Simply put, the stock market refers to the platform over which a publicly listed company trades its shares and issues them to the general public – collectively considered to be the shareholders of the particular company. The primary market is where the company issues its shares through an Initial Public Offering (IPO) in order to raise capital.

Introduction

Constituting the largest investment avenues, the stock market consists of two primary stock exchanges – the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). It is the primary market that publicly listed companies use to list their shares, following which investors can proceed with buying or selling those shares over the secondary market.

How is the stock market regulated in India?

In India, both the primary and secondary markets are presided over by the Securities and Exchange Board of India (SEBI). Constituted as an independent unit under the SEBI act, 1992, the statutory board retains the right to conduct periodical inspection of the stock exchanges.

Share markets – The types

  • Primary market
  • Companies list their shares over the primary market with the objective to raise funds. Should the company be issuing shares for the first time, the inherent process is referred to as Initial Public Offering (IPO). It is through this process that the company proceeds towards becoming a public entity.

  • Secondary market
  • It is the secondary market over which a company’s shares are traded. Once investors sell their holding, they can exit the secondary market.

Workings of the share market

  • Understanding stock exchange
  • Stock exchange refers to the platform over which financial instruments - such as stocks and derivatives - are bought and sold. The general rule is that participants must be registered with SEBI as well as the stock exchange prior to conducting these transactions – collectively called trades.

  • Listing in the primary market
  • A company that has just newly gone public has to register itself in the primary market through a process known as Initial Public Offering (IPO). Here, the company has to furnish details about itself, stocks that it wants to issue, etc. Allotment of stocks happens during the process of listing, following which bidders get their respective shares.

  • Trading over secondary market
  • Once the company has listed itself in the primary market, investors can then start trading the issued stocks over the secondary market. In simple terms, a secondary market is the melting pot for buyers and sellers wherein a gamut of financial transactions takes shape on a regular basis.

  • What does a stock broker do?
  • Considering the sheer number of investors, it can be problematic assembling everybody at a common location. This is where stock brokers and brokerage firms – that have to be mandatorily registered with the stock exchange – come into the picture.

    Besides serving as middlemen between investors (buyers and sellers), stock brokers act as intermediaries between investors and the exchange as well.
    Once a price is finalized, the stock exchange immediately confirms the relevant particulars in order to do away with any discrepancy or default, for that matter.
    This is followed by ‘settlement’ – a process whereby ownership of shares is transferred to the investors. Usually, transfer of ownership happens over two days from the date of trading (T+2).

Click here to open an online trading account.

DISCLAIMER

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product.  Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.



Trending Articles

Article Links

Equity Fund

Financial Derivatives

What is Demat Account

What is Share

What is Stock Market

Latest Articles

stocks-and-securities
stocks-and-securities

What is GDR in the stock market?

Read More
Posted on 20 March 2020
stocks-and-securities
stocks-and-securities

What is Over-The-Counter Market Trading?

Read More
Posted on 20 March 2020
stocks-and-securities
stocks-and-securities

What is a Dividend in the Share Market?

Read More
Posted on 20 March 2020

Featured Articles

image abc-of-personal-money
abc-of-personal-money

Are Millennials Any Different When It Comes To Planning Financials?

Read More
Posted on 05 February 2020

Relevant Articles

image pension-funds
pension-funds

What is the PM-SYM Scheme?

Read More
Posted on 27 March 2020
image pension-funds
pension-funds

NPS vs PPF – Which Is A Better Option For Investing?

Read More
Posted on 27 March 2020
image pension-funds
pension-funds

How to Have a Monthly Income Throughout Life

Read More
Posted on 27 March 2020