If you are planning to invest or regularly invest in the stock market, you can easily relate to the stock market terms. Stock market can be seen as a marketplace for stocks. So, while you do stock market trading, you purchase and sell stocks in a stock exchange. The history of stock exchange shows that these exchanges have evolved significantly over time, playing a crucial role in the listing and trading of stocks.
These exchanges help in listing of stocks and different stocks app types or stock market app types help as brokers for stock market trade execution.
But, is this stock market definition complete? No, there are different types of stock market. Each one has a different purpose.
Let us learn about stock market trading, and what is stocks and what is the stock market in detail.
What Is A Stock Market Trade?
A stock market trade is an activity where the shares change hands between the stock buyers and the stock sellers. This activity of buying and selling of stocks is called stock market trading. A stock market trade enables investors to invest in stock market. The stock market trading activity leads to stock price movements (the rise and fall in stock prices).
Let us look at a hypothetical example to understand stock market basics:
Tommy wants to sell 10 stocks of Bajaj Housing Finance Ltd at ₹181 per share. Harry wants to buy the same company’s stock at ₹181 per share. They both can exchange their shares at the stock exchange. Thus, many buyers and sellers like these would exchange shares, imparting the stock price and leading to market volatility.
But, what is the stock exchange?
Stock exchange is a place where stocks are listed for the buying and selling to take place. In India, the NSE (National Stock Exchange) and the BSE (Bombay Stock Exchange) are popular stock exchanges.
The BSE is the oldest Indian stock exchange, while the NSE is comparitively new.
When you do stock market trading, you choose between these two exchanges for putting trades. A stock purchased in one exchange can be sold at another exchange and the same stock can be purchased from both exchanges in your portfolio. For example, you might have purchased 10 stocks of a company through NSE and 10 from BSE. Still, their total average price would reflect as your average stock purchase price.
These two exchanges also have their respective indices. Let us learn about them.
What are Stock Market Indices?
The two exchanges, NSE and BSE have their respective benchmark indices. These are S&P SENSEX is the index of the BSE and the Nifty is for the NSE. These are two of the most popular indices in the world for stock market trading.
These indices have two benchmark indices called the SENSEX and the Nifty50 index. Just like their respective exchanges, the SENSEX is an older index than the Nifty50. Apart from the benchmarks, there are a number of broad market and sectoral indices by the NSE and the BSE.
When you look at the stock charts, these are by either of the exchanges (BSE or NSE). These stock charts are used by traders and investors to analyse price movements and form speculations on them.
With the help of stock charts, various technical research can be conducted. Investors can study factors like the RSI, P/E ratio, candlestick charts, trendlines and more through these indices and individual stock movements within them. As the individual stock price listed in the exchange that are the part of an index fluctuate, the index value too follows the suite. The index moves are nothing but a mirror of its constituent stock price movements.
Another exciting news–you can not just invest in individual stocks in these indices, but you can also invest in the entire index together with passive mutual funds. In fact, you can even trade the indices on the stock exchange with the help of a specific mutual fund type called ETF or Exchange Traded funds.
What Are The Types Of Stock Markets In India?
There are two broad types of stock markets in India. These are the primary market and the secondary market. Let us learn about these two stock market types in detail.
Primary Market
The primary market can also be called a stock debut market or the red carpet for launching new stocks. Each stock has to go through a process called stock listing in the primary market to be available for trading. This process of launching stocks is called the IPO or Initial Public Offering. This allows the companies to raise capital for the very first time.
In the primary market, the stocks are allotted to those who had subscribed to the IPO as per their subscription percentage and allotment conditions. Every stock has to go through the primary market launch process before going to the secondary market.
Secondary Market
After making a launch in the primary market, the stocks are listed in the secondary market. Here, they enter the list of one or both the stock exchanges and are open for trading. Investors can buy, sell or trade derivatives for these stocks. Unlike the primary markets, investors can trade in stocks here till they are listed in either of the exchanges as per the SEBI (Securities and Exchange Board of India) regulations.
Who Are The Participants Of The Stock Market
Currently, there are four categories of stock market participants in India.
These are as follows:
Investors Or Traders
Investors or traders form the base of any stock market. They are the reason why the stock market exists. Their buying and selling of stocks impacts the price of the stocks and the overall market.
Stock Market Brokers
Stock market brokers are the enablers of the stock market. They are the mediums through which investors and traders invest their money in the stock market. These can be individual brokers or stock market apps like HDFC Sky. These brokers help you with demat account opening and trading account since the shares can now only be traded in dematerialised form. There are two stock App types: one connected with your bank account and the other a two-in-one account. For each trade settlement, these brokers charge a brokerage fee.
Stock Exchanges
As discussed earlier, stock exchanges like NSE and BSE form a marketplace where investors and traders can trade using the brokers.
The Regulator
The securities markets in India is regulated by the securities markets regulator SEBI. The SEBI makes rules, safeguards investor rights, spreads investor awareness and settles market grievances.
The stock markets function smoothly with these four market participants doing their role.
Conclusion
The stock market’s definition is not limited to the work it does but also to the purpose and process of its operations. It is a marketplace for buying and selling stocks and is divided into primary and secondary markets. Through HDFC Sky, you can look at stock charts and other
