To create wealth or earn more income through the stock market, should we directly jump to the market and directly trade? Since 1792 the stock market is operating and will operate till humans are alive on the earth. So before jumping into the market, please try to have a basic understanding of the stock market, attend training or self-study, reading books, financial news, etc.
Here, I am going to discuss below points:
What is the stock market/Exchange?
It can be defined as a market place where the company’s shares are traded.
Investors /traders normally participate in the market to buy /sell shares and other financial products.
In India, major exchanges are the Bombay Stock Exchange (BSE), National Stock Exchange (NSE), and Multi Commodity Exchange (MCX) etc.
Who are the investors?
Investors could be Investment bank, Wealth Management firms, Trading Firms, Hedge Fund, Mutual Fund, Insurance, Govt Pension fund) , retail traders, etc. These firms manage the fund of their clients /rich clients/High net-worth individuals /Government etc.
Major institutional firms in India like SBI Capital Markets, Life Insurance Corporation of India, SBI Life and SBI Mutual Fund, etc.
Retail traders are normally individual trader manages their own trading account.
What are the types of products available in the Stock market to buy/sell?
There are many products available like as below major types:
1. Cash equity
2. Derivatives (Index /stock Futures and Options )
3. Commodity
What is the primary and secondary market?
In the primary market the stock/shares/securities are created through IPO (Initial Public offerings).
In the secondary market these shares are traded by investors/retail traders.
What are initial public offerings?
It can be defined as the public offerings where the company’s some portion of ownership sold to institutional investors /retail investors. IPO offering normally managed by Investment banking IPO division and they get commission depending on the IPO offering size. In this way a company can raise funds for business expansion or other future growth plans.
How one can trade through the stock market?
To trade into the stock one needs to create a brokerage account as brokerage firm provides the platform to trade, as they have network connectivity to exchanges like NSE, BSE, or MCX.
What is the role of CDSL and NSDL?
CDSL stands for Central Depository Securities Limited, whose role is to hold the securities in electronic forms. When somebody buys stocks the details of the buyer, number of quantity, date etc CDSL keeps all these information linked to his PAN and DP ID. CDSL works for the Bombay Stock Exchange (BSE).
NDSL stands for National Depository Securities Limited, whose role is to hold the securities in electronic forms. It works for National Stock Exchange (NSE).
DP ID is unique identification number stands for depository participant ID (CDSL/NSDL) , this ID allocated each customer who opens brokerage account.
What is Demat Account Number?
A demat account number is the combination of DP ID and Customer ID of the Demat account holder.
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