An Overview of the Stock Market

The stock market or the share market comprises of buyers and sellers of shares. The shares can be traded over private or public platforms. Investors who buy shares of any institution, are conferred ownership to a certain part of the institution. A company can build its market capitalization through its outstanding shares. There are various financial intermediaries that act as middlemen by overseeing the financial transactions made between two parties, such as banks, insurance, stock exchanges.

India has two stock exchanges -the NSE and the BSE. The stock market provides the pricing information resulting from the financial transactions, between the buyers and the sellers, of the market. The stock market is regulated by SEBI which is a regulatory body that issues guidelines to intermediaries and companies regarding the securities and capital, with the motive of ensuring the interests of the investors are protected. The BSE is one of the oldest stock exchanges in Asia and has a market capitalization of $3 trillion dollars. The BSE constitutes the indices of BSE SENSEX, S&P BSE Smallcap, Midcap and Largecap, BSE 500. The NSE is a government owned stock exchange also having a market capitalization rate of $3 trillion. The NSE considers the indices of NIFTY 50, NIFTY Next 50, NIFTY 500.

The stock market ensures liquidity by providing a mechanism for an investor to sell their financial assets. The comprisal of the stock market ranges from small companies to large companies. Small individual investors or large investing firms can invest in any stocks from any of the stock exchanges in the world. Today, stocks are traded over electronic platforms, making it convenient for investors to look up at stock prices, analyze their perceptions according to the price indices and invest. Back in the days, stocks were traded through brokers using physical mediums, like certificates or paper receipts, which involved more complexity in contrast to the advancing technology of today’s world.

The stock market exhibits both the primary market and the secondary market. The primary market offers new shares to the investors, the sale of securities to the public can be facilitated by underwriting institutions such as bank. In the secondary market the shares that are already in the public domain or with the investors, are traded with buyers and sellers. The investors in the secondary market trade stock with each other rather than with any issuing firm.

There are two types of offerings of shares to the public -IPO and FPO. IPO are initial offerings of shares to the public done via primary market. FPO are follow on public offerings wherein an issuance of additional shares is done by a company after IPO. The prices of the shares offered in IPO are fixed, while the price of shares in FPO is deemed based on their market value.

Some companies have dividend payments which is a sort of reward to the investors for investing in their business. Dividends are the distributions of a company’s earnings to its shareholders.

Today, investors have an option for a better portfolio management, as investors can manage their risk by diversifying their investments among various financial instruments. Building a proper portfolio requires proper analysis of stock, bond or any other commodity and can bring in profits to the investor. 

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