The beginners in the stock market always have a lot of question in their minds. Trading and investing in the market is not as easy as it looks. In fact, it requires right knowledge and information to be able to make good returns from the share market. This is possible only if the beginners or new investors know the stock market basics. Therefore, to make things easier for them, in this article, they can learn about Indian stock market basics.
The first query that must be crossing in the minds of the beginners is the stock market is whether share market and share market are different concepts.
Difference between Stock Market and Share Market
When the buyers and sellers come together at a single place it is known as the stock market. In fact, when the trading shares and securities were done in the physical form, the buyers and sellers use to stand in a ring to trade. With the introduction of bolt and electronic trading, the dealing of shares and securities is done with the help of brokers. To conclude, the terms share market and share market have no difference in a real sense.
Now let us learn about some share market basics that every trader or investor entering the market must know.
Stock Market Basics for Beginners
The beginners should first learn how and where trading or investing of shares in the stock market in India is done. The shares of the different companies are listed on two primary stock exchanges of the country: National Stock Exchange (NSE) and Bombay Stock Exchange (BSE).
LEARN – What is NSE India
People invest their money to have a better future. In fact, investments help to overcome the negative effects of inflation, decline in permanent income, etc. Therefore, it would not be wrong to say that stock market gives an opportunity for investors to buy the stocks at a lesser price and sell them at a higher price. To sum up, the investors must carefully select right stocks and put correct strategies in place to make good returns in the share market.
The beginners in the share market must know that there are two kinds of markets i.e. primary markets and secondary markets. Let us now understand the difference between the two types.
Difference between Primary Markets and Secondary Markets
When a company decides to list itself on the stock exchange, it comes out with an initial public offer i.e. IPO. So when a trader or investor applies for shares in an IPO, such market is termed as the primary market. On the other hand, when the traders and investors are able to purchase and sell the shares of a company after they are listed on the exchange, it is called secondary market.
Another stock market basic that every beginner should know is when the shares price starts to rise and fall. To put it another way, there is always a reason for rise and fall in the stock price. Therefore, the investors must have some basic knowledge of stock price movement.
How is Stock Price Determined?
The share price rises when there is buying in the stock and declines when there is selling. In fact, the buying can be due to good results, improving performance, or any other factor. On the other hand, the fall in the stock price can be due to bad results, some unexpected event, etc. To conclude, the share price is determined depending upon the demand and supply in the market.
The next important basic point that every beginner in the stock market must know is the meaning of stock indices.
Meaning of Stock Indices
Many companies from different sectors are listed on the exchange. The companies from similar sectors are grouped together to form an index. The classification norms for grouping companies vary from sector to sector. NSE index comprises of 50 stocks and BSE index comprises of 30 stocks.
LEARN MORE – Stock Market Indices
Next important question is how can a beginner buy and sell shares.
How to Buy and Sell Shares?
The beginner can place buy and sell shares orders to the broker after opening a demat account. The brokers will take the order and act accordingly. In return, the investor or trader has to pay brokerage. In addition, the brokers often provide the investors with investment advice.
The new investors also get confused between trading and investment. In the next segment, we shall clear their doubt.
What is Trading and Investment?
When shares are purchased and sold in short span of time, it is known as trading. On the other hand, investment means purchasing the shares and holding them for long-term i.e. more than 12 months. The traders sell the shares as soon as he makes profits while the investor waits for the long term gains.
Who Regulates Stock Market?
The beginners in the stock market must know that the Securities and Exchange Board of India (SEBI) regulates the Indian stock market. They have the power and responsibility to look after the interest of the investors. They aim to develop the share market and its working.
The beginners in the stock market can further enhance their knowledge by reading share market basics books. By reading the stock market basics books the beginners can learn about the technical and fundamental analysis of the stocks.
Popular Books on Stock Market Basics
- Technical Analysis Of The Financial Markets By John Murphy
- Book by Nifty Trading Academy (Best Technical Analysis Book)
- NCFM Technical Analysis Module
- Technical Analysis book by Martin J Pring
- Japanese Candlestick Charting Techniques by Steve Nison
- Elliott Wave Principle by A.J. Frost and Robert Prechter
Nifty Trading Academy is one of the leaders in providing share market education to the beginners. At our academy, the beginners in the stock market can learn reading the charts. In fact, the beginners can become successful investors or traders with good chart understanding. Join our academy and learn reading the technical charts of the stocks. To reach us you can contact us via email or phone. We will be glad to serve you.
I am Hitendra Dixit. I am a civil engineer, at the age of 47 I have changed my profession and came in to stock market. I got excellence award for best share market training institute in India. I provide training in live market, during training sessions I do trade with real money in front of members. Many of my members left their job and became a professional trader with my support and guidance.