Understanding the basics of Stock/Share Market

The stock market in India is very vast and diverse. It provides an excellent investment opportunity for people looking to grow their savings. The stock market has over the past decade consistently given a return of 12% which beats the general inflation for the period.

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Before investing in the stock market, it is worthwhile to educate yourself about stock market basics India. By spending some time learning share market basics, you will grow as an investor and will also be able to take sound investment decisions.

What is the stock market? Is it different from share market?

The two terms are used interchangeably however, there is a difference between the two. A share is a unit of capital or equity for a public limited company. Only companies issue equity shares, which are traded in the share market.

In contrast, stock market is a market where different financial instruments are traded. Some examples of these instruments are:

  • Equity shares
  • Mutual funds
  • Debentures
  • Bonds
  • Derivatives
  • Commodities
  • Currencies

What is the share market?

The share market is a market where equity shares are traded. There are two types of share markets:

  • Primary share market:

This market comprises of companies that are listing on different stock exchanges for the first time. Different categories of investors can invest in such a listing. This listing is called IPO or Initial Public Offer. Each company that is going to list, decides the capital it requires, the share price, and the number of shares that it offers.

  • Secondary share market:

Shares that are already listed are bought and sold by investors in the secondary share market. This market allows investors to enter and exit shares that have already been listed. The price for shares in the secondary market depends on the demand and supply for the share, and also on company performance.

How to buy shares in the share market?

To buy shares in the share market, it is necessary to open a demat account. You can easily open a demat account with a reputed broker like Kotak Securities. A demat account is nothing but an electronic repository for all financial instruments you invest in. It keeps a record of all your investments. It allows you to track your investments and check the gain or loss on them. It is also important to have a trading account to purchase and sell shares.

After opening the demat account, the next step is to open a trading account. A trading account can be opened with the same intermediary with whom you have a demat account or any other broker. A trading account allows you to purchase and sell different financial instruments.

Before trading, it is better to educate yourself about different aspects of the financial markets. A lot of different companies, such as Kotak Securities, have free resources online, especially share market basics for beginners. With these tools, you can trade in the market and grow your capital to meet all your investment goals.