Every company needs money to operate its business. Sometimes, the profits from selling products or services are not enough to cover the working capital requirements. Companies invite ordinary people like you to invest in their company in order to run it efficiently. Investors get a portion of any profit they make. This is the first step to understanding stock market basics. Let's take a closer look at this.
You can own shares, which allow you to hold a portion of the company's worth. You can own a percentage of the company if you invest a proportional amount. If you own 2% shares traded on the stock exchange, that would be 2% ownership.
Shares are the units of ownership in a company and its financial assets. Also known as equity, stocks, scrips, and stock, shares are also called shares. You will be referred to as either a stockholder of the company or a shareholder after you have purchased them.
Why would a company need money? More capital is required when a company expands, scales up or wants to grow. A company can tap the share market to offer investors a set number of shares, which is based on its market price.
The company will pay investors some money in return for them becoming part owners. Investors will be paying the company money and in return they will become part owners. However, investors are not lenders to the company and are not creditors. These are share market basics for beginners, as it is important to understand why companies require shares.
An important aspect of the share market basics is Initial Public Offering. An Initial Public Offering (IPO) is the first time a company sells its shares to the public. Securities and Exchange Board of India, our regulator of markets, has set out a few rules and regulations that a company must follow to be eligible to list its IPO on an exchange.
Securities and Exchange Board of India oversees any fraudulent transactions and activities by any party: investors, traders and brokers, as well as companies.
What stock exchanges are and how many are there?
Stock exchanges are a place where buyers and sellers can come together to purchase and sell stock. Two stock exchanges are the primary in India: Bombay Stock Exchange, (BSE), and National Stock Exchange, (NSE). This information is essential to understand the basics of India's stock market.
What is Nifty and Sensex, and
Companies who wish to be listed on the NSE, BSE, or both must apply. Stock exchanges require equity benchmarks in order to indicate the stock market's trend in the best possible way. BSE and NSE both have hundreds and thousands of companies listed. It will be hard to sift through the large number of companies that are listed if you only have to choose the top 30 stocks or what the bottom 100 are doing. Nifty and Sensex are able to group these companies together.
Nifty50 is a compilation of the 50 most prominent companies on NSE and Sensex. It also includes the 30 most popular stocks on BSE according to market capitalization. The most influential companies in the stock market and the country's economy are the top. An index that includes the largest and most important companies can be a good indicator of the overall stock market.
BSE500, Nifty Midcap, and BSE Smallcap are also available. Nifty 50, Sensex, and Smallcap are the primary benchmarks.
There are also sectoral indexes: Nifty Pharma, BSEBankex, and Nifty PSU. These indices group the top stocks of each sector, which allows us to see how it is performing.
In short: Indices tell us, in a concise, clear, and simple way, what the market is doing.
When is it possible to trade on the stock market?
You should know the basics of India's stock market. This includes when you can buy and sell shares. Stock market hours in India are from 9.15 a.m. until 3.30 p.m. The stock market closes on a few days during the year. These are called market holidays. Holi, Id and Independence Day are just a few examples of market holidays.
You will earn capital gains if you purchase shares at a lower cost and then sell them at a higher value. There are two options. If you're a beginner, you should know the difference between stock investing basics and stock trading basics.
There are two options
Stock investors Those who invest in stock stocks for a longer time period, sometimes for years, are called stock investors. Over time, returns are compounded. Fundamental analysis is used by investors. Because your investment grows along with the company's growth trajectory, investors use fundamental analysis.
Stock traders Stock traders usually buy and sell in the same trading session. Technical analysis is used by traders to determine which stocks to invest. Traders seek short-term and immediate gains. Basics of stock trading will require that you learn technical indicators such as momentum oscillators and bollinger bands. Charts are also required.
A Demat and trading account must be opened. Many brokers and investment platforms now offer Demat cum trading accounts. A trading account can only be used for transactions. You can buy and sell. A Demat account is not necessary if you're a trader. If you buy and sell within the same day, a trading account will suffice. Your shares are stored electronically in your Demat account. It usually takes two working days for shares that have been dematerialized to be transferred to their Demat account. After that, your Demat account will debit or credit your account with the proceeds of your sale or purchase.
Are there taxes?
Yes, taxes will be applied to any gains made from stock market transactions. Below is a table that outlines how much tax you will have to pay.
The gains you make over the long-term capital gain period are those that you have made after you hold your shares for at least one year. Short-term capital gains are those gains that you make while you hold the shares for less than one year.
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