What is share market? -Meaning, Factors, Importance and Kinds of Share Market

What is Share Market?

Hi Investor!!

Do you new to the stock market?

I will take you through the world of the share market in this article. Firstly, let us learn-

What is the share market?

A Share Market, equity market, or share market is that the collection of buyers and sellers of stocks (additionally called shares), which expressed the ownership asserts on business.

These may incorporate securities listed on a public stock exchange, also as the stock that’s only traded privately, like shares of personal companies which are sold to investors through equity crowdfunding

Investment in the stock market is regularly done by means of stock brokerages and electronic trading platforms. Investment is normally made in light of an investment methodology.

Share market is the place purchasing and selling of share occurs. Share expressed to a unit of ownership for the organization from where you got it.

For example, you bought 10 shares of Rs. 200 each of ABC Company, and then you become a shareholder of ABC. This permits you to sell ABC share whenever you need.

Investing in shares permits you to satisfy your fantasies like advanced education, purchasing a vehicle, fabricating a home, and so forth.

If you start investing at a young age and stay invested for a long time, the rate of return will be high. You can design your investment procedure dependent on the time you need cash.

By purchasing a share, you are investing cash in the organization. As the organization develops, the cost of your share also will increment. You can get benefit by selling the shares in the market.

There are various factors that affect the price of a share. Sometimes the value can rise and sometimes it can fall. Long term investment will nullify the fall in price.

What are the factors impacting Share Market?

To acquire money from direct equity, one has to realize the variables affecting the share cost.

An organization’s share cost doesn’t move autonomously. Several internal and external factors are responsible for it.

When an organization is predicted to grow faster, more people want to carry the stock.

This leads to higher demand for the stock in the market, which results in higher prices. Further, securing plans, buyback offer, declaration of reward, and the parting of share sway costs for the time being

Likewise, there are macroeconomic factors, for example, GDP, expansion, financing costs affecting execution, and along these lines stock costs.

On the off chance that the economy is progressing admirably, the interest for products and enterprises will be higher, bringing about more benefits for organizations.

Further, high expansion implies more significant expenses and buyers will have the option to purchase less merchandise and ventures, harming the organization’s sales and profit.

Why at all a company sells its shares to the public?

A company requires capital or money for its expansion, development, etc. and for this reason, it raises money from the public.

The process by which company issues shares is called Initial Public Offer (IPO). We will read more about the IPO under the Primary Market.

You would have always heard people talking about the bull market and a bear market. What are they?

The bull market is one where the prices of stocks keep rising and the bear market is where the prices keep falling.

Read|How to invest in share market a beginners step by step guide

Where do all these buying and selling happen in Share Market?

There are main exchanges are the NSE (National Stock Exchange) and BSE (Bombay Stock Exchange). These are the two major stock exchanges in India and are regulated by SEBI (Securities and Exchange Board of India).

Brokers act as an intermediary between the stock exchange and the investors. So to start investing or trading, you have to open a Demat account and trading account with a broker.

You can open the Demat account online easily through a simple process. After linking your bank account with these accounts, you can start your investment journey.

How many kinds of Share Market?

Share market is categorized into two namely:

1. Primary Market
2. Secondary Market

Primary Market:

• A public issue introduced in the primary market can be of two types- an initial public offering (IPO), or a follow-on public offering (FPO).
• An IPO is utilized when an unlisted organization needs to raise value capital by giving shares.
• It tends to be either a new issue or a proposal available to be purchased.
• The issue can be either through an open or private situation.
• The issue is open when the portion of shares is made to in excess of 200 people; the Issue is private when the assignment is made to under 200 people.
• Cost of a share can be founded on Fixed cost or Book building issue; Fixed cost is chosen by the guarantor and referenced in the offer record; Book building is the place the price of an issue is found out based on the demand from the investors.

Secondary Market:

• The shares bought in the primary market and whenever they can be sold in the secondary market.
• The secondary market operates through over the counter (OTC) and exchange-traded market.
• OTC markets are casual markets wherein two gatherings to agree on a specific transaction to be settled in the future.
• Additionally called auction market wherein all exchanges happen by means of the trade.
• The share market assumes a crucial job in supporting the organizations to raise capital for development and growth.
• Exchange-traded markets are highly regulated. Additionally called auction market wherein all exchanges happen through the trade.
• Share market assumes an essential job in supporting the organizations to raise capital for extension and development.

Why is Share Market important?

Share market plays a vital role in aiding the companies to raise capital for expansion and growth. Through IPOs, companies issue shares to the public and in turn receive funds that are used for various purposes.

The organization gets recorded on the stock trade after IPO and this gives a chance to even a typical man to put resources into the organization. The permeability of the organization increments also.

You can be a dealer or speculator in the share market. Merchants hold stocks for a brief time frame while financial specialists hold stocks for a more drawn out length. According to your money related requirements, you can pick the investment item.

The financial specialists in the organization can utilize this investment to satisfy their life objectives. It’s one of the significant stages for investment as it gives liquidity.

For instance, you can purchase or sell shares whenever dependent on the need. That is, money related resources can be changed over to money whenever. It offers sufficient open doors for riches creation.

You know well that you can win cash by investing in shares.

What are the ways through which your money grows?

The following are the ways through which your money grows.

1. Dividends
2. Capital Growth
3. Buyback

Dividends:

These are the benefits the organization gains and it is appropriated as money among the shareholders. It is dispersed by the number of shares you own.

Your profits can be reinvested, used to take care of family unit tabs, to send a youngster to school, to begin a business, or even to pay for get-away or provide for a noble cause.

The more shares you own of top-notch profit stocks, the more cash you can make. Profit financial specialists gather this particular kind of investment after some time.

So put away your cash where there an ever-increasing number of profits are given to the speculators. The organization which gives more profits implies Price per Earning is acceptable to that organization.

Capital Growth:

Investment in equities/ shares leads to capital appreciation. The longer is the duration of investment, the higher the returns.

Investment in stocks is associated with risks as well. Your risk appetite is based on your age, dependents, and needs. If you are young and don’t have any dependents, you can invest more in equities to get more yield.

But if you have dependents and commitments, you can allocate more portion of the money to bonds and less to equity.

Buyback:

The organization repurchases its share from the financial investor by paying a higher incentive than the market esteem. It repurchases shares when it has an enormous money heap or to solidify its possession.

Over the most recent 2 years we have seen various organizations, particularly organizations from the technology segment, declaring buyback of shares.

Before we get into the subtleties of buybacks in India, let us see how the worldwide situations on buybacks work.

Universally, there are two different ways that an organization can repurchase its own shares.

Firstly, it is conceivable to repurchase the shares and hold these shares as treasury stock to be a determined sheet of the organization. This is utilized by the organization for treasury tasks.

Secondly, you can repurchase the shares and stifle the shares, in this way decreasing the exceptional shares to that degree. In India, the main strategy isn’t permitted and shares must be repurchased for quenching.