What is the share market in India? How does the share market work? Is it safe to invest in the share market? We will see each and every detail about the share market in this post. Hence you have to keep reading the post till the end.
The stock market, share market, and equity market are the same things. In the share or the stock market, you can buy or sell the shares of any company. Buying a share means you are buying some small amount of share of the company. You will own a small amount of ownership of that company. If the company gets profit, you will also get profit, and if the company faces loss, you will also face loss.
The share market started 400 years ago. There was a Dutch East India Company which is in the Netherlands now. People used to explore the world by ship. The map was not discovered at that time hence this company used to send their ships to explore more places and trade as well. They used to travel thousands of kilometers and they also required a lot of money.
No one has a large amount of money at that time. They openly used to offer to the local folks that if they invest their money and whatever the stuff or trade they would get after returning. They would give the earned profit to them. This was a risky task for them because most ships do not use to return. The reason behind this was most ships used to be looted by pirates, most ships used to drown.
Investors found this work risky and they thought that they would invest their money in 3-4 ships. This was a kind of share market at that time. Gradually this business became successful. The local folks also used to get their shares of what they have invested. I am sure you must have read that the East India Company and the Dutch India Company were so rich at that time in History books. Now today, the majority of the company became dependent on the stock market.
What is a Stock exchange?
The stock exchange is a building where people buy and sell stocks. It has divided into 2 types of market, the primary and secondary. The primary market is that market where companies sell their shares. There are some rules and regulations and it also depends upon the people how much they want to spend. The companies decide on a range to sell their shares.
There is an important thing to remember that every share has equal value. Whenever a company sells their shares they do not sell 100%. The owner keeps the majority of the share so that he can have decision-making power. If you sell all the shares then the investor would become the owner of that company. They all can take the decision of that company as well. Those who have more than 50% shares can make the decision for the company. Hence the founder prefers to keep more than 50% shares to himself.
For example, Mark Zuckerberg has more than 50% shares of Facebook. The people who have purchased the share can sell to another one and this is called the secondary market. In the secondary market, people sell and purchase shares from each other. Share price in the secondary market fluctuates as per the demand of the market.
Also, read How the internet works?
India’s Stock Exchange.
Almost every country has popular stock exchanges. India has 2 big and popular stock exchanges the first one is the Bombay Stock Exchange and 2nd one is National Stock Exchange. Bombay Stock Exchange has 5400 registered companies. National Stock Exchange has 1700 registered companies. A large number of companies are registered on the stock exchange and if we want to see the share prices simultaneously then Sensex and Nifty are made to measure the price.
Sensex shows the trend of the top 30 companies on the Bombay Stock Exchange. The number of Sensex has reached more than 40,000. The same as we have Nifty, Nifty shows the trend of the top 50 companies on the National Stock Exchange.
If a company has to sell its share at a Stock exchange then it is called a Public Listing of that company. If this company is doing this for the first time then it is called an IPO (Initial Public Offering). When East Company was there then it was easy to sell the shares of the company publically. But now it is difficult and critical as well and it should be.
Because anyone can build a fake company and make scams. There have been so many scams that have happened in the name of the share market previously. This is the reason that rules and regulations are so strict in the share market. SEBI(Securities and Exchange Board of India) handles all these things in the share market. SEBI checks which company should be listed and is eligible to list in the stock market.
People used to trade by bidding at docks during the East India Company. Before the internet people used to go to Bombay stock building to invest, buy and sell their shares. Now you need three things only, the Bank account, the Demat account, and the Trading account only. The people who invest their money are called retail investors.
Retail investors always need a broker to invest their money in the stock market. The broker works as a medium between buyer and seller. A broker could be anyone and anything. A broker could be a third-party app, bank, or platform as well. When you invest your money through a broker in the market then he takes some commission. It is very obvious that no one work for free and the broker will definitely charge the brokerage amount.
Investing Vs Trading.
Investing and trading are different things. Investing means investing your money in the share market for a long time. Same as trading means, investing your money in the share market for a short time. Whenever the price goes up, people withdraw their money. So it is a quick and fast step. In fact, there are some people who do full-time trading jobs in the stock market.
Now the question is, is it safe to invest the money in the share market? Is share market gambling? Yes, most people consider it gambling because of the risk factor. In my opinion, it is a kind of legal gambling. The share market is gambling for those people who do not know much more about the company.
People do not know what is the performance of the company, what is the parameters of the company, and what is the financial record of the company. So if you do not know these things about the company before investing money in the share market, then it is gambling for you. You will not know the future performance of the company without doing further research.
Do not invest the money in the share market before researching it. One idea I can give is, before investing your money in the share market, to speak to those people who know well about it.
Consult with those people who do invest their money in the share market and have much good experience. A mutual fund is much safer than a share market. But still do not invest all your money in the share market. Divide your money into different companies even in a mutual fund to avoid future loss. Hope you must have understood What is the share market in India?