What is Share Market?

You must have heard of terms like “stock market”, “share market” in your day-to-day lives. So, what is share market? If you are just an average investor, then you can get by just fine without bothering much about this term. However, if you are in it for the long haul and want to learn how to trade in shares, then having some basic knowledge is imperative. A share market is a basic platform that brings buyers and sellers in one place to trade publicly listed shares during market hours. In India, there are two principal stock exchanges. One is the National Stock Exchange (NSE) and the other is the Bombay Stock Exchange (BSE). So, let us begin by understanding share market basics.

Why invest in share market?

In the words of the legendary Warren Buffet, “Investing is laying out more money now, to get more money back in the future.” Even though according to some, ‘investing in shares’ is a risky proposition, studies have shown that putting your money in the right shares for a long duration could provide the solution for beating inflation. Furthermore, it can even be a better investment option than gold and real estate. Having said that, if investment has been done in the right kind of shares, it can help traders in making profits.

How to Invest in Share Market?

  • To invest in the share market, you need to open a Demat and trading account. That’s mandatory.
  • After that, log into your Demat and trading account and choose the shares you wish to buy and sell. Make sure you have the requisite funds in your account to buy those shares. You need to present the necessary documentation for it. Upon successful verification, your account will be opened.
  • Select the price point at which you want to buy and sell shares. Then wait for the buyer/seller to fulfill that request.
  • Once the transaction is done, you either receive shares or money for the stocks you bought or sold.

Types of share market

The Share market can be classified into two types, namely the Primary and Secondary Markets.

PRIMARY MARKET SECONDARY MARKET
Before a company gets listed in stock market, they enter the Primary market. The purpose of entering the primary market is to raise money and if the company is selling their shares for the first time, it’s known as the Initial Public Offering (IPO). Once the shares are sold in the primary market, they are then traded in the secondary market. The transactions in the secondary market, called trades occur in the stock exchange. Here, the investors buy and sell the shares amongst themselves at an agreed-upon price. Usually, a broker acts as an intermediary that facilitates such transactions.

What Is Traded On The Share Market?

There are four types of financial instruments that are traded on the stock exchange. They are as follows : -

  • Shares – It represents a unit of equity ownership in a company. Investors holding a company’s share are known as shareholders.
  • Bonds – Bonds are issued by a company to raise capital from the public. Bonds represent loans made to the issuer. Instead of going to a bank, the company acquires money from the investors who buy its bonds. It pays its investors a fixed rate of return.
  • Mutual Funds – Mutual funds are companies that pool money from multiple investors and invest the money in a mix of securities like stocks, bonds and short-term debt.
  • Derivatives - Derivatives are financial instruments that derive their value from an underlying asset like shares, currency, commodities etc. Futures & Options are common examples of derivative instruments.

How are Shares Priced in the Market and Who Determines the Price?

After a company’s shares start trading publicly on a stock exchange, the price of its shares are factored by the demand and supply of its shares in the market. If there are favorable factors, the demand for its shares will be high, thus leading to an increase in share price.

Why do companies need shares and why do they have to list it?

Companies need more capital when they are expanding their business. At such times, companies approach the share market to offer a certain number of shares based on their market value that investors can purchase. Investors pay some money to the company and in return get to be part owners. When share value rises, the value of the shares owned by the investors rises.

A company can list its shares by selling its shares to the public through a process namely Initial Public Offering. The company has to abide by the rules and regulations of the Securities & Exchange Board of India (SEBI) to launch its IPO and to be eligible for listing. The SEBI is the regulator of securities market in India. It safeguards the interests of the investors in the securities market.

What is a stock exchange?

A stock exchange is a platform where different financial instruments like stocks and derivatives are traded. It helps in the buying and selling of shares and other securities. The activities in the stock market are regulated by SEBI. The primary stock exchanges in India are NSE and BSE but in totality at present, as per SEBI, there are seven recognized stock exchanges in India.

What are Sensex and Nifty?

In India both the primary stock markets, that is the NSE and BSE require an index to measure the performance of the market. Sensex or the Sensitive Index is the index for BSE whereas Nifty is the index for NSE.

The regular timings of NSE and BSE stock market is 9:15 AM to 3:30 PM. Additionally, there is a pre-opening session from 9:00 AM to 9:15 AM and a post-closing after 3:30 PM which goes on till 4:00 PM. The stock markets remain shut on certain days which are known as stock market holidays. Holi, Republic Day, Eid are examples of such holidays. The Share market remains closed on weekends.

How to Make money in a stock market?

If you are a beginner in stock market trading, along with discipline and patience, you need to do a thorough research on the markets before you start share trading. The lure to earn good money will always persist but one must keep in mind the volatility of the stock markets before arriving at a decision as to whether to hold or sell the stocks in hand. If you want to get better at stock market trading, you need to understand the different financial instruments like shares, ETFs, Futures & Options, etc. and the various opportunities that are available in the stock market through order types, like intraday, delivery and margin trading.

Conclusion

In order to start share trading or investing, one needs to open a Demat and Trading account. Bajaj Financial Securities Limited is a trusted brokerage firm with one of the lowest brokerage rates in the market. If you don’t have a Demat account, open one today and start share trading right away!

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Share Market FAQs

There isn’t any specific answer to this question. It is totally dependent on your personal situation. However, it would be wise if you considered some of the factors mentioned below.

  • Amount of money you have to invest
  • Maintaining diversification of your investment portfolio
  • Time horizon of investment

As a beginner, you should study the market and look for value stocks. They are stocks of companies that have a sustainable business model and are expected to be profitable in the long run.

Stocks are financial securities that show part ownership in one or multiple companies, whereas a share is the smallest denomination in the stock of a company. Every unit of a stock is a share, and every share of a stock is equal to a portion of the company’s ownership.

The financial instruments that are traded in the stock market are derivatives, shares or stocks, bonds, Exchange Traded Funds and Mutual Funds.

You buy stocks in the stock exchange. However, you have to open a Demat and Trading account in to trade in the stock market.

For any business, the thumb rule is to buy at a low price and sell at a higher price. Therefore, one should study the stock markets before investing.

Short Selling of shares is when an investor sells a share first and buy it later. Short selling is only allowed in Equity Market in intraday. Short selling is allowed in Futures and Options market. An investor uses short selling in the bearish market. If the market turns bullish, short sellers of shares will be in an unfavorable situation.

You cannot trade after market hours. However, you can place an order using order type AMO (After market order). It gets placed as a market order when the market opens.

There’s no such concept as “zero risk”. If you are in the market to trade, then you must have the stomach to digest volatility. There are broadly two types of investment risks. 1. Systematic 2. Unsystematic.
Systematic risk involves the entire market system. It could be major policy changes by the government, war, inflation etc. It is difficult to protect your portfolio against this risk. It is also known as market risk.
Unsystematic or diversifiable risk is unique to a company or a particular industry. For example, strikes, lawsuits are some examples which impact the price of a specific company or industry.

Equity is a common financial instrument in stock markets. If you are an equity shareholder you are eligible to claim any profit that has been paid by the company as dividend.
Regarding one should invest in equity or not, is a personal call. However, equity is one such financial instrument which helps in diversification of investments with certain risks involved has given favourable returns over long terms.

The SEBI is the leading regulatory authority in securities markets in India. Itprotects the interests of investors in securities and to promote the development of, and to regulate the securities market.

It is generally the number of stocks or assets in a particular market that closed at a higher and at a lower price as compared to the previous day. Technical analysts refer to these to analyze stock market behavior, check market volatility and predict whether a price trend seems to continue or not.