If you are here, then you should know that you are already different from the crowd. Less than 2% of Indian population actually looks to understand about Share Market and its related concepts before they start investing their hard-earned capital.
Most of the traders and investors choose to jump into the share market space and start trading without much of a knowledge about the basics and fundamentals.
Well, if you are looking forward for a better understanding of stock market basics, then it seems that you are getting serious about managing your earnings. You want your hard-earned money to work for you.
However, while you are trying to enter into it, you need to understand that investing through share market has its own set of rules, risks, returns and dependencies on many external factors.
You also need to list down your investment objectives, returns expectations, risk appetite, market understanding level, broker dependency level etc.
At the same time, you need to understand the volatility factor related to your investments in the share market. You can invest in blue chip companies which carries less risk and high returns.
For instance, the share market is more volatile than real-estate, fixed deposits, gold investments, etc while is less volatile than cryptocurrency or Oil and gas exploratory drilling for that matter.
In order to understand the basics of share market, we have this whole review for you with information on different stakeholders, exchanges, indices, types, timings, tips, returns and other related concepts.
Share Market Meaning
Share Market – is a specific kind of market where shares are bought and sold by different individuals, institutions and corporations. These shares belong to different companies that are listed on different exchanges in the share market.
Let’s say you are a trader and are looking to understand how to buy shares and/or sell shares of different companies. Share Market is the place where those transactions happen. However, you don’t need to physically go to any specific location.
You can access it through the trading “platforms” that provided by different “stockbrokers” or simply said, intermediaries from anywhere.
These “platforms” come in the form of mobile trading apps, web applications or terminal software that can be downloaded and installed onto your laptop or computer.
Are we getting ahead of ourselves? Let’s take a step back and understand different kinds of market participants to understand what we just meant at the top.
Share Market Founder
The share market in India was founded in the forms of different exchanges and the first exchange that saw the light of the day was in the year 1875.
Yes, it is that old!
It was founded by Premchand Roychand who was an influential businessman of his time. He made huge chunks of money through the stockbroking business and was called the “Big Bull” in the industry.
Currently, Vikramajit Sen is the Chairman of the exchange while Ashishkumar Chauhan is the managing director and CEO.
Sectors in Share Market
In total, there are 18 sectors in the share market encompassing all the potential business domains and industries.
Within these 18 sectors, 1000s of companies are enlisted. Here are the details:
It is distributed to the investors in the form of equity stocks.
It is basically the division of the equity stocks.
It is issued when there is no cash liquidity in the company for issuance to the investors.
This one is issued when the market price of the stock is overvalued and needs to be reduced.
Stock dividend is issued from the free reserves of the stocks.
A stock split, when issued, increases the number of shares without impacting the value of the share in any form.
Shareholders get new shares allocated.
Existing held shares are further multiplied. No new shares allocated.
Share Market Growth
When we talk about the growth of the share market, it can be seen from multiple perspectives. The growth can be of entities such as:
Number of overall traders in the market
Number of stockbroking companies provided trading services
Number of exchanges opened
Monetary Scale of transactions
Number of transactions performed
Overall valuation of different indices
There could be some metrics as well to judge the growth of the share market. However, for reference here, let’s talk about the BSE valuation over the last few years.
The below table mentions the BSE valuation over the last 12 years and how it has grown in its scale.
SENSEX Major Single Day Highs
Furthermore, here is a quick look at the expected forecast of BSE based on market trends and momentum. This forecast is done for a few months:
Stock Market Volatility
Volatility in the stock market gives you a measure of the risk attached to the corresponding stock or index. Higher the volatility, higher is the risk.
The stock or any investment product, with its price point, if sees a lot of ups and downs and moves a lot towards new highs and new lows, it is considered to be a highly volatile stock.
As you can imagine, if a lot of such fluctuations are happening, then it would imply that the stock has a reasonable amount of risk as well for traders putting their money into it.
Thus, if your risk appetite is high, you may go for shares that are highly volatile. At the same time, if you believe in low but consistent returns, then you may choose to invest in more stable and less volatile stocks.
In order to figure out the volatility of a stock, just look at the historical trends of the stock through different charts. You can spread the timeline to 6 months to a few years. This will give you a perspective on how different stocks have behaved in comparison to each other.
More the variations in its price points, higher is the volatility, higher is the risk, higher are the potential returns!
Stock Market Returns
Like in the case of fixed deposits or gold, there is no specific returns percentage that one can tell you which is, in a sense, guaranteed.
However, if you want to get an “idea” on how much you can expect on an average, then the stock market in India has been providing returns around 15% to 18%. This is based on the assumption that you have done a requisite amount of research or have consulted a professional before investing your capital in the stock market.
A quality portfolio can even beat this range as well, while, a clueless portfolio may result in losses too.
Furthermore, the returns in stocks may also depend on the sector you are investing in. While one sector may be lucrative, the other one could have repercussions.
Here is a quick snapshot of some of the yearly returns provided by a few sectors:
Food & Beverage
Oil & Gas
Market Value Of Shares
Another crucial concept related to shares is the market value of shares.
When a company lists for the first time in the stock market through an IPO, there is a specific issue price that is set up by the underwriters working for the IPO company.
However, over a period of time in the secondary market, the stock sees a lot of ups and downs in its value. This has a lot to do with the business dynamics, industry or sector, government regulations on the industry, macro and microeconomic impacts, global factors along with the internal momentum of the management.
For example, a stock such as Symphony Limites was priced at 2.33 in the year 2008 while its current market is 1011.45. Similarly, Bajaj Finance was reeling at 6.75 then and now it is placed at a market value of 2593.75.
It happens the other way around too.
Reliance Infra, for instance, was placed at 562.50 in 2014 while it is now at 20.90. At the same time, Videocon industries stock was at 159.35 in 2014 and is currently at 2.59.
Thus, these examples give a clear picture of how to look at the stock market and if you are looking to enter, then learn stock market trading.
The share market opening time on a regular basis for trading is 09:15 am on a working day.
However, there are a couple of timelines that you need to be aware of. That is, there is a pre-opening session at 09:00 am for Order entry & modifications which lasts till 09:08 am.
And even before that, there is a block deal session between 08:45 AM to 09:00 AM. During these 15 minutes, block deals between two parties happen where the transaction size consists of a minimum quantity of 5 lakh shares or a minimum value of ₹5 crores.
The details of these deals are disclosed by the stockbrokers to their trading clients at the end of the trading session.
More information on this discussed later in this review.
Share Market Closing Time
The stock market closes at 03:30 pm, as far as the regular trading session is concerned.
However, even in this case, there are a few details you must be aware of. Like in the case of the morning session, there is a block deal session in the afternoon as well that happens between 02:05 PM to 2:20 PM.
Furthermore, there is a post-closing session between 03:30 pm to 03:40 pm along with a consolidation session between 03:40 pm to 04:00 pm.
More details are on this are discussed in the Share market timings section ahead.
Share Market is Closed Today?
Well, the share market is generally closed on the public holidays and holidays that are based on state or central elections etc.
Here is a quick look at some of the declared holidays by the share market:
Mahatama Gandhi Jayanti
Diwali Laxmi Pujan
For more information on this, you can check this detailed review on Stock Market Holidays for different indices and figure out whether the stock market is closed today or not.
Share Market Participants
There are multiple parties involved in the overall management and operations of the share market with each entity fulfiling its own part in the play. Let’s look at those ones and see how the stock market works:
Share Market Regulators
Like the Banking space is regulated by RBI (Reserve Bank of India) in our country, on similar lines, the Indian Share market is regulated by SEBI or Securities and Exchange Board of India and the Portfolio Management Services Regulations SEBI are being followed as well.
The primary operation of this regulatory body is to provide a conducive and protective environment for stock market investments while promoting and developing the overall share market among potential investors.
SEBI was established in the year 1992 as per the SEBI act 1992 that was set-up to keep it aligned under the legal jurisdiction. It is headquartered in Mumbai along with a presence in some of the other metro cities of India.
Ajay Tyagi is the current chairman of SEBI.
Share Market Exchanges
There are different share market exchanges that offer different investment and trading options for potential investors. Some of those are listed below:
NSE or National Stock Exchange is the biggest exchange in India.
It was incorporated in the year 1992 and in fact, was the first exchange in India that provided screen-based electronic trading without the use of physical shares. In total 1696 companies are listed on NSE however, the top 50 companies are majorly used for trading and order placement.
The index NIFTY 50 is one of the most prominent indices under NSE.
The monetary size of NSE is close to $1.5 Trillion dollars which makes NSE among the top 10 exchanges in the world. If you are looking to invest in NSE listed companies, then apart from equity trading, you can trade in other segments such as Commodity, Currency, Derivatives etc.
Quick Fact: NSE processes 500 Million+ messages every day and claims to have an uptime of 99.99%.
BSE or Bombay Stock Exchange is one of the oldest stock exchanges in the world and in fact, is the first Asian Stock Exchange.
It was launched back in the year 1855 and was finally recognized by the Government of India in 1957. In total, this exchange has 5749 companies listed and traders trade on this exchange in these listed companies.
Out of these 5000+ listed companies, the Sensex index is used as a component that indicates the momentum of the market. Sensex uses 30 out of the total listed companies for this monitoring.
The total market cap of BSE is ₹175+ Lakh Crore.
Quick Fact: BSE claims to be the fastest exchange in the world with a median speed of trading of 6 microseconds.
MCX or Multi Commodity Exchange of India Limited, as the name suggests, is an independent commodity derivative-based exchange. It has its headquarters in Mumbai and was established in 2003. However, it came under the regulations of SEBI as recent as September 2015.
The turnover of this exchange was recorded at around ₹13 Trillion in 2017, making it one of the largest commodity exchanges in the world.
There are several commodity types offered by this exchange include Metal, Energy, Bullion, Agro commodities with further segregations ahead.
Quick Fact: MCX is India’s first publicly listed exchange.
NCDEX or National Commodity & Derivatives Exchange Limited is a relatively small exchange and like MCX, it is a commodity-based stock exchange.
This exchange was established back in the year 2003 and has around 900 registered members with 25 lakhs+ client base. NCDEX has a presence in 7 metro cities of the country including Delhi, Mumbai, Hyderabad, Kolkata etc. If you are looking for a stockbroker that is a member of NCDEX, then you can trade in both agri and non-agri based commodities.
Share Market Index
Like mentioned above, each of the exchanges is constituted with 1000s of listed companies.
Obviously, it is next to impossible to track all these companies in one go to get an idea about the market momentum.
That is why there are different indices in the share market under different exchanges that help investors and traders understand the direction in which the market is moving.
For instance, there are indices namely Sensex and Nifty. Each of these indices is made up of the summation of the current market price of a few companies (with specific weight to different types of companies).
These companies come from different sectors and domains to make sure there is no inclination towards a particular company or business sector.
A Share Market Index help in the following ways as mentioned below:
Filtering relevant companies that can make or break the momentum, rather than tracking all companies.
Indices act as market benchmarks. In other words, if you beat the returns provided by the index at an overall level, then you are going pretty well and vice versa.
Indices help to understand the trader’s sentiment as objectively as possible.
Some of the indices in the Indian Share market are Sensex, Nifty 50, Nifty BSE Bankex, BSE Smallcap, BSE Energy etc.
Share Market Types
There are two different types of share market at the onset:
Primary Share Market
Secondary Share Market
When a company that is not listed in any of the exchange and is looking to go public and raise funds, they come up with an IPO (Initial Public Offering).
With an IPO, a company gets funding from generic investors like you and me while the investors get a specific stake in the company in return. This share allocation through an IPO is done in the Primary Market.
On the other hand, when we talk about generic trading in the share market where traders buy and sell stocks to each other, that kind of market is the Secondary share market. The price of the shares of the listed companies is controlled in the secondary market.
Share Market Timings
When you trade in the stock market, then there are a couple of things (or rather dates) you need to be aware of:
For example, if you bought 100 shares of Infosys on Tuesday, 1st March 2005 as a delivery trade.
Then, there is a T+2 settlement cycle that you need to consider while placing that trade. It basically implies that the shares you have purchased will be reflected in your demat account after 2 business days i.e. 3rd March 2005 (assuming there are no stock market holidays between the dates).
There was a time when these difference of dates was T+5 but with the advancement in technologies and corrections in operational processes, it is now maintained at T+2 days (hoping it gets even quicker going forward).
Remember, you need to be wary of these settlement cycles if you are placing an order type that requires you to actually own a share and then get it credited to your demat account.
For instance, if you are placing an intraday based trade and you are going to square off/exit your position by the end of the day, in that case – there will not be any settlement happening.
As far as trading hours are concerned, there is a variance depending on the exchange considered.
For instance, for BSE or Bombay Stock Exchange, the trading hours are between 9:15 am to 3:39 pm every business day while NSE operates in the timeline between 9:15 am to 3:30 pm.
There are multiple share market apps that can assist you while placing your trades. Most of the stockbrokers provide their respective mobile trading apps for you to take care of your investments in the stock market.
These mobile trading apps provide you with features such as:
Order placement and execution
Market trends and news
Research, tips and recommendations
Furthermore, you are suggested to check out an app named ‘Stock Pathshala‘ which is basically a stock market education app. This app provides you with free stock market courses, audio podcasts, videos, market trends and a lot more.
Benefits of Stock Market
If you choose to invest your capital through the stock market, here are a few benefits you’d be availing:
Gains on your investments post calculative portfolio set up
Potential dividend income outside the returns received.
Protection against inflation
Ease of access towards your investments
Easy to buy and easy to sell through different trading platforms
Stock Market Bull & Bear
Another important aspect of the Share Market is understanding the trend of the market. In other words, whether the market is moving in a positive/upward direction or is going down towards a slope.
Although, the direction depends on multiple internal and external factors including micro and macroeconomics, industry news, corporate movements and so on.