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Share Market Basics - All about Share Market Trading & Investment

19 Jan 2016 | 15:00PM

 

Investments are primarily done to ensure financial security for investors. Savings are insufficient to meet future requirements due to rising inflation. This is why investing is important. Although there are several kinds of financial instruments available, stock investing offers the highest returns.

Share Market Basics

Before starting to invest in stocks, learning about what the share market is and how it works will help. It is where shares of different companies are traded. In India, there are two primary exchanges; the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).

Investment is a key to your safe and secured future. However, to overcome the impact of inflation, investments in plain old financial instruments does not seem to be adequate. To get something extra out of your investments, Share market offers the lucrative opportunity of purchase and trade of securities such as stocks and options.  Angel Broking empowers every eager investor to understand the working of the share market by providing information on stock market basics, how to trade, types of financial instruments, and successful trading strategies that offer better returns for you to become someone more than a regular investor.

Kinds of Share Markets

  • Primary Market:

    This is where companies offer some part of their shares for the first time to individual and institutional investors. Such offerings are known as the initial public offerings (IPO). This is the route adopted by private companies to convert to public companies on the share market.
  • Secondary market:

    After the IPO, the shares are traded on the secondary market. This allows investors to sell their holdings at the prevailing market prices. It also provides the opportunity to other investors who may not have received shares during the IPO.
  • Online Trading on the Share Market:

    Orders are placed through an online trading account using a computer and internet connection. Investors who want to trade themselves find this service beneficial.
  • Offline trading on the Share Market:

    : Using a stock broker or placing orders on the telephone is known as offline trading. The brokers place orders on behalf of their clients and provide confirmation on the execution of these transactions.

How to Invest in the Share Market

Stock Indices

Thousands of companies list their shares on the Indian share markets. From these, a few similar stocks are grouped together to form an index. The classification may be on the basis of company size, industry, market capitalization, or other categories. The BSE Sensex includes 30 stocks and the NSE comprises 50 stocks. Others include sector indices like the Bankex, market cap indices like the BSE Midcap or the BSE Small cap, and others.

Rolling Settlements

Every order that is executed on the share market must be settled. Buyers receive their shares and sellers receive the sale proceeds. The settlement is the procedure wherein the buyers procure their shares and sellers receive their monies. The rolling settlement is when all trades have to be settled at the end of the day. In other words, the buyer must pay for his purchase and seller delivers the sold shares in one day on the share market. Indian share markets adopt the T+2 settlements, which means the transactions are completed on Day One and the settlement of these trades must be completed within two working days from Day One. 

Stock Exchange Board of India (SEBI)

Because the bourses have inherent risks, a market regulator is required. The SEBI is provided with this power and has the responsibility of developing as well as regulating the markets. The basic objectives include protecting investor interest, developing the share market, and regulating it’s working.

Investing in Shares

Investors must determine their share market investment strategy based on their personal requirements and financial limitations. After doing research and shortlisting the potential stocks, they must monitor their movements and enter the market at the right time. Investors can place their orders either through an online or an offline trade. Monitoring the performance of their investments regularly to make their decisions based on market conditions and other factors is vital to ensure they can maximize their returns through stock investing.