To make sure we have enough funds to be prepared for the future. Simply earning and saving is not enough. Inflation — the price-rise beast — eats into the value of your money. To make up for the loss through inflation, we invest and earn extra. This is the investment fundament. The stock market is one such investment avenue.

Stock Market Basics: Reading a Stock Table - ykewobuzyjeca.web.fc2.com

It has a history that goes way back to the s. Earlier, stockbrokers would converge around Banyan trees to conduct trades of stocks. As the number of brokers increased and the streets overflowed, they simply had no choice but to relocate from one place to another. Finally in , they relocated to Dalal Street, the place where the oldest stock exchange in Asia — the Bombay Stock Exchange BSE — is now located.

Even today, the BSE Sensex remains one of the parameters against which the robustness of the Indian economy and finance is measured. In , the National Stock Exchange or NSE was formed.

Within a few years, trading on both the exchanges shifted from an open outcry system to an automated trading environment. This shows that stock markets in India have a strong history. Yet, at the face of it, especially when you consider investing in the stock market, it often seems like a maze.

But once you start, you will realize that the investment fundamentals are not too complicated. A stock market is similar to a share market. The key difference is that a stock market helps you trade financial instruments like bonds, mutual funds, derivatives as well as shares of companies. A share market only allows trading of shares.

The key factor is the stock exchange — the basic platform that provides the facilities used to trade company stocks and other securities. A stock may be bought or sold only if it is listed on an exchange.

Thus, it is the meeting place of the stock buyers and sellers. India's premier stock exchanges are the Bombay Stock Exchange and the National Stock Exchange. This where a company gets registered to issue a certain amount of shares and raise money. This is also called getting listed in a stock exchange. A company enters primary markets to raise capital. If the company is selling shares for the first time, it is called an Initial Public Offering IPO. The company thus becomes public.

Once new securities have been sold in the primary market, these shares are traded in the secondary market. This is to offer a chance for investors to exit an investment and sell the shares.

Secondary market transactions are referred to trades where one investor buys shares from another investor at the prevailing market price or at whatever price the two parties agree upon. Normally, investors conduct such transactions using an intermediary such as a broker, who facilitates the process. First, you need to open a trading account and a demat account.

This trading and demat account will be linked to your savings account to facilitate smooth transfer of money and shares.

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Now that we have understood what a stock market is, let us understand the four key financial instruments that are traded:. Companies need money to undertake projects. They then pay back using the money earned through the project. One way of raising funds is through bonds. When a company borrows from the bank in exchange for regular interest payments, it is called a loan. Similarly, when a company borrows from multiple investors in exchange for timely payments of interest, it is called a bond.

For example, imagine you want to start a project that will start earning money in two years. To undertake the project, you will need an initial amount to get started. When your friend holds this receipt, it means he has just bought a bond by lending money to your company.

Thus, a bond is a means of investing money by lending to others. This is why it is called a debt instrument. When you invest in bonds, it will show the face value — the amount of money being borrowed, the coupon rate or yield — the interest rate that the borrower has to pay, the coupon or interest payments, and the deadline for paying the money back called as the maturity date. The share market is another place for raising money.

In exchange for the money, companies issue shares. Owning a share is akin to holding a portion of the company. These shares are then traded in the share market. Consider the previous example; your project is successful and so, you want to expand it. Now, you sell half of your company to your brother for Rs 50, My brother will buy 50 shares for Rs 50, He is now a shareholder.

Suppose your brother immediately needs Rs 50, He can sell the share in the secondary market and get the money. This may be more or less than Rs 50, For this reason, it is considered a riskier instrument.

Shares are thus, a certificate of ownership of a corporation. Thus, as a stockholder, you share a portion of the profit the company may make as well as a portion of the loss a company may take. As the company keeps doing better, your stocks will increase in value. These are investment vehicles that allow you to indirectly invest in stocks or bonds.

It pools money from a collection of investors, and then invests that sum in financial instruments.

This is handled by a professional fund manager. Every mutual fund scheme issues units, which have a certain value just like a share. When you invest, you thus become a unit-holder. When the instruments that the MF scheme invests in make money, as a unit-holder, you get money.

What drives the stock market ? | Basics of Share Market

This is either through a rise in the value of the units or through the distribution of dividends — money to all unit-holders. The value of financial instruments like shares keeps fluctuating. So, it is difficult to fix a particular price. Derivatives instruments come handy here. These are instruments that help you trade in the future at a price that you fix today.

Simply put, you enter into an agreement to either buy or sell a share or other instrument at a certain fixed price. Stock markets are risky. Hence, they need to be regulated to protect investors. The Security and Exchange Board of India SEBI is mandated to oversee the secondary and primary markets in India since when the Government of India established it as the regulatory body of stock markets.

Within a short period of time, SEBI became an autonomous body through the SEBI Act of SEBI has the responsibility of both development and regulation of the market. It regularly comes out with comprehensive regulatory measures aimed at ensuring that end investors benefit from safe and transparent dealings in securities. Now that you have understood what a share market is and other stock market fundamentals, you need to understand how it works and how you can invest in the share market.

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Existing customers can send in their grievances to service. No need to issue cheques by investors while subscribing to IPO. Just write the bank account number and sign in the application form to authorise your bank to make payment in case of allotment. No worries for refund as the money remains in investor's account. KYC is one time exercise while dealing in securities markets - once KYC is done through a SEBI registered intermediary broker, DP, Mutual Fund etc.

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Stock Market Basics For Beginners

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