Fundamental Analysis of Indian Stocks

Fundamental Analysis of Indian Stocks

Fundamental Analysis of Indian Stocks – Investment in stocks means generating wealth. People have different views in making decisions regarding investing in stocks. Human behavior has a different appetite to take risks. Some people make statements according to them it’s risky to make an investment in the stock market.

But from studies, it is proved that making an investment in the stock market in the right shares helps to beat the inflation for investing it for a long horizon term of 5-10 years. In right place, it helps traders to make quick profits.

What is the stock market and share market?

A share market is a place where activities of buying and selling of shares happen.

A stock market is the same as a share market but the only major difference between a share market and the stock market is that the share market only allows trading with shares while, in the stock market, it allows to trade with shares, derivatives, mutual funds, and bonds.

The basic platform to do a trade of buying and selling of shares and other securities trades only in Stock Exchange. In India, the stock exchanges are BOMBAY STOCK EXCHANGE and NATIONAL STOCK EXCHANGE.

Financial instruments traded in a stock market

  • Bonds
  • Shares
  • Derivatives
  • Mutual Fund

Types of Share Market

Here are the two different types of share market:

#1 Primary Market

When the company sells or issues new stocks or bonds for the first time is termed as the primary market. Mainly this activity is followed in a form of an initial public offering (IPO). Companies get registered to issue a certain amount of shares for which they hire investment bankers. For this process, there is a need for an underwriter, which helps to review and create the price and other details of the securities.

The securities which are issued by the primary market are subject to strict regulation and companies need to file with Securities and Exchange Commission (SEC). Price is the major thing to cater to as it is the most volatile in the primary market because demand is difficult to determine at the starting of the IPO and so most of the IPOs are set at low prices.

#2 Secondary Market

In this market, the securities which are traded are already sold on the primary market. This market is referred to as Stock Exchange. In this market, anyone can purchase or sell securities. A broker usually trades on the behalf of the investors in the secondary market. Investors need to pay brokerage fees to the broker. In this market unlike the primary market, the price is determined according to the supply and demand in the market.

The volumes traded in this market differentiate on the daily basis so this affects the price of the stock. The price is determined at whatever price both the parties agreed upon. There are many brokerage firms in India that make trades on behalf of the investors and charge different plans. There are two markets, one is auction market and another is dealer market. Most of the small investors or the investors who do not hold more information trade through dealer markets.

Functions of Stock Exchange

Here are the two Functions of the Stock Exchange:

#1 Pricing of Securities

The securities are valued depending on the demand and supply and the company which is associated with gold is valued higher because in these securities the demand is higher. This kind of valuation of securities is helpful to investors, the government, and creditors.

#2 Safety of transactions

In Stock Exchange, only the listed securities are traded and the exchange checks the visibility of the companies then only it get listed to the exchange. The companies which are listed in the exchange need to follow the strict rules and regulations provided by the exchange board and because of this, it keeps the safety of transactions.

#3 Liquidity

The stock exchange provides more transparency as to when and where the investors want money they can get it. The main aim of the stock exchange is to provide stability for the market to proceed sale and purchase of stocks.

#4 Economic Growth

In the stock exchange, various companies provide buying and selling of stocks. This process includes disinvestment and reinvestment which helps to invest in more investment proposals and this leads to economic growth.

About Us:

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