WHAT IS STOCK MARKET PART-1

WHAT IS STOCK MARKET?

              


The stock market is itself a really broad field that needs years of experience to expertise. To grasp what stock market is 1st you ought to bear in mind of the term stock. So, a stock is nothing however the ownership of an organization, as an example, Reliance Industries Limited, Tata Motors Limited, etc. divided into small parts, and every part has named a share or stock. 

Currently, since you are somewhat acquainted with the word stock, it will be simple to understand what the stock market is, therefore, the stock market is somewhat the same as the market that we tend to manage in our daily life to get different examples of stuff to buy vegetables and fruits that we go to the market for vegetables and fruit, to get clothes that we tend to go to the market for clothes, etc.

Technically, we can say that stock trading takes place in the stock market.

The next word is the stock exchange. It is basically an organization or association that offers us a facility for trading stocks, bonds, futures, options, commodities. 
So now you must be thinking that what's the distinction between the stock market and the stock exchange, just leave it aside as it's a little difficult for a beginner to comprehend this at this moment.
What you should remember for now is that there are many stock exchanges worldwide, such as LSE (London Stock Exchange), NYSE (New York Stock Exchange), TSE (Tokyo Stock Exchange) etc.

The two famous stock exchanges in India are NSE (National Stock Exchange), BSE (Bombay Stock Exchange).

Why are businesses going public?

Companies going public are dividing their ownership into parts, but why are they doing so?
 I,m going to attempt to clarify this by offering you an example, assume you're a company owner, and since we all understand that for expansion of any business or company cash investment is very crucial. To expand your business, you need money that can be borrowed either from the bank in the form of a loan or from the public. If you choose to borrow from the bank, it will cost you extra money in the form of interest, which is not a good idea. Second method is to get cash from the public for which you won't have to pay interest, now the issue that might come to your mind is why anyone would give you their hard-earned money without any advantage in form of interest, rather than offering you their money they could go for fixed deposits that would give them interest on their money. Here, in this case, you don't borrow their money for free, but instead, offer them a portion of your company's property or ownership in the same percentage as they had earlier invested in. You don't have to pay interest now for the cash you borrowed because you gave them part ownership in your business in exchange. You now have the cash to invest in your business and grow your profitability, and this profit is then distributed proportionately to the public that has previously invested cash in your business. 
Similarly, businesses issue shares to raise capital for their company activity, development, and other economic needs to be met.

How does stock price rise or fall?

The stock price changes due to supply and demand. If more and more individuals want to buy the inventory than sell it, the stock price will rise. It means that the stock's demand is more than its supply. On the other hand, if the selling side has more individuals than purchasing, the stock price will fall. It implies the stock's demand is lower than its supply.

What do you need for trading?

You need three kinds of accounts to begin investing in the stock market (BSE, NSE, etc.).

• Demat account
• Bank account
• Trading account

Demat account is an account where all your shares are kept when you purchase them. To open a Demat account you must get in touch with some stock brokers.

Stockbrokers are agencies registered with the stock exchange and SEBI (authority for regulating the financial markets in India. It provides a platform for trading in financial products. Companies, brokers, and investors all must be registered with SEBI before trading) that act as intermediaries between investors and the Indian stock market. Stockbrokers also provide you with trading platforms where you can buy/sell your stocks.

There are basically three types of brokers.

• Full-service broker
• Discount brokers
• Bank brokers

Full-service brokers or bank brokers constantly assist you and provides advice on what stock to purchase and when. While on the other hand discount brokers do not provide any advice related to the stock market. On the other side, some bank brokers provide you with some additional facilities, such as providing you with office space and an internet connection computer where you can sit and trade.

The issue now is,

Which broker type is best for you and why?

If you are a beginner with very little or no understanding of the stock market then you must go to a full-service broker because they will guide you every now and then and if you have excellent understanding and experience in the stock market then you should go for the discount brokers because the brokerage (a set commission that your stockbroker earn every time you do a trade) of discount brokers are much lower than full-service brokers, which will help you to maximize your earnings.

Some famous full-service brokers are

• ICICIDirect
• Sharekhan
• Hdfc securities
• AxisDirect

and many more...

Some famous discount brokers are

• Zerodha
• Upstox
• 5Paisa

and many more...