What Is Share Market?

The stock market is where investors buy and sell shares of companies listed on stock exchanges. When you buy a company's stock, you become a shareholder. Companies vary in size and market capitalization, offering a range of options for investors.

This article explores the stock market in-depth, covering key terminology and concepts to help you navigate it effectively.

In India, the primary stock exchanges are the Bombay Stock Exchange (BSE), where trading initially began, and the National Stock Exchange (NSE), which introduced automated trading systems. These exchanges are crucial for buying and selling shares, serving as the backbone of India's financial markets.

Once new securities are sold in the primary market, they are traded in the secondary market, where investors exchange shares at market prices. Regulation of these markets is overseen by the Securities and Exchange Board of India (SEBI), ensuring transparency and investor protection.

Share Market is a marketplace where publicly listed companies' shares are traded daily. The primary market is where the companies float the shares to the public; extending shares in the open market is known as Initial Public Offering- IPO, mainly for market capitalisation. Some stockbrokers are registered with the stock exchanges to trade company stocks and other types of securities. A share may be bought or sold only once listed on the stock exchange. Thus, the share market meaning is a place where buyers and sellers come together only to trade stocks.

Regardless of their size or business strategy, companies list themselves on stock exchanges to raise funds and increase their capital value. This capital is used for various purposes, such as expanding operations, purchasing machinery (particularly relevant for manufacturing companies), or other reasons specific to the company's goals. When a company goes public and sells shares to investors, the funds raised are utilised to strengthen and grow the business.

• Suitable for Expansion: The sale of company stocks creates dependable and stable long-term financial growth. Companies can use these proceeds for business expansion and development.
  
  
• Easy Entry and Exit: The stock market enables effortless entry and exit through the purchase and sale of shares of any company at a price regulated by the demand and supply of that share.
  
  
• Regulated Processes: A haven for the investors as the stock exchanges and market regulators require the listed companies to adhere to stringent disclosures and regulatory requirements. It does not leave behind the stockbrokers who have to tread the path set out by SEBI.
  
  
• Secure Clearing Mechanism: The stock exchanges assure the investors of a reliable and secure clearing mechanism for purchasing stocks that will be delivered to them through their Demat Account.

The stock market operates on a straightforward mechanism via an online platform. Here, we highlight the main elements of the share market.

• Participants: The participants include SEBI, the stock exchanges (such as BSE and NSE), stockbrokers, and traders categorized as daily traders and long-term investors. Remember that investors, also known as traders, must set up a Demat and Trading Account before beginning their trading journey.
  
  
• IPO: The initial requirement for a company to list on the stock exchange is to file a draft offer document with SEBI. After meeting specific regulatory norms and upon approval, the company offers its shares to investors through an IPO in the primary market.
  
  
• Distribution: In this stage, the company issues and allots shares to investors who applied during the IPO. This process is computerized, so not all investors may receive shares. Subsequently, the shares are listed in the share market, allowing investors to sell their allotted shares while others can buy them.
  
  
• Stock Brokers: These intermediaries, or middlemen, are individuals or broking agencies registered with SEBI and the Stock Exchanges. They assist investors in buying and selling shares through the stock market. Your Demat and trading account are set up with your stock broker, who executes deals for you. Upon order confirmation, the stockbroker sends you a contract cum transaction bill report.
  
  
• Order Processing: This final step involves the broker placing an order or trade on behalf of the investor on the specific exchange. The executed trade order is settled, where the buyer receives the shares and the sellers receive their funds. The settlement period for the order is T+2, meaning payment should be completed within two working days from the transaction day.

• Capital: It refers to the wealth in the form of money, assets or investments owned by the organisation or its promoter. The capital of the company or market capitalisation
  
  
• Ask: The price a seller is ready to accept for a security.
  
  
• Bid: The price a buyer offers for a security.
  
  
• Bull Market: A condition where securities prices are rising or expected to rise
  
  
• Bear Market: A condition where securities prices fall due to widespread pessimism
  
  
• Dividend: A portion of a company's earnings paid to shareholders quarterly or annually
  
  
• Volume: The number of shares traded in a market during a period
  
  
• Yield: The income return on an investment, such as interest or dividends received
   

With an in-depth understanding of what is stock market to and its advantages to the necessary process of placing an order, this article walks you through the basics you require to begin investing in the stock market. Make the most of this investing stream and reap the benefits in the long run.

To opt for a Demat Account opening with HDFC Bank, click here.​

Read more on the benefits of a Demat Account here.

*Terms and conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances.