People start investing in the stock markets to grow their wealth. Some also actively trade the markets for a regular profit. However, for beginners, the stock market can be quite daunting, with its complex terminologies and intricate workings. In this post, we will provide an overview of the basics of the Indian stock markets. We will include stock market terminologies, the functioning of stock markets, and the types of stock markets in India. We will also explain how to open a trading account and start investing in stocks using popular platforms like Zerodha, Upstox, and Angel One.
Stock Market Terminologies
Before we start learning how the stock market works, it is essential to understand some of the basic terminologies related to the stock market. Here are some of the key terms:
- Stocks: Stocks are also known as shares or equities. When a company goes issues its shares to the general public, it offers its ownership to the public in the form of shares. Buying a share of a company means owning a portion of the company and becoming a shareholder. The shareholder is eligible to get a part of the profits.
- Stock Exchanges: A stock exchange is a platform or a place where traders and investors buy or sell stocks. In India, there are two major stock exchanges, eg. the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE).
- Indices: Indices are a group of stocks that represent a particular sector or market. The two most popular stock indices in India are the BSE Sensex and the NSE Nifty.
- Brokers: Brokers are intermediaries who help investors buy and sell stocks on the stock exchanges. They charge a commission for their services.
- IPO: IPO stands for Initial Public Offering. It is the first time a company brings its shares to the general public and offers its shares to the public to subscribe.
- Market Capitalization: Market capitalization is the total monetary value of all the shares of a company. Market Cap is calculated by multiplying the number of shares available in the market by the current market price of each share.
Functioning Basics of Stock Markets
The stock market functions as a platform for companies to raise capital by offering their shares to the public. When investors buy shares of a company, they become part-owners of the company and are entitled to get a part of the profits. The stock market is regulated by the Securities and Exchange Board of India (SEBI). SEBI ensures that the market operates in a fair and transparent manner free of any scams.
The functioning basics of Indian stock markets involve several key players, including investors, brokers, regulators, and stock exchanges. Here is a brief overview of their roles:
- Investors: Investors are individuals or institutions that buy and sell shares in the stock market. They can earn a profit by buying shares at a low price and selling them at a higher price.
- Brokers: Brokers are intermediaries who execute trades on behalf of investors. They charge a commission for their services and provide research and analysis to help investors make informed decisions.
- Regulators: Regulators like SEBI ensure that the stock market operates in a fair and transparent manner. They set rules and regulations for companies, brokers, and investors to follow.
- Stock Exchanges: Stock exchanges like BSE and NSE provide a platform for companies to list their shares and for investors to buy and sell shares. They also regulate trading activities on their platforms.
Types of Stock Markets in India – The Basics
There are two types of stock markets: primary and secondary markets.
- Primary Market: The primary market is where companies raise capital by issuing new shares to the public through IPOs. In the primary market, companies sell shares directly to the public, and the proceeds from the sale go to the company. Therefore, investors who participate in IPOs can buy shares at the offer price and sell them in the secondary market.
- Secondary Market: The secondary market is where investors buy and sell shares after they have been issued in the primary market and get listed. In the secondary market, the price of shares is determined by demand and supply. Investors can buy shares at the current market price and sell them at a later date for a profit if the share price increases. In the share price decreases the investor will face a notional loss.
- Apart from the primary and secondary markets, NSE and BSE, there are also different types of stock exchanges in India, including regional stock exchanges, national stock exchanges, and commodity exchanges.
How to Open a Trading Account and Start Investing in Stocks
Now that we have covered the basics of stock markets let us discuss how to open a trading account and start investing in stocks using popular platforms like Zerodha, Upstox, and Angel One.
- Zerodha: Zerodha is one of the most popular discount brokers in India. To open a trading account with Zerodha, go to the Zerodha website and click on “Open an account”. Enter your personal details and upload the required documents. After the company approves your application, fund your account, download their mobile app, and start trading.
- Upstox: Upstox is another popular discount broker that offers low brokerage fees. To open a trading account with Upstox, follow these steps. First, log in to the Upstox website and click on “Open an account”. Enter your personal details and upload the required documents. Once your application is approved, fund your account and start trading.
- Angel One: Angel One is a full-service broker that offers research and advisory services to its clients. To open a trading account with Angel One you need to visit the Angel One website and click on “Open an account”. Enter your personal details and upload the required documents. Once the company approves your application, fund your account and start trading.
In conclusion, investing in the stock market can be a great way to grow your wealth over the long term and beat inflation. However, it is essential to understand the basics of Indian stock markets before you jump into a trade. Firstly, in this post, we covered stock market terminologies. Secondly, we also covered the functioning of stock markets and the types of stock markets in India. Thirdly, we explained how to open a trading account and start investing in stocks. Lastly, we discussed popular platforms like Zerodha, Upstox, and Angel One. Remember to do your own research, and diversify your investments in different sectors. You also need to invest for the long term to reap the benefits of the stock market.