The Stock Market is a place where people buy, sell, or issue shares of publically listed companies. Companies are listed on a place called Stock Exchange. These activities can be done online as well as offline, but nowadays it’s mainly online. All the operations that take place in this market are defined by rules and regulations made under the Securities Exchange Board of India(SEBI) Act,1992, and Securities Contract Regulation Act,1956.
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Some Important terms, you should familiar with if you are interested in the stock market.
1] Listed Public Company – Company whose shares are brought and sold on the stock market is known as a Listed Public Company. There is a listing process that the company had to go through to be called a listed company.
2] Stock exchange – It is a place where companies are listed or you can say a place through which buyer and seller meet. National Stock Exchange(NSE), Bombay Stock Exchange(BSE) are the recognized stock exchanges of India.
3] Securities Exchange Board of India(SEBI) – It is a statutory regulatory body that keeps an eye on and regulates our country’s securities market and protects the interest of investors.
4] Stock Brokers – Platform or people through which you buy or sell shares. They buy or sell shares according to your directions. They are intermediaries between stock exchanges and you.
5] Demat Account – Account where your shares or share certificates(that states your ownership) are kept in e-form.
Stock Market vs Stock Exchange
- The stock market is a wider term, it includes the stock exchange.
- People buy and sell shares in the stock market of the companies that are listed on the stock exchange.
- The stock exchange is an intermediary between stockbrokers and companies.
Primary Market vs Secondary Market
- A primary market is a market when the security is purchased for the first time or we can say where securities are made. The most popular example of primary market is IPO(Initial Public Offer).
- A secondary market is a place where investors or traders buy and sell shares that are already in the market.
- In the Primary Market investors buy directly from the company when they bring IPO.
- In the Secondary Market, investors buy and sell securities from each other.
How you can Earn from the Stock market?
When share prices increase
- when you invest in some company security, you buy shares of that company.
- Say you buy 100 shares of company XYZ at Rs. 10 per share, the total amount invested 100*10=1000 Rs.
- Now due to many factors like company earning good profits, sales are increasing of the company and more, the share price may increase
- Say after 2 months share price of company increases by Rs.20, Current share price of XYZ is Rs. 30.
- You invested Rs. 1000 for 100 shares, now it becomes Rs.3000 for the same 100 shares and you enjoy Rs.2000 profit.
- When a company earns good profits, It decides to distribute profit among its shareholder known as dividends.
- Company announce dividend on a per-share basis means If you are holding 100 shares of XYZ company
- And Company says announce dividend Rs. 2per share, so you will get 2*100=200 Rs.
- Dividend Income directly credited to your account.
Invest in the stock market as per your risk capacity, Because the share price not always increases, you may suffer loss.
How you can buy or sell securities in Stock Market?
- To invest or trade in the stock market you must have a Demat account, Bank account, and a PAN Card.
- If you don’t have a Demat account you can open one by yourself through platforms like Zerodha, groww, upstox, and more.
- Or you can contact any broker or ask your bank to open a Demat account
- Once your Demat account is opened, you have to add funds to it, to buy shares from your linked bank account.
- Now, you are ready to invest or trade in the stock market.
1] What are factors affect share price?
Factors affecting share price are Company earnings, sales, inflation rate, government policies, Budgets, industry growth rate, and more.
2] what are the documents required for opening a Demat account?
Documents required are Aadhar card, PAN Card, Bank Account Details, Bank Statements or Cheque, Pan card photocopy, your scanned signature.
3] What is a Demat Account?
A Demat account is an account where all your shares and share certificate are kept in e-form.
4] What is the risk involved in the stock market?
The risk involved is market risk, business risk, inflationary risk, price fluctuations, and more.
5] What is the stock market?
The Stock Market is a place where people buy, sell, or issue shares of publically listed companies.