The Stock market, its exchange platforms, and significance
This is a contribution post by Jasmine Bhatia
Stock markets have been a buzzing investment option post-pandemic where the news and every other person talks about the fight between the Bulls and Bears and how to trade in the fluctuating market.
However, there are still many who wish to try their hands in the market but are unaware of the Stock market and its trading platforms. Here’s a brief introduction:
Understanding Stock market
The Stock market is a marketplace where companies register through IPO (Initial Public Offer) to issue their stocks and get money from the public; Investors buy and sell the stocks in stock exchange platforms to trade and earn money.
What is Stock exchange?
Stock exchange is a platform that provides a transparent market for trading of financial instruments like stocks and derivatives and in India, these activities are regulated by SEBI (Securities and Exchange Board of India).
Major Stock exchange platforms
- BSE (Bombay Stock Exchange) was founded in the year 1875.
- NSE (National Stock Exchange) was incorporated in the year 1992 and started its operations in 1994.
Index of BSE
Sensex is the stock market index for BSE (Bombay Stock Exchange) in India
Nifty is an index of NSE (National Stock Exchange).
Sensex and Nifty
Sensex is a combination that comprises of Sensitivity and Index, which indicates the movements of 30 established Indian companies that are most actively traded stocks and represents various sectors of the industry and the Indian economy.
Nifty is a combination of National and Fifty which comprises the top 50 stocks that are from 12 different sectors like information technology, financial services, consumer goods, telecommunications, automobiles, and a few others.
How does Sensex move up and down?
The fluctuation in Sensex depends on the price movements of the listed 30 companies by the Company Performance, investor sentiments, happening of current events, and natural calamities.
When Sensex moves up, it means there is a rise in the prices of the stocks of most of the major companies of BSE.
And when Sensex goes down, it means that there is a fall in the prices of stock of most of the major stocks on the BSE.
Other Indices of BSE
BSE 100, BSE 200, BSE 500, BSE MIDCAP, BSE PSU, BSE SMLCAP, BSE Auto, BSE Pharma, BSE FMCG and BSE Metal
Trading in Stock Market
To trade means to buy or sell securities, the essentials for which are:
- Demat account-
A Demat account is a place where shares purchased or sold will be in dematerialized or electronic form. Demat accounts can be opened through firms that are registered with Central Securities Depositories Limited (CSDL) or National Securities Depository Limited (NSDL) or both.
2. Trading account-
Trading account eases the sale and purchase of securities online through a brokerage platform The next step is to register with a broker or brokerage platform. Stockbrokers are financial intermediaries who act as a link between the stock exchange and the investor.
3. Bank account and PAN card
Key participants of the stock market
- SEBI,
- Stock exchange platforms (BSE and NSE),
- Investors
- Stockbrokers.
Purpose of the Stock Market –
The stock market is required for:
- Capital Investment –
The Stock market is a platform to companies to Raise capital that they can use to expand their businesses by the sale of shares that gives the benefit of liquidity to the founders of the company and advantage of higher valuation of the company
- Investment Income –
The investors or traders get an opportunity to earn money by purchasing the company’s stock and a rise in its share price benefits the shareholder by selling it to the investors who are looking to buy. Both buyers and sellers are key requisites to execute a trade.
Investors also get dividends from a few companies as per the amount declared by them on each stock.
Investor’s record
The Stock market has been chosen as an investment option with a high return compared to FD given by the bank but has its own risk factor attached to it.
However, if an investor maintains strictness in its trade and researchers well before investing in a company, they can make good profits from it.
As per data by economic times, the total number of retail investors increased by 14.2 million in FY21, with 12.25 million new accounts being opened on CDSL and the NSE alone saw retail investors’ share grow from 33% in 2016 to 45% in 2021.
The stock market really isn’t a gamble, as long as you pick good companies that you think will do well, and not just because of the stock price.
Peter Lynch
Jasmine Bhatia is a blogger, volunteer, home maker, learner and an optimistic person by nature. She believes our life is a beautiful creation of the universe given to each one of us and each day is blessed with new thoughts, new opportunities, new challenges and new learning from every little cell of life. Her articles are written with a motive to re-fill the dose of positivity and believe in the beauty of the lessons of life that it gives to all of us. Find her on Twitter.
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