing in companies’ shares while the stock market has a border possibility in trading like mutual funds, assets, and bonds. This way the stock market has broader possibilities than the share market.
Shares can be issued by companies easily but the same for the stock is not done. This gives the stock to have a huge value than shares. Now that you know the difference, better choose the market wisely.
Why need a stock market?
As mentioned above, companies raise their funds through the stock market. Now if the company gains, it eventually helps in raising the country’s GDP.
Listed below are some reasons why the stock market is needed.
Capital Raise
Raising the company is done through investors funding and eventually helping in overall growth further.
Gathering buyers and sellers
It works best as a platform to meet up interested sellers and buyers. Giving benefits and chance to flourish their and country in hand.
Stage for all
This does not discriminate and put up a choice to investors to put a fixed amount. It’s the game is open for all, put the amount you wish.
Price Sighting
How can you evaluate the right amount for a certain company? How does one company know its value? These are the questions answered through the platform shared.
Tracking down Economy
Investing in either small or big stocks of a company, not only if the company flourishes but it eventually flourishes the economy of the country as well. Even consumers are benefits and investors have a say in the company’s management with the ownership.
Fortune foundation
Investing in stock has been one of the safest and high-value returns. This has been a good help for investors in creating wealth.
Face of Public
Not only wealth is the factor, but companies get social and political support. This gives a positive environment and reflects the general public.
Working of Stock Market?
Stock Market works in the following order:
- SEBI(Securities and Exchange Board of India), regulates the fundctioning of Stock Exchanges. Stock Exchangers conducts trading platforms for investors and company by listing companies for trading.
- Now listing of company’s shares are done by IPO in the secondary market. The bidding takes place after the stock allotments.
- As the number of investors increases, the chaos doubles too. Too maintain the chaos, stockbrokers and brokerage firms comes into play. It acts as an intermediate between the investors and the stock exchange.
- The order you like to buy is then sent to the selling order through the broker. Where the agreement upon the price takes place and then the order confirms.
- Once the exchange is confirmed, the transaction takes place. The transfer of ownership takes place which is also called settlement.
Types of Share Market
Primary Market
It is the kind of market where buyers can directly buy from the seller, which is sold in public for the first time. There are many kinds of primary markets like IPO, a private placement, a right issue, and preferred allotment. This market is also known as the new issue market.
This is the cost-efficient way to raise capital with a lesser chance of manipulation. With the exciting advantages, it also has a downfall that not much information is given about investors, and trading data history is also foreseen sometimes.
Secondary Market
After the primary market, the same existing securities like bonds, debentures, bills, treasures are traded along with investors. This is also known as the after-issue market.
This market does not have direct contact with investors to the trading company. The broker places the intermediate for the trading.
In the secondary market, the securities are transferred from one investor to another. Hence, liquidity is very important. While in the primary market, the securities are sold once, but here it is sold infinite times.
Bottomline
Stock Market is not rocket science, yet a calm mind is what is required. Hurrying and making sudden decisions will not be fruitful here. Knowing the market and understanding its past flow might help you in making the game strong. So, think wisely and play safe.
Some Frequently Asked Questions for you.
What do you mean by BSE and NSE?
BSE stands for Bombay Stock Exchange and NSE for National Stock Exchange. These are the largest stock exchangers of India which trades more than 5000 companies.
Does this Exchange stock operate during weekends and holidays?
Yes, they too have holidays and week offs. The order placed on weekdays gets function and in-process during working Mondays in BSE and NSE.
What are the risks involved while starting trading?
There are a number of risks:
– Market rise and fall.
– News flow.
– Risk specific to the company.
– The problem of liquidity.
What are the downfalls of the secondary market?
– Sudden loss can be witnessed due to price fluctuation.
– The broker-mediated process might lead to slow processing.
– Hindrances by government policies.
What are IPO and FPO in the stock market?
IPO is the first public issue while FPO comes as the second issue. In FPO, investors are already aware of the issue listed.
Who acts as an intermediate in the primary market?
– Registrar to the issue.
– Bankers.
– Underwriters.
– Portfolio managers
– Debentures trustees.
– Collection banks.
How risky can the secondary market be?
It is a broker-linked exchange so, make sure to have cautious behavior towards it, as the brokers might show higher risk than the loans that are seen in the primary market.
