Stock market is a place where shares, bonds, debentures, options, etc are traded. It comprises of Primary Market and Secondary Market. In the Primary Market, new issues are offered by a company to the public through Initial Public Offering (IPO). In the Secondary Market, already issued securities are traded by investors among themselves at a price agreed between each other.
National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) are the two major Indian stock markets. Securities and Exchange Board of India (SEBI) is the regulator of share markets in India.
Sensex is a stock market index comprising of the top 30 well established companies listed on BSE. NIFTY 50 is NSE’s benchmark stock market index comprising of top 50 companies across 13 sectors of the Indian economy.
Features & Benefits
Below are some of the features & benefits of investing in Stock Market
- BSE and NSE are the two major stock markets in India that follow same trading mechanism, trading hours and settlement process
- Around 4,700 firms are listed on BSE and about 1,200 firms are listed on the NSE
- Share trading takes place through demat account where shares are held in electronic form and trading account where shares are bought and sold from
- Demat accounts are held with Depository Participants (DP’s) like banks, brokers, financial institutions, etc
- Trading takes place from Monday to Friday, between 9:00 am to 3:30 pm on rolling settlement basis i.e T+2 , where settlement of transaction takes place after 2 working days
- A market where share prices are rising and are expected to rise further is known as Bull market, Bear market is a market where share prices are falling and expected to fall even further
- The National Securities Depository Ltd (NSDL) and the Central Depository Services India Ltd (CDSL) are two main depositories in India where demat accounts are held
How does it work?
Shares are ownership in capital of the company. The price of shares depend on the performance of the company. When you buy a share, you are purchasing proportional share in all the future earnings of the company. The part of the earnings of company is distributed as dividends to shareholders. The performance of stocks depends on a number of factors such as economic outlook, inflation, deflation, demographics, market sentiments and so on. Hence the most cautious way to invest is after doing a thorough research of the company in whose stocks you are about to invest in.
How to invest in stock market ?
So you have the money but no clue as to how can you invest? Follow these simple steps and you are good to go!
Take assistance of a broker
To invest in a stock market you must approach designated people authorized to buy and sell on the markets. They are called brokers. They can be individuals or agencies who are licensed to do the trading on your behalf
Open a demat & trading account
For trading the most primary requirement is a Demat account. Demat account is an account where the sahres you buy are held. Like a savings account is needed to store money in your bank, same way a demat account is needed to store your shares. The shares and stocks you buy cannot be held in physical form. Trading account is one which you will use to do the actual trading
Once you are done with the above process, you can start the trading. Tell your agency or boker as to which shares or stock you would want to buy and the quantity. Our agency will guide you through this process with their knowledge. But it's stock and you must have your own analysis in place
These are the basic steps necessary to start trading. However, the real trading starts after this. You need to constantly monitor your stock performance, take wise advice from experts and take decisions
Things to Keep in Mind
- Follow a systematic investment approach and keep an open eye on the market. The volatile nature of the market can bull or bear the stock anytime. With a disciplined approach you will be in a safe position
- Always diversify your portfolio. It reduces your risk on investment and improves your overall return on investments
- Always have a study about the company. This will give you a fair idea of the amount of risk you should choose to take
- Think long term – Short term stocks may benefit you sometimes but stocks give you a better returns if you be patient and invest time and money strategically to reap benefits over a period of time. Always think long term with stocks
- Don't fall for the famous strategy of "buying when a share is low & selling when it is high". You must have a keen eye on the performance of your stocks over a certain period, market trend etc. which will aid you in having a proper analysis to take decisions