What is the stock exchange & its function
Why do we go to the market We want to purchase something. Like cloth, books, fruits, etc. So we go to the market. Similarly, if we have to buy or sell a share of a company. So we go to Stoke Market. But here we do not have to go anywhere. Because whatever happens here is online. And the word we are using there is the stock market. If we add too many shares, we call it Stokes.
If we say the stock market or share market, here we do not have to be confused. Because both mean the same. And if we want to buy or bake a company’s stock here, then we need the stock market. So what has become the main purpose of the stock market? Here he helps you. It helps you, its facilities your transaction. If you are a buyer and you have cash, and you have to buy shares here. Or to buy a stock, it helps you find a share. If you are a sale and you are already holding shares and all you have to do is sell, then it facilitates you.
That he should find you by the buyer. You can sell that which you own, goods or shares. So what are we doing here? We are exchanging stock here. You bought goods from stock or you already have shared with you. So you will become a seller here.
And if you sold goods to someone, then you are doing stock exchange here. Basically because here you are only able to buy things, only then you are able to buy shares because someone here is selling it. And you are able to sell here because someone is buying it. It means to say that here you are exchanging the stock one hand to another hand. To exchange or exchange these securities or stocks, we have to stock exchange in India. Manually to stock in India first of all
- BSE – Bombay Stock Exchange which was Asia’s first stock exchange and one.
- NSE – National Stock Exchange which was established around 1992.
Apart from this, we also have a lot of state-wise stock exchange. But the trade is done here. Within India, they are both within the exchange. And of these two, the most trade is within the NSE. So we have understood this thing that if we also have to sell or buy any stock, then we will need to exchange it. And we have seen the requirement of exchange here that we have two exchanges NSE and BSE.
- BSE – Bombay Stock Exchange
- NSE – National Stock Exchange
If you are a buyer, it will help you find the sale. And if you are a sale, it will help you find a buyer, exchange. Now we have to see that if we want to buy a share, then we will buy through the exchange. There are two ways to buy shares of any company. Buy directly from your share company. Or whichever company removes the first timeshare then you buy or else who already has that share, then buy from it. So we will use two methods to buy a share. So there are many companies that have removed a lot of their shares 20 years, 25 years ago. Then we could not buy it. But if we buy share now how will we buy it. Now we have seen 2 ways to buy a share.
- Buying directly from the company.
- Or buy from someone who has a share.
So whatever share we buy here through exchange or through NSE BSE. We buy it from those who already share it.
Here why the share is selling and why are you buying
Here, the share you buy from the exchange, we cannot buy the share directly from the company. We are buying that share from whoever has the share, so we call it the secondary market. This means that someone has already bought shares from that company. And after that, we are buying it from the NSE BSE. Whatever share we are buying from NSE BSE is coming in the secondary market. We are not buying shares directly from the company. And whenever we buy shares directly from the company, we call it IPO.
IPO – Initial Public Offering
When the company comes to share for the first time and you subscribe for it and demand that we also want to share, you apply for it, and after applying you get the share. So you can say that we have bought a share directly from the company. Which we call the primary market.
1. Primary market
Is where securities are created. It’s in this market that firms (float) new stock and bonds to the public for the first time and Initial Public Offering. Or IPO is an example of a primary market.
2. Secondary market
Also called the aftermarket and follow on public offering is the financial market in which previously issued financial instruments. Such as stock, bonds, options, and futures are bought and sold.
And here we get to see important terms.
IPO – Initial public offering Many companies such as DCS, Infosys, Maruti Suzuki have their share 10, 15 years ago. Then we could not buy this share through IPO. If we want to buy shares of the company at that time, those who bought through IPO, if they want to sell, then we can buy them, then why they want to sell the share. If they feel that the company will not be able to grow further.
That is why they sell their share. Or want to cover your profit. Or are we satisfied that we have done as much profit as we wanted to create and now we want to sell it? And why are you buying? You feel that the company will grow and profit in the future after you purchase, the share price will go up. So you can buy shares of those companies here. So you are buying shares of those companies here.
Can we buy directly from the stock exchange website?
You cannot directly purchase online share by visiting the exchange’s website. Any company has a registered member in the exchange and if we talk about the registered member, we call them depository participants. So we call the same depository participant as brokers.
Basically, if you want to trend or share buy or sell. So you have to open an account with any brokers. After opening an account with any brokers you can do your trading activity from there itself. Trading activity means if you want to buy a share or make a sale then you can do it from there. It is like a bank like RBI will not let you open an account here. If you open an account with another bank, such as a private band or public bank, then you conduct an NEFT or RTGS transaction from there, then you will be able to conduct the transaction through the RBI route. So in the same way if you open an account with any brokers, whatever trade you do from here, then it will go to the exchange and whatever buy or sale you are making will be a statement.