What is Share Market? How Does it Work?

What is Share Market?

Share Market - The Buzz word among many of you. Still new to Stock market? No worries I will let you know what is Share Market and how does it work. Usually in Market both buying and selling happens, whereas in Share market, buying and selling of Share happens. Can you get my point? Here share represents a unit of ownership of the company from where you bought it. For instance, if you buy 10 shares from ABC Company, then you become a shareholder of that company, also you can sell those shares anytime you want.

By Buying shares, you are investing money in the company. As the company grows, the price of share what you have bought too increase. You can get profit by selling the shares in the market when the price hikes. The price can also goes high as well as down, its based on the demand.

Why Company Sells Shares?

For development, Expansion, etc a company needs capital or money. Hence the company sells its Shares to public. This process by which company issues shares is called Initial Public Offering(IPO). You may also come up with a word like Bull Market and Bear Market. Having any idea of it? Fine, Bull market is, where the price of stocks keep raising and the Bear market is where the prices keep falling. 

Where it Happens?

Okay, now got some idea about what is stocks and why companies are selling those stocks to public. But where all these exchange of stocks, like buying and selling happens? 

• NSE (National Stock Exchange)
• BSE (Bombay Stock Exchange)

These are the tow major stock exchange in India, regulated by SEBI(Securities and Exchange Board of India).Brokers will act as a intermediator between the stock exchange and the investors. So to start investing or trading, you have to open a demat account and trading account with a broker. 

Types of Share Market?

1. Primary Market
2. Secondary Market

Primary Market

• When a company register itself for the first time to sell its shares and raise funds, it enters the primary market. this is called Initial Public Offering.
• Issue is public when the allotment of shares is made to more than 200 persons; Issue is private when the allotment is made to less than 200 persons.

Secondary Market

• The Secondary Market is the market, where the already listed companies can trade/sell stocks. 
• Here the investors buy shares at its current price.
• It also offers the investors an opportunity to sell all its share and exit the market.
• This Secondary Market operates through over the counter(OTC) and exchange Traded Market.
• OTC markets are informal, wherein two parties agree on a particular transaction to be settled in future.
• Exchange Trade Markets are highly regulated, wherein all transactions happen via the exchange.

What is Stock Exchange?

As we discussed earlier, Stock exchange are Secondary markets, where existing owners of shares can transact with potential buyers.

when you buy a share of stock on the stock market, you are not buying it from the company, you are buying it from some other existing shareholder. In like manner, when you sell your shares, you do not sell them back to the company—rather you sell them to some other investor.