What is Stock Market?

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What is Stock Market by VJS Academy
What is Stock Market by VJS Academy

Have you ever wondered what is Share, Stock and Stock Market? And would you like to know various Market Types and where you can Buy and Sell Shares? Well…

Share… one of the equal parts in a Company’s Capital.

When a Company wants to raise Capital for their Business Expansion or for New Projects, they go for Public Issue.

This way, they invite Public to invest in their Company and become Share Holders of the Company.

Once you become a Share Holder of the Company, you will be shared their Profits (if any) in the form of Dividend.  And you have the Questioning Rights and Voting Rights.

Share Market…  a place where Shares are bought and sold.

Stock Market… besides Shares, Bonds, Mutual Funds and Derivative Contracts also traded.

Shares can be traded in the market usually in 2 ways.

Primary Market: Companies raise Capital through issuing “Initial Public Offer”.  You can Buy Shares direct from the Company through “Exchanges”.

Secondary Market: Investors Buy or Sell Shares already listed in the Exchanges.  They Buy or Sell Shares from another investor at the Market Price.

Exchange: The place where you can Buy/Sell instruments like Shares, Bonds, Mutual Funds, Derivative Contracts, etc. Main Exchanges in India are:

Bombay Stock Exchange (BSE)

National Stock Exchange (NSE)

Market Types:

Cash (Equity) Market:

  • You can Buy any number Shares
  • Delivery is possible
  • You can Hold them as long as you want

Derivatives Market:

  • You can Buy/Sell Shares in Lots only
  • Delivery is not possible
  • Positions will be closed on Contract Expiry Date

Mainly, we have 3 Contracts:

  • One month Contract
  • Two months Contract
  • Three months Contract.

Expiry Dates:

Last working Thursday of the Month is Expiry Date.  If that Thursday is Holiday… before working day is the closing day. Next working Friday is the New Contract date.  If that Friday is Holiday… next working day is the opening day.

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