Basic Concept of the Stock Market
Investing in the stock market is among the most common ways investors attempt to grow their money, but it's also among the riskier investment options available. Understanding the basic concept of the stock market is a first step in becoming an informed investor. While the stock market is an extremely complex system, its basic traits are much more simple.
OWNERSHIP
The most basic concept of the stock market is the idea that each share of stock represents a small portion of ownership of a corporation. While most businesses are founded by small groups of people, when a company "goes public" its owners decide to sell shares of stock and, in turn, receive cash from buyers. A company may have thousands of investors, but each one has the right to profit from the company's success and each runs the risk of losing money if the company performs poorly. Stockholders receive updates from the company and can vote for board members to influence the business's activities.
Supply and Demand
A stock's price depends on many factors, the most basic of which is supply and demand. When a particular company's stock is in high demand, prices for its stock will rise. When more people want to sell shares than there are buyers for those shares, prices for those shares will fall. Demand is dependent upon how likely other investors think it is for a company's stock to rise in value. In a typical transaction, the seller thinks the stock is at its peak price, while the buyer expects it to rise in value at some point in the future.
OWNERSHIP
The most basic concept of the stock market is the idea that each share of stock represents a small portion of ownership of a corporation. While most businesses are founded by small groups of people, when a company "goes public" its owners decide to sell shares of stock and, in turn, receive cash from buyers. A company may have thousands of investors, but each one has the right to profit from the company's success and each runs the risk of losing money if the company performs poorly. Stockholders receive updates from the company and can vote for board members to influence the business's activities.
Supply and Demand
A stock's price depends on many factors, the most basic of which is supply and demand. When a particular company's stock is in high demand, prices for its stock will rise. When more people want to sell shares than there are buyers for those shares, prices for those shares will fall. Demand is dependent upon how likely other investors think it is for a company's stock to rise in value. In a typical transaction, the seller thinks the stock is at its peak price, while the buyer expects it to rise in value at some point in the future.
What is a Stock Exchange?
Stock exchange is platform where exchanges of stock take place. Stock exchange provide services to traders and brokers to buy and sell stocks.
Compines who are interested to generate capital from public has to get listed on stock exchange.
In India there are mainly two stock exchanges
1 National stock exchange (NSE)
2 Bombay stock exchange (BSE)
NSE and BSE both follow same trading mechanism, trading hours and settlement process. NSE has around 1,600 companies listed and BSE on other hand has more than 5000 companies listed on it. All trading on both stock exchange take place between 9:15 am to 3:30 pm indian standard time from Monday to Friday.
What is sensex and Nifty?
You must have heard or seen on the news about sensex and Nifty going up and down so and so many points.
So what actually this sensex and Nifty are, well they are the index of the market or one can say they are the indicator of the market.
Nifty is the index of national stock exchange and sensex is the indicator of Bombay Stock exchange.
Sensex goes up when the major companies listed on BSE goes up and sensex goes down when latter goes down , same applies for nifty too.
Currently sensex is at 37882 points and nifty at 11284 points
How are this points calculated?
Sensex is calculated taking into consideration of stock price of 30 companies listed on BSE which has highest market capitalisation, it is know as free float market capitalisation method.
Nifty is calculated using stock price of 50 companies listed on NSE.
Market regulators
The overall responsibility of development, regulation and supervision of stock market and exchange taking place rests with securities and exchange board of India (SEBI). It is an independent body found in 1992 and has powers of imposing penalties on market participants in case of breach.
Compines who are interested to generate capital from public has to get listed on stock exchange.
In India there are mainly two stock exchanges
1 National stock exchange (NSE)
2 Bombay stock exchange (BSE)
NSE and BSE both follow same trading mechanism, trading hours and settlement process. NSE has around 1,600 companies listed and BSE on other hand has more than 5000 companies listed on it. All trading on both stock exchange take place between 9:15 am to 3:30 pm indian standard time from Monday to Friday.
What is sensex and Nifty?
You must have heard or seen on the news about sensex and Nifty going up and down so and so many points.
So what actually this sensex and Nifty are, well they are the index of the market or one can say they are the indicator of the market.
Nifty is the index of national stock exchange and sensex is the indicator of Bombay Stock exchange.
Sensex goes up when the major companies listed on BSE goes up and sensex goes down when latter goes down , same applies for nifty too.
Currently sensex is at 37882 points and nifty at 11284 points
How are this points calculated?
Sensex is calculated taking into consideration of stock price of 30 companies listed on BSE which has highest market capitalisation, it is know as free float market capitalisation method.
Nifty is calculated using stock price of 50 companies listed on NSE.
Market regulators
The overall responsibility of development, regulation and supervision of stock market and exchange taking place rests with securities and exchange board of India (SEBI). It is an independent body found in 1992 and has powers of imposing penalties on market participants in case of breach.
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