What is Share Market and How does It Work?
In your daily life, you have probably heard terminology like "stock market" and "share market." Then What is share market? If you are an average investor, you won't need to worry too much about this word. It is essential to have a basic understanding if you want to learn how to trade shares and are in it for the long run. During market hours, a share market operates as a basic marketplace where buyers and sellers may buy and sell publicly listed shares in a single place. There are two main stock markets in India. The National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). So let's start by going over the fundamentals of the share market.
What is Share Market?
The Share market, also known as the stock exchange, is where businesses get money from people to help their companies grow. These people, who give money, buy something called "shares," which make them part owners of the business. They can also have a say in important decisions and get some of the company's profits.
Understanding the Sensex:
Sensex is like a measuring tool for the stock market. It shows how well the top 30 companies in the Bombay Stock Exchange (BSE) are doing. When Sensex goes up, it means those companies are doing well, and when it goes down, they're not doing as great. It helps us understand how the whole Indian stock market is doing.
Two Types of Stock Markets
There are two main kinds of stock markets:
- Primary Market: This is where companies first offer their shares to the public. It is like the first time they sell them to people.
- Secondary Market: In this market, people buy and sell shares that have already been sold in the primary market. It is like people trading cards they already have.
Both markets are important. The primary market helps companies get the money they need to run their business, while the secondary market lets people easily buy and sell shares.
How the Stock Market Works
The stock market is all about supply and demand. The price of shares goes up when lots of people want to buy them and there aren't many shares available in the market. When there are too many shares and not many buyers, the prices go down.
Stock exchanges are like a stage where buyers and sellers come together to trade shares. Buyers offer a price they are willing to pay, and sellers offer a price they are willing to sell at. When they agree on a price, a trade happens, and shares change hands.
Stockbrokers play a big role by connecting buyers and sellers. They help make the trades possible.
People in the Stock Market
Several kinds of people are involved in the stock market:
- Issuers: Issuers are the companies that sell shares to raise money for their business like capital in the business.
- Investors: These are people who want to make money by owning shares. They always hope that the shares will become more valuable, or they will get some of the company's profits.
- Regulators: Regulators are like the police of the stock market. They make sure everything happens fairly and transparently and that people are safe from scammers.
- Stock Exchanges: Stock exchanges are like marketplaces where people trade shares in the market. In India, the major ones are the NSE and BSE.
- Stockbrokers: These are professionals who help people buy and sell shares. They act as the middlemen, making the trades happen in the market.
- Traders: Traders are like investors, but they buy and sell shares often, trying to make quick profits when prices go up or down in the market.
Factors That Affect the Stock Market
Several things can make the stock market go up or down:
- Global Events: Events like wars, conflicts, or trade problems between countries can create uncertainty in the stock market. Good news can make prices go up, and bad news can make them fall.
- Economic Indicators: The stock market is influenced by how well the economy is doing. Things like how much the country makes (GDP), inflation, interest rates, and jobs can change the stock market.
- Politics: Elections, new rules, and issues between countries can make the stock market uncertain and prices go up and down.
- Company News: When companies share news like how much money they made, if they're merging with another company, or launching new products, it affects their share prices.
- Natural Disasters and Health Crises: Things like earthquakes, hurricanes, and pandemics (like COVID-19) can affect the stock market. They can disrupt businesses and change how much people buy.
- Investor Feelings: How people feel about the stock market also matters. If they are positive, they want to buy more shares, and prices go up. If they feel negative, they might sell, making prices drop.
How Can I Invest in the Stock Market?
- You must open a trading and Demat account in order to make investments in the stock market.
- After that, select the shares you want to buy and sell by logging into your trading and Demat accounts. Verify that you have enough money in your account to purchase those shares. You must provide the required supporting paperwork for it. After verification, your account will be activated.
- Decide on the price range you wish to purchase and sell shares at. Next, watch for the seller or buyer to comply with that request.
- After the transaction, you will either get shares/cash for the stocks you purchased or sold.
Conclusion
The stock market is an exciting place where you can buy and sell shares of companies. It's a way to grow your money, but it also comes with risks. Always make sure to research and understand how the stock market works before you invest. It can be a great opportunity, but being informed is the key to success.
