In India, only 4% of people are invested in the share market, rest of the people’s don’t know what is share market and how does it works?
But I’m here to give you in depth knowledge of what is Share Market and How does it Works.
Share Market is always enticing investors because of the returns that many existing investors made in the share market. However, they take risk appetite. But Only few people know what the share market and how it works?
Also Read: 11 Ways To Earn Money Online
Nowadays, If you are an investor, then where should you invest?
Fixed Deposit -7%
Debt Fund – 6%
Real Estate – 5%
Gold – 5%
If you invested in the share market and mutual fund, you would get up to 30% ROI.
Every person wants to save their money and invest somewhere they will get some return.
Most of the people directly or indirectly invested in the share market, But few of them invested directly in the share market. On the other hand, people indirectly invest in share market like Mutual Funds, LIC, and other similar investments available.
I have been trading and investing in the share market for more than two years.
So, I’m going to cover all about the Share Market & How it works.
Let’s Dive in!
What is Share Market?
Many people heard that share market is gambling, people get stuck in and they become indigent in gambling
But in Reality,
Share market is like a Business; However, Share market is a marketplace where people can buy or sell company shares online, Either OTC (Over The Counter) or through centralized exchanges.
Share market is the best source for companies to raise funds from investors in exchange for giving a part of ownership.
Besides, Investors become shareholders of that company which shares they bought. Shareholders earn a part of the profit earned by the company as a way of Dividend. As well as, shareholders are also responsible for the risk of bear losses, if the company fails to perform well.
Companies need to get registered with stock exchange (NSE, BSE) and SEBI (Securities and Exchange Board of India) to be able to trade in the stock market.
What sources can companies borrow funds?
Companies can borrow funds from the Bank or other financial instruments.
But if companies can borrow funds from banks, then they have to pay some amount of interest. However, in the share market, they don’t give any interest. Instead of providing interest, they will provide ownership in terms of share.
For example, if Mr. A buys five shares at RS. 500 ( each share is Rs100) if the company perform well and company grows then share price also increase, and the share price is reached at Rs. 150 each, then Mr. A, who has 5 Shares, can get a profit of Rs. 250 and in reverse case, Same as Vice-versa.
I hope it will be clear now what the share market is.
What are the Basics of Share Market In India?
Many people thought that the share market is just like buying shares at a low price and selling those shares at a high price. However, Trading and investing in the market is not as uncomplicated as it looks. Additionally, it requires the right knowledge and information to be able to make good returns.
Before We go ahead, we should know about the Stock exchanges of India.
In India, There are 2 stock exchanges:
- National Stock Exchange (NSE)
- Bombay Stock Exchange (BSE)
What is the National Stock Exchange (NSE)?
The National Stock Exchange of India Limited (NSE) is India’s Leading Financial Market Incorporated in November 1992 as a Tax Paying Company.
NSE Introduced Nifty 50 on 1st April 1996, as the identifying base for 50 Stocks indices, and it is extensively utilized as Indian Capital Market. NSE was started to end the monopoly of the BSE in the Stock exchange in the Indian market. National Stock Exchange is the 10th Biggest stock exchange marketplace, and as of March 2017, its market capitalization reached over $1.41 Trillion.
At the Present time NSE listed 51 Stocks, and it is owned and managed by India Index Services and Products Ltd. (IISL).
Nifty, also called NIFTY 50, the term NIFTY 50 is derived from the 50 leading active companies included in NIFTY. Besides, if NIFTY goes up, that means that the stock price of those 50 companies has gone up and vice-versa.
What is the Bombay Stock Exchange (BSE)?
Premchand Roychand founded BSE in 1875. The Bombay Stock Exchange is Asia’s oldest stock exchange, and it was established in 1875 as the Native Share & Stock Brokers Association. The Bombay Stock Exchange is located at Dalal Street, Mumbai, India. Having the 11th Largest Market Capitalisation value at $2.2 Trillion.
BSE is also known as Sensex 30 because it consists of 30 well-established and financially sound companies listed on BSE. Companies selected based on free-float market capitalization.
Over the past 140 Years, BSE has facilitated the growth of the Indian corporate sector by providing it an adequate capital rising platform.
In 1995, the Financial market launched a fully electronic trading system.
At the present time electronic systems capture overall the financial industries. Securities the BSE lists include stocks, Future and Options stock, Index futures, Index Options.
What is a Demat and Trading Account?
In the 1990’s if people wanted to buy/sell shares, then they needed to do trade physically. If They’re going to trade, then they need to sign an application and submit their form. After shares were allotted, they got a Share Certificate. This is quite a lengthy process.
After the introduction of Dematerialization in 1996, the overall process has become online and quite comfortable.
Demat accounts are similar to bank accounts. For Example: If we deposit cash in a bank account with the help of internet banking, we can see all the amounts we deposited. As same as in Demat, we can see all the shares we bought from the share market. Without a Demat account, you cant trade in the stock market.
As we discussed the Demat account further, we need to understand the trading account. A trading account used to buy and sell stocks in the share market. The trading account acts as a link between the bank account and Demat account.