What are Markets?
Terms of Markets differ in the share market in this market share plays an important role where buyer and seller trade with huge amounts of money in terms of shares. In this market bull and bear play an important role where the term bullish market and bearish market.
Why Invest in the share market?
We invest in shares to build our wealth in the long run. While some people view shares to be a risky investment, many studies have proved that putting your money in the right shares for a long period of time (five to 10 years) can provide inflation-beating returns — and be a better investment option than real estate and gold.
Some people also have short-term strategies while investing in share markets. While shares can be volatile over a short period of time, investing in the right shares can help traders make quick profits.
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 1854, they relocated to Dalal Street, the place where the oldest stock exchange in Asia – the Bombay Stock Exchange (BSE) – is now located. It is also India’s first stock exchange and has since then played an important role in the Indian stock markets. Even today, the BSE Sensex remains one of the parameters against which the robustness of the Indian economy and finance is measured.
What Is Traded On The Share Market?
There are four categories of financial instruments that are traded on the stock exchange. These include:
- Shares share represents a unit of equity ownership in a company. Shareholders are entitled to any profits that the company may earn in the form of dividends. They are also the bearers of any losses that the company may face.
- BondsTo undertake long-term and profitable projects, a company requires substantial capital. One way to raise capital is to issue bonds to the public. These bonds represent a “loan” taken by the company. The bondholders become the creditors of the company and receive timely interest payments in the form of coupons. From the perspective of the bondholders, these bonds act as fixed-income instruments, where they receive interest on their investment as well as their invested amount at the end of the prescribed period.
- Mutual funds are professionally managed funds that pool the money of numerous investors and invest the collective capital into various financial securities. You can find mutual funds for a variety of financial instruments like equity, debt, or hybrid funds, to name a few. Each mutual fund scheme issues units that are of a certain value similar to a share. When you invest in such funds, you become a unit-holder in that mutual fund scheme. When instruments that are part of that mutual fund scheme earn revenue over time, the unit-holder receives that revenue reflected as the net asset value of the fund or in the form of dividend payouts.
- Derivatives derivative is a security that derives its value from an underlying security. This can have a wide variety of such as shares, bonds, currency, commodities and more! The buyers and sellers of derivatives have opposing expectations of the price of an asset, and hence, enter into a “betting contract” with regard to its future price.
Difference Between Primary Markets and Secondary Markets
When a company comes out with an initial public offer (IPO) it is called the primary market. The normal purpose of an IPO is to get the stock listed in the share market. Once the share gets listed and bought, it starts trading further in the secondary market.
What are Stock Indices?
From the companies listed on the stock exchanges, a few similar stocks are grouped together to form an index. The classification may be on the basis of company size, industry, market capitalization, or other categories. The Sensex is the oldest index comprising shares of 30 companies and represents roughly 45% of the free-float market capitalization. The Nifty includes 50 companies and accounts for approximately 62% of its free-float market cap. Others include sector indices like the Bankex, market cap indices like the BSE Midcap or the BSE Small cap, and others.
What is Meant by Trading and Investment?
The fundamental difference is that trading refers to the short-term buying and selling of shares whereas investment refers to the long-term holding and buying of shares. A trader normally tries to churn the money rapidly following short-term events and market movements of prices of stocks of any company whereas the investor tries to buy a good stock in the share market and waits for the stock price to appreciate over time.
What are Rolling Settlements?
Every order that is executed on the share market must be settled. Buyers receive their shares and sellers receive the sale proceeds. The settlement is the procedure wherein the buyers procure their shares and sellers receive their monies. The rolling settlement is when all trades have to be settled at the end of the day. In other words, the buyer must pay for his purchase and the seller delivers the sold shares in one day on the share market. Indian share markets adopt the T+2 settlements, which means the transactions are completed on Day One and the settlement of these trades must be completed within two working days from Day One. However, T+1 is currently being adopted in phases.