LEARN HOW TO START TRADING/INVESTMENT FROM THE VERY BEGINNING
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WHAT ARE SHARES?
Shares are a way to own a part of the company’s value. In proportion to the capital you invest, you can get ownership rights to a certain percentage in the company.
Say for example, If you own / buy 2% or 100 Shares of Reliance industries, then you can say you have ownership of 2% or 100 shares in the company.
Hence, shares are units of ownership in the company and its financial assets. Shares are also known as stocks, equity, scrips etc. After purchasing them you will be known as a stockholder or a shareholder of the company.
Why does a company need money from the market? As mentioned before, when a company is scaling up, expanding its business etc, it will need more capital. During such times, a company can tap into the share market and offer a certain number of shares based on its market value, which investors can buy.
Investors will be paying the company some money and in return get to be part owners. So when the value of shares rises, the value of shares investors own rises. Investors are however not lending money to the company so they are not creditors. These indeed share market basics for beginners because it is essential to understand why companies need shares at all.
How does a company list its shares?
Another important aspect of share market basics is Initial Public Offering (IPO). The first time a company offers its shares to the public, it is called an IPO. Securities and Exchange Board of India (Sebi), our markets regulator, has laid out a few rules and regulations for a company to list its IPO on exchanges which they have to comply with before being eligible for listing.
There Are 2 Types in Financial Market
1. Primary Market : Primary market refers to the market where in securities are sold for the first time. As we discussed above the initial public offerings (IPO) these are sold for the first time so they are issued in the Primary Market.
Say for example, you started a new company and want to raise funds so you will issue shares in the Primary Market as Initial Public Offering (IPO).
Because your company and your shares both are new in the Financial market.
2. Secondary Market : Secondary market refers to the market for sale and purchase of previously issued or the second hand share.
As we have given your example in previous one, where you issued share as IPO, and raised fund .
So, when next time you want to issue shares ,your shares are now old in the market, and these will be issued in Secondary Market.
WHAT IS SEBI (SECURITIES & EXCHANGE BOARD OF INDIA) ?
Securities and Exchange Board of India is the securities market regulator to oversee any fraudulent transactions and activities made by any of the parties: companies, investors, traders, brokers and the likes.
It also prevents malpractices by companies, brokers, merchant bankers etc.
Some examples of malpractices include:
- Unofficial private placement
- Insider trading
- Prices rigging
- Violation of rules
- Delay in delivery of shares
- Unofficial premium on New issues.
What are stock exchanges and how many exchanges are there?
Stock exchanges is a place or a platform where traders and buyers come together to buy and sell stocks. There are two primary stock exchanges in the country: Bombay Stock Exchange (BSE) and National Stock Exchange (NSE). This is extremely important information to know about stock market basics in India.
WHAT IS NIFTY AND SENSEX ?
All companies who want to get listed approach either NSE, BSE or both. All stock exchanges need equity benchmarks to signify the trend in the stock market in the best way possible. Both BSE and NSE have 100s and 1000s of companies listed on them. But if you have to pick the top 30 stocks, or look at what the bottom 100 are doing, it will be difficult for you to siphon through this huge number of companies listed. What indices like Nifty and Sensex do is to group them together.
Nifty 50 is a collection of the top 50 companies listed on NSE and Sensex is a collection of the top 30 stocks listed on BSE by way of market capitalisation. The top companies are the ones that influence the stock market the most and influence the country’s economy the most. Hence an index with the top and largest companies is the best gauge for how the entire stock market.
There is also BSE500, Nifty Midcap, BSE Smallcap and many more such indices. However, Nifty 50 and Sensex are primary benchmarks.
When can you conduct stock market transactions?
To know about the stock market basics in India, you should also know when you are permitted to buy and sell shares. The stock market business hours in India run from 9.15 a.m. to 3.30 p.m. There are a few days in the country when the stock market is shut, they are known as market holidays. Few examples of market holidays are Holi, Id, Independence Day, Republic Day etc.
HOW DO YOU ACTUALLY MAKE MONEY ?
Naturally, when you buy shares at a lower price and sell it at a higher price, you earn the capital gain. However there are two ways you can do this and if you are a beginner, it is especially important for you to know the difference between stock trading basics and stock investment basics.
There are two ways :
Stock investors: Stock investors are those who keep their money in the stock for a longer period of time, sometimes even years. Returns are compounded over a period of time. Investors use fundamental analysis. They look at the growth trajectory of the company because your investment literally grows with the company in the long term.
Stock Traders : Stock traders generally buy and sell within the same trading session. Traders use technical analysis to understand which stocks to invest in. Traders look for short and quick gains. Stock trading basics will require you to learn technical indicators like momentum oscillators, bollinger bands, charts and more.
How do you start trading or investing:
- You need to open a Demat and trading account. Most investment platforms and brokers these days provide you with a Demat cum trading account. Trading account is used for just the transactions.; buying and selling.
- Generally, if you are a trader, you don’t really need to open a Demat account because if you are buying and selling within the same day, a trading account will suffice.
- Demat account is where your shares are stored in electronic form.
- Generally takes 2 working days for shares to get dematerialised and transferred to your Demat account. So after that, if you buy or sell your share it gets debited or credited from your account.
Are there any taxes?
Yes, taxes are applicable to the gains you make from your stock market transactions.
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Thank You
THE SUCCESSLOGY
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