Stock Market Basics
As far as stock market is concerned, we all need to understand that a share is a partial ownership of a company. If a company issues 1000 shares, and you own 100 of them, that means you own 1% of the company. A stock market is a common place where shares of different companies are traded. In this post you can see Stock Market Basics for beginners.
Difference between primary markets and secondary markets
When a company comes out with initial public offering (IPO) it is called primary market. The normal purpose of an IPO is to get shares listed on the stock market. Once the stock is listed and purchased, it begins further trading in the secondary market.
For example, suppose a company called Tamilcapital has been operating for 5 years with 40 branches in 6 states in India. Now this company is thinking of starting a new business. Or let’s say he wants to upgrade his company on a technical level.
This will require several crores of rupees. If you take a loan from banks to raise this fund, you have to repay the interest and principal over a period of time. Instead, raising funds through stock market does not have to pay interest and the company gets more growth.
The company needs to access the primary market to raise funds. In terms of primary market, tamilcapital is known as IPO. Tamilcapital shares are available directly to us as people in the primary market. A minimum investment of, Rs15000 per individual is mandatory for any IPO.
After the company receives funding, these shares will go to the secondary market for trading. There are the people who have already bought in the primary market will sell those shares. As far as the secondary market is concerned, there is a gap between TAMILCAPITAL and the public. Here, the shares of this company are bought and sold from one person to another.
How are stocks priced in the market, and who sets the price? – Stock Market Basics 2022
The market determines the price of stocks according to the usual laws of supply and demand. Generally, stock prices rise when the company is growing very fast or making good profits or receiving new orders. As the demand for the stock increases, more investors want to buy the stock at a higher price, hence the price rises.
What is the role of a broker in the stock market?
A broker helps you execute your buy and sell trades. Brokers generally help buyers find sellers and sellers help find buyers. Most brokers will advise you on what stocks to buy, what stocks to sell and how to invest money in stock markets for beginners. For that service, the broker is paid a commission.
Can everyone buy and sell shares in the share market? – Stock Market Basics for beginners.
Anyone above the age of 18 can buy and sell shares in the market. Do you need to open a trading account with a broker and can you buy and sell shares in the stock market after the trading account is opened?
Demat Account vs Trading Account?
There is an important difference between the two. A trading account is a place where you can buy and sell stocks of your choice. A demat account is where you keep your stocks safe. When you buy stocks in your trading account, your bank account is debited and your demat account is credited.
What is trading and investing? – Stock Market Basics for beginners.
The basic difference is that trading refers to the short-term buying and selling of stocks. This means buying stocks on the same day and selling them on the same day, or buying stocks today and selling them tomorrow or the day after tomorrow.
Whereas investing refers to long-term holding and buying of stocks. Today it means buying shares of a company and waiting to sell them at a profit rather than selling them immediately. You can wait from three months to 10 years for this. No major loss will occur in this.
What are Rolling Settlements?
Every order executed in the stock exchange must be settled. Buyers receive their shares and sellers receive sales proceeds. Settlement is the process by which buyers purchase their shares and sellers receive their cash.
Rolling settlement means that all trades must be settled by the end of the day. Indian stock exchanges accept T+2 settlement which means that trades are settled on the first day and settlement of these trades should be completed within two working days from the first day.
What is SEBI? – Stock Market Basics
SEBI stands for Securities and Exchange Board of India. As stock markets have inherent risks, a market regulator is needed. SEBI is vested with this power and is responsible for developing and regulating the markets. The basic objectives include protecting investor interest, promoting the stock market and regulating its functioning.
Are equity market and derivative market the same?
Both the stock market and the derivative market are part of the overall stock market. There is a difference in the goods traded. The equity market deals in shares, while the derivative market deals in futures and options (F&O). F&O market is based on underlying asset like equity shares.
How can a beginner invest in the stock market?
4 Important Factors to Consider Before Investing in Stock Market
- Fundamental and Technical Analysis
- Supply and Demand
- Money Management
- Mind Control
We have seen about Stock Market Basics in Tamil in this post. In the next post we will see some more important stock market information.