Share Market

aboutWhen a company requires capital or money in order to sustain, grow, expand or general corporate purpose, then the company will decide to sell their shares to the public; it means that a company divides itself into a number of shares and sells a part of those shares to the general public at a price. The marketplace, which allows companies to issue and sell their shares to the general public, is known as the stock market. Stock market and share market both terms are correct and interchangeable. Not only shares, but also bonds, mutual funds and derivative contracts are traded on the market.

There are two types of share market, primary and secondary. A primary market is a place where a company first gets registered, and sells their shares to the general public for the first time, known as Initial Public Offering [IPO]. After it is launched in the primary market, they are then traded in the secondary market. In India, trading in the stock market takes place on two stock exchanges, National Stock Exchange[NSE] and Bombay Stock Exchange [BSE]. Both have the same process and trading methodology. But the NSE is almost a monopoly in derivatives trading. The Securities and Exchange Board of India (SEBI), is responsible for regulating the stock exchanges, their development, and protecting the rights of the investors. The framework laid down by SEBI, helps in reducing risks of fraudulent activities by companies.

Buying and selling the shares of companies listed on the stock exchange with a goal to make profit is known as share trading. There are various myths and misconceptions about the share market that have made their way into the public consciousness.These myths tend to keep potential investors away from the market, thereby losing out on a greater opportunity for their finances. This trend seems to be changing in recent times.

A myth that discourages new investors/ traders in the share market is that it is only an ideal investment for the wealthy. This is entirely misguided. You can even invest in shares for as low as 10 rupees. All it requires is the right knowledge about how to select the right stock, the right entry price, and the right exit price.

History proves that the share market has always risen in value over a period of time. The rate of return on investments should be ideally higher than inflation. The stock market is the economic growth indicator; stock market investors are the ones who can take direct advantage of a booming economy. A trader will have the freedom to choose which companies to trade/invest in, and also it will serve as a much needed liquidity cushion. Before starting trading, the trader must analyze the various options of stock and predict the future movement of that entity.