Here you learn the Indian stock market basics for beginners before trading & investing in stocks or share market. Some basics facts which anyone interested in Indian stock market must know about.
Table of Contents
- What is stock market
- What is a stock
- Share Price
- Stock Exchange
- SEBI
- Broker
- Full Service Brokers
- Discount Brokers
- Demat Account
- Working Hour of Indian Stock Market
- Depository
- Share Holder Promoter Investor
- DII (Domestic Institutional Investors)
- FII (Foreign Institutional Investors)
- Retail Investor
- Trader & Investor
- Delivery & Intraday Trading
- Brokerage & Charges
- Chart
- Index or Indices
- Nifty 50
- BSE Sensex
What is stock market
We all must have heard about the stock market. This is the place where we Buy & Sell stocks or shares of companies. Stock market is the way through which businesses or companies raise funds from the public, either retail or institutional or foreign institutional, by issuing part of equity or share. And also stock market is the medium through which general public could invest in different businesses, became a part of its profits or may be losses without making any initiatives or direct efforts. In this way businesses and investors fulfils the needs of each other to grow more and make profits and the economy of the country improves. Hence through stock market we not only invest to grow our savings but also we invest in our country’s economy to grow more. Before knowing details about how to invest in Indian stock market we must know some basic facts about stock market.
What is a stock
Stock or we may call it as Share, Script, Security, Equity etc. is a part of ownership of that particular company or business. A company issue or sell a part of its shareholding to public or investors after listing on stock markets. By buying a stock of a company we become partner or part owner of that company.
Share Price
Every stock or share has a price that we have to pay to buy the share. Share price is calculated by dividing the market capitalization of the business with the total number of outstanding shares. Although the company has decided the price of its share when it first time lists in the stock market or stock exchange through IPO, but after that generally the market decides the stock price of any company and according to that the valuation of the business is evaluated.
Stock Exchange
Buying & Selling of stocks are performed through the Stock Exchanges. The company who wants to sell its share to public has to list itself in the Stock Exchanges through IPO (Initial Public Offering). After that the shares of that company moves from one hand to another through buy and sell of that stocks. According to the demand and supply of the shares, the price of that stock move up and down. Market decides the price of that stock as per the company’s business growth and performance.
In India there are two major Stock Exchanges. One is BSE (Bombay Stock Exchange) and the second is NSE (National Stock Exchange). Both are situated at Mumbai.
BSE (Bombay Stock Exchange) is the first ever stock exchange in India and also in Asia established in 1875. It is situated at Dalal Street, Mumbai. There are more than 5000 listed companies in BSE.
NSE (National Stock Exchange) was incorporated in 1992 and commenced operations in 1994. It is situated at Bandra, Mumbai. NSE is the first online stock exchange in India and also World’s Largest Derivative Exchange in terms of contracts traded. There are close to 1900 companies listed in NSE.
Both the exchanges are fully online and all the buying, selling & trading activities could be done online. We can also buy a stock on BSE and sell it on NSE and vice versa.
SEBI
To monitor, control & regulate the process of the stock market there is a Govt. Regulatory body known as SEBI (Securities and Exchange Board of India) who provides rules, regulations & guidelines in order to protect the interests of investors.
Broker
We could not buy or sell stocks directly from stock exchanges. For that there are certain agencies licensed by stock exchanges and regulator SEBI to perform Buy or Sell on behalf of public known as Broker. They are the mediator or service provider through whom we buy & sell stocks and trade in stock market.
There are basically two types of Brokerage Agencies according to their services offered.
Full Service Brokers
Full Service Brokers provides various other services like research & analysis reports, advice & stock recommendations etc. along with the demat account cum trading platform. They may also charge more brokerage for their services. Most of the Full Service Brokers are subsidiaries of banking agencies like ICICI Securities, HDFC Securities, Kotak Securities etc.
Discount Brokers
Discount Brokers don’t provide any special services to their clients. They only provide the platform to trade in stock market through the demat cum trading account. For which they charge very less amount in form of brokerage. So many of the small & retail investors prefer to open account with discount brokers. In India currently Zerodha is the most popular discount broker having largest userbase and Upstox is the fastest growing discount broker. Both of them has fast, secure and user friendly trading platform (We use both).
Demat Account
We have to open an account with any of the Brokers to trade in stock market. That is known as Demat Account. Basically it is a Demat cum Trading account through which we trade in market. The stocks we hold are stored in our Demat account. We can hold stocks as long as we wish or we can sell it at any time (during the working hours). All the process of buying, selling are done online through the broker’s platform over internet through website or mobile app of the brokerage agency. Read more here how to open a demat account online with easy steps.
Working Hour of Indian Stock Market
The normal working hours of the Indian stock market or the stock exchanges are from 9.15 AM to 3.30 PM on Monday to Friday except Public Holidays. During this time we can perform all trading activities in Indian stock market.
Depository
Demat Account is the account in which the stocks we purchase and wants to hold for more than one day are being stored. This account is provided by the Broker to us but the Share are not stored at the brokers custody rather it is stored in the custody of depositories.
Those are CDSL (Central Depository Services (India) Limited) and NSDL (National Securities Depository Limited). Hence brokers could not misuse or perform any buy or cell of stocks without our permission.
Share Holder Promoter Investor
All those who have shares of any company are called as share holders of that company. The primary share holders of a company who are the first owners of the company and basically manage the company are called as Promoter. Other share holders are known as Investor.
There are basically three types of Investors.
DII (Domestic Institutional Investors)
DII (Domestic Institutional Investors) are various institution of our country like Mutual funds, Insurance companies, Banks etc. who invest in stocks.
FII (Foreign Institutional Investors)
FII (Foreign Institutional Investors) are institutions of outside of our country and invest in our stock markets.
Retail Investor
Retail Investors are the general public who invest in stock market. In this category there is a part known as HNI (High Net worth Investor) also known as NII (Non Institutional Investor) who invests in big amounts in the stock market.
Trader & Investor
Those who buy and sell stocks as like a business to make short term profits are generally called as Trader and those who buy stocks and hold for long term as like a asset to achieve long term goals are generally known as Investor.
Delivery & Intraday Trading
If we purchase any stock and sell it the same day without holding it then it is called as Intraday trading. In this case the stock doesn’t come to our Demat Account. And if we purchase and don’t sell the same day rather hold it for more than one day then that is known as a Delivery trade or Positional trade. In this case the stock comes to our Demat account and show in our Holdings.
Brokerage & Charges
There are various charges & taxes we have to pay for trading in stock market. The charges that Broker charges for their services are known as brokerage. We have to pay some charges to exchanges and depositories in form of DP charges and some other charges. We also pay some tax to Govt. in form of STT, GST etc. for each trade which is fixed for each brokers. But the types and amount of brokerages are differ depending upon the type of broker we have (full service broker or discount broker) and the type of trade (delivery, intraday, F&O etc.) we take.
Chart
To know the price change and movement of any stock we look at the Chart of that stock which gives the data of price movement in a graphical manner. There are different types of charts that traders use as per their trading techniques and strategies. Candlestick chart is the most popular among the traders around the world.
Index or Indices
Every exchange has several Indices or Index which represents a group of stocks and reflects the average price movement of that group of stock. There is a main Index which represents the group of top stocks of that exchange. From the value and price movement of that index we know the overall performance of that market. Main indices of the country also represent the nation in the global stock markets and reflects the sentiments of the investors of the whole country. In India we have two major indices i.e. Nifty50 and BSE Sensex.
Nifty 50
Nifty 50 is the main Index of NSE which consists of top 50 stocks listed in it.
BSE Sensex
BSE Sensex is the main Index of BSE which consists of top 30 stocks listed in it.
These two indices represent the performance of top companies of our country. Hence it reflects the overall performance of Indian stock market and Indian economy.
These are some basic facts we should know about Indian stock market before entering in to it. There are various other facts we will know in details as we go deeper in to markets and gain some experience.
