Share Market

What is share market?

Share Market is a collection of markets which is a buying and selling house of shares which helps the company to raise the capital easier from banks, mutual funds etc. Share Market is the reflection of the overall performance of the corporates. Basically it is an upbeat mood. Predictions have been made by the Economists that the economy will be growing around 10% in the near future. Share market allows a company to achieve greater scale in its operations and to improve its profitability.

In simple words. A Share Market is a place where many companies have been listed and shares are available to Buy and Sell. One who holds the share of the company is known as a Shareholder. If in case the shareholder is not interested to hold the shares of the company he can sell those shares in the Share Market. Basically market is a place where we buyer buys and seller sells the goods; similarly stock exchange is a place where stock transactions are being exchanged within two individuals.

Share Market started working from 1875. Share Market mainly consists of two most important stock exchanges in India.

• Bombay Stock Exchange (BSE)
• National Stock Exchange (NSE)

Bombay stock exchange is the oldest stock exchange in Asia. It is the largest stock exchange with over 6,000 stocks listed. It is located in Mumbai. BSE started functioning with the name called- Native Share & Stock Broker’s Association. BSE is spreaded all over India. BSE made trade Efficient, transparent and time saving too. Index of Bombay stock exchange is SENSEX. BSE comprises of 30 companies. By using “Free Float Market Capitalization” methodology index calculation is being done.

To facilitate smooth transactions and to empower investors, various services are offered by BSE.

• BSE training Institutes.
• BSE online trading Facility.
• Investor Services.

National Stock Exchange is the largest stock exchange in India. It is responsible for vast majority of share transaction. NSE is the first exchange in the world to use satellite Communication for trading. There is a certification programme being conducted by NSE. The programme is named as ‘NCFM’ i.e. NSE’s Certification in Financial Markets. It is mandatory for NSE to meet International Standards. Its main objective is to establish nationwide trading facility for all types of securities. NSE provides the flexibility of providing maximum Security to investors.

In today’s time trading shares is one of the most fruitful or we can say is a worthwhile method of making money.

There are some reasons why to invest in Stock Market:

• It is quite easy to learn how to profit from the Stock Market.
• Minimal time is required in trading.
• Quick Liquidation.
• You do not need a huge amount of money to start with making money or trading.

Before investing in the Share Market it is recommended to be clear about the ‘Basics of Share Market’. Basics include to be clear about each and every aspect of Investments, share trading, share options, Company, Shares, Debentures, Mutual Funds, Share Trading etc.

Share

A Share is a document which is issued by a company, which entitles shareholders to be one of the owner of the company. A share is issued by the company or it can be very easily purchased from the Stock market. By selling the shares we can get capital gain and by owning we can earn a portion. A Company’s share price depends upon what investors think about the share, not necessarily what the company is “worth”. Some of the companies that are growing quickly often trade at higher price. Stock price of a company is also affected by market news. Basically a capital is subdivided into shares. We can very easily calculate the capital of any company. Capital is the difference between Assets and Liabilities. Examples of Assets are The machinery, Furniture, Buildings etc. Bank loans, Money Owned to people from whom things  have been bought on credit. Capital is the total amount an owner has in the business.

For Example: if the required capital of a company is Rs. 5,00,000 and is divided into 50,000 units of Rs. 10 each, each unit is called a share of face value Rs. 10. A share may be of any face value depending upon the capital required and the number of shares into which it is divided.

When you invest in share, you do not invest in market. You invest in equity shares in the market. Owning shares means having a share of a business without bothering about managing it.

Types of Shares:

There are basically various types of Shares.

ü  Preference Shares.

ü  Equity Shares.

ü  Bearer Shares.

ü  Registered Shares.

Preference shares are the shares that give political right. Equity Shares enjoy the classical rights. Equity Shares do not have any preferential rights. Bearer Shares are the Shares where the owner is who posses them. Registered Shares are assigned to a determined name of a person.

Important facts:

• Owning a stock means you are a partial owner of the company.
• Investments in stocks can generate returns through dividends.
• Share offer no guarantee of any returns and can lose value, even in long run.

Shares have number of Advantages which make it a desirable investment vehicle:

·         Shares offer limited legal liability.

·         Most shares are liquid.

·         Shares offer two ways for their owners to benefit- by capital gains and by Dividends.

·         Common share has the potential to deliver very large gains.

·         Shareholders have the right to vote.

·         Shareholders are able to buy as many new stocks as possible.

Disadvantages of Shares:

• Prices of shares Fluctuate a lot.
• There is no positive link between inflation and corporate profits.
• Shares require more Hardwork and Analysis.
• Some companies go broke therefore you need to diversify a lot.

New to Stock Trading

Before we talk about stock trading it is necessary to understand what is meant by trading? Trading is the action performed by traders and other agents in the financial markets. Trading is basically exchange of goods, services or both. It is also referred to as commerce. Market is a place where trading takes place. Stock trading calls for a systematic approach. A successful trader will have to spend time, learn the systems, then finds out the system that best suits the trader. It is a misconception that trading can be done by anyone but honestly telling it’s not a game play which can be done by anyone by just investing money in the stock market.

There should be a proper plan strategy to earn steady returns from stock trading. A stock trader needs a trading plan. Each trader has different point of view to look at the strategies being used for the trading. A trader need to work on the best strategy applicable to him and which is best suited to him. Most of the traders shares and study their past price trends. Based on the trend they work out. They opt for the plans that give the maximum returns.

Market trend is continuous in nature. It keeps on changing because the trend never remains the same. There is a Bull market trend shows the market is rising. Bear market trend tells the market is falling. A flat trend is a trend where the market moves within a band. One single plan doesn’t work for all the above 3 conditions. It is recommended to look at the market and then decide to go long. Sometimes the market is really frustrating because the moment investors buy the prices start falling and decide to short sell, it starts to move up. It happens because the market behaves on the basis of millions of individuals who are trading. Basically a stock market is unpredictable, we cannot predict what will happen in the market after few hours.

You an also trade within the same trading day such that all positions are really closed before the market closes for the trading day. It’s called Day Trading. It is referred to the practice of buying and selling financial instruments within the same trading day. Traders are the active traders. There is nothing more exciting than playing in the stock market. Investors may become greedy after earning at a particular point of time.

There are two types of trades:

1. Market trade
2. Limit trade

Market trade: when we talk of market trade, investors buy and sell the stocks for the going rate.

Limit trade: here the prices have been set to you’ll buy or sell the shares.

There are different methods of trading – day trading, swing trading, trend trading. Swing trading combines the better of 2 worlds, the slower pace of investing and increased potential gains of day trading. Swing trading jumps into a strongly trending stock after its period of consolidation Trend marketing is the most risk free and fastest way to make money in the stock market. This helps to take large profits.

Note: Much of the money you make is in just a few days if you're a short-term investor. If you made $50 the first day and then added it to you investment and made $60 on that the second day and kept adding and increasing your return, the numbers grow geometrically and just like the penny doubled every day for one year, you soon make a huge sum. If you try to guess at exactly when to trade, you often end up losing all profit.

Indian Stock Market

Before we discuss about Indian Stock Market it is mandatory to understand “what exactly Market is?”

The Market is a structure that allows buyers and sellers to exchange any type of goods, Services and information.

Indian stock market has about 30 million domestic investors. Stock exchanges started in 1875 in India. There are two most important and widely used stock exchanges of India, BSE and NSE. BSE stands for ‘Bombay Stock Exchange’ and NSE stands for ‘National Stock Exchange’. About 2500 companies are listed in both of these Stock Exchanges. The History of Indian Stock Trading started with 318 persons taking membership in Stock Brokers Association with rupee one for membership fee.

Indian Stock Market has seen many up and downs but now its flying higher and higher. Various actions have been taken by government to take steps to prevent frauds such as diversion of huge funds from banks through fraudulent means. To prevent from such frauds, the Government formed the Securities and Exchange Board of India (SEBI) in 1992. SEBI controls and regulates the functioning of Stock, Brokers, Sub-Brokers, Exchangers, and Investment Advisors etc. Top Officials of SEBI says that the chances for fraud now is nil.

Many FII i.e. Foreign Institutional Investors are investing in Indian Stock Market on a very large scale. In 1999 sensex crossed 5000 mark, in 2000 it crossed 6000 mark. Nobody can predict the environment of Indian Share Market so it is also called as “Volatile market”. Result of a cricket match between Pakistan and India affected the movements in Indian Stock Exchange. Nowadays global investors seek India as their preferred location for investment. Indian Stock Market appeals to middle class Indians also. Many Indians who are working in foreign countries divert their income into shares or stocks. For this particular reason online trading took place. NRIs have been provided with good facilities taken their time constraint in mind. Many shareholders have started their offices in other countries to provide help to NRIs so that they can buy and sell shares or stocks online after returning from their work.

Indian Stock Market can be associated with the growth in the field of Information Technology, Telecommunication, Agriculture, Education etc. Indian Stock Market provides biggest growth opportunities. In India 4% of the total population invests their money in Indian Share Market.

Fundamentals of Indian Stock Market:

BSE and NSE represent themselves as synonyms of Indian Stock Market. BSE got permanent recognition from the Government of India in 1965. Bombay Stock Exchange is more popular than National Stock Exchange. BSE has largest number of companies listed in the world. BSE is the largest stock exchange in Asia. BSE developed the BSE Sensex in 1986. BSE sensex is the index of BSE. It is a widely used market index in India and Asia. Though there are many stock exchanges but most popular ones are BSE and NSE.

There are 30 companies that determine the BSE sensex are as named: ACC, Bajaj, Bharti, BHEL, Cipla, Dr Reddy's, GACL, Grasim, HDFC, HDFC Bank, Hero Honda, Hindalco, HLL, ICICI Bank, Infosys, ITC, L&T, Maruti, NTPC, ONGC, Ranbaxy, Reliance, Reliance Energy, Satyam, SBI, Tata Motors, Tata Power, TCS, Tisco and Wipro. NSE i.e. National Stock Exchange is a Mumbai Based Stock Exchange. In terms of daily turnover and number of trades for derivative trading and for equities as well. NSE was incorporated in 1992. NSE has major segments of the capital market. Like- Equity, futures and options, Currency futures, Retail Debt Market, Wholesale Debt Market. NSE conducts online examination within 19 modules. Branches of NSE are located all over the world.

Hence Indian Stock Market is the widest market for the stock to be traded within large number of investors.