What is Share Market?
The terms "stock market," "share market," and "equity market" all refer to the same thing. These are stock exchanges where you can buy or sell shares in a corporation. Purchasing stock in a firm entails acquiring a portion of the company's ownership. That is, you gain ownership of a portion of the corporation. If the company generates a profit, a portion of that profit will be distributed to you. If that company suffers a loss, you will be responsible for a portion of that loss.
History and purpose of shares
The first stock exchanges appeared roughly 400 years ago. A Dutch East India company, similar to the British East India company, existed in the 1600s. A similar corporation existed in the Netherlands today, known as the Dutch East India Company. People used to engage in a lot of exploration using ships back then. The globe map as a whole had not yet been discovered. As a result, the businesses used to send their ships out to explore new areas and trade with far-flung destinations. The journey used to be thousands of kilometres long and took place on a ship. This required a significant sum of money, and no single person at the time had such wealth. As a result, they issued a public invitation for people to invest in their ships. When these ships travelled long distances to other lands and returned with wealth, they were known as galleons. They were promised a portion of the treasures/money in the future. However, this was a high-risk venture. Because at that time, more than half of the ships did not return. They became disoriented, broke down, or were looted. It's possible that anything may happen to them. As a result, investors recognised the venture's high risk. So, rather than investing in a single ship, they decided to buy 5-6 of them to ensure that at least one of them would return. Previously, one ship would approach numerous investors for funding. As a result, a stock market was developed. The ships were auctioned openly on their docks. “Docks are the locations where ships dock”. This approach gradually grew successful as ordinary people replaced the firms' cash shortages, and ordinary people were given the opportunity to make more money. Today, each country has its own stock exchange, and the stock market has become extremely important to each country.
What is Stock Exchange?
Stock exchange is that place, that building where people buy and sell shares of the companies.
The market can be divided into two types- The primary market and the secondary market
· The primary markets are where corporations sell their stock. The corporations determine what their share prices will be. Although there are certain rules here as well. Companies can't make too many changes because so much depends on demand. What is the maximum price that individuals are willing to pay for the company's stock? Nowadays, businesses choose from a variety of options. They decide to sell their shares between a certain price range and a certain price range.
· A secondary market is a marketplace where investors can readily buy and sell assets that have been issued by the original issuer, whether that issuer is a bank, corporation, or government agency.
How many Shares are possible?
A point to be noted here is that every share of the company has equal value It is upon the company to decide how many of its shares it wants to make. If the company's total value is 1 lakh, it may issue 1 lakh shares of 1 rupee each or 2 lakh shares of 50 paise each. When firms sell their shares on the stock exchange, they never sell all of them. To keep control of his decision-making power, the owner always keeps the majority of the shares. If you sell all of the shares, everyone who buys them becomes a shareholder in the company. They can all make decisions about the company now that they are all owners. Individuals with more than 50% of the company's shares would be able to make decisions about the company. As a result, the company's founders wish to keep more than 50% of the stock. Mark Zuckerberg, for example, owns 60 percent of Facebook's stock. People who have purchased shares in the corporation can sell them to others. This is known as the Secondary Market, and it is where people purchase and sell shares and trade them amongst themselves. Companies decide the prices of their shares in the Primary Market. Companies have no control over the secondary market values of their shares. The price of a share fluctuates depending on the demand for and supply of that particular stock. As a result, share values fluctuate depending on supply and demand.
Indian Stock Exchange
Almost all big countries have their own stock exchange. The Bombay Stock Exchange, which has over 5400 registered businesses, is one of India's most popular stock exchanges. The other is the National Stock Exchange, which has 1700 companies registered and is home to a large number of countries. How should we evaluate this if we want to see whether the values of the company's shares are moving up or down taken together? Some indicators, such as the Sensex and the Nifty, have been put in place to gauge this. Sensex displays the average trend of the top thirty firms on the Bombay Stock Exchange, regardless of whether their shares are rising or falling. The sensitivity index, which is the full form of Sensex, shows the similar thing. The Sensex index has surpassed the 40,000 marks. The number itself isn't really significant. Only by comparing this number to previous numbers can the value of this number be determined. Because this number was chosen at random. They decided from the outset that the values of the thirty companies' shares would be as follows. So we add up all of the numbers and come up with a total of 500. As a result, the Sensex has gradually risen, reaching a high of 40,000 in the last 50 years. As a result, this chart depicts how far the stock values of these 30 companies have risen in the last 50 years. “NIFTY stands for National + Fifty”. The Nifty index depicts the price changes of the top 50 businesses listed on the National Stock Exchange, which is a similar index.
How to sell your Company’s Shares?
The term "public listing" refers to a company's desire to sell its stock on a stock exchange. When a company sells its shares for the first time, it is known as an IPO (Initial Public Offering), which means that the firm is selling its shares to the public for the first time. It was much easier to accomplish this during the time of the East India Company. Anyone can sell their company's stock to the general public. But, as it should be, today's procedure is lengthy and complicated. Because consider how simple it is to defraud folks. Anyone could create a bogus company and list it on the stock exchange, exaggerating the company's value and accomplishments. They might deceive the public, and the public would naively invest in his company as a result. He might then flee with the money. As a result, defrauding someone has become exceedingly simple. Scams like these have occurred many times throughout India's history. For example, the Harshad Mehta and Satyam scams were all the same: they deceived the public, got themselves listed on the stock exchange, collected the money, and then fled.
When these scams occurred, stock exchanges realised that their systems needed to be strengthened and made more scam-proof. As a result, the resolutions and regulations were strengthened, resulting in today's extremely convoluted rules. SEBI (Security and Exchange Board of India) is an Indian regulatory authority that investigates matters such as which companies should be listed on the stock exchange and whether they are doing so properly. If you wish to do this (i.e. get listed), you must first meet SEBI's requirements. Their norms are very strict and this process may take 3 years. When you go to sell Company’s shares but there's no demand for it amongst people then SEBI can remove your company from the stock market list.
How can you invest money in the stock markets?
During the East India Company's reign, one could go to the ports where the ships left, engage in bidding wars, and purchase and sell stocks. Before the internet, this could only be done by physically going to the Bombay Stock Exchange building. However, once you have access to the internet, all you need are three accounts: a bank account, a trading account, and a DEMAT account. You'll need a bank account because you'll need your money. A trading account is a type of account that allows you to trade and invest in a firm. A DEMAT account is used to store digitally purchased equities. Most banks now provide a three-in-one account, which combines all three accounts into one convenient package. Retail investors, or ordinary folks who desire to invest in the stock market, are people like us. A broker is always required for a retail investor. A broker is a person who connects the buyer and seller. Our brokers may be our banks, a third-party software, or even a platform in our case. When we invest money in the stock market through brokers, the broker keeps a portion of the money as a commission. This is referred to as the "brokerage rate." The majority of banks levy a brokerage fee of roughly 1%. However, 1% is a bit excessive. That is not the appropriate amount. If you look hard enough, you can find platforms that charge approximately 0.05 percent or 0.1 percent in brokerage fees. For people who wish to do a lot of stock trading, this brokerage cost is a drawback. When a large number of stocks are acquired and sold in a single day, a significant amount of money is lost due to brokerage costs. However, if you plan to invest for the long term, a high brokerage rate won't make much of a difference because you'll only pay it once.
Investing Vs Trading
Investing entails placing a sum of money in the stock market and leaving it there for a period of time. Trading entails instantly depositing and withdrawing funds from several locations. All of this happens in rapid succession. In fact, trading stocks is a full-time profession. Many people in our country work as traders and spend their days withdrawing money from one share and depositing it in another, all while profiting.
Is Share Market Gambling?
An important question that arises is whether you should invest money in the share markets? Many people equate it to gambling because it involves a lot of risk. It is correct, in my opinion, to say so, because this is, after all, a form of gambling. If you don't understand the sort of firm and its performance, the parameters of the company and its financial record, and if you don't look at its history and accounting data, it's equivalent to gambling. Because you have no idea how the business will function in the future. You simply listen to people say that the company is doing well and that we should invest in it on the stock exchange, so you do. You should never do this since it is incredibly dangerous, especially when there are people who perform this job on a daily basis, such as traders, who are specialists in this sector and have a greater understanding of the stock market. They would obviously outperform the others because they understand how everything works.
By: - Rohit Kumar Meena
20CE01061
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