STOCK MARKET BASICS – MUST KNOW
What is a stock market?
A stock market is a place for buying and selling of securities (shares, bonds, commodity, derivates) of the companies listed on the stock exchange.
Types of Securities :
SHARES - These are the financial instruments offered by a public company to raise capital from the investors. A share is a single unit of net worth of the company, offering ownership rights to the shareholder (investor)
BONDS - Bonds are high security debt instruments issued by the government, companies, municipalities, to raise funds to fulfill the capital requirements of the issuer party.
COMMODITIES - Commodity market is a market that tardes in agricultural products such as cocoa, fruits; and natural resources such as gold, silver, timber, oil and metals.
DERIVATIVES – Derivatives are financial instruments traded in the market that derive their value from the underlying asset. Common types of derivates are: Futures, Forwards, Options and Swaps.
The Stock Exchange includes :
The stock exchange trade in securities through their respective indices-
BSE – SENSEX (Sensitive Index) (Top 30 companies as per market capitalization)
NSE – NIFTY (National Fifty) (Top 50 Companies as per market capitalization)
SEBI :
Securities and Exchange Board of India is a regulatory body established in 1992, with the primary role of monitoring the malpractices in the capital market, and protect the interest of the investors.
THE INDIAN STOCK EXCHANGES :
Bombay Stock Exchange (BSE) - Established in 1875. About 5000 listed companies.
National Stock Exchange (NSE) – Established in 1992. About 1600 listed companies.
MARKET TRENDS:
Bull Market - When the market shows a consistent upward trend that is the market is rising and the investors are making gains, usually upward of 20 percent.
Bear Market – When the market shows a consistent downward trend that is the market is falling and the investors are making losses, usually a drop of more than 20 percent.
INITIAL PUBLIC OFFER (IPO):
Initial Public Offer is the process where a private company, decides to go public, by listing it shares on the Stock Exchange for the first time.
Written By Priyal Doshi, Law Student at Jindal Global Law School