Companies need money to run their businesses.
This money can be acquired through profits, and if the profits are not sufficient, then funds are raised through initial public offerings (IPOs).
What is a share market?
- Share market is a platform where several buyers and sellers come together to trade on the publicly listed shares of the company during some of the specific hours of the day.
- We hear words such as share market and stock market from traders.
Both are almost similar; there is only a minor difference between the two:
There are two main, or, say, principal, stock exchanges in India.
They are as follows:
What are stocks?
- Stocks are an investment method to build wealth.
- When you invest in the stock of the company, it means that you have a share in the company.
- There are several types of stocks available in the stock market.
These stocks are categorized based on the following:
Types of share markets:
In India, there are two types of share markets.
They are as follows:
Primary share market:
- When the company registers itself for the first time on the stock exchange through the issue of shares, it is said that it has entered the primary market.
- This concept is also known as an initial public offering (IPO), after which the company is publicly registered and its shares can also be traded by the public at large.
Secondary share market:
- Once all the new securities are sold in the primary market, they are then traded in the secondary market.
- Here, investors get the chance to buy and sell the stocks among themselves at the relevant market prices.
- These transactions are under the surveillance of the broker or any other such intermediary.
Basic terms of the share market:
Before entering the trading business, you will have to understand a few basic terms of the share market.
They are as follows:
| Term | Description |
| Sensex | It is a collection of top 30 stocks that are listed on BSE by way of market capitalization index |
| Demat | It is a form of an online portfolio that will hold the shares and other securities of the customer in an electronic form |
| SEBI | Securities and Exchange Board of India (SEBI) is the main market regulator to oversee the activities of the entire share market |
| Stock Index | It is the statistical source that will measure all the financial market fluctuations |
| Trading | This is the process of buying and selling of shares of the company |
| Portfolio | It is the collection of the large number of assets that are owned by the investor |
| Bull market | Here, the companies tend to generate more revenue because as the economy will grow then the consumer will tend to spend more |
| Bear market | It refers to the slowdown in the economy which will make the consumer to spend less turning into the low GDP economy |
| Stock market broker | It is an investment advisor that will buy and sell the shares on behalf of its client |
| Nifty 50 | It is the collection of top 50 stocks that are listed on NSE by way of market capitalization index |
| Bid price | It is the highest price that the buyer will pay to purchase the shares at any given time |
| Ask price | It is the lower price that will seller will charge to sell the shares at the given time |
| Equity | The value that will be received by the shareholder when the company is liquidated after all the debts are paid off |
| Dividend | It is the cash or reward that the company pays to its shareholders |
| IPO | Initial Public Offering (IPO) is the selling of the securities in the public in the primary market for the very first time |
| Call & Put Option | Call option gives the investor a right to purchase the security, whereas the put option gives the investor a right to sell the security |
| BSE | Bombay Stock Exchange (BSE) is the first securities exchange market in India. It was established in 1875 as the Native Share and Stock Brokers Association |
| NSE | National Stock Exchange (NSE) is the first exchange to provide screen- based or electronic trading in India. It is the fourth largest stock exchange in the world |
What is traded on the stock market?
There are, in total, four different financial instruments that are traded on the stock market.
They are as follows:
| Term | Description |
| Sensex | It is a collection of top 30 stocks that are listed on BSE by way of market capitalization index |
| Demat | It is a form of an online portfolio that will hold the shares and other securities of the customer in an electronic form |
| SEBI | Securities and Exchange Board of India (SEBI) is the main market regulator to oversee the activities of the entire share market |
| Stock Index | It is the statistical source that will measure all the financial market fluctuations |
| Trading | This is the process of buying and selling of shares of the company |
| Portfolio | It is the collection of the large number of assets that are owned by the investor |
| Bull market | Here, the companies tend to generate more revenue because as the economy will grow then the consumer will tend to spend more |
| Bear market | It refers to the slowdown in the economy which will make the consumer to spend less turning into the low GDP economy |
| Stock market broker | It is an investment advisor that will buy and sell the shares on behalf of its client |
| Nifty 50 | It is the collection of top 50 stocks that are listed on NSE by way of market capitalization index |
| Bid price | It is the highest price that the buyer will pay to purchase the shares at any given time |
| Ask price | It is the lower price that will seller will charge to sell the shares at the given time |
| Equity | The value that will be received by the shareholder when the company is liquidated after all the debts are paid off |
| Dividend | It is the cash or reward that the company pays to its shareholders |
| IPO | Initial Public Offering (IPO) is the selling of the securities in the public in the primary market for the very first time |
| Call & Put Option | Call option gives the investor a right to purchase the security, whereas the put option gives the investor a right to sell the security |
| BSE | Bombay Stock Exchange (BSE) is the first securities exchange market in India. It was established in 1875 as the Native Share and Stock Brokers Association |
| NSE | National Stock Exchange (NSE) is the first exchange to provide screen- based or electronic trading in India. It is the fourth largest stock exchange in the world |
Shares:
- They tend to represent the equity ownership in a company.
- The shareholders are entitled to an equity dividend every year and also bear the losses on behalf of the company, if any.
Bonds:
- To accumulate a large amount of funds, the company might issue bonds to the public.
- Bonds also refer to the loan taken by the company.
- Bond holders can be considered creditors of the company, and they also receive timely interest payments in the form of coupons.
- For the bond holders, these bonds act as a fixed-income instrument.
Derivatives:
- It is a security that will derive its value from an underlying security.
- Here, the traders of derivatives have opposing expectations of the price of an asset, and so they might enter into a betting contract with regards to its future price.
Mutual funds:
- They are professionally managed funds that pool the money of numerous investors and then invest the collective capital into various other financial instruments.
Conclusion:
The stock market in India is an ocean of opportunities, and they tend to grow with each passing day.
Frequently Asked Questions (FAQs)
The two main types of markets are the primary market and the secondary market.
The two main types of stock are common stock and preferred stock.
The two main stock exchanges in India are the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE).
The two main types of shares are primary equity shares and preference shares.
The full form of an IPO is an initial public offering.
About Us:
Trading Fuel is our website for blogs, where we update several blogs on the stock market, market indices, economic events, and taxation scenarios. We also regularly update the same with new information. We wish you a happy reading, and do comment with your views on the same.
