What is share market? Learn the Stock Market Basics
The world of the share market is an exciting and dynamic environment where opportunities abound. Sometimes the stakes might be high, but the potential rewards are also immense, making it an enticing arena for those willing to take calculated risks and seize the moment.
Share market is a place where businesses come to raise capital, investors come to grow their wealth, and traders come to make a quick buck. Sounds interesting, right? So, whether you are a seasoned investor or a curious beginner, just stick to this blog to understand the stock market basics.
What is stock market?
The share market, also known as the stock market, is a platform where publicly traded companies can raise capital by selling their shares to the public.
These shares represent a portion of ownership in the company and give the shareholder certain rights, such as the right to vote on significant decisions and receive a portion of the company’s profits in the form of dividends.
Types of Share Market
There are mainly two types of share market –
- Primary Market
- Secondary Market
The primary market is where new securities, such as stocks or bonds, are first issued and sold to the public for the first time. In contrast, the secondary market is where securities that have already been issued in the primary market are traded among investors without the involvement of the issuing company.
Both the primary and secondary markets play important roles in the financial system. The primary market helps companies raise capital to finance their operations, while the secondary market provides liquidity for investors and helps to determine the value of securities. Together, they create a dynamic marketplace that drives economic growth and shapes our financial world.
Participants in the share market
The main participants in the share market include:
- Investors: Individuals or institutions that buy stocks as an investment with the expectation of making a profit through capital gains or dividends.
- Traders: Individuals or institutions that buy and sell stocks frequently, often in the short-term, with the goal of making a profit through market fluctuations.
- Stockbrokers: Professionals who act as intermediaries between buyers and sellers, executing trades on behalf of clients.
- Stock Exchange: A stock exchange is a platform where securities are traded between buyers and sellers. The primary stock exchanges in India are NSE and BSE.
- Regulators: Government bodies that oversee the share market, ensuring that it operates fairly and transparently and protecting investors from fraudulent activities.
- Issuers: Companies that issue stocks to raise capital and finance their operations.
How does the Share Market Work?
The share market operates on the principle of supply and demand. The value of a company’s shares is determined by their demand. When there is more demand than supply, the price of the shares goes up, and when there is more supply than demand, the price goes down.
The stock exchange plays a crucial role in the stock market. It provides a platform for buyers and sellers to come together and trade shares. The trading mechanism involves buyers placing bids for shares at a specific price and sellers offering shares at a certain price. Once a buyer and seller agree on a price, the transaction is completed.
The brokers also play an essential role in the share market by connecting buyers and sellers and facilitating transactions.
What is Sensex?
The Sensex was first introduced in 1986 with a base value of 100, and it has since become one of the most widely followed stock market indices in India.
It refers to a stock market index that measures the performance of the top 30 companies listed on the Bombay Stock Exchange (BSE) based on market capitalization. It is often used as a benchmark index for the Indian stock market and reflects the overall performance of the Indian equity market.
Factors Affecting the Stock Market
There are several factors that can affect the share market, including:
- Economic indicators: Economic indicators such as gross domestic product (GDP), inflation, interest rates, and employment data can affect the share market.
- Company-specific: Company-specific factors such as earnings reports, mergers and acquisitions, and product launches can affect the share price of individual companies.
- Political events: Political events such as elections, policy decisions, and international conflicts can affect the share market. Political instability and uncertainty can lead to volatility in the market.
- Natural disasters and pandemics: Natural disasters, such as earthquakes and hurricanes, and pandemics, such as the COVID-19 outbreak, can have a significant impact on the stock market. These events can disrupt supply chains, reduce consumer demand, and affect business operations.
- Investor sentiment: Investor sentiment can also affect the share market. Positive sentiment can increase demand for stocks, while negative sentiment can lead to a decrease in demand.
- Geopolitical factors: Geopolitical events such as wars, political unrest, and trade disputes can create uncertainty and volatility in the share market. Favourable events may positively impact the share market and vice versa.
How to start investing in share market via smallcases?
smallcase is a basket of stocks or ETFs representing a specific investment theme or strategy, allowing investors to build their diversified, low-cost portfolios.
Investing in smallcases is quite easy and convenient. You can effortlessly buy and sell the entire basket of stocks or ETFs with a single transaction. This saves much time and effort compared to selecting and buying individual stocks.
Moreover, smallcases are created and managed by professional investors and financial advisors. Therefore, you can begin investing in smallcases even if you don’t know much about the financial market.
You can begin investing in smallcases by following the steps below:
- Choose a portfolio
- Subscribe to the manager
- Invest and chill!
Yes, it’s that easy to start investing in smallcases. So, what are you waiting for? Hurry up and start investing in financial instruments via smallcase!
To sum it up
The share market is a dynamic and exciting world that allows you to buy and sell shares of publicly-traded companies. It provides you with an opportunity to invest in companies you believe in and potentially earn profits by buying and selling shares at the right time.
The stock market gives you an opportunity to grow your money, but at the same time, it also comes with risk. Hence, always do your own research on the share markets before investing in them.
And if you’re looking for expert-advice, you can invest via smallcase!