Share Market Basics in India

Each one of us wants that our future is secured and our hard-earned money is available to us at the times of need along with fulfilment of other responsibilities. We may save a large amount of money but the monster of inflation or the rate at which things become costlier tends to eat away our savings. Therefore, to keep our funds safe, we need to invest in certain long-term avenues wherein our returns beat the inflation. Share market is one of the best avenues to keep our funds invested for the long-term and reap benefits.

A share market is an electronic platform wherein the buying and selling of shares issued by the companies take place. A company who wants to raise money from public gets its shares listed through an Initial Public Offering (IPO) and the shares are allotted to the applicants. After that, there is regular buying and selling of shares by investors. As the share price grows over the years, so does the money of the investors. Let us learn the share market basics to understand its functioning better.

There are Two Kinds of Share Markets:

• Primary market

In the primary market, the company launches an IPO wherein it raises a certain amount of capital. This is the process of being listed on the stock exchange or a share’s initiation into the stock market.

• Secondary market

Once the shares are listed on the stock exchange, there will be regular trading or buying/ selling of the shares. This is called the secondary market. The buyer of the shares and the seller agree upon a price, which is reflected in the trading price determined by the forces of demand and supply. The investor has to initiate share trading through an individual broker or a brokerage firm.

While shares are traded in a share market, the broader market where other financial instruments such as bonds, mutual funds, and derivatives are traded is known as a stock market. Let us understand each of the instruments in details:

• Bonds

Companies are always in need of money sometimes for expansion, while sometimes for a specific project. However, they cannot always approach banks for loans. Hence, they resort to other ways. A company may raise funds from multiple investors who are promised timely repayment of their money along with interest payments. This is known as bonds. It is a debt instrument, which means that as an investor you feel you are investing money but actually, you are lending it to a company. You will get periodic interest payments and the actual amount on maturity. There are also bond options, which allow you to save taxes.

• Mutual funds

Mutual funds are a financial instrument, which has become very popular in recent times. Not everyone has the acumen to invest directly in the markets. Most of us may not even have the complete share market knowledge. Hence, a mutual fund is a means by which asset management companies or fund houses encourage investors to pool in their money so that they can invest the collected sum in equity or bond markets under the guidance of an expert Fund Manager. Each investor then reaps benefits in proportion to their investment. Mutual funds give the investor the advantage of exposure to markets under the guidance of expert advice with minimal risk.

• Derivatives

Share prices are subject to fluctuations and it is difficult to set a fixed price for the securities. Derivatives are instruments, which helps you to trade in future at a price that is fixed today. Derivatives are nothing but an agreement or a contract that you enter in today to either purchase or sell a share or any other instrument at a pre-determined price at a future date.

How to Trade in Shares Online

To trade online, you require a trading account and demat account. These two accounts will be linked to your savings bank account in order to facilitate the seamless transfer of shares and money. Indiabulls Ventures Limited has various kinds of trading software to cater to a diverse base of traders who want to buy and sell shares.

• Shubh Mobile Trading App

This is a mobile trading app by Indiabulls, which allows you to take charge of your share investments and make wise financial decisions regarding your future. It is available for download on the Playstore and App Store. You can access the ‘Dashboard app’ on Shubh to get a quick view of your portfolio position, open orders, and order summary, among other aspects. Apart from this, you can also access real-time share prices, news on domestic and world economy, market statistics, and details of every happening at the cash and futures segment. In short, you will get the complete share market information in just a few clicks.

• Power Indiabulls (PIB)

PIB is an online trading platform, which offers some of the most advanced trading features and rich experience to online traders. With features such as real-time reports, online trading, stock prices, newsroom, and charting PIB empowers internet-based users to participate in the equity markets, Futures & Options (F&O), and online IPOs. Some of the other reasons to subscribe to PIB include multiple market watch windows, live news, global market summary, customized market watch, and NRI trading.

What does the SEBI do?

There are many risks associated with the stock markets. Therefore, the Government of India has established the Securities and Exchange Board of India (SEBI) since 1988, to supervise the functioning of the secondary and primary markets in India. In 1992, the SEBI became an autonomous body through the SEBI Act.

The SEBI is responsible for the complete development and regulation of the stock markets. One of the main objectives of the SEBI is to safeguard the interest of all the investors and ensure fair practices and transparency in the dealings of security. To achieve this, the SEBI releases measures and mandates from time to time. The entire stock exchange and the associated intermediaries need to comply with the mandates of the SEBI.

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