The Indian stock market is a financial market comprising securities like bonds, equities, ETFs, and derivatives and trades on exchanges at prices governed by demand and supply. India has two types of stock regulated by SEBI (Securities and Exchange Board of India) – the National Stock Exchange (NSE) and BSE (Bombay Stock Exchange). But how does the stock market work? While joining stock trading classes of a stock market institute in Pune will give more insights into it, an overview can help you get a basic understanding.
Difference Between Stock Market and Share Market
Laypersons use the terms stock market and share market interchangeably. While stock is a holder’s part-ownership in one or more companies, a share is a single unit of ownership in a particular company. Both these markets differ in their modes of operation. They enable trading bonds and securities. However, a company can issue shares directly. Whereas it cannot follow the same pattern for stocks. They are essentially several shares put together. Shares have a smaller value attached to them. On the other hand, stocks represent a more significant value.
Stock Market Participants
The stock market has various participants that make up for the market. The four key participants include the following.
- SEBI: SEBI is the regulator of Indian stock markets, ensuring efficient and transparent functioning of the stock markets. Additionally, SEBI protects the interests of all the participants. It also sets regulatory frameworks that all the participants should follow to protect investor interests.
- Stock Exchanges: As mentioned above, NSE and BSE are the two stock exchanges in India. NSE considers 50 companies in its index and BSE considers 30. On the other hand, NSE has over 1700 companies listed under the equity segment and BSE has more than 5500 organizations.
- Investors and Traders: Investors purchase stocks to become part owners of a particular company. On the other hand, traders buy or sell this equity. An important aspect to note here is that investors intend to buy a share and retain it for at least a year to benefit from the dividend and price growth. However, on the other hand, traders aim to buy and sell the stock as early and at a price as high as possible.
- Stockbrokers: As the name suggests, a broker is an intermediary executing buying and selling orders for investors against a stipulated commission or fee.
Primary and Secondary Markets
Let’s now look at the primary and secondary markets to gain a better understanding of how the stock market works in India.
1. Primary Markets
An organization lists its shares in the primary market initially via an Initial Public Offering (IPO). The IPO is open for a specific period, allowing buyers a window to bid for shares and buy them at the company’s issue price. Once the company completes its subscription period, the bidders receive their shares, thus making the company public.
2. Secondary Markets
The last step includes listing the company on the stock market. It means the stock that the company has issued through the IPO can now be freely purchased and sold. Thus, the secondary stock market is a place where shares are traded after their initial offering to the public in the primary market.
3. Learn Various Share Market tools
Technology has an important place in the share market. It has brought a significant transformation in the way people trade stocks or invest in the share market. Unlike yesteryears, today, share market players have intuitive applications or platforms that aid the trading and investment process. Furthermore, share market players can use various tools, trading platforms, etc., for various purposes to simplify their stock market journey. Share market classes in Pune provide access to these tools and train aspirants to use them optimally and reap benefits from them.
Stock Market Trading – How it Works?
Once a company lists its stocks on the country’s stock exchanges, it can trade them in the secondary market. Stockbrokers or middlemen who act as intermediaries between the investor and the stock exchange help buy and sell stocks listed on the exchanges.
The broker passes on the buy order for shares to the stock exchange. Further, the stock exchange looks for a sell order for the same share. Once the seller and buyer are found, a price is agreed upon to finalize the transaction. After that, the stock exchange confirms to the broker that the order has been confirmed. The broker then passes on the message to the investor. The entire process takes place in seconds and in real time.
Additionally, the stock exchange also confirms the buyer and seller’s details to avoid defaulters. It facilitates the actual transfer of ownership of shares from sellers to buyers. In the stock market world, the process is termed the settlement cycle.
Must Read – Stock Market : What You Need to Know Before Investing
Begin Your Stock Market Journey with One of the Leading Stock Market Classes in Pune!
As stated earlier, the above overviewed how the stock market works. However, if you intend to become a stock market investor, you should comprehensively understand the workings of a stock market. It would help you make the right investment decisions and succeed more convincingly.
Join Wealth Note, a trustworthy stock market institute in Pune with years of experience training thousands of stock market aspirants. Our well-designed courses, trained faculty members, and access to the latest tools educate you on the stock market and make you a capable stock market player. Call us at +91 70666 66464 to explore how we can help you become a learned and informed stock market participant.