How does the share market work?

 What is a share?

A business needs a lot of money to start and grow. Small portions of the company are known as shares, and they are sold to the public, in doing so the owner of the company receives money for the development of his company.

Let's understand it with an example, Jai is a businessman. He has a computer making company called ABC. The value of this company is 50 crores. Now Jai wants to grow his business, for this, he needs 30 crores. But Jai does not have that much money. Now he will sell 3 crore shares of his ABC company in the market for 10₹. People who buy this share are called shareholders. The shareholders get a small portion of the company ABC and Jay get the money to grow his company.

What is the Share Market?

In earlier times, when computers were not in use, the shares were physically marketed. But in today's time, online share marketing is happening due to the Internet. You can also buy and sell your shares at your home.

There are two famous stock markets in India:

1) NSE: National Stock Exchange

2) BSE: Bombay Stock Exchange

These are the two most popular stock markets where shares are bought and sold. Besides, there are several state-wise markets. Whichever company needs to sell its shares, that company must first register itself in this stock market. The NSE is registered with 1800 companies and the BSE is registered with 5800 companies. In the stock market of NSE. The fluctuations are called NIFTY and the fluctuations in the market of BSE are called SENSEX.

SEBI (Security Exchange Board of India) has given some guidelines for the stock market. And accordingly, there are stock exchanges in the stock market.

How does the share market work?

If the company has to sell its shares, it first registers itself in BSE. BSE consists of financial brokers as employees. Those who do not know anything about the stock market, take the help of these financial brokers for which the financial brokers get a commission.

Let's understand this with an example, Yash has bought some shares but he doesn't know anything about the stock market, so he enlists Steve's help to do stock market trading. Steve is a financial broker, so he knows everything about the stock market. Now Steve will talk to Jay, the owner of company ABC, and buy his stock on behalf of Yash. This is how the entire stock market works.

How does a shareholder benefit from shares?

Yash has bought 1000 shares of company ABC for 10 shares. Now that the company ABC has made a very good profit in the next one month, will the ABC company give some part of that profit to Yash? No, it does not happen. Whenever a company grows, its share price in the market increases. Meaning that the price of Yash which was bought for 10₹ is now 15₹, then Yash will sell that share to another, giving him a profit of 5₹ on each share. But if the company incurs losses in place of profit, then the value of the shares in the market decreases, causing loss to the stakeholder as well. This is how the profit and loss system works in the share market.

What is the bull and bear in the stock market?

Many times we hear that a bull run is going on in the stock market today, or a bear run is going on. But have you ever wondered what are these bears and bulls and what does it mean in the stock market? Let's understand, in the stock market, bull means boom, and bear means recession. The bull always strikes from bottom to top, so when the economy is doing well and the stock price is rising, the stock market is booming, it is called the bull market. And the bear always strikes from top to bottom, so when the economy is running poorly and the stock price decreases, it is called a bear market. Bull and bear markets are opposed to each other.

I hope you now get to know the basic knowledge about the stock market. If you have any questions, you can ask by commenting below.

Post a Comment