HOW SHARE MARKET WORKS

 What is a Share Market ?

   Share market is also known as stock market or equity market. It is a platform were you can buy or sell company's shares. Buying shares means- buying some percent ownership of that company. This means if gains profit, then you will also get some percent of that profit and if it faces loss then you will have to face it as well.

   Share market connects large number of people and company's where you can connect to wider audience and offer shares to public.

How Share Market started ?

Share market was started in 1600s by Dutch East India Company which used to transport goods to long distances across seas. This company needed large amount of money for the successful long distance transportation. So this company appealed to the common people to invest on their ships and in return, people will get some percent of their profit. People started feeling that this system was becoming risky because many of the ships never returned some of them got drowned due to tides. So due to this reason people who invested on this ships started facing loss. Later on they decided to invest not only on one ship but on many ships in this way their chances of gaining profit increased. In this way, this system became successful and money needed by the company was supplemented by people and in return people started earning money through shares. Nowadays, every country has its own stock exchange and they are greatly dependent on Share market or Stock market.

What is Stock Exchange ?

Stock Exchange is the place or building where, people buy or sell stocks of companies. The market can be divided into two types :- Primary market and Secondary market. In Primary markets, companies sell their shares. The companies decide under what share prices they should sell their stocks. Although there are some rules and regulations, but company cannot maneuver to much because it depends upon the demands of buyers. So nowadays, companies decide a price range to sell their stocks.

How Many Shares can a Company Have ?

   Every share of the company has equal value. It is up to that particular company, how much share it is going to make. For example:- if a company has an evaluation of 50,000 Rs then it can sell 50,000 shares for price:- 1 Rs per share or if it makes 100000 shares then it can sell them on 0.5 Rs per share. A company never sells 100 % of its shares in the share market. This is because, the owner of the company is the person who keeps majority of the shares to keep possession of his decision making power. If you sell all the shares then all the buyers of the shares, will become the decision makers or owners of your company. An individual who has more than 50% shares is able to make decisions regarding the company. Therefore, the founders of the company prefer to retain more than 50% of the shares.

   Sometimes, people who buy shares from companies can sell it to other people this is called Secondary market where people buy and sell shares among themselves and also trade shares.

India's Stock Exchange: -

   There are two popular stock exchanges in India :- One is Bombay Stock exchange which has around 5400 registered companies and National Stock Exchange which has 1700 registered companies. 

In order to observe whether the prices of the shares of the companies are moving up or down, some measurements have been made :- Sensex and Nifty. Sensex shows average trend of price fluctuations of the share of top thirty companies of Bombay Stock Exchange. Nifty :- National + fifty shows the price fluctuations of the shares of top fifty companies registered in National Stock Exchange.

 How to Sell your  Company's Shares ?

If a company wants to sell its shares on stock exchange, then it is termed as "public listing". If a company sells its shares for the first time then it is called IPO (Initial Public Offering) i.e., offering the shares to public for the first time. 

SEBI (Securities And Exchange Board of India) is a regulatory body that has been established to look into the issues of listing companies for Stock exchange and whether it is done in the proper manner or not. If you want your company to get listed then, you will have to fulfill the norms of SBEI. 

How to invest money in Stock Markets ?

       In order to indulge in buying shares, the buyer must have :- Bank account, Trading account and DEMAT account. You need bank account because you need money to buy shares. Trading account allows you to trade and invest money in a company and DEMAT account is needed to store the stocks that you buy in a digital form. The common people want to invest in Stock markets are called retail investors. A retail investor always require a broker. A broker is a person who bring the buyer and seller together. The brokers could be banks, a third party app or even a platform. When someone invest money through brokers in stock market, then the broker retains some money as his commission. This is called "brokerage rate". Banks mostly charge a brokerage rate of 1% and there are other platforms as well which charge brokerage rate of 0.05% or less than 1%. The brokerage rate is a disadvantage for those who want to take part in lot of stock trading.