Basics Of Stock Market

You might have heard tons of individuals talking about stock Market  But still not clear about what’s stock Market is ? and the way does it work? This blog explains the fundamentals of stock market for beginners –

Basics of stock Market for Beginners-
You might have heard tons of individuals talking about stock Market  But still not clear about what’s stock Market is ? and the way does it work? This blog explains the fundamentals of stock market for beginners –

What is a stock?
A stock is a type of investment that represents an ownership share in a company. Investors buy stocks that they think will go up in value over time.

What is share?
A share is referred  as a unit of ownership which represents an equal proportion of a company’s capital. A share entitles the shareholders to an equal claim on profit and losses of the company.

What is the stock market?
A stock market is  a platform where buyers and sellers close to shop for financial instruments within the sort of shares, debentures, bonds, mutual funds, etc.

What is the essential working of the stock market?-
It is important that each beginner must understand the essential working of the stock market before entering the stock market .

There is a replacement electronic products  manufacturing company which is getting to raise funds through the stock exchange . First of all, the corporate is new so it’ll need to advertise itself through advertisements and other mediums of selling . If the investors just like the idea they’re going to sponsor the corporate by buying the shares through the method of IPO (Initial Public Offering). When the investors will buy the shares, they’re going to become the partial owners of the corporate with ownership limited to the shares held by them. you would like to possess a Demat account to take a position in IPO.

When the corporate grows and makes profits, more investors have an interest in buying the shares of the corporate . If demand increases, then the worth of acquiring the share increases. the increase within the value of the shares leads to increasing the worth of the corporate and thus fund new initiatives. If the corporate seems to show unprofitable, then the investors fear that they could face loss and that they might panic. As a result, they begin selling their shares to scale back their losses before the corporate loses more value. So as demand for the stock goes down, the worth of the share decreases.

The price of the share is additionally hooked in to many other factors

Economic situation of the country
Fluctuating prices of raw materials
Updates within the taxation rules and regulations
Changes in laws of a specific sector
New developments in production technology
Cost of labor

What are the essential two sorts of stock market every beginner should know?

Primary-market- Primary market is a market wherein corporates issue new securities in order to raise funds. The company which issues its shares is called issuer and the process of issuing shares to public is known as public issue or Initial Public Offer (IPO). This entire process involves various intermediaries such as Merchant Banker, Bankers to the Issue, Underwriters, and Registrars to the Issue. All these intermediaries are registered with SEBI
Secondary Market-The secondary market is where the securities issued in primary market are bought and sold on the stock exchanges – Bombay Stock Exchange (BSE), National Stock Exchange (NSE) and others. BSE and NSE are the most widely traded exchanges in India with a market capitalization of Rs 1,25,18,954 crore and Rs 12,282,127 crore respectively.

 Basic Stock Market Terminologies you should know

Whether you are a budding or seasoned investor, knowledge of the basic terms used in the stock market is necessary. You will end up becoming not only a better investor but also a successful trader as your vocabulary on stock market grows. Here is a glossary of basic terms that you need to know as an investor:

• Agent:

An agent is a brokerage firm which does buying/selling of shares on behalf of the investor in the stock market.

• Ask/Offer:

It refers to the lowest price at which the owner of the equity shares is ready to sell the shares in the stock market.

• At the money:

  Under this scenario, the strike price of an option is equal to the price of the underlying asset which it represents.

• Broker

  A person who purchases or sells an investment on behalf of the investor/trader in return for a commission.

• Bear Market:

  It refers to a period in which the prices of equity shares fall consistently. You may look at it like beginning of a downward trend in the stock market.

• Bull Market:

  An opposite of bear market, a bull market situation in which the prices of the stocks are increasing over a prolonged period of time. A single stock and a sector can be bullish at one time and bearish at another time.

• Beta:

  It measures the association between price of one equity share and the overall movement of stock market. Beta of the market is assumed to be 1. A stock’s beta of more than 1 shows a higher risk than the market. A beta of less than 1 shows that stock is less riskier than the market.

• Bid:

  It is the highest price that the buyer of a stock is ready to pay for a particular stock.

• Blue Chip Stock:

  These are equity shares of companies which are well-established and financially stable. These generally have a relatively huge market capitalization.

• Board Lot:

  Each exchange board defines a standard trading unit which relies on the per share price. Some of the popular board lot sizes are 50, 100, 500, 1000 units.

• Bonds:

  A bond is a fixed income investment which is issued by the government or a company to its buyers. It shows a specified amount which an investor lends to the issuer of the bond for a specified period of time at a variable or fixed interest rate.

• Book:

  It relates to an electronic record which is used to organise all the buy and sell orders of particular stocks which have remained pending.

• Call Option:

In this, the buyer of the option gets a right not an obligation to purchase the underlying asset at a specified price and time.

• Close Price:

It is the final price on a specific trading day at which the equity shares of a company is sold or traded.

• Convertible Securities:

  It is a security like preferred stocks, bonds, debentures which are issued by an issuer capable of being converted into other securities of that issuer.

• Debentures:

  It is a form of fixed-income instrument which is not backed by security of any physical assets or collateral of the issuer.

• Defensive Stock:

  During the tenure of recession or an economic downturn, investors holding defensive stocks like these receive  a constant rate of dividends.

• Delta:

  A delta relates to the ratio of change in the price of a derivative in response to change in the price of the underlying asset. A higher delta suggests higher sensitivity of the delta to the price changes in the underlying asset.

• Face value:

  It relates to the amount of money or the value in cash that the holder of a security will obtain from the issuer of the security when the security matures at the specific date.

• Moving Average

  It refers to the average price per unit of an equity share with respect to a specific period of time. Some popular time frames used to study the moving average of a stock include 50- and 200-day moving averages.

• One-sided Market:

  It refers to a situation wherein a market only contains potential sellers/ buyers instead of both being present simultaneously. Market makers show only the bid price or an offer price indicating that market is heading in one direction.

• Spread

  It refers to the difference between the bid and the ask prices of an equity share. You may perceive it as the difference between the amount at which you would like to buy and the amount at which you would like to sell a stock.

• Volatility

  It refers to the fluctuations in the price of an equity share. Highly volatile stocks witness severe ups and downs during trading sessions. These are highly risky bets which can bring large amount of profits for the skilled intra-day trader.

• Volume

  It shows the average number of shares of stock which are traded during a particular time period usually the daily trading volume. It can also convey the number of shares which you are allowed to purchase of a given stock.

• Yield

  You may use the yield to calculate the return on an investment which you get after receiving dividend on a share. You can find the yield by dividing the annual amount of dividend by the price paid for the stock