What is Share Market And How it Works in India ?


Knowing about the share and their categories:

A very general question arises that what is share market and how it works? In this article, author has discussed above question to make it clear for the people who are interested in share market in India.

The stock refers to stock that is held by the company. There are different stocks that are held by the people who invest in the same. This equity that the person holds is different for varied stocks accordingly. In this context, there is a division of two kinds of stocks held by the owners, which is known as the stocks that are common and secondly the stocks that are preferred. The rights that the owners holding these shares varies as the owners of the stocks that are preferred would be given priority relating to the voting rights in the meeting and also the dividend privileged prior to the stocks that are common.

The share is the part of the capital invested:

Shares are regarded as the division of the whole of the capital that is invested in the company and each of the shares that are bought is the amount paid towards the investment in the company. The trading of the same can be done either being present in the stock exchange or through the internet.

The stock market and its importance :

There is a place where these stocks are dealt with and this place would be known as the stock market. The count of the stock exchanges is close to twenty, among which the Bombay Stock exchange and the National Stock exchange take the credit of being the largest. These stock exchanges help the shareholders to exchange the shares and stocks. There are buyers and sellers who could trade their stocks and shares in the platform and make the business easy for themselves.

The procedure of trading in the stocks and shares:

The first step that is required to be undertaken in the trading of stock is by opening a demat account and a trading account. The more number of stocks and shares owned would be the managing directors or founders of the company. The stocks are sold and bought in the stock market. The technology like the internet has helped the stock owners to trade their stocks and shares much easily and with the stress free environment. We have two important stock exchanges in India, the Bombay Stock exchange and the National Stock Exchange. Most of the trading happens in these stock exchanges.

The middlemen in the trading of the stocks:

There are brokers who act as the middlemen in selling and buying the stocks and shares for the concerned people. The same can be cause of concern as a specific amount has to be paid to the broker in the course of the trading being done accordingly. Looking out for less amount of brokerage rates are important so that the profit towards the stocks or shares held by the owners would be effectively high. In the absence of the technology, you should make sure that you have a trading company whom you could communicate to place the trade dealings. This is very important as sometimes there may be drop in the net connection or loss of power when it is very crucial for trading.

The online trading is helpful to the investors as the trading can be done based on the updates that are updated online. This will enable the investor or the trader to understand the fluctuation in the prices if any in the stock market and decide accordingly. Most importantly, the documents relating to the trading could be known online and based on which the terms can be adhered before placing the stock or share on board for trading.

Different types of Trading:

The shares and stocks can be traded through different channels. The first one would be termed in the stock exchange as the ‘market order’, which means that the stocks are traded at the price that has been stated in the terminal and the same would be received accordingly. The current price in the market is the last price for which it can be sold or bought respectively. This is not the case with the Limit order and the Stop order options. In the limit order, a particular amount is stated in the terminal of the trading and when the price of the stocks reaches that rate the trade is closed.

On the contrary, if the price does not reach the price sated therein, it would be in the state of pending and would go under loss of the amount invested, as the penalty fee needs to be paid in the event of not reaching the limit price. This is because the same has to be traded within a specified time, usually within three past half hour. If the price reaches the limit price as stated, the order automatically will get executed.

  • The stop loss option would be traded in such a way that a low price is already stated in the terminal and if the prices fall, they fall for good as the price stated is lower and if it is high, fortune hits the seller.
  • The day trading is another kind of trading for the traders who sell and buy the stocks offline. You could trade four times more than the amount which you have in your trading account. If the margin is fixed the reversing of the transaction could be done in the later part of the day, if the same is not met. However, this does not apply if the margin of the profit is not fixed. The transaction has to be completed by three past half hour.
  • The delivery trading is a kind of trading, wherein you can make a purchase of the stocks by paying from your demat account and hold the same till it is sold. There is no limitation relating to the sale of the stock. The same can be done when you feel the prices are quite high to be sold. Its your decision on the whole and the market would influence your decision as to whether you want to sell it immediately or want to wait till the price rises.