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Wednesday, May 13, 2020

How share market works ??

Table of contents..

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.

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