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How Does Indian Share Market Works: A Beginner's Guide

From company perspective, company raises money through stock exchange. Who will give the money in exchange of share of the company? Here comes the investor. People who want to raise their wealth invest their money in various investments. So they invest their money in various investments. One of best investment is share market.

Investor cannot buy/ sell share directly from stock exchange. There will be mediator between the stock exchange and you while buying and selling of share of the particular company. That mediator is called stock broker or investment service. These brokers give trading account and demat account. Investor can buy/sell shares of the company only through these brokers. They will interact with stock exchange and give you result. Stock exchange cannot manage all process. So, they give these roles to the stock broker and Investment services. 

STRUCTURE AND OVERVIEW OF SHARE MARKET IN INDIA

For example, you buy shares of Shape Up Company during IPO process. Company sells their share first time in the market. This market is called primary market(process 1-2). In this market, you can buy share from company through demat account without intervening of stock exchange(process 2-3). After IPO process, Shape Up Company will listed on stock exchange like NSE, BSE etc (1-4).But, you decided to sell it. 

You can sell these shares to anyone who wants to buy the same shares through stock brokers with the help of stock exchange(3-5)). Likewise, buyers buy the share of Shape Up Company through stock brokers(5-6). Stock exchange will match the buyer and seller of Shape Up Company. This whole process is regulated by board like SEBI in India.

You can buy and sell the shares of many companies as you want. There is no need to hold the particular shares for a long period.Whenever a buyer is ready to buy the shares, you can sell it. If there is no buyer, then you can't sell the shares of the company. You need not to worry about it because a lot of order will take place in a single day. To know more, click this.

Advantages of investors to invest in share market:

  •  The return on investment is very high in share market.
  •  No large money required
  •  As long as you know about the company, you can buy/ sell the shares/ securities.

Disadvantages of investors to invest in share market:

  •  You want to share the risk of the company as owners.
  •  As company went bankrupt, investors may lose their investment.

 

What is Share\stock market?

As we know how the share market works, it will easy to understand the term 'share market'. Share\stock market is an electronic marketplace where people buy or sell the Share/securities of any publicly listed companies.People buy share/securities when they feel good about the company. People sell share/securities when they feel bad about the company. 

For company, the share market is a place to raise the capital for their future use. For an investor, it is a place for investment to earn more money. Simply, it is a place which connects investor and company. Excellent Company returns their favour by giving dividend, coupon interest, good profit, etc

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