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FUNDAMENTALS OF STOCK MARKET

FUNDAMENTALS OF STOCK MARKET

Stock

  • Stock is nothing is but the ownership of the company divided into small parts and each part is called as Stock.
  • A person carrying a stock of a company holds that part of ownership in that company.
  • A person holding maximum stocks has maximum ownership like Directors, Chairman etc.

Stock Market

  • A Stock market is the place where buying and selling of stocks takes place. Nowadays due to Internet and advanced technology, buying and selling of stocks takes place anywhere in India and also from foreign country, there is no need to be physical present in exchanges like NSE and BSE.

Stock market information and its analysis

  • Financial markets like NSE (National Stock Exchange) and BSE (Bombay Stock Exchange) are India’s economic barometer (a guide to economic growth).
  • Stock markets like NSE and BSE enable trading of a company’s stock.

Rolling Settlement Cycle: (RSC)

  • RSC means when you will get your stocks in your demat account or in physical form.
  • In a rolling settlement, each trading day (T) is considered as a trading period and trades executed during the trading day (T) are settled on a T+2 basis i.e. trading day plus two working days.

What is Demat account and why it is required?

  • Securities and Exchange Board of India (SEBI) is a board (corporate body) appointed by the Government of India in 1992 with its head office at Mumbai.
  • One of its functions is helping the business in stock exchanges and any other securities market.
  • Demat (short form of Dematerialization) is the process by which an investor can get stocks (also called as physical certificates) converted into electronic form maintained in an account with the Depository Participant (DP).
  • DP could be organizations involved in the business of providing financial services like banks, brokers, financial institutions etc. DP’s are like agents of Depository.

Depository is an organization responsible to maintain investor’s securities (securities :an be stocks or any other form of investments) in the electronic form. In India there are two such organizations called NSDL (National Securities Depository Ltd.) and CDSL (Central Depository Services India Ltd.).

Investors wishing to open Demat account have to go to DP and open the account. Opening the Demat account is as simple as opening the bank account with any bank. FUNDAMENTALS OF STOCK MARKET

As you need a bank account to save your money, make cheque payments etc, likewise you need to open a demat account if you want to buy or sell stocks.

All stocks you possess show in your demat account. So you don’t have to possess any physical certificates. They are all held electronically in your demat account. As you buy and sell the stocks, accordingly your stocks will get adjusted in your account.

Is a demat account a must?

  • The market regulator, the Securities and Exchange Board of India (SEBI), has made t compulsory to open the demat account if you want to buy and sell stocks. So a demat account is a must for trading and investing.

Finally – After successfully opening the demat account, the DP will allot “Beneficial Owner Identification” Number, which will be needed to mention for all your future transactions. If you want to sell your stocks, you need to place an order with your broker and give a ‘Delivery Instruction’ to your DP.

The DP will debit your account with the number of stocks sold. You will receive the payment from your broker.

If you want to buy stocks, inform your broker about your Depository Account Number, so that the stocks bought are credited into your account.

Important terms in stock market and in stock trading

  • Open – The first price at which the stock opens when market opens in the morning.
  • High – The stock price reached at the highest level in a day.
  • Low – The stock price reached the lowest level in a day.  FUNDAMENTALS OF STOCK MARKET
  • Close – The stock price at which it remains after the end of market timings or the final price of the stock when the market closes for a day.
  • Volume – Volume is nothing but quantity.
  • Bid – The Buying price is called as Bid price.
  • Offer The selling price is called offer price.
  • Bid Quantity The total number of stocks available for buying is called Bid Quantity.
  • Offer Quantity The total number of stocks available for selling is called Offer Quantity.
  • Buying and selling of stocks Buy is also called as demand or bid and selling is also called as supply or offer. First selling and then buying (this only happens in day trading) is called as shorting of stocks or short sell.
  • Stock Trading Buying and selling of stocks is called stock trading.
  • Transaction One complete cycle of buying and selling of stocks is called One Transaction.
  • Squaring off This term is used to complete one transaction. Means if you buy then have to sell (means square-off) and if you sell then you have to buy (means square-off).
  • Limit Order In limit order the buying or selling price has to be mentioned and when the stock price comes to that price then your order will get executed with the mentioned price by you.
  • Market OrderWhen you put buy or sell price at market rate then the price get executes at the current rate of market. The market order get immediately executed at the current available price.  FUNDAMENTALS OF STOCK MARKET

ALSO READ : https://www.brainyias.com/iasbuzz/balance-of-payments/

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