Over the years, people’s approach towards managing their finances and wealth creation has changed. This is evident from the recent surge in the number of Demat accounts opened in the past year. Most people are looking to invest in the stock market to grow their wealth. But before you start your journey, you must learn the basics of stock market trading India and have a clear understanding of how a stock market works. 

This blog acts as a guide for beginners and introduces them to the different aspects of the stock market such as stocks and shares, the difference between stocks and shares, stock exchanges, how to start trading in the stock market, etc. 

What Is a Stock Market? 

As the name suggests, the stock market is a marketplace that is a collection of exchanges where the buying, selling, and issuance of the stocks happens. The trading of stocks is usually done through over-the-counter marketplaces or on the stock exchanges. These exchanges and marketplaces operate under certain rules and regulations laid out by the Securities and Exchange Board of India (SEBI). National stock exchange (NSE) and Bombay Stock Exchange (BSE) are the two primary stock exchanges in India. SEBI is the principal regulator of the Indian stock market. It regulates day-to-day trades and the financial instruments that are traded in the stock exchanges.

Shares vs Stocks

A stock is a security that represents your slice of ownership of a company and is traded on the stock exchanges. While both the terms, stocks, and shares are used interchangeably, there is a slight difference between the two. Both are used to denote the fraction of ownership in a publicly held company. The difference between stocks and shares is more to do with the syntax than financially or legally. Stock is a generic term that denotes the fractional ownership of one or more companies. On the other hand, the term shares has more specific usage and are used to describe the fractional ownership in a specific company. 

How the Stock Market Works

For a company to run successfully, it should be able to generate profits to meet the working capital required for its functioning. But sometimes, the capital made through profit is not enough. When a company is looking to raise the capital required to expand its business, it puts its shares in the stock market and raises money by inviting the stock market investors. The investors or stockholders get ownership of the company proportional to the amount they have invested. A shareholder stands to make financial gains if the company does well. 

Now the question arises, how does a company list its shares in the market? For a company to become publicly traded and to list its shares on the exchanges, it has to ensure that it meets the criteria set by the regulatory authority SEBI. The process followed by a private or unlisted company to go public by listing its shares in the stock market and by offering them to the public for the first time is called an Initial Public Offering (IPO). A company has to comply with the rules, regulations, and guidelines set by the Securities and Exchange Board of India (SEBI) before it decides to offer its shares to the public for the first time.

Stock Market Trading India

First and foremost, you need a Demat and trading account to start your journey in the stock market. When you trade online, your Demat account holds your securities and shares in an electronic form. Having a Demat account or dematerialisation increases the ease of accessibility by converting the share certificates from physical to electronic form. A trading account is sufficient if you plan to buy and sell the shares within the same day. But if you plan to hold on to your shares for the long term, you need a Demat account. A Demat account is used to settle the trades electronically.

In simple terms, you make money in the stock market when you sell a share at a higher price than the price at which you bought it. There are two ways in which you can make money in the stock market. If you are new to stock market trading India, it is imperative to understand the difference between stock investors and stock traders. 

Conclusion

Trading and investing in the stock market might seem a bit complex to the uninitiated. But once you have understood the basics of stock market trading, you will realise that it is not as complicated as you thought earlier. If you are one of those who are looking to grow their wealth and do not fear the ups and downs of the market. Investing in the stock market would be a good place to begin. To begin your journey, use the stockbroker’s trading platforms such as the Dhanush app by the Ashika group to open your trading and Demat account.

Leave a Reply

Your email address will not be published. Required fields are marked *