However, if you are a beginner, it is highly important for you to understand the nitty-gritty of the stock markets because, without the right knowledge, you can be tempted to invest anywhere and can end up making wrong decisions.
In this Blog, we are going to discuss the basics of the stock market, investing in stocks, how to invest in the stock market and other related aspects.
So, if you are interested in stock market investments, this is the right read for you. Let us discuss all you need to know about stock markets and investing in stocks.
General Understanding of the Stock Market
Firstly, let us talk about the Stock Market to understand the basic concepts related to it.
The general fact is that companies need money to run their operations, working capital requirements, and other expenses. Now, companies may not be able to fulfill all the fund requirements from the profits generated from selling goods and services. Thus, to source additional funds, companies invite the general public to invest some money into their company so that they can run the business efficiently. In return, investors get a share of the profit made by the company in the form of dividends.
Understanding of Shares
Shares (also known as stocks, equity, or scrips) are a medium through which investors can get ownership of a company. Investors get ownership rights to a certain percentage of the company in proportion to the capital invested by them.
Shares can be called the units of ownership in the company and its financial assets. After purchasing shares of a company, investors are called shareholders or stockholders of the company.
Thus, investors pay money to the companies by buying shares of the company and becoming part owners of the company.
Process of Listing Shares
When a company wishes to invite the general public to subscribe to its shares, it comes up with an Initial Public Offering (IPO). IPO is the first time a company offers its shares to the public. IPOs are governed by the market regulator, the Securities and Exchange Board of India (SEBI). Companies willing to come up with an IPO need to comply with the norms listed by SEBI to become eligible for listing.
Which are the Stock Exchanges in India?
Stock Exchanges refer to the place or platforms where traders and investors come together to buy and sell stocks. The two primary stock exchanges of India are National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).
Nifty 50 and Sensex
Nifty 50 and Sensex are the indices of the stock market. These are the primary benchmarks while there are others like BSE500, BSE Small cap, Nifty Midcap, and various other indices. Other than these, there are some sectoral indices like BSE Bankex, Nifty PSU, Bank Nifty and Nifty Pharma etc.
Nifty 50 refers to the list of the top 50 companies listed on the NSE while Sensex is a collection of the top 30 stocks listed on the BSE by way of market capitalization.
Timings for Trading in the Stock Markets
The stock market business hours in India are from 9.15 a.m. to 3.30 p.m. The market is shut on various days known as market holidays, which are the main festivals celebrated in the country. You can view the list of trading holidays on the respective stock exchanges.
How to Trade in Stock Markets
The primary necessity for trading in stock markets is to open a demat and trading account. One can learn to trade through a Demat account by seeking help from financial advisors and getting knowledge on how to buy and sell securities.
The main objective of any investment is to make a profit from it. Thus, one must buy shares at a lower price and sell them at a higher price. Now there are two types of parties who deal in the stock market- Investors and Traders.
- Investors are those who mostly invest for a longer period of time. The major benefit, in this case, is that the chances of the share price increasing grow and one can also avail of the benefits of compounded returns.
- Traders deal in the stock market by buying and selling within the same trading session or in a span of short period of time. Traders do this by conducting technical analysis to understand which stocks to trade in.
Lastly, one must also remember that there are taxes involved in the stock market. Your final return will depend on your capital gains.
Also, you must learn to monitor your investments periodically as it helps you to know how much you have achieved and earned over time and whether you are on the right path. When you monitor your portfolio, you will also be in a situation to make changes to it to attain your goals in the desired manner.
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