- What is share market?
- Everything about sensex & nifty- what are stock market indices?
- 23 must know terms for investors in stock market
- Stock market participants & financial intermediaries
- What is market capitalization?
- What are initial public offerings?
- What are the stock market timings in India?
- What is a ‘BULL’ & ‘BEAR’ market?
- Why do stock prices fluctuate?
What is share market?
Before understanding what stock market is, we need to understand what a market really is. Well I am sure most of you have at least once in our life visited a market to buy our daily requirements like clothes, vegetables, fruits. But could you buy stock, bonds and other financial instruments from these markets? Well not really, you buy them from the financial markets.
Financial markets, like your local markets also have buyers and sellers who transact with each other. This simply means you cannot buy/sell public companies like reliance without transacting through the financial markets.
The main purpose of the financial market is to help you facilitate your transactions. So if you are a buyer of a share, the stock market helps you meet the seller and vice versa.
Unlike your super market, which is a physical market, stock market is an online market, so you can go about conducting your transactions through your phone or computer. Initially stock market was a physical market, but with technological advancements, things have changed.
Let’s get started with understanding why stock market even exists
Stock market serves two purposes:
1) Helps companies to raise money
2) Helps individuals to earn secondary source of income.
2) Helps individuals to earn secondary source of income.
Well, companies need money to grow and expand. They can borrow money from the banks by taking a loan but drawback in this case is that they must pay an interest on the loan taken. Another route that the company can take is to raise money from us, the public.
When the company raises money through public, they don’t have to worry about any interest payment, but like our elders always remind us that nothing comes free in life, raising money through public also comes at a cost. Companies have to sacrifice ownership to the public, that’s how a public company comes into existence.
Ambani family owns 45% in reliance industries but 52% is owned by the general public. As majority of the holding in the company is by the public, it is a public limited company. But what’s in it for you and me? Why should we invest?
As mentioned above when a company raises money from the public, they sacrifice part ownership. Wait, what? Can people like you and me can have some ownership in companies like Reliance, Maruti Suzuki, Wipro, Tata group companies? Does that mean we could sit across the table with Mukesh Ambani or Ratan Tata and help them take decisions?
Well not really, when you invest in these stocks, you buy them at a particular price and expect them to appreciate over a period of time. Investors invest for the sole purpose of profit.
When the company raises money through public, they don’t have to worry about any interest payment, but like our elders always remind us that nothing comes free in life, raising money through public also comes at a cost. Companies have to sacrifice ownership to the public, that’s how a public company comes into existence.
Ambani family owns 45% in reliance industries but 52% is owned by the general public. As majority of the holding in the company is by the public, it is a public limited company. But what’s in it for you and me? Why should we invest?
As mentioned above when a company raises money from the public, they sacrifice part ownership. Wait, what? Can people like you and me can have some ownership in companies like Reliance, Maruti Suzuki, Wipro, Tata group companies? Does that mean we could sit across the table with Mukesh Ambani or Ratan Tata and help them take decisions?
Well not really, when you invest in these stocks, you buy them at a particular price and expect them to appreciate over a period of time. Investors invest for the sole purpose of profit.
What are stocks and what is stock market?
A stock refers to ownership in a company, so when you purchase a stock you become a part owner in the company and have a claim in the earnings of the company. Stocks, shares, equity all mean the same. For example: the cake is like the company and the piece is like a stock.
Stock market is a place where the shares of public listed companies are issued and traded through the stock exchange (Eg: BSE, NSE)
Stock market is split up into two sections:
Stock market is a place where the shares of public listed companies are issued and traded through the stock exchange (Eg: BSE, NSE)
Stock market is split up into two sections:
Primary market:
New stocks are created and sold to the public in the primary markets. Common investors as well as domestic and foreign institutions can purchase shares when they are first issued in the primary market. Primary market is a place where a private company offers its shared to the public, hence the entire process is called IPO (Initial Public Offering)
Secondary market:
After getting listed in the primary markets, trading of these shares take place in the secondary market.