Basics of Share Market.

What is Share Market?

The main function of the share market is to function as a source of capital for companies. Companies which wants to expand its business can go to share market. In share market ownership of the company is sold to investors in form of stocks/shares. Individual stocks represent ownership of company subdivided into small units. These small units are called as stocks which can be buy/sell in share market.

Share market is like an interface between companies and investors. Share market is a place where stocks of companies are listed. These listed stocks are available for investors for buying. The money raised by companies in the process of selling their stocks is their accumulated capital. This accumulated capital is used by companies, the main advantage of raising capital from share market is that interest-free. Unlike bank loans, where interest payment shall be made or borrowed fund, share capital demand no interest. From point of view of investment, share market is the best long-term option. Share market provides best long-term returns. In addition to investors’ money are very liquid in share market. The day they want they can sell their holding easily.

Investors, Share market, Companies relation
World’s Major Stock Markets

Nearly every major country has a stock exchange. Here’s the top 10, ranked by with total market capitalization. They are listed with the most quoted indices that are closest to measuring their performances:
1. New York Stock Exchange – The major indices are the Dow Jones Averages and the S&P 500.
2.    NASDAQ – The index is also called NASDAQ.
3.    Tokyo Stock Exchange – Nikkei 225 Index.
4.    London Stock Exchange – FTSE
5. Euro Next – CAC (Paris), AEX (Amsterdam), BEL (Brussels), PSI (Lisbon).
7.    Hong Kong Stock Exchange – Hang Seng.
8.    Toronto Stock Exchange – SPTSX.

In India, we have two big share markets, Bombay stock exchange (BSE) and National stock exchange (NSE). If one wants to buy stocks from Bombay stock exchange then he/she need not travel to Bombay or Delhi. He can simply approach a stockbroker or else do it oneself. Doing oneself is possible by opening an online trading platform & a Demat account. Online trading platforms are provided by all major banks like ICICI, SBI, HDFC, etc,. And discount brokers like Zerodha, Upstox, Sharekhan etc.

Why investors buy stocks?
Investors buy stock for two reasons
For earning dividends (a sum of money paid regularly by a company to its shareholders out of its profits)
For claiming capital appreciation: Capital appreciation is dependent on the growth of company’s assets and earnings. If company’s earnings (profit per share) is increasing, its market price will certainly increase in the same proportion

Other Financial Markets

The stock market is just one type of financial market. Before you invest, make sure you are familiar with them all:
  • Commodities are usually traded in futures options, which makes them more complicated. They include grains, oil, and the strangely-named pork bellies.
  • Foreign exchange is where people buy and sell currencies. It’s a very high risk because the values can change dramatically for no apparent reason very quickly.
  • Derivatives are very complicated securities that derive their value from the underlying asset, such as subprime mortgages. Individual investors should stay away. Even though they can offer huge returns, they can also deplete your entire life savings in a day.

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