Come let us talk about India Stock market
Is it in place?
How does it work?
What are its advantages and disadvantage?
And how you can invest money in it?
What is India Stock market?
India Stock market, share market or equity market all three mean the same. These are markets where you can buy or sell a company’s shares. Buying shares of a company means buying some percentage of ownership of that company.
That is you become the holder of a percentage of that company. If that company makes a profit, some percentage of that profit would also be given to you.
Telling you an example of this on the smallest scale, presume you have to establish a start up. You have 10,000 rupees, but that’s not enough so, you go to your friend and tell him to invest another 10,000 rupees and offer him a 50-50 partnership.
So whatever your company profits in the future, 50% of it would be yours. 50% of it would be your friends. In this case, you’ve given 50% of the shares to your friend in this company. The same thing happens on a larger scale in the stock market.
The only difference being, instead of going to your friend, you go the entire world. And invite them to buy shares in your company.
History and purchase of shares
The origin of share markets dates to around 400 years ago. Around the 1600s, there was a Dutch East India company, like the British East India Company. There was a similar company in the country of Netherlands today, Known as Dutch East India Company
In those times, people used to indulge in a lot of exploration using ships. The entire world map had not yet been discovered. So the companies used to send their ships to discover new and trade with faraway places, gradually this system became successful because the money crunch faced by the companies. Was supplemented by the common people and the common people got a chance to earn more money.
Today each country has its own stock exchange, and every country has become greatly dependent upon the stock market.
What is India Stock market?
India Stock market is that place, that building where people buy and sell shares of the companies. The market can be divided into two types- the primary market and the secondary market, 1. Primary market a where the companies sell their shares,
The companies decide what exactly would be their share prices, although there are some regulations in this to, the companies cannot men oeuvre too much because a lot of it depends upon the demand, how much price the people are willing to pay for the company’s shares if the value of the company is 1 million rupees.
it sells 1 million of its shares and offers shares at 1 rupee per share, if it’s demand is high and a lot of people want to buy its shares, the company would obviously be able to sell its shares for a higher price, what the companies do nowadays is decide upon a range. There’s a minimum price and maximum price, they decide to sell their shares within that range,
How many shares can a company have?
A point to be noted here is that every share of the company has equal value, it is upon the company to decide how many of its shares it wants to make if the total value of the company is 1 million, then it make 1 million shares of 1 rupee each, or it may make 2 million shares of 50 paisa each.
When companies sell their shares in the share market, it never sells 100% of them. The owner always retains majority of the shares to keep possession of his decision making power. If you sell all the shares, then all the buyers of the shares would become owners of the company.
Since they all become owners, they all can take decisions regarding that company. The individual who has more than 50% of the shares would be able to make decisions regarding the company.
Therefore the founders of the company prefer to retain more than 50% of the shares. For example 60% of the shares of Face book are retained by mark Zuckerberg. The people who have bought shares of the company can sell it to the other people this is called the secondary market.
Where people buy and sell shares amongst themselves and trade in shares in the primary market, the companies set the prices of their shares. The share prices fluctuate depending upon the demand and supply of the shares, so the prices of the shares fluctuate depending upon the demand and supply.
India Stock market
Almost every big country has its own stock exchange there are two popular India Stock market, one is the Bombay stock exchange which has around 5400 registered companies, and the other is the National stock exchange that has 1700 registered companies.
With so many countries registered in the stock exchange, if we want to observe, overall, whether the prices of the shares of the companies are moving up or down.
What is sensex?
Sensex shows the average trends of the top thirty companies of the Bombay stock exchange averaging out, whether the shares of the companies are moving up or down.
The full form of sensex, the sensitivity index, displays the same, the number of sensex, that it has reached 40,000 marks. The number it means not a lot, the value of this number can be understood only upon comparison with the past numbers.
Because this number has been randomly decided. They decided at the start that the values of the shares of the thirty companies would be this, so we compile all the numbers and then say that it is 500.
So gradually the seven has been rising and it has reached the 40,000 mark in the past 50 years. There is another similar index nifty National + fifty. Nifty shows the price fluctuations of the shares of top 50 companies listed on the National stock exchange.
How to sell your company’s shares?
If a company wants to sell its shares on the stock exchange, then this is termed as ‘public listing’ if a company is selling shares for the first time, then it is called IPO- initial public offering, that is offering the shares to the public for the first time.
During the days of the east India Company, it was easier to get this done anyone could sell the shares of their company to the public, but today this procedure is very long and complicated and so it should be.
India in its history has been a witness to a lot of scams like these. Eg harsad mehta scam, satyam scam, they were all the same- footing the people and getting themselves listen listed on India Stock market
Collecting the money and then absconding, so as and when these scams happened the stock exchange realized that they need to make their procedures stronger and scam proof, for this the resolution and rules were made stronger due to which there are very complicated rules today.
SEBI- security and exchange board of India is a regulatory body that looks into issues like which companies should be listed on India Stock market.
If you want to do this, then you would have to fulfill the norms of SEBI, their norms are very strict, for example, there need to be a lot of checks and balances on the accounting of your company, at least two auditors must have had checked your company’s accounting this entire maybe take around 3 years.
More than 50 shareholders should be present in the company if you want a company to be publicly listed.
How can you buy shares?
A bank account, a trading account and a demat account needed Bank account because you would need your money. A trading account to allow you to trade and invest money in a company or demat account to store the stocks that you buy in a digital form,
Most of the banks today have started offering a 3 in 1 account with all three accounts encompassed within your bank account. We need a broker, a broker retina some money as his commission. This is called brokerage rate. Banks mostly charges a brokerage rate of around 1%.
Investing vs. trading
So, investing and trading are two different things, investing means putting in some amount of money in the stock market and letting it stay there for some time. Trading means quickly putting in money at different places and withdrawing from some places this all happens in quick succession.
Is share market gambling?
An important question that arises is whether you should invest money in the share markets?
A lot of people compare it with gambling because a lot of risk is involved in it. In my opinion it is correct to say so because this is indeed some sort of gambling. If you are not aware of the type of the company and its performance,
Because you would have no idea of how the company would perform in the future. So in my opinion, you should never directly invest in the share market, and instead rely on the experts. A very competent form of it is mutual funds. Mutual funds work the same way, investing money in many different places.
There a fine app called ” kuvera” for investing in mutual funds, kuvera is an app that charges 0% brokerage fees, No matter how much money you invest. So I would recommend that you install this app if you’re interested in mutual funds interesting below link you can download here.
India Stock Market link