Introduction to Stock Market

What is a Share Market?

The stock market, also known as the share market, is a platform where publicly traded companies' stocks and other securities are bought and sold by buyers and sellers during specific hours of the day while adhering to SEBI’s well-defined guidelines.

Types of Share Market

The stock market is divided into two main sections: primary market and secondary market.

Primary Market: The primary market is where companies raise capital by issuing new stocks to the public. When a company registers itself for the first time at the Stock Exchange to raise funds through shares, it enters the primary market. This is called an Initial Public Offering (IPO). After this, the company becomes publicly registered and its shares can be traded by the market participants.

Secondary Market: The secondary market is where investors buy and sell existing stocks that have already been issued by companies. The secondary market is also where the stock prices are determined based on supply and demand. 

Major Stock Exchanges in India

There are two major types of Stock Exchanges in India, namely the-

Bombay Stock Exchange (BSE): The Bombay Stock Exchange was established in 1875 in Mumbai at Dalal Street. It is one of the oldest and 6^th largest stock exchange in the world.

The estimated market capitalization of Bombay Stock Exchange as of January stands at $ 4.25 Trillion and has around 6000 companies listed under it.

National Stock Exchange (NSE): The National Stock Exchange was established in 1992 in Mumbai. It has evolved itself into an advanced and automated system offering trading facilities to investors and traders across the country.

The estimated market capitalization of National Stock Exchange as of August stands at $ 3.4 Trillion and is acclaimed as the 12^th largest stock exchange in the world.

How to Invest in the Stock Market?

To invest in the stock market, you need to open a brokerage account with a registered stockbroker. A stockbroker is a licensed professional who can buy and sell securities on your behalf. Before investing, it is essential to research the companies you are interested in and their financial health. It is also important to diversify your investments to minimize the risk of losses. Investing in the stock market can also be very profitable, as stock prices can rise over time and provide significant returns on investments. 

What are the Financial Instruments traded in the Share Market?

There are four categories of financial instruments that are traded on the Share Market. These include: -

1.            Shares

A share or a stock of a company represents a unit of equity ownership in a company. Shareholders are entitled to any profits in the form of Dividends that the company may earn. They also enjoy the right to vote in any Annual General Meeting (AGM) of the company.

2.            Mutual Funds

Mutual Funds are investments that allow you to indirectly invest in share markets or bonds. In simpler terms, the money pooled by a large number of people (or investors) is what makes a Mutual Fund.

3.            Bonds

To undertake long term and profitable projects, a company requires substantial amount of capital. Bonds refer to high-security debt instruments that enable an organization to raise funds and capital to fulfil their requirements.

4.            Derivatives

The term Derivative refers to a type of financial contract whose value is dependent on an underlying asset or a group of assets. This can have a wide variety such as shares, bonds, currency, commodities and more. Contract value depends on changes in the price of the underlying asset.

Conclusion

In today’s time, investing in the Stock Market can be considered as one of the best ways to generate long term wealth. With a right strategic investment plan, any investor can achieve their long term desired financial goals with the help of the stock market.