INTRODUCTION TO STOCK MARKET

Prof. S. Thilak, Assistant Professor, SIMS

 

What is the Stock Market?

           A Stock Market refers to a collection of Stock Exchanges where regular activities of buying and selling and issuing of shares to publicly-held companies take place. The Indian stock market are NationaI Stock Exchange (NSE) and Bombay Stock Exchange (BSE)in US it is  NYSE(Equity), NASDAQ(Equity), Chicago Mercantile Exchange (Derivatives). In China it is SSE index (Shanghai Stock Exchange). In Japan it is Tokyo Stock Market in-short they call it as Nikkei. In United Kingdom the primary stock exchange is LSE (London Stock Exchange) and FTSE (The Financial Times Stock Exchange) or “Footsie”.

 

Activities of the Stock Market

           Composition of the Stock Market is of following entities Regulator, Intermediaries, Depository-and Participants. Regulator: Stock Market regulator is a body assigned the task of regulating the country’s Stockmarket by Government of the Country. The mission of the regulator is to protect the investors, maintain the fair, orderly, and efficient market, and facilitate capital formation. In India we have SEBI (Security Exchange Board of India). Intermediaries: Stock Broker- is a corporate entity, registered as a trading member with the stock exchange and holds stock broking license. In India we have stock brokers like ShareKhan, SBI, ICICI Zerodha and Angel Broking etc., Depositoryis a financial intermediary which offers the service called DEMAT account. It is a digital vault for the investor’s shares. The investors have the option to open the DEMAT account either in NSDL (National Securities Depository Limited) or CDSL (Central Depository Securities Limited). Bank- helps in facilitating thetransferring of funds from the investor’s account to the trading account. Clearinghouse also acts as an intermediary between a buyer and a seller and seeks to ensure that the process from trade inception to settlement is smooth. This process takes about trading day one to trading day two.Participants:AMC (Asset and Management Companies) are the typical participants that are the mutual fund companies like SBI mutual, HDFC Mutual etc., these participants get money from the public and invest in the share market, the money owned by them are not theirs. There are large domestic corporate entities like Banks, Insurance firms etc., these large corporates invest their own money in the share market. The Foreign Institutional Investors are called as non-domestic corporate entities. These could be foreign asset management companies, hedge funds, and other investors. The Domestic Retail Participants are individual investors transacting in the Market.

 Traders

           A trader is a person who spots an opportunity and initiates the trade with an expectation of profits.

Types of Trader

Scalper is a type of a day trader usually holds stocks for very little time intending to make a small but quick profit.

Day Trader initiates and closes the position during the day.

Swing Trader holds on his trade for a slightly longer time duration. The duration can run into anywhere between a few days to weeks.

Movement of Stock

           News & Events:  Companies news or events like increase the goodwill of the company in earning more profits or giving the higher value of Dividend to the investors these are reasons that the company’s share value increases or vise versa.  For example suddenly the Government brings a regulation which affects the industry then automatically the share value falls or vise versa. Global News or Event let’s consider the present situation COVID-19 because of this virus not in India the whole world is in crisis and all the share market value has fallen.

Demand and Supply – Movement of the Stock market is also based on the demand and supply of the shares in the market.