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Understand The Basics Of Share Market

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By Author: Nirav Singhaniya
Total Articles: 11
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Before diving deep into the world of stock trading, you should know how to select the potential stocks and what influences their movement. All of this requires a proper understanding of the Indian stock market. As a matter of fact, with right information and knowledge, even novice traders can easily earn good returns. In an attempt to simplify Share Market for you, this article uncovers the basics of trading in share market along with the key concepts that you must be aware of.

What is Share Market?

The share market consists of stocks from various companies that are listed on a particular exchange. This exchange brings both the buyers & sellers together, providing a platform to trade the shares and securities. There are two prestigious exchanges that list the shares of different companies: Bombay Stock Exchange (BSE) and National Stock Exchange (NSE). Here, the exchange tends to track demand and supply and this is directly associated with the price of every stock.

However, a share market is not like your everyday supermarket where you walk in and buy whatever you want on your own. You need an expert guidance. You cannot simply choose your share and trade at the exchange. Traders must be represented by a registered stock broker or online share market broker like IndiaNivesh Securities Ltd. A trader will place an order through the broker, after which the broker forwards the same in the exchange on his or her behalf.

What Are The Different Types of Share Market?

The share market can be categorized into two types:

Primary Share Market (PSM)
Secondary Share Market (SSM)

A primary market is where companies tend to register themselves for issuing particular volume of shares. Thereby they also get listed into the stock exchange if they are doing it for the first time. The main purpose of such companies is to improve their capital. If they are selling shares for the very first time, the company is stated as IPO or Initial Public Offering, as a result of which the company turns public.

On the other hand, a secondary market is where the shares which are already sold in the PSM are traded again. This provides traders an opportunity to sell their shares or exit their investment. This market is meant for trades, where an investor can buy shares from another at the current market price. As stated earlier, these transactions are performed with the help of a broker who will facilitate the complete process of stock market trading.

Which Financial Instruments Can Be Traded in Stock Market?

There are a wide range of financial instruments that can be traded in the Indian stock market and these are explained below:

Equities: Equities also known as shares or stocks provide investors ownership of the selected company. You can sell or buy shares of the company of your choice with the help of a professional broker like IndiaNivesh Securities Ltd.

Bonds: These are termed as debt instruments in which a company or the government borrows money from investor at a specific rate of interest for a given time period. They offer fixed-income to the investors.

Mutual Funds: In this, capital gets pooled from different investors and then this money is invested in different asset classes. The profits get distributed among the investors according to the units that they bought.

Derivatives: The derivative is a type of financial contract whose overall value gets derived from its underlying asset. This is ideal for mitigating risk. Some of the common forms are futures, forward, swaps and options.

Who Regulates The Share Market?

Since 1988, The Securities and Exchange Board of India (SEBI) regulates the primary and secondary share market. The objectives of this organisation are to protect the best interests of investors in their stocks, to promote the growth of stock market and to regulate the stock market.

Becoming well-versed with the market might take some time, but the support and guidance of professional online stock market will make the process much easier!

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