Share Market Basics Knowledge for Beginners: The share market is a platform where buyers and sellers come together to trade on listed shares during specific hours of the day.
Share and stock market terms are used interchangeably by the people around us.
Both of these terms refer to the same thing.
What is the share market?
- The share market is a platform where buyers and sellers come to trade publicly listed shares during specific hours of the day.
- There are two stock exchanges in India; they are the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).
What are shares?
- A share is a part of the company’s value.
- In proportion to the capital you invest, you can get ownership rights to a certain percentage of that company.
- For example, if you own 3% of the shares being traded in the market, you can say you have 3% ownership in the company.
- Thus, shares are considered to be units of ownership in the company and its financial assets.
- The other good names of Share Market Basics are as follows:
After you buy the shares of any company, you will be known as a stockbroker or the shareholder of the company.
Also Read: What is Share Market and How it works?
Types of Share Market(Share Market Basics):
A share market can be further classified into two parts.
They are as follows:
1. Primary share market:
- When a company registers itself for the very first time at the stock exchange so as to raise funds through shares, it enters the primary market.
- This process of entering the primary market and raising funds is known as an Initial Public Offer (IPO).
- After an IPO, the company will become publicly registered and its shares can be traded among the market participants.
2. Secondary share market:
- After the securities are sold in the primary market, the company will then enter the secondary market.
- Here, investors will be getting the opportunity to buy and sell the shares on their own at the market prices that are available to the entire country.
Read More About What are the Primary Market and the Secondary Market?
Why do companies need shares?
- When a company is scaling up or expanding its business or expanding the same, it will need more capital.
- During these times, a company can opt for the share market and then offer a certain number of shares based on its market value.
- Through this, investors will be paying the company some money and, in return, they will get a chance to be part owner of the company.
- So now, when the value of the shares rises, the value of the shares that are owned by the investors will also rise.
How are the shares priced in the markets and who determines the prices?
- The market will determine the prices as per the general rule of demand and supply.
- The share price of the company tends to go up when the company is growing fast or earning good profits.
- Due to this, the demand for the stocks of the company will go up, and eventually, the price of the company’s stocks will also rise.
- Similarly, when the company is not performing well, there is high chance that the stock of the company will fall, and this will lead to a reduction in the price of the company’s stock.
What are Stock Indices?
- From all the companies that are listed on the stock exchange, a few similar stocks are grouped together to form an index.
- This index classification can be based on the following terms:
The following are the main indexes along with their free-float market capitalization:
|Index||No. of Companies||Free-float market capitalization|
Other sectors that will form an index are Bankex, market cap indices such as the BSE Midcap or the BSE Small cap, and others.
How do companies list their shares?
- Companies offer their shares through an Initial Public Offer (IPO).
- The first time a company will offer its shares to the public is known as an IPO.
- The Securities and Exchange Board of India (SEBI), which is our market regulator, has laid down a few rules as well as regulations for the company to list its IPO on the exchange, with which they will have to mandatorily comply before being eligible for listing.
What is SEBI?
- The full form of SEBI is the Securities and Exchange Board of India.
- It is the responsibility of the securities market regulator to oversee any fraudulent transactions and activities that are made by any parties such as companies, investors, brokers, traders, and the like.
Learn More About SEBI
What are stock exchanges and how many are there?
A stock exchange is a place or platform where buyers and sellers, or traders, come together to buy and sell stocks.
There are two primary stock exchanges in our country, and they are as follows:
What are the Nifty and Sensex?
- All the companies that wish to get listed will either approach the NSE, the BSE, or both.
- Both the BSE and the NSE have 100s to 1000s of companies listed on them.
- But to pick the top 30 or bottom 100 companies, it will be difficult to go through this huge number.
- So in order to organize these companies, Nifty and Sensex came to group them together.
- The Nifty 50 is a collection of the top 50 companies that are listed on the NSE.
- The Sensex is the collection of the top 30 companies that are listed on BSE.
- All these companies are listed by way of market capitalization.
- The top companies are the ones that will influence the economy of the country.
- Thus, an index with the top as well as the largest companies is the best gauge for how the entire stock market will work.
- There is also the BSE500, BSE Small cap, Nifty Midcap, and other indices.
- However, the Nifty50 and Sensex are considered to be the primary benchmark indices.
- There are other sectorial indices as well, such as Nifty Pharma, BSE Bankex, Nifty PSU, and others.
Learn More About What is Nifty || Nifty 50 Stock List || SENSEX Meaning
When can you conduct stock market transactions?
- The stock market hours in India are from 9:15 AM to 3:30 PM.
- There are a few days in the country when the stock market is closed, and they are known as the market holidays.
How do you make money in the stock market?
- The most basic way to earn money in the share market is to buy low and sell high.
- However, there are two ways through which you can make money in the share market:
What is fundamental and technical analysis?
- Fundamental analysis is about understanding the business of the company, its growth prospects, debt, profitability, etc.
- Technical analysis, on the other hand, will focus on the charts and patterns and will try to find out the past patterns to apply to the future.
- Fundamentals will be used by investors and technicals will be used by traders.
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