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What is Stock Market

What is Stock Market ?

Stock market or share market is place where buyers get to buy and sellers get to sell shares of the public listed companies they own. Stock market is an electronic platform or market place where buyers and sellers get to trade their stocks or shares through exchanges.

Stock Market Definition

A stock market is an electronic market place where shares of publicly listed companies are traded. For instance, A buys the shares in ABCD while B sells the shares in the same ABCD through stock market where all the trade is happening.

To understand the stock market, you also have to understand about

  • What is stock
  • How does stock market work ?
  • What is stock exchange and how does it work ?
  • Participants of stock market
  • Regulating stock market
  • How to invest in stock market
What is Stock ?

A stock is a security or certificate which represents the ownership of an investor in a company. Units of stock are called shares. This stocks provides a proportion of the company's asset and profit equal to how much they own. There are two types of stocks generally. One is preferred stock and other is common stock.

Preferred stock holder doesn't get voting rights while common stock holder gets to vote in the shareholder's meeting. The dividends are paid to preferred stakeholders first then to the common stakeholders.

Preferred stock holders have higher claim on assets and earnings of the company to the common stock holder. For example owner of preferred stock (such as Mukesh Ambani) will receive dividends before common stock holder and will have higher priority at the time of bankrupt and liquidation.
What is stock
Stock Market

How Does Stock  Market Work ?

As you know stock market is the place where stocks of publicly listed companies are traded through exchanges. There are two main stock exchanges in India. They are National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). Stock exchanges are the facilitators who provides facility to trade shares or stocks between stockbrokers and investors by buying and selling.

A company at first issues IPO (Initial Public Offering) to the stock exchanges for the investors to invest their money and buy the shares or equity or stocks of the company.

An IPO is the Initial Public Offering  is the first time issuance of the shares or equities or stocks of the company to the Institutional Investors and also for the retail investors. An IPO is the underwritten by the investment bankers who also manages to the shares to be listed on one or m exchanges.

The IPO is issued by the company to raise funds or to raise new equity capital or to monetize the shares of investor privately held in the company.

You should always invest in the IPO of a good company

Stocks or shares or equities are issued to the exchanges. The exchange issues the shares to the investors through stockbrokers in the exchange of funds. The stockbroker works as intermediary between the investors and the exchange. The shares are transferred to the Demat account of the investor by the Depository. There are two main Depository and they are NSDL (National Securities Depository Limited) and CDSL (Central Depository Securities Limited). The main function of the depository is to facilitate holding of dematerialized securities and enable securities transactions by book entry.

Purpose of  Stock Market 

The main purpose of the stock market is to raise new equity capital or just to raise funds from the Institutional Investors and also from the retail investors. The funds are taken by the company and shares of the company is transferred to the the investors through stock exchanges.

What is Stock Exchange ?

Stock exchange is a place where investors get to buy and aell shares or stocks. Stock exchange doesn't hold shares for its own. Stock exchange is provides facility to stockbrokers and traders to buy and sell stocks, bond, securities and other financial instruments.

How to Invest in Stock Market 

Investing in share market has been seen as a very risky thing since many of the people don't actually know What is Share Market.

To invest in share market you need to have a Demat and Trading account. This Demat and trading account will be used to invest your funds to the share market. You can place buy orders and sell orders through your trading account and once the orders are executed, you will have the shares of the company you have bought in to your Demat account after T2 days.

For instance, you have bought 10 shares in the company Tata Steel at a price of Rs.350 with funds of Rs.3500 today.

Then tomorrow will be T1 days, the day after tomorrow will be T2 days and so on.

You will get shares in Tata steel after T2 days to your Demat account.

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