What is share market and how it works ? : The share market has always been a popular investment avenue. In fact, it always catches the eyes of the investors because of the returns that can be made in the stock market. More and more people are investing in the market in the hope of making good returns. In addition, mutual funds and SIP mode investment have been first preference of the people to invest their savings. In this article, we shall discuss the about the basis of the share market of India and how it works.
The first and foremost question that strikes the mind of any investor is the difference between stock market and share market. Are the two terms same or different? In this segment, we will understand how similar or different are stock market and share market.
What is Share Market ?
Stock Market and its Difference from Share Market ? : Stock market is a place where the buyers and sellers come under one place on a single platform to trade in stocks. The stock market has grown over a period of time. In fact, in earlier times when BOLT facility was not there, people use to stand in a trading ring to purchase or sell a stock. But with time, the computer terminals took over and now trading happens at broker’s office using the internet. To sum up, it would not be wrong to say that share market and stock market are one and the same thing.
Now we shall understand the basics of the India stock market.
Stock Market Basics in India
The Indian stock market has two exchanges where trading of shares and securities is possible. They are National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). The shares of different companies are traded on these exchanges. The investors aim to invest money in such avenues where they can deal with inflation, future needs, etc. The stock market is one investment avenue which has the potential to give high returns to the investors. The investors cannot start investing or trading in the stock market without proper information or knowledge. To become a successful investor or trader one needs to learn about the functioning of the stock market, develop right strategies, indulge in understanding the technical and fundamentals of a company and much more. Trading Fuel helps the beginners in the stock market to learn and form good investment strategy.
The Indian stock market has two types of markets. In this segment, we shall learn about the types of markets in the share market in India.
Types of Markets:
There are two types of markets: Primary market and Secondary market. The primary market is one where a new company decides to come out with an initial public offer (IPO). The new companies can get itself listed on the stock exchange through the primary market. On the other hand, once the company get itself listed and starts trading normally, it is termed as a secondary market. The trader and investor can indulge in normal buying and selling of shares.
The next thing that the traders and investors in the Indian share market must know is how and who determines the price of shares?
How and Who Determines Share Price?
The stock market determines the price of the shares. The whole concept of share market is dependent on the demand and supply concept. To put it another way, the price of the shares increases when there is more buying. On the other hand, the price of the shares decreases when there is selling. Thus, the demand and supply concept helps in identifying the price of a stock.
The next important thing that every trader and investor must know is the meaning of the term stock indices. In fact, stock indices are the most common term in the India share market, so let us learn about it.
Meaning of Stock Indices
The Indian stock market has hundreds and thousands of companies listed on it. The companies belong to different sectors and fields. When such companies are combined or grouped together to form an index it is termed as stock indices. The companies forming part of stock indices are classified on the basis of size, market capitalization, etc. The NSE index comprises of 50 stocks and BSE Index comprises of 30 stocks. Apart from stock indices, the Indian share market has sector indices that include bank index, pharma index, IT index and so on, where similar companies are grouped together.
Now the next important question is how any normal person can trade in the Indian stock market. Well, the answers to it is simple as anyone can trade in the stock market through online or offline mode. Let us learn more about it.
How can I buy a share?
Online trading is one where the shares and securities can be purchased or sold using the internet. In fact, the transaction can be carried out by the trader or investor by sitting at his home, office, or from anywhere in the world. In fact, the trader or investor just need to log in to the trading account and execute the transactions. On the other hand, offline trading is one where trading can be done by visiting the office of the broker or by calling him to give orders to execute the transaction.
Trading in shares in securities is possible only with the help demat account. To execute transaction via online or offline mode the user must have a demat account with the broker. However, it must be kept in mind that trading account and demat account are different.
What is Trading Account and Demat Account?
Trading account is an account through which the user can execute only buy and sell orders. To execute transaction you need to open a trading account with the broker. The demat account is one which holds the shares and securities of the individual just like a bank account. In addition, when you purchase the shares in the trading account, the bank account gets debited and the demat account gets credited with shares. Upon selling of shares, vice versa happens.
Securities and Exchange Board of India (SEBI)
By now you must be very well knowing the basics of the Indian stock market. One more important thing that every investor in the market must know is that the Securities and Exchange Board of India (SEBI) regulates the Indian stock market. It has the authority to regulate and look after the welfare of the investors in the Indian stock market.
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