Everyone wants to invest in the stock market and earn a profit. But as a beginner, it is essential to know how, when, and where to invest. But people get confused and make wrong decisions. A stock market is often a perfect place for investors to make profits, but if some precautions are adopted while investing, it can be very beneficial in keeping the risk of loss away. So beginners need to know about certain basic things that can help them invest. But before that, it is essential to know about the stock market. In this article, we will discuss the Stock market and the types of the stock market.
What is the Stock market?
A stock market is a market where shares of various companies are bought and sold. This is a market where investors either earn a lot of money or lose all their money. Here investors buy the shares and become a shareholder in that company. Generally, it is a place to buy and sell a stake in a company listed on the stock exchange. Majorly, there are two stock exchanges in India -
How does a company get listed in the Stock market?
To get the company listed in the stock market, the company has to agree with the stock market. Subsequently, the company submits all its requisite documents to the capital market regulator SEBI. Once the documents are submitted and cross-checked by SEBI, and SEBI founds the information to be correct, and all the conditions are fulfilled, the company gets listed in the stock market, i.e., BSE / NSE.
After listing, the company keeps on providing information about every activity to the stock market from time to time. These typically include information that affects the interests of investors. In both the stock exchange, the shares of a listed company are bought and sold through a broker. Also, shares and bonds, mutual funds, and derivatives are traded in the stock market.
Sectors involved in Stock Market
There are various types of sectors in the stock market. The sectors present in the stock market are-
These are some sectors where an investor can invest as per their choice. Also, many sectors are performing well in the sectors in the present scenario. If an investor wants to opt for his preferred industry, he must first know about the big companies involved in the industry, along with fundamentals and technical analysis. The investor should also get information about the financial position of that company.
How does the Stock Market work?
Investors are often willing to know much about the stock market, but before doing that, it does not make sense to learn more about the stock market without knowing how it works?
After knowing the working of the Stock market, the investor will be in a better position to make the right decisions. So, let's discuss and understand how the stock market works.
It isn't easy to collect all of them in one location with a considerable investor base. Also, it's challenging to manage all the investors and handle all the transactions by a single entity. Therefore, to facilitate more efficient trades, stockbrokers and brokerage firms came into the equation.
Brokers are individuals and entities who have been registered by the Stock Exchange and serve as intermediaries between traders and the stock exchange. Therefore, when a person as an investor or trader places an order to buy any shares at a specific price, the Broker will process the order on the stock exchange, which has various parties. The next step is the transfer of your request.
The buy order is passed on to the exchange by the Broker, where the stock exchange matches that buy order for a sell order for the same share. Once the seller and a buyer are found, the price is finalized, the order is confirmed, and the stock exchange is communicated to the Broker.
Settlement in the Stock Market
After finalizing the price, the stock exchange confirms the details to ensure no default in the order transaction. The stock exchange then expedites the transfer of ownership of the shares, termed Settlement. The settlement time earlier took not days but weeks to materialize, which happens in T+2 days. If an investor trades today, the shares are reflected in the investor's Demat account in two working days' time. Also, make sure that the stock market transactions can only be carried out during the regular trading session time, usually is 9:15 am to 3.00 pm.
The rise and fall in the stock market is the demand and supply of shares. In the stock market, you will see two types of investors, but they both have different opinions.
1. If the demand goes up or exceeds the supply, there will be a rise in the price.
2. On the contrary, if the supply exceeds the demand, there is a decrease in the price.
So before investing in the stock market, it is essential to check the demand and supply graph.
In a nutshell, we can say that anyone can invest in the Indian stock markets; however, as with all investments, one must research, analyze and plan as per your investment goals. The reason is proper planning will help the investors tend to make sound decisions. That is why all investors need to understand the business and the stocks they are investing in. It will assist in evaluating a company's present performance, past performance, and the strategies on which they are working.