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Thursday, May 14, 2020

All about share market

Share market || Stock market ..

Table of contents..

What is share market

What is share market ??

The share market is a platform where shares/stocks are sold or traded. However it’s not just shares, but even bonds, mutual funds and derivative contracts that are traded in this market. 

Share market is  where buying and selling of shares take place. As the name share market is a combination of two words share and market. market is a place where buying and selling of goods take place. and so is share market where buying and selling of shares take place.

However share market is not any place where you have to go to buy shares. It can be considered as a visual market. Means buying and selling of shares can be done by you without going anywhere i.e. buying and selling of shares can be done just sitting at home.

The Indian stock market is considered to be the oldest stock market in Asia .
In India shares are exchanged at two places
Share market, NSE, BSE,

NSE- National stock exchange.

BSE- Bombay stock exchange.

We will be discussing it in detail later.

In olden days when Internet was not avilable then buying and selling of shares were done physically i.e. auctions were conducted for buying and selling of shares of different companies. You all must be aware about the auctions being done in ipl. 
The same way shares were bought and sold those days. But after the arrival of internet everything became online in the share market and now a days you can start investing in the market from the same day you wish .. but before that you must have a knowledge of share market.   

What are shares ??

What are shares || Stocks

Shares are also known as stocks , scrips etc. Shares are simply documents .
 Share represents a unit of ownership in the company from where you bought it.
Buying shares means you are buying a part of the related company..

We know that to run any business or a company the owner or the promoter needs capital or money in large amounts. How does he gets the required money to run his business. 

A company’s capital is divided into shares in order to sustain, grow, expand or raise funds. Each share forms a unit of ownership of a company and is offered for sale to people who look to invest in order to raise capital for the company. Now why would anyone buy shares of a company? Well the obvious reason is: to receive capital gains in the future. This means that people buy shares with the expectation that the value of the business and so its shares would rise. Capital gains can either be achieved through capital investment or through dividends.

Let us understand by an example..
Let us take  any company listed in the stock market i.e. " Hero " company. Hero company manufactures motorcycles. So what is the process ..
  1. Firstly hero company manufactures motorcycles.
  2. Then it sends it to the market.
  3. After that the public or the customers buy it . And then pays for it. 
In the end hero company gets the money for the bike it manufactured earlier. Don't you think that from where the company had got money. This is where the role of share holders come Shareholders are the persons that buy shares from the share market.

Share holders invest their money in the Share market by buying shares from the stock market. Thus raising funds for the company and when  company expands, the values of shares increase and the shareholders get profit.

How Share market works ??

All the companies that issues shares to their investors has to register itself in the share market on NSE(national stock exchange) or BSE(Bombay stock exchange). 
How share market works

After registering here the company is available for the investors to buy the shares.  there are financial brokers who also work for the share market as an employee. Investors or people who want to invest in the share market also have to register through brokers.

  • Suppose a company wishes to raise money from investors, it first needs to be registered in the stock exchange, which it does with an IPO.
  • The company produces shares and sells them at a particular price. The investors who buy the shares are the shareholders of the company.
  • For every share, a fixed amount of dividend (profit, in layman terminology) is paid to the investors. If the company grows, the dividend increases and vice versa.
    In case the company keeps growing, it will attract more investors and more shares need to be issued.
    All these transactions are carried out under a regulating authority known as the stock exchange, like NSE and BSE. Companies list their shares in these exchanges and investors buy them.

There are many brokerage companies that allow people  invest in the share market. People  have to register with the brokerage companies and after that they allow them to invest in the companies listed on NSE or BSE.

Investors and traders connect to the exchanges via their brokers, and place buys or sells orders on these exchanges. What makes them decide on their trading strategy? You might have often heard the terms ‘Nifty’ and ‘Sensex.’ Both of them are indices - the former representing NSE and the latter BSE. These indexes play an integral part in the working of these exchanges.

What Is NSE and BSE ??

What is NSE and BSE

You might be hearing in the newspaper or television that the sensex has fallen down or the nifty has increased up. Then you might have thought what is Sensex and Nifty. But before that we need to understand stock exchange.

So basically stock exchange is a place where buying and selling of shares take place and they are called stock market. 

In India there are two most popular stock exchange...

NSE - National stock exchange.

BSE - Bombay stock exchange.

BSE (Bombay stock exchange) is the oldest stock exchange in the Asia. It was established in 1875. Currently it is the 12 th largest stock exchange in the world. There are more than 5500 companies listed on BSE. With a trading speed of 6 micro seconds . BSE is the world's fastest stock exchange in the world.

The BSE does have some interesting history. A man named Premchand Roychand founded the Native Share and Stock Brokers Association in the 19th century. In those times, it used to function in Dalal Street under a banyan tree - where traders would gather together to buy and sell stocks. Gradually, the network expanded and the exchange was established by the name of Bombay Stock Exchange in 1875. 

NSE ( national stock exchange) was established in 1992. It is currently the 10th largest stock exchange in the world.
It was  first stock exchange in India to offer a fully automatic screen based trading system. 

The NSE was initially set up with an aim to usher in transparency to the Indian market system, and it has ended up delivering on its aim quite well. With the help of the government, the NSE successfully offers services such as trading, clearing as well as the settlement in debt and equities comprising domestic and international investors.

What is Sensex and Nifty ??

What is Sensex and Nifty

Sensex and Nifty are basically indices.
To know the economic development of a country there are some criteria i.e. financial performances of the shares of companies but there soo many companies listed on the stock exchange and if we want to know the status of the market then it is impossible to track the stocks of all the companies at a time. 

So to simplify this problem a group of companies is selected that represents the whole market and this group is called index. 

Index of BSE is called sensex. 
And index if NSE is called Nifty.

Sensex is also called BSE 30. Because it is a group of top 30 companies listed on BSE on the basis of its reputation, market capitalisation and significance.
The performance of these top 30 companies indicates the sensex to go up or down. 

If Sensex goes up then it means that the majority of the companies in the BSE 30 is gaining profit i.e. they are doing well and people are buying shares of those companies. It is also called as bull market.

What is Sensex and nifty

If Sensex is declining then it indicates that the majority of the top 30 companies are not doing well they are going in loss and  people are selling their shares. It is also called bear market. 

If Sensex of a country is going up. It is the indication of the economic growth of a country.

Similarly the index of NSE , nifty is calculated by grouping top 50 companies that are listed in NSE. The performance of these top 50 companies decides the movement of Nifty. Base year for the calculation of nifty is taken as 1995. And base value for Nifty is taken as 1000 points. 

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What are stock brokers ??

 What are stock brokers

Let's Suppose a person has to invest some amount of money in the stock market then he cannot buy Shares directly from the Share market. Instead a company , a firm , or a intermediatery is required. 

That intermediatery is called a stock broker. A stock broker maybe an individual or a firm or a company generally it is a company. The stock broker is registered in the share market. These brokerage company accepts our orders and take it it to NSE or BSE. 

To buy Shares from the Share market
We need a trading and a demat account in the brokerage company. 

Through it we place our orders in the share market for a particular company by entering the number of shares , Amount, and at what price we want to sell them. The stock broker sends our orders in the share market in seconds. And we get the shares we want to buy. The shares will come in our portfolio in trading account and money will be deducted from our demat account . In the end we will have shares in portfolio.

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