Stock Market
is a term which was really fascinated and confusing during our younger age. May
be for people who are old enough to understand what it really is also still
confused since they are not into it. When you watch the news, at the end in the
business section the newsreader may read about Nifty or Sensex (if you are an
Indian) closing high or low which can make you wonder what it is?
This curiosity
and hearing about this often can make you so much interested in knowing about it.
But basically, you will be withdrawn from it most of the times as Stock Market
is really technical and tedious to understand.
There is
also the disbelief among people especially in India that the Stock Market is a place
where you fail and loses money. The involvement of money In Stock Market and
the presence of lots of scammers and some scam news had made the reputation down.
What is Stock Market?
There can be
multiple stock exchanges in a country that allows trading in stocks and other
securities like NSE (nifty) and BSE (Sensex) which are the most important stock
exchanges in India of many.
Though it is
recognized as a stock market or equity market for trading stocks or equities,
it also trades other financial securities such as exchange-traded funds (ETF),
corporate bonds, and derivatives based on stocks, commodities, and currencies.
Small
individual stock investors are known as retailers to big institutional investors
like Foreign Institutional Investors (FII) and Domestic Institutional Investors
(DII) which can be situated anywhere in the world that includes banks, insurance
firms, pension funds, and hedge funds, all participate in the stock market. A
stock exchange trader may execute their buy or sell orders on their behalf.
How a Stock Market works
During older
times the Stock Market issued and deals with the paper-based physical share
certificates, the modern-day computer-aided Stock Markets operates
electronically. This has enabled the Stock Market to popularize and increase
participation from individuals.
In order to trade
in Stock Market, you need to have a Demat account under any brokerage firm
like a Full-service broker or Discount broker.
Upstox is a discount broker backed by Ratan Tata. To open an account in Upstox, click here
Stock market
offers a zero-risk environment where market participants can transact shares
and other financial securities. The stock markets act as primary markets and
secondary markets.
In a primary
market the stock market allows the company to sell and issue their shares to the public for the first time through Initial Public Offering (IPO). This process
allows the company to raise funds.
For this a
company divides into a large number of shares and sells a part to the public in
a fixed price and get listed on to the share market at a listing price
according to the demand and market conditions. The Stock Market acts as a medium
for this process and gets a fee for its services.
The
secondary market constitutes the buying and selling of these shares following
the IPO and listing. Thus, the stock market acts as a trading platform in the
secondary market and earns a fee for every trade that occurs.
A potential
buyer bids on a stock while a potential seller asks for the same stock at a
particular price. When you buy or sell in the market, you agree to accept any
ask or bid price for the stock. If there are many bids at a given price, a sale
occurs when the bid and ask prices match. If there are multiple bidders at a
given price, a sale occurs on a first-come, first-served basis.
At a later
date, a publicly-traded business may offer fresh or more shares through other
means, such as a rights issue or follow-on offer. They could even buyback or
delist their stock. Such trades are also made possible by the stock market.
0 Comments