Everyone heard about the Indian Stock Market. However, only a few people are familiar with it. As all want to invest and make more profit. Yet hardly 4% of people invest in the Share Market of India. Although the Stock Market of India gives an 18% return on investment. In other words, the Indian Financial Market is the most beneficial investment option these days. So what stops us from investing in the share market. The lack of knowledge about it. If it is, then no need to worry more. Here is a complete guide about the Indian Stock Exchange.
Moreover, in India, investors are of two types. The ones who are experts in investing and the others who don’t. The ones who don’t know about the investment opportunities invest in Fixed Deposit, Real Estate, Debt Fund, etc. On the other hand, the expert investors invest either in Share Market or Mutual Funds. Above all, the Share Market plays a crucial role in long-term investments. So let’s begin from scratch to know everything about for Indian Share Market.
What is the Stock Market?
Moving further, as we all go to the market to buy/sell our essentials. Similarly, there is a Stock Market where investors meet together to make more money. The Financial Market is a platform where people buy/sell Shares of companies. These companies are mostly publicly listed as they need money from the public for expanding their business. But to create and exchange more financial assets, one does not need to go anywhere. As today due to advancements in technology, the entire trading of Shares is online. So basically, the buying and selling of Shares take place in the Stock Market of India.
What is Share?
- In general terms, the share is a part of someone’s belonging which another person buys or takes for their benefit.
- Just like that, Share in the stock market is a portion of ownership in the company.
- It has fluctuated variations, sometimes up and sometimes down.
- A company exchanges its shares with the public and takes money from them for investment.
- In this way, both the company and the public invest in their long-term goals.
Is the Stock Market different from the Share Market?
Meanwhile, a doubt may arise that the stock market and the share market are two different things. But both have a similar meaning, just different names. The Share Market of India only deals with issuing or trading of shares. Yet the Indian Financial Market provides you more financial assets such as mutual funds, shares of companies, or derivatives. In fact, investing in the Indian Stock Market will give you more profit than the Indian Share Market. The only foundation is the Indian Stock Exchange – a platform where the tradings occur.
Trading Hours in Indian Financial Market
The market timings for trading is 9:15 am to 3:30 pm as per Indian Standard Time. All transactions in the Share Market of India are done from Monday to Friday. There is a Pre-market session from 9:00 am to 9:15 am to know about the open value of the market.
Primary and Secondary Markets
Before diving deeper into the Indian share market, let’s grasp about types of share market. There are two kinds of stock markets, one is Primary and other is Secondary.
- Also known as New Issue Market (NIM), because it is concerned with new issues.
- A market in which securities are available to sell for collecting long-term capital.
- Securities like shares are issued for the first time only.
- Using an IPO (Initial Public Offering), a company sells its stocks to the public for the first time.
- Investors can only buy securities.
- It has no desired place.
- The company fixes the prices of securities.
- A market in which existing securities are available to buy/sell.
- Trading of only issued securities can be done.
- No issuing of the new securities.
- Both buying and selling take place.
- It has a fixed place known as the Stock Exchange.
- Demand and supply regulate the prices of securities.
Indian Stock Exchange
The stock exchange acts as a barometer of the economic growth of a country. To measure the development of a country economically, we need the Stock Exchange.
“Stock Exchanges are market places where securities that have been listed thereon, may be bought and sold for either investment or speculation.” – Pyle
Therefore, the stock exchange refers to an organized market where selling and buying different types of securities take place as per rules. Securities include bonds, shares, debentures, etc. In India, there are 24 stock exchanges are functioning currently. Among them, there are two Indian stock exchanges highly trending in India, namely, The BSE and The NSE.
- The Bombay Stock Exchange (BSE) established in 1875 and located at Dalal Street Mumbai.
- It is the first and oldest stock exchange in India.
- The BSE lists nearly 6000 companies.
- Sensex is a unit to calculate the overall performance of the BSE.
- The National Stock Exchange (NSE) started trading in 1992 and located in Mumbai.
- The NSE introduced online trading for the first time in India.
- It is the fourth largest market in terms of trading volume.
- NIFTY is its index to calculate the growth of the NSE.
Indian Stock Market Indices
Many companies list their shares in the Stock Market of India. In fact, it is difficult to track the stock of every company, so a few similar stocks are combined to form an index. The index represents the value of the entire stock market of India. For the BSE, the index is Sensex while for the NSE, it is NIFTY.
Sensex or BSE 30 is the index that depends on shares of the top 30 companies of the Bombay Stock Exchange. Moreover, it represents the increase and decrease in the market value of shares. When Sensex increases, the market is known as “Bull Market” and when it decreases, it is called “Bear Market”.
NIFTY 50 is the index based on shares of the top 50 companies of the National Stock Exchange. The companies are from different sectors. It comprises of 50 stocks. It is a national index to calculate the economic growth of the market.
Who controls the Indian Stock Market?
We all know that investing in the stock market in India is quite risky. Indeed via the share market, the people invest in securities to get good opportunities. The Securities and Exchange Board of India (SEBI) was developed in 1992 to protect the rights of the investors. As it is equally important to regulate the stock market to build up the economic condition of the country. SEBI is an organization that controls the stock exchanges. The main functions of SEBI:
- Check unfair trade practices in connection with the security market
- Develop the capital market
- Regulate the venture capital fund
- Register brokers, sub-brokers, transfer agents, etc.
How is the Share Price decided?
The stock price keeps on changing due to the rise and decline in it. Whenever there is more demand than supply for the stock, its price will increase. On the other side, the price will decrease in having less demand than the supply. In this way, the demand and supply affect the share price in the stock exchange. Even the BSE and the NSE followed the criteria to decide the stock prices.
How to trade in the Indian Stock Market?
Before trading, the investors or traders have to buy/sell by placing an order to the broker after opening a Demat account. The stockbroker forwards the buy order for shares to the stock exchange. Afterward, the stock exchange finds a sell order for the same share. If once a seller and a buyer are fixed, then only a price is decided for the transaction.
The stock exchange contacts the broker once the order is confirmed. The broker delivers the same message to the investor. In the meantime, the stock exchange matches the details of the buyers and the sellers of shares to ensure fair trade. Then the final phase of the deal in the share market comes i.e. settlement. The settlement implies the transfer of shares from the Demat account of the seller to the Demat account of the buyer. These days it takes T+2 days to settle stock trades. It means if someone trades a share today, then the shares will be deposited in the Demat account within 2 working days.
Once the investor makes the transaction, the stockbroker gives him/her a contract note. In the contract note, the name of the securities and its complete details along with their quantity and price are written. This note is duly signed by the broker and it is preserved by the investor as a proof of transaction.
Role of Stock Broker in the Indian Share Market
A stockbroker is a member of the Indian Financial Market who buys/sells securities on behalf of the non-members (investors) in return of a fee. A broker acts as an intermediate between the investor and the stock exchange.
Well, this is all about the Indian Financial Market which one should know before investing. The trading of stocks is not as easy as it sounds. The basic knowledge about it will be helpful in the future.
FAQs Regarding the Stock Market
Along with, the brokerage fees, an investor has to pay the stamp duty fees and securities transaction tax.
No, trading and investment are two different concepts. Trading is when selling and buying of stocks take place in very little time. While investment refers to buying the shares and holding them for a long time.
One can easily get shares by visiting the official websites of the Indian Stock Exchanges.
Anyone who wants to make a contract for buying and selling of shares in the share market.
Editor’s Note | Everything about Indian Stock Market
In times of COVID-19, the Share Markets in India are failing to levels that never happened after the crises of the Sub Prime Landing Crises during 2008-09. Most importantly, the BSE SENSEX and NIFTY 50 declined to 35% due to this pandemic. Moreover, in the stock market, the prices of shares are facing a downfall that affects the profit margins of the companies. The lockdown from March to May, deeply influenced the economy of India. This hit hard the income of all the companies selling non-essential items such as clothes, cars, jewelry, furniture, etc. The other side the fall down in the Indian Stock Exchange provides opportunities to the investors with long term goals. Well, it is expecting that the Indian Economy will recover its growth and hoping that the stock market of India will be back on its track soon.