Introduction
Source: https://groww.in/blog/how-does-stock-market-work-in-india
Hi friends, I am back with the next part of the stock market series.
Hope you enjoyed reading my previous blog on Indian stock exchanges.
In this blog, we will see about the Indian stock market and its related concepts.
Indian Stock Exchanges
A stock exchange is a centralized location that brings corporations and governments so that investors can buy and sell equities.
Source: https://in.pinterest.com/pin/bse-vs-nse–808044358136387233/
NSE and BSE play a major role in determining the overall growth of various sectors and the economy.
NIFTY50 and SENSEX indexes help the traders in determining whether it’s bull or bear at the end of the day in the stock market.
Please read https://layersofmanagement.com/2022/04/05/a-snippet-on-indian-stock-exchanges/ to know about BSE and NSE.
Securities Exchange Board of India(SEBI)
The Securities and Exchange Board of India (SEBI) is the regulatory body for securities and commodity markets in India under the ownership of the Ministry of Finance, Government of India.
It was established on 12 April 1988 and given Statutory Powers on 30 January 1992 through the SEBI Act, 1992.
SEBI has its headquarters at Bandra in Kurla Complex, Mumbai.
Source: https://present5.com/welcome-to-thetoppersway-com-unit-2-indian/
Structure of SEBI
The SEBI is managed by its members, which consists of the following:
- The chairman is nominated by the Union Government of India.
- Two members, i.e., Officers from the Union Finance Ministry.
- One member from the Reserve Bank of India.
- The remaining five members are nominated by the Union Government of India, out of them at least three shall be whole-time members.
Power of SEBI
Source: https://zfunds.in/m/what-is-sebi
Functions of SEBI
Source: https://goprep.co/explain-the-objectives-and-functions-of-the-sebi-i-1nlv7r
Financial Market
Financial Markets include any place or system that provides buyers and sellers the means to trade financial instruments, including bonds, equities, the various international currencies, and derivatives.
Financial markets facilitate the interaction between those who need capital with those who have capital to invest.
Source: https://rupeefye.wordpress.com/2020/09/13/financial-market/amp/
1. Money Markets
In the money market, companies borrow money for a short term.
Money market is regulated by the RBI (Reserve bank of India).
It usually consists of Commercial paper, treasury bills, certificates of deposits, etc.
2. Capital Markets
Capital markets are financial markets that bring buyers and sellers together to trade stocks, bonds, currencies, and other financial assets.
Capital markets include the stock market, bond market and derivative markets.
Stock Market
Source: https://stockquantum.com/what-is-share-market-how-stock-market-works-in-india/
The stock market consists of exchanges or OTC markets in which shares and other financial securities of publicly held companies are issued and traded.
A stock market, equity market, or share market is the aggregation of buyers and sellers of stocks (also called shares), which represent ownership claims on businesses.
These may include securities listed on a public stock exchange, as well as stock that is only traded privately, such as shares of private companies which are sold to investors through equity crowdfunding platforms.
Types of stock market
Primary Market (Initial Public Offering)
Source: https://corporatefinanceinstitute.com/resources/knowledge/finance/secondary-market/
An initial public offering (IPO) or stock launch is a public offering in which shares of a company are sold to institutional investors.
- Companies must meet requirements by exchanges and the Securities and Exchange Commission (SEC) to hold an IPO.
- IPOs provide companies with an opportunity to obtain capital by offering shares through the primary market.
- Companies hire investment banks to market, gauge demand, set the IPO price and date, and more.
- An IPO can be seen as an exit strategy for the company’s founders and early investors, realizing the full profit from their private investment.
Secondary Market
Source: https://corporatefinanceinstitute.com/resources/knowledge/finance/secondary-market/
The secondary market, also called the aftermarket and follow-on public offering, is the financial market in which previously issued financial instruments such as stock, bonds, options, and futures are bought and sold
- Investors trade securities without the involvement of the issuing companies.
- Investors buy and sell securities among themselves.
- The secondary market does not provide financing to issuing companies –they are not involved in the transaction.
- The amount received for a security in the secondary market is income for the investor who is selling the securities.
Source: https://www.wallstreetmojo.com/secondary-market/
Source: https://www.wallstreetmojo.com/secondary-market/
1. Stock Exchanges
A stock exchange is a centralized platform where trading occurs.
Investors can buy or sell stocks without knowing each other personally.
The only factor looked after here is whether the prices suit buyers to purchase and sellers to sell the stocks.
2. Over the Counter (OTC) Markets
An OTC market allows individual participants to deal with each other.
Investors remain at a higher risk due to the lack of regulatory mechanisms.
It basically works on the factors of demand and supply which determines the price of stocks.
Difference between Primary Market and Secondary Market
Source: https://commercestudyguide.com/difference-between-primary-secondary-market/screens
Types of stocks
Source: https://in.pinterest.com/pin/396950154660496925/
Stock Market Participants
Source: https://www.kotaksecurities.com/ksweb/share-market/how-share-market-works
1. SEBI
The Securities and Exchange Board of India (SEBI) is the regulatory body for securities and commodity markets in India under the ownership of the Ministry of Finance, Government of India.
2. Brokers
A stockbroker is a financial professional who executes orders in the market on behalf of clients.
A stockbroker may also be known as a registered representative (RR) or an investment advisor.
3. Stock Exchanges
A stock exchange is a centralized location that brings corporations and governments so that investors can buy and sell equities.
4. Investors and Traders
- Investors tend to be focused on the long-term, seeking to put money in securities that are both profitable and appear to represent a good value.
- Traders are also market participants, but they often have a shorter time horizon and are looking for price fluctuations in a stock relative to the market, rather than buying into a security for the long-term.
How does the stock market work?
Source: https://www.adigitalblogger.com/wp-content/uploads/How-Stock-Market-Works-compressed.jpg
Conclusion
Hope you enjoyed reading about an overview on the stock market.
We will see more in-depth about the concepts in stock market i.e., shares, debentures, bonds, and mutual funds in the coming blogs.
See you soon guys!!! Take
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