The stock market refers to the collection of markets and exchanges where the issuance and trading of equities or stocks of publicly held companies, bonds, and other classes of securities take place. A stock exchange facilitates trading in company stocks and other securities. A stock may be bought or sold only if it is listed on an exchange. Thus, it is the meeting place of the stock buyers and sellers. There are four broad segments of stock market, viz, Equity, Derivative, Debt, &MF.
It is a market where financial instruments are issued & traded. Stock market facilitates mobilization of funds from those with excess of it (Investor) to those who are in need for funds (Business). Business owners raise fund from the market by way of issuing shares to investors.
Primary vs Secondary market
Stock market is broadly divided into two; viz,
Primary Market –Primary market is the market where investors can buy shares directly from the issuer company. A company comes up with an Initial Public Offer (IPO) for raising fund from general public to meet its fund requirement. Investors are issued shares in proportion to their investment in the company. These shares are listed on the stock exchange to facilitate easier, speedier, & efficient transfer of shares. This whole process is called getting the company/shares listed on stock exchange.
Secondary Market – Secondary Market is the market where stocks, which are issued to investors through IPO, are traded. Secondary market provides existing shareholders a platform where they can exit from their investment by selling shares in the market. Those investors desirous of buying shares of a company but couldn’t get in IPO can buy shares from secondary market. This buying and selling activity is carried out on screen-based trading platform of Stock Exchange facilitated by stock brokers.
Type of Investor
Investors are broadly categorized as (i) Institutional Investors, & (ii) Non – Institutional Investors
Institutional Investors – Large organizations (such as banks, insurance companies, pension funds, finance companies, mutual fund) which have considerable fund to invest are referred to as Institutional Investors. Such investors originated within the country are called Domestic Institutional Investors (DII), and those located outside the country are known as Foreign Institutional Investors (FII).
Non – Institutional Investors – Non – Institutional Investor is an individual investor. It includes Retail investors, High Net Worth (HNI) investors, & Corporates.
Capital markets functioning in India is regulated by Securities & Exchange Board of India (SEBI). Rules and regulations governing Indian securities market are framed, overhauled, & implemented by SEBI. The primary role of SEBI is to protect the interest of investors and to promote the growth and development of securities market in India so that, securities market continues to remain important source of raising fund. SEBI also works to ensure that Investors, Intermediaries, and Issuers carry out investing in orderly manner.
What is Bullish Market & Bearish Market?
Markets are often described as ‘bull’ or ‘bear’ markets. These names have been derived from the manner in which the animals attack their opponents. A bull thrusts its horns up into the air, and a bear swipes its paws down. These actions are metaphors for the movement of a market. In bullish market prices continue to rise. If the trend is downward, it is considered as bearish market.