WORKING OF THE SHARE MARKET

The following are the main functions of the share market:

1. An IPO is a way for a company to be listed on the primary market.

2. Secondary Market: Shares are dissolved

3. Investors can trade the stocks on the secondary market.

4. Brokerage firms and stock brokers are registered entities with the stock exchange that offer you the opportunity to purchase a particular share at a specific price.

5. Your broker will forward your buy order to exchange. The exchange searches for a sale order for the same share.

6. This process takes T+2days, i.e. Your shares will be deposited into your demat account within two working days.

Stock market is one of most popular avenues for investing. There are more than Rs. On occasion, 6 lakh crore worth stocks were traded on the Indian stock exchanges. Stock market investing can be described as a gamble. If you understand the basics of the stock market, it would no longer be considered a gamble.

Before you start, it is worth learning about some market concepts.

HOW SHAREMARKET WORKS:

The previous section introduced you to market participants and other basics. Let's connect these stories and learn how the stock market operates.

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• Stock exchange is a platform that allows financial instruments such as stocks and derivatives to be traded. To trade, market participants must be registered with SEBI and the stock exchange. This includes brokers who trade, companies that issue shares, traders, and investors. The Securities and Exchange Board of India, which sets the rules of conduct, regulates all of these activities.

   

• An Initial Public Offering (IPO) is the first step to get a company listed on the primary market. It contains details about the company and the stock being issued. The stocks that were issued on the primary market are allocated to investors who have made a bid.

   

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• The secondary market allows investors to trade stocks that have been listed. This is where the majority of trading takes place. This market is where buyers and sellers meet to trade in order to make or reduce losses.
• Registered with the stock exchange are brokerage firms and stock brokers. They act as intermediary between investors and stock exchanges.

• Your broker will forward your order to buy shares to the exchange. The exchange then searches for similar sell orders. Once a seller or buyer has been agreed upon, the price is finalized and your broker will be notified that your order was confirmed.

  The message is then sent to you. Multiple parties are involved in the communication chain, including brokers and exchanges. The trading process is now electronic. The computer is used to match buyers and sellers.
  The process can be completed in minutes.

  HOW YOUR ORDER IS PRESENTED

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• There are thousands upon thousands of investors. All of them cannot meet in the same place and trade together. Stock brokers and brokerage firms are able to play a crucial role in this.
• Your broker at the exchange will process your order once you have placed an order to purchase a specific share at a given price. There are many people involved behind the scenes.

• The exchange confirms details of buyers and sellers in order to prevent default. The exchange facilitates the transfer of ownership. This is known as settlement. It used to take several weeks to settle trades.

  This has now been reduced to T+2 days. If you trade today, your shares will be deposited into your demat account the next day (i.e. tomorrow). two working day).

• The exchange guarantees that the trade will be honored during settlement#. The buyer will get his shares regardless of whether the seller has the stock required to sell. A settlement that is not accepted is invalid. This means that trades will not be allowed to take place.
• Share prices can change depending on when and how trades are conducted. Because prices for shares, like other goods, are affected by their perceived value, This can be seen in the increase or decrease of stock demand. There are more orders to buy stock as there is increased demand. This results in a rise in stock price. If you see a stock's price rise even though it is not significant, this means that somebody or many have placed buy orders for it. The stock's price fluctuation is greater if there is more trade.

The volatility in the stock market is something you must have heard. These are the four reasons for the volatility that is currently affecting india.

HOW TO INVEST IN SHARES:

Follow these steps to invest in the Share market

Step 1: Be aware of your investment needs and limitations

Step 2: Decide on your investment strategy

Step 3: Get on the market when it is right for you

Step4: Make the trade

Step5: Monitor your portfolio

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Step 1

First, you need to understand your investment needs and limitations. You should consider the future as well as the present when determining your investment requirements.

Your limitations are the same. You might be earning Rs. You can earn up to Rs. 20,000 per month. You may need to save at least Rs. You need to set aside Rs. 10,000 for monthly instalments for your car and Rs. 5,000 to cover your monthly expenses.

Only Rs. This amount can be used to invest up to Rs. If you are an investor who is cautious about taking on risk, you might prefer to invest more in low-risk investments like fixed deposits and bonds. You have only Rs. 1,000 left to invest in stock market investing. 1,000 Take into account your tax obligations.

Capital gains tax is charged to profits made on short-term shares buying and selling. If you sell shares within a year, this tax is not applicable.

You shouldn't be forced to sell shares in the short-term because of cash shortages. It is better to make a well-thought, wise decision than incur unnecessary costs in the near future.

 To better  your finances you can delve into Financial Planning. These are some of the benefits of financial planning

Step 2

Once you have a clear understanding of your investment profile, analyse stock market data and determine your investment strategy. Determine which stocks best suit your investment profile. You have two options: one large-cap stock, or several small-cap stocks, if you have a budget of Rs 1000. High-dividend stocks are a good option if you want to generate additional income.

If you don't have the funds, consider growth stocks that are more likely to appreciate in the future. Your investment strategy should include deciding the type of stocks you want to acquire.

This guide will help you create your personal financial plan.