Your Basic Guide of Share Market

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What is the share market?

A share market is a place where issuing and trading of shares takes place. A stock market is very similar to the share market with a slight difference. Stock market deals with financial instruments like bonds, derivatives, mutual funds, shares of companies, etc. whereas the share market enables you to trade only in shares of companies. The stock exchange is the primary platform that facilitates you to trade company stocks and other securities. Remember a stock can be bought or sold if it is listed on an exchange. Hence the stock exchange becomes a meeting place for stock buyers and sellers.

Why invest in the share market?

Every year a number of people invest in share market to build wealth over time. Where some people think of shares as a risky investment, there are many who have proved that it is the right place to put your money for a long period and make it lucrative. In the long run, it can provide with inflation-beating returns and prove to be a better option over investing in real estate and gold. Some people invest in shares for a short time as well with a trading purpose. The market volatility can give a chance of making quick profits at times, in this case, depending on the market situation.

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India’s first and Asia’s oldest stock exchange is Bombay Stock Exchange also popularly known as BSE. Even at the current moment BSE Sensex stands to be one of the crucial parameters to measure the strength of the Indian economy and finance. In 1993, the National Stock Exchange (NSE) was introduced. In a few years both the exchanges switched from outcry system to an automated trading environment.

What are the types of share markets?

There are mainly two kinds of share markets that are primary and secondary markets. Read further to understand these in detail.

  • Primary Market – A primary market is a place where the company gets registered to issue a particular number of shares and raise money. This is called getting listed in a stock exchange. A company has to enter the primary market in order to raise capital which is why it is also called a new issues market. Many times, the new issues take the form of initial public offering (IPO). Demand is unpredictable in the primary market, which makes the prices highly volatile, which is why many IPO’s are set at a lower price. A company entering the secondary market can raise its equity in the primary market.
  • Secondary Market – A secondary market is a market where companies enter after it has sold its offering in the primary market. The secondary market is basically a platform for investors to exit an investment and sell the shares. Secondary market transactions are also termed as trades where investors can buy shares from other investors at the prevalent market price or at the price that is agreed upon by both the parties.

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You can easily start trading in share market once you open the trading account and a demat account. These accounts will be linked to your savings account to ensure smooth functioning of your trading activities.

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