A stock market is a place in which long-term capital is raised by industry and commerce, the government, and local authorities, and it is regarded as a capital market. The money derives from private investors, insurance companies, pension funds, and banks and is usually arranged by issuing houses and merchant banks. Stock exchanges are also part of the capital market, which provides a demand for the shares and loans representing the capital once it has been raised. A stock market is ideally a place where securities can be sold and purchased at an agreed price.
Indian Share Market is one of the oldest Stock Market in Asia, and East India Company mainly used to transact Loan Securities by the end of the 18th Century. Back in the 1830s, trading on corporate stocks and stocks in both Bank and Cotton presses took place in Bombay.
Some informal groups of Stock Brokers organized themselves in 1875 and were formally organized as Bombay Stock Exchange (BSE). Back in 1956, the Government of India recognized the Bombay Stock Exchange as the first Stock Exchange in the country on behalf of the Securities Contracts (Regulation) Act.
But still, there was no means to measure the overall performance of the Exchange. So, in 1986, the Bombay Stock Exchange developed BSE Sensex (Sensex = Sensitive Index), an index of top 30 companies, which gave the means to measure the overall performance of the Exchange.
Things to know before the share market opens:
- Organized Body
A stock exchange is ideally an organized body with a management committee and rules that control how the Exchange works. Some people on the Exchange are subject to the Exchange laws, which the management committee enforces. Once upon a time, a stock market physical place where traders met face-to-face to make deals, but today, most trades occur electronically.
- Public Company Stock
Public companies are a vital element of stock markets. Public companies are ideally those that tend to have stock that is bought and sold on a public stock exchange. Before a stock can be sold, it should be listed on the Exchange. To protect its investors, a public company needs to disclose financial and business information that mainly affects one’s stock value.
- Trading Through Brokers
Trading on a stock exchange is limited to stockbrokers and traders who are also members of the Exchange. Ideally, investors need to have one brokerage account if they want to participate in trading. For many people, brokerage services are provided on behalf of the employer-sponsored retirement investment fund. For some individuals who want to trade independently, an individual account is required.
- Restrictions/Investment Ceilings
The government of India tends to prescribe the FDI limit, and different ceilings have been prescribed for other sectors. Over a few years, the government has been progressively increasing the tops. FDI ceilings tend to fall in the range of 26-100%.
By default, the possible limit for portfolio investment in a particular listed firm is decided by the FDI limit prescribed for the industry to which the company belongs. However, there are at least two additional restrictions on portfolio investment. It includes an aggregate limit of investment by all FIIs, inclusive of their sub-accounts in any particular company, has been fixed at least 24% of the paid-up capital. Still, the same can be raised up to the sector cap with the approval of the boards and shareholders of the company.
Secondly, any single FII in any particular firm should not exceed 10% of the company’s paid-up capital. Regulations permit a separate 10% ceiling on investment for each sub-accounts of an FII in any particular firm. However, in foreign corporations or individuals investing as a sub-account, the same roof is only 5%. Regulations also impose limits for investment in equity-based derivatives trading on stock exchanges.
Stock prices are influenced by psychological factors of greed, fear, news, and expectations, which factors into the movement of prices. These are factors that urge people to buy or sell, which would lead to an upward or downward trend of markets. The stock market is not different from any other market. It runs on the basic principle of demand and supply of shares, thus driving the price of the market. There are innumerable factors that alter the price of the market. Maybe the buyer has more money at a certain point, or the seller is not willing to sell at a particular price. Whatever it is, it reflects the share price. To sum it all, price is the end result of all factors which create demand and supply. 95%retailers or 5% professionals generate demand and supply?
5% Professionals create demand and supply, retailers as buyers are enormous in numbers, but the stock market is unpredictable, professionals just 5% are significant players in the market and are ones who create demand and supply. Buying and selling in the stock market is an art and skill. Big players like institutions, mutual funds, foreign institutional investors, etc., have got a lot of money to invest in the stock market. Generally, big players buy and sell in markets in such a way it creates confusion for the rest of the world. They try to control demand and supply in the market as per–share market news.
Hence one can start trading after considering the various share market news and make the best possible decision. People need to consider tips here when investing in the share market.