HOW DOES SHARE MARKET WORK?

HOW DOES SHARE MARKET WORK?

HOW DOES SHARE MARKET WORK?Ask any layman about the share market investing, and they will tell you that they don’t know about stock trading. Yet, the stock market is one of the largest avenues for investment. As many as Rs. 6 lakh crore-worth stocks have been traded in the two stock exchanges in India on some occasions.

HOW SHARE MARKET WORKS:

In the previous section, you were introduced to the different market participants and other share market basics. Let’s try to stitch these narratives together and understand how the stock market works.

• A stock exchange in the platform where financial instruments like stocks and derivatives are traded. Market participants have to be registered with the stock exchange and SEBI to conduct trades. This includes companies issuing shares, brokers conducting the trades, as well as traders and investors. All of this is regulated by the Securities and Exchange Board of India (SEBI), which makes the rules of conduct.

• First, a company gets listed in the primary market through an Initial Public Offering (IPO). In its offer document, it lists details about the company, the stocks being issued, and so on. During the listing, the stocks issued in the primary market are allotted to investors who have bid for the same.