Everything You Need To Know About Equity Market

By Author: Nirav Desai
Total Articles: 5
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When you decide to invest, there are numerous investment options out there in the Indian market. The preferred choice of them is equity market. If you are beginner and just starting your investment journey, you need to be well-versed with what the equity market has in store for you.

Definition:
Simply put, it is a place where shares get traded. Now, there is a difference between the terms stock market and equity market. Stock market trades other financial instruments as well like mutual funds, commodities, currencies, etc. The equity market in India focuses only on the shares listed by the companies. Knowing the definition is not enough. You must be aware of its types as well –

1) Primary market: It is where the companies not listed in the stock exchange enter the list for the first time. Here the company must sign a listing agreement with the stock exchange stating it will follow the reporting and corporate governance regulations. Only then will the stock exchange list the company. The primary market acts an intermediary between the investors and companies for raising funds. Before raising funds, the company needs to create a prospectus under SEBI and the stock exchange stating the purpose behind raising funds and providing information about the company.

This information is then made available to the investors who wish to invest in the company shares. The organisation has the liberty to decide when to list themselves based on market conditions. So, if the market is in bear phase, the impact will be on the share prices on the listing. Hence, companies prefer to list themselves when the market buoyant.

2) Secondary market: The other type of equity market is secondary. This is where the shares get traded. The companies that listed themselves in the primary market can trade their stocks in the secondary market. The prices of such shares get determined when the market is open. It also depends on factors such as market conditions, company performance, and investors’ sentiments. Also, if the company comes with right issues or bonus shares, they do not come through primary market. They directly approach the secondary market unless the promoters offload further stake in the organisation.

Considering now there is online trading available, it is easier to sell and purchase shares instantly in the equity market in India. With the advent of Demat and trading account, you can invest as a short-term or long-term investor. The convenience levels have gone so high that you can invest through mobile applications as well. The secondary market investors are more in number than primary as not everyone prefers to invest in a company. The secondary market witnesses’ investors doing more of intraday trading which is selling and purchasing shares on the same day.

Getting the basics right is the best way to frame an investment strategy. Remember, mindless trading does not offer any profit. Also, shunning equity market as a gamble also does not help. So, the ideal way to go about investing in such markets is by keeping an eye on the stock exchange and taking the plunge.