How is Stock market for Beginners?

It is essential to understand the basics before you start any new task. This is true for anyone who wants to enter the stock market. The stock market, in simple terms, is where buyers and sellers gather to trade stocks. People used to gather in the trading ring before the internet was invented to purchase and sell stock. All trades today are done via computer terminals in brokers' offices. The terms "stock market" and "share market" are interchangeable.

Continue reading to learn more about the market. Learn about the various stock markets and how they work, as well as why stock prices fluctuate and how to trade stocks. 

SHARE MARKET BASICS

It is important to understand how the market works if you are just starting out in share market investing.

• Stock market: This is where shares from different companies can be listed and traded.
• These trading platforms are known as stock exchanges.
• India has several stock exchanges, including the Bombay Stock Exchange(BSE), National Stock Exchange(NSE), Metropolitan Stock Exchange [MSE], National Commodity and Derivates Exchange (NCDE), and Multi Commodity Exchanges (MCX).
• Indian investors must open a demat and trading account with a registered participant (DP) in order to buy and sell stock.

Securities and Exchange Board of India is responsible for closely monitoring the stock market. SEBI issues regulations to regulate the stock market in order to manage its functioning, increase transparency and protect investors' interests. Investors are encouraged to take part in the stock exchange with confidence.

PRIMARY AND SECONDARY MARKKETS

India's share market is divided into two types: the primary and secondary markets. Let's look at each of these markets.

Primary Market

An initial public offering (IPO) is when a business entity decides that it wants to become public and list on the stock market. The IPO allows the entity to issue shares to the public. These shares are available for purchase on the primary market. Generally, the IPO's purpose is to raise funds for the expansion or growth of the company.

Secondary Market

The new company is listed on the stock exchange once all shares that were issued as part of the IPO are subscribed in full and allotted to investors. The shares are now available for sale on the secondary market. These shares can be purchased and sold on the stock exchange at current market prices.

WHY DO STOCK PRICES FLUCTUATE

When shares are placed on the secondary market, the laws of supply-demand govern their prices. Let's look at three scenarios.

1. The stock is in high demand and there are few sellers. The stock price will rise due to high demand and limited supply.

2. Many sellers are looking to sell their stock but only a few buyers are available. This is because the demand is high and supply is low. The stock price falls as a result.

3. There are usually two buyers and one seller. The price level can fluctuate slightly in such an environment.

Other factors also affect stock demand and supply, which can impact stock prices. Here are the most important factors investors should must consider:

• Company performance If earnings exceed expectations, shares will be in high demand. The stock price will rise as a result. If the company's performance is declining, stockholders might want to sell more shares in a market with few buyers. The stock price may fall in such an instance.
• Sector performance It is common for stock prices in the same sector to move in a similar manner. Stock prices within a sector that is experiencing bullish trends are more likely to rise. Stock prices can fall if the mood is bearish.
• News: Economic announcements such as a change to the repo rate can have an impact on the company's debt costs. This could impact its stock price. Stock price movements could also be affected by political events, such as changes in governance.

SIGNIFICANCE OF STOCK INDEXES

Stock market indices are a key skill for investors new to the stock market. A stock market index tracks the performance of several stocks.

The stock exchange lists many company stocks. A stock market index is a grouping of stocks. A number of factors may influence the selection of company stocks, such as:

• Sector to which the stocks belonged
• The company's size
• The company's market capital

The NSE's benchmark Nifty index comprises 50 stocks, while the BSE Sensex consists of 30 stocks. Nifty Metals and Nifty Pharma are some of the most popular sectoral indexes.

Stock market indices may reflect the performance of a specific segment or the whole market. Investors can compare stocks and see whether they are moving with or against an index. Investors and traders can use stock market indices to get a sense for investor sentiment.

EQUITIES AND DERIVATIVES

Two types of products are available on the stock market: equities or derivatives.

• The stock of companies is traded on the equity market. You can buy stock in a company to gain part-ownership.
• Futures and options are traded in the derivatives markets. These financial contracts are based on certain underlying assets such as currencies, shares, commodities and currencies. The underlying assets in the stock derivatives market are equities.

Two types of products are available on the stock market: equities or derivatives.

HOW TO INVEST OR TRADE IN STOCKS

Online and offline stock trading is possible for both beginners and experienced investors.

• Online trading: This is when you trade or invest in stocks over the internet. Traders and investors can now use multiple platforms, including the broker's website and smartphone apps. Online trading is possible from any location in the world.
• Offline Trading: You can visit the broker's office, or send orders over the telephone.

WHAT IS A DEMAT ACCOUNT?

A Demat account holds your financial securities in electronic form. This account is similar to a bank account, but it holds your financial securities. It can include shares, bonds, and government securities as well as mutual funds and other asset types. You can manage all of your investments online with a Demat account.

HOW TO OPEN A DEMAT ACCOUNT

It is easy to open a Demat bank account. Here are the steps:

• Fill out the account opening form by visiting the DP's office or website.
• You will need to submit copies of your PAN card and Aadhaar cards, as well as passport-sized photos, in order to open a Demat bank account.
• Please read the terms and conditions carefully.
• Next is in-person verification. Usually, the DP will send a representative to visit you at your residence. Some DPs will allow you to verify your identity online through Aadhaar.
• After all, formalities have been completed, you will be issued a client ID, Demat account number, and a password. Now you can log in to start investing.

The Demat account is just the beginning. You will need to open a trading or Demat account if you want to trade on the stock market. You can also open this account with the same DP.

DIFFERENCE IN TRADING ACCOUNT & DEMAT ACCOUNT

The trading account allows you to place buy and sell orders on the market. The Demat account stores stocks that you have purchased through the trading account. Let's look at how it works.

• Let's say you want to purchase shares using your trading account. Your trading account balance will be debited, and digital share certificates will credit to your Demat account.
• What happens if you sell shares? Your trading account will receive the proceeds of the sale and the share certificates will be removed.

ROLE IN DP

After you have opened a trading and Demat account with your broker, you can buy and sell stocks. Your broker or DP acts as a mediator between you and the exchange. There are many buyers and sellers on the stock exchange. Finding the best deal can be difficult. The DP can help buyers find sellers and sellers find buyers.

It is a good idea to open a Demat account with a full-service broker for beginners to the stock market. These DPs offer a variety of educational resources, stock recommendations, timely research reports, as well as stock recommendations. They also offer charting and trading tools as well as multiple trading platforms. All of these can help you find lucrative trading opportunities on the stock market.

TRADING Vs. INVESTMENT

The principal difference between investment and trading is the length of stockholding.

• A trader who buys shares aims to make a profit on changes in stock prices in the short term. Stocks may be held for only a few hours, for several days, weeks or months. They want to make consistent gains.
• Investors, on the contrary, look for stocks that will increase in value over time. Long-term capital gains are made by waiting for stock prices to rise over many years.

HOW TO PICK STOCKS PERSONALLY FOR INVESTMENTS OR TRADING

Before shortlisting stocks, traders and investors do extensive research. They use two approaches to analyze stocks: technical and fundamental.

Fundamental Analysis

This type of analysis involves studying the fundamentals and operations of the company. Some things mentioned below are the one you should do:

• Check out the balance sheet of your company
• Take a look at its growth prospects
• It is possible to make a profit in the future.
• Analyze its debt structure, etc.

Fundamental analysis is a way to determine the company's overall health. Investors can use it to determine whether the stock is suitable for long-term investment.

Technical Analysis

Technical analysis requires that one examine the volume and price charts of the stock. These charts can reveal patterns that could be used to help predict future price movements. For traders and investors who want to make a profit on the basis of price movements, technical analysis can be very useful.

CONCLUSION

Now you should have a better understanding of the stock market. You can learn how to invest and stock market trading by diving in. Do your research before you dive in. You should shortlist the stocks that you want to purchase, review their fundamentals and view technical charts for price patterns. You will be able to profit from the lucrative stock market opportunities by taking a disciplined approach and analyzing the data thoroughly.