What Is Stock Market: Stock Market is the marketplace of buyers and sellers. they can trade or invest shares and companies which are listed in stock market for public. We can be a part of the company or it’s a organised platform which simplifies the exchange of ownership in these companies.it is the network of exchanges and over –the-counter (OTC) markets.
How stock market works
Understanding the stock market’s intricate working is crucial for successful investing and trading.
Primary Market
When company wants to grow on large scale they needs the huge capital for the growth of the company then stock market fulfil their wish.companies issue new shares for public through an (IPO) Initial Public Offering.
After IPO launching company raises capital by selling these shares to investors. And after buying share in company we become fractional owner of the company.
Price decide by the management of company. Directly promote capital formation
Secondary Market
Secondary market is known as Stock market/stock exchange. Secondary market is exchange of existing securities. Price decided by the forces of demand and supply.. This is where previously issued shares are bought and sold between investors.
Indirectly promote capital formation. Stock trading happen in secondary market In secondary market Retail investors like us, institutional investors (like mutual funds and pension funds), and traders can trade the share or invest in companies
Stock Exchanges
Stock exchange is the platform where we can buy and sell the share of companies. These are organized marketplaces that facilitate trading. There are many stock exchange in world.
New York -NYSE New York Stock Exchange
India – Bombay Stock Exchange (BSE) and the National Stock Exchange of India (NSE).
America -(NASDAQ) National Association of Securities Dealers Automated Quotations are the few examples of stock exchanges.
Stock Exchanges provide a platform for buyers and sellers to connect. Todays Stock exchanges are primarily electronic, where we can execute trade through computer and mobile phones
How Trading Happens
For trading investor use a stockbroker it should be a firm on that broker’s firm we can buy and sell the shares. Broker are the agents between the investor and the stock exchange.
Stock exchange’s system matches buy and sell orders of investor when investor place order for buy or sell share at a particular price or available Current Market Price (CMP)
Supply and Demand forces decides the market prices. The price at which a transaction occurs is determined by the forces of supply and demand.
When Supply decreases then Demand goes high then price goes up. When Supply increases Demand goes down then price goes down
If more people want to buy a stock than sell it, the price tends to go up. If more people want to sell a stock than buy it, the price tends to go down. Once a trade is executed, the ownership of the shares is transferred.
Factors of Moving Stock Prices
Political Stability
If there is political stability market goes up, if Political instability market goes down.
Economy
Inflation numbers going high and GDP data comes down then automatically markets reacts negatively and goes down if inflation is in control then market goes up.
FII (Foreign Institutional Investor) & DII (Domestic Institutional Investor) Data
If they putting lot of money in market then market goes up, If they feeling risky and start taking out their money then market trend goes down.
Global Events / Budget
Some event are bad some events are good for market for eg. Budget if in budget government decides to reduce corporate taxes then it is good for market. on other hand some event are bad for markets like COVID 19.
Company Performance
Factors like a company’s profits, revenue, new products, and management decisions can affect its stock price.
Industry Trends
The performance of the industry a company belongs to can influence investor sentiment.
Investor Sentiment
The overall mood and confidence of investors play a significant role. Optimism (bullish sentiment) can drive prices up, while pessimism (bearish sentiment) can lead to price declines.
Making Money in the Stock Market
Capital Gains
If you buy a share at lower price and sell it on high price then you will make a profit
Dividends
Some companies distribute a portion of their profits to shareholders as dividends, You will get dividend per share if you have 500 quantity of shares and company gives the 10 Rupees per share then you will earn 500 X 10 = 5000 Rupees or If a company declares $1 dividend per share and you own 100 share you receive $100 in dividend.
Regulation
In India, the Securities and Exchange Board of India (SEBI) is the primary regulator of the stock market. SEBI’s role is to protect investors’ interests, ensure fair and transparent market practices, and prevent fraudulent activities.
SEBI sets rules and regulations for stock exchanges, listed companies, brokers, and other market participants. Key laws governing the Indian stock market include the SEBI Act, the Securities Contracts (Regulation) Act, and the Companies Act.
Conclusion
In Conclusion, the stock market is a dynamic and complex ecosystem where ownership in publicly traded companies is bought and sold. Prices are driven by supply and demand, influenced by a wide range of factors. It provides a platform for companies to raise capital and for investors to potentially grow their wealth.
