The stock market refers to the collection of markets and exchanges where regular buying, selling, and issuance of shares of publicly-held companies occur. These financial activities are conducted over the counter (institutionalized formal exchanges). There are times when securities cannot meet the requirements to have a listing on a standard market exchange such as the New York Stock Exchange (NYSE). Then these securities can be traded over-the-counter. There can be multiple stock trading centers in a country or a region which allow transactions in s tocks and other forms of securities.
There is a key difference between t he stock market and the stock exchange. The stock market represents the companies that list the equity shares for the public investors to trade. Stock Exchanges enable and facilitate those equity securities, stocks by providing the infrastructure.
Over-the-counter (OTC): It is a process in which securities can be traded via a broker-dealer network, unlike the centralized exchange. Over-the-counter trading involves equities, debt instruments, and derivatives.
Though it is called a stock market, it is primarily known for trading stocks or equities. There a re other financial securities – like exchange-traded funds (ETF), corporate bonds, and derivatives based on stocks, commodities, currencies, and bonds are also traded in the stock markets.
An exchange-traded fund (ETF) is a vessel of securities that trade on an exchange, similar to a stock.
ETF share prices fluctuate all day as any activity like buying and selling of the ETF. This is not like mutual funds as they only trade once a day after the market closes.
ETFs can contain all types of investments including stocks, commodities, or bonds. ETFs offer low expense r atios and fewer broker commissions than buying the stocks individually.
Broker-Dealer: A firm that functions as a broker by getting the sellers and buyers together. They also act as a dealer by taking positions of its own in selected securities.
The Broker-dealer is a license granted by the Securities and Exchange Commission (SEC). This grants the licensee to buy and sell securities for its clients’ accounts.The firm may also act as principal, or dealer, trading securities for its inventory.
TOP 10 LARGEST STOCK MARKETS (According to Market Capital)
|●||1) New York Stock Exchange (NYSE), US|
|●||2) NASDAQ, United States|
|●||3) Shanghai Stock Exchange (SSE), China|
|●||4) Honk Kong Stock Exchange (SEHK)|
|●||5) Japan Stock Exchange (JPX)|
|●||6) Shenzhen Stock Exchange (SZSE), China|
|●||7) EURONEXT, Europe|
|●||8) LSE Group, UK and Italy|
|●||9) Bombay Stock Exchange (BSE), India|
|●||10)National Stock Exchange (NSE), India|
|●||11) Toronto Stock Exchange, Canada|
The Bombay Stock Exchange , is an Indian stock exchange located on Dalal Street in Mumbai. It is the oldest stock exchange in Asia, established in 1875. The BSE is the 9th largest stock exchange with a new market capitalization of $3 trillion as of 2021. There are 6.9 crore+ registered investors, 1400+ brokers, 69000+ MF distributors and 4700+ companies.
National Stock Exchange of India Limited (NSE) is the 10th largest government-owned stock exchange of India, located in Mumbai, Maharashtra. NSE was established in 1992.
The New York Stock Exchange (NYSE), which dates back to 1792 is the oldest and the largest stock exchange in the world. Many of the oldest publicly traded U.S. companies are listed on the New York Stock Exchange(Big board).
The Intercontinental Exchange now owns the NYSE, after purchasing it in 2013. The New York Stock Exchange passed the milestone of one million shares traded in one day in 1886. By 1997, one billion shares were traded daily on the NYSE.
The Shanghai Stock Exchange ( SSE) is the largest stock exchange in mainland China. A-shares and B-shares are the two main classes of stock for every company listed on the SSE. China Securities Regulatory Commission(CSRC) is run by a non-profit. Most of the total market cap of the SSE is made up of formerly state-run companies like major commercial banks and insurance companies.
There are some strict regulations for a company to be listed in the Shanghai Stock Exchange:
- The company should have the approval of the
- It must have a total share capital of more than RMB 50
- The amount of publicly-offered stock must be greater than 25% of total issued shares unless a company’s total share capital is more than RMB 400 million, in which case the percentage is reduced to only 10%.
- The company must have no records of major illegal acts or any false financial reports in the past three
The two prominent Indian market indexes are Sensex and Nifty. Sensex is the oldest market index for equities. 47% of the i ndex’s free-float market capitalization includes shares of 30 firms listed on the BSE. It was created in 1986 and provides time-series data from April 1979, onward.
The other index is the Standard and Poor’s CNX Nifty. It includes 50 shares listed on the NSE, which represent about 46.9% of its free-float market capitalization. It was created in 1996 and provides time-series data from July 1990, onward.
The overall responsibility of development, regulation, and supervision of the stock market rests with the Securities and Exchange Board of India (SEBI), which was formed in 1992 as an independent authority. SEBI has consistently tried to lay down market rules in line with the rules stated in the best interests of the market. It holds vast powers like imposing penalties on market participants, in case of a breach.
SEBI is a statutory regulatory body established in 1992. It regulates the Indian capital and s ecurities market while ensuring to protect the interests of the investors. They formulate regulations and guidelines. SEBI controls the operations of depositories, participants, custodians of securities, foreign portfolio investors, and credit rating agencies. The head office of SEBI is at BKC, Mumbai. It restricts insider trading, to stop fraudulent and unfair trade practices related t o the securities market. Their job is to promote and regulate. The SEBI has three main powers:
- Quasi-Judicial: SEBI is empowered to deliver judgments related to fraud and other unethical practices in terms of the securities
- Quasi-Executive: SEBI implements the regulations and judgments made and takes legal action against the It is also authorized to inspect Books of account s and other documents if it comes across any violation of the regulations.
- Quasi-Legislative: Some of SEBI’s regulations consist of insider trading regulations, listing obligations, and disclosure These have been formulated to keep malpractices at bay.
The stock market allows companies to issue, circulate and sell their shares to the common public for the first time through the process of initial public offerings (IPO).
An initial public offering (IPO) is the process of offering shares of a private corporation to the public in the event of new stock issuance. These companies have to meet the requirements and clauses of the exchanges and the Securities and Exchange Commission (SEC) to hold an IPO.
An opportunity is presented to the companies through the primary market. They can obtain capital by offering shares.
Companies hire investment banks to market, gauge demand, and set the IPO price and date, etc. It basically means that a company divides itself into a number of shares (say, 30 million shares) and sells a part of those shares (say, 2 million shares) to the common public at a price (say, 200 INR per share).
IPO is also seen as an exit strategy for the founders and the early investors(mainly venture capitals).
One needs to have a Demat account to start investing.
Demat is simply an account that allows you to hold your shares in a virtual electronic format. A Demat account dematerializes the physical shares by converting them to an electronic form. On opening a Demat account, one can be given a Demat account number to be able to virtually settle your trades. Demat is quite s imilar to a bank. In your Demat account too, the securities are held and accordingly debited and credited. You do not need to have any shares to open a Demat account.
Benefits of a Demat account!
- Security of shares: The important benefit of the Demat account is that it is safer than holding physical shares w hich can get lost, damaged, or
- No forgery or theft: Since the Demat account is electronic in nature, the risk of documents getting stolen or lost is
- Lower cost: Physical share certificates attract paperwork and stamp With a Demat account, all this is scrapped out and you can get a Demat account easily.
- Multiple access points: A Demat account is operated electronically, which essentially means that users can access the account from multiple touchpoints—mobile, tablet, PC, laptop,
To select a stock to invest one must definitely try Zerodha and ticker tape are the best online platforms.
What is s&p
The S&P 500 Index, or the Standard & Poor’s 500 Index, is a market-capitalization-weighted index of the 500 largest U.S. publicly traded companies. The S&P is a float-weighted index, meaning company market capitalizations can be adjusted by the number of shares in the market for public trading.
Summing the total market capital s hould be the 1 st step to determine the weighting of each component of the S&P.
- For the index, calculate the total market cap by adding all the market caps of the individual
- Take the company’s market capitalization and divide it by the total market cap o f the index to calculate the weighting of each
What is the P/E ratio?
The price-earnings ratio relates to a company’s share price to its earnings per share. A high P/E ratio can mean two things, either the company’s stock is overvalued or the investors are expecting a high profit or growth rate in the near future. Companies that are losing money do not have a P/E ratio since there is nothing to put in the denominator. There are two kinds of P/E ratios – forward and trailing P/E – that are used i n practice.
What is the P/B ratio?
The P/B ratio measures the market’s valuation of a company relative to its book value. The market value of equity is typically higher than the book value of a company. P/B ratios under 1 are typically considered s olid investments.
What is dividend yield?
The dividend yield is the amount a company pays shareholders for owning a share of its stock market divided by its current stock price. The dividend yield–displayed as a percentage–is the amount of money a company pays shareholders for owning a share of its stock divided by its current stock price. Mature companies mostly par dividends.
What is beta Volatility?
Beta is a concept that m easures the expected move in a stock relative to movements in the overall market. Greater than 1.0 suggests that the stock is more volatile t han the broader market, and a beta less than 1.0 indicates a stock with lower volatility. Beta calculates the risk from the expected return. Beta is a better indicator of short-term risk and not a long-term risk.