Share Market: What is Share Bazar, Meaning, Types, Role, Investment & Tips
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The share market is extremely important for a country’s economy. It is a platform where big and small companies offer shares of their business to investors. The best thing is that anyone can open a Demat account and invest in the share market. Also known as share bazaar, it is crucial for investors who want to invest in publicly traded companies with high-profit potential. It also indicates an economy’s overall financial health and industrial performance.

In the following sections, we will break down what a share is, the benefits of investing in shares, its types, and how to invest.

What is the Share Market?

A share market is a marketplace where investors trade different instruments like stocks, mutual funds, bonds, etc. It is a place where big organisations sell parts of their companies called shares, and retail investors buy them in expectation of greater returns.

Each share represents a part of the company. Governing authorities like SEBI manage and monitor the shear market and its functioning. Share market investment helps investors diversify their portfolios and earn returns as the company grows.

Types of Share Markets

Share markets are of two types: primary and secondary. Let's discuss them in detail:

  • Primary Market: In the primary market, a stock exchange-listed company registers to raise funds by selling a certain number of shares. After registration, the company heads towards the secondary market to sell individual shares. A firm selling its shares for the first time is called IPO (Initial Public Offering).
  • Secondary Market: In the secondary market, traders exchange new securities. It allows investors to sell their stocks and exit the investment. In the secondary share bazaar, one investor sells shares to another investor at the prevailing market price or a mutually agreed price. Usually, such transactions involve a broker to facilitate the process.

Role of Share Market

The share market ensures liquidity, price transparency, fair dealings, and price discovery in trading activities. It provides data access to all market participants to guarantee transparent and fair securities pricing. Moreover, it facilitates efficiently matching buyers and sellers with similar investment goals and risk appetites. By providing the necessary market liquidity, investors may trade in shares and derivates to earn appropriate returns. Companies use the platform to raise capital when required.

Investment in Share Market

Investment in the share market offers multi-faceted benefits that attract both newcomers and seasoned investors. These include the following:

  • Potential for high returns
  • Ownership in the company
  • Diversification across various sectors spreads the risk and reduces the impact of poor-performing shares
  • High liquidity lets you easily convert investments into cash
  • Generate wealth over time through dividends and capital appreciation

Despite these benefits, investing in the share bazaar includes risks due to volatility, credit risk, and unexpected events like changing government policies, man-made disasters, or bad news specific to a company. Utilise a balance of long-term and short-term investment strategies to mitigate these risks and maximise returns.

Share Market Information

Shares, mutual funds, bonds, and derivates are the four main components of the share market. Shares can be equity or preference shares; mutual funds can be money market, bond, stock, and target-date funds; bonds are debt securities to firms or the government, while derivates can include bonds, currencies, stocks, commodities, interest rates, market indices, and cryptocurrencies.

Investors, brokers and regulators are the key market participants. Investors invest in shares, brokers facilitate the trade, and regulators like SEBI ensure fair pricing and transparency in the trade. Market indices are hypothetical investment portfolios investors use to gauge market movements. Indices like NIFTY and SENSEX indicate the performance of a particular market segment, helping investors make informed investment decisions to ensure high returns.

How to Start Investing in the Share Market?

Here is a stepwise guide to invest in the share market:

  • Choose the investment type from stocks, bonds, mutual funds, derivatives, etc.
  • Select a reliable broker with market knowledge and years of experience.
  • Open a Demat account, which is mandatory to hold securities electronically.
  • Research the investment options to mitigate the risk of loss and maximise profit potential.
  • Invest in a security that best suits your investment goals and risk appetite.
  • After investing, monitor your portfolio regularly to understand its performance, reduce loss, and identify shares that do better for future investments.
  • Since the share market is highly volatile, keep up with the latest trends to make better investment decisions.

Share Market Tips for Beginners

Before making an investment in the share market, it’s crucial to understand the process of trading securities.

  • Comparing and analysing stockbrokers before opening a Demat account with them.
  • Research the available stocks to mitigate risk and improve profits. Stay updated about the latest share market all information through TV channels, newspapers, online platforms, etc.
  • Set realistic investment goals and choose stocks that suit your investment amount, risk appetite, security, and investment horizon.
  • After investing, monitor the portfolio regularly to understand the fund’s performance, reduce losses, and identify shares with high growth potential.
  • The share market keeps fluctuating, which affects their prices. Stay informed about the latest trends to understand their direction and make better decisions regarding your current and future investments.

Frequently Asked Questions

Q: What is the share market in simple words?

A share market is a platform where companies put up their stocks for sale, and traders buy them to own a portion of the business.

Q: Which is the best share to invest in?

Certifying a share as the best share to invest in depends on its financial performance and other factors. On these lines, some of the best shares are Kotak Mahindra Bank, Reliance Industries and Nestle India.

Q: How do you start trading stocks?

The first step to start trading stocks is to open a Demat account and compare securities to make a smart investment.

Q: Which share gives the best profit?

Shares in Reliance Industries, Tata Consultancy Services, Kotak Mahindra Bank, Infosys, etc., are the best shares to generate maximum profit in 2024.

Q: Which share is low price?

Crest Ventures, Taparia Tools, Guj Inds. Power and Haryana Leather are some low-investment shares with good growth potential.

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Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Tax laws are subject to amendment from time to time. The above information is for general understanding and reference. This is not legal advice or tax advice, and users are advised to consult their tax advisors before making any decision or taking any action. Mutual Fund investments are subject to market risks, read all scheme related documents carefully.