A stock market is a place where people trade stocks, bonds, and other risk weighed securities. One can find people buying and selling securities on the same day itself. And, there are many who like to buy and hold for a longer period before selling.
Why was the Stock Market created?
All it began from the European side, the money lenders at that time ensured to fill the gap left by large banks. The lenders exchanged risky debts with a different interest rate amongst each other. Meantime, people started doing the same with government debt bonds. As there was no intermediate between the involved parties at that time, people used to hire brokers who used to sit in coffee shops. Things continued in the same manner for many years and brokers stood as an intermediate for buying/selling securities.
The British East India Company has a significant role in the history of the stock market. People started buying shares of this government backed Company. And, over time, they found that their shareholdings were growing and they used to receive dividends. Seeing this, all eyes focussed on buying the shares from the already buyers which created a demand for those stocks. The stock owners had then sold their shares at a premium value to the new buyers. Tapping the heat out of the situation, a giant shipping Company named – the South Seas Company (SSC) pooled funds from various investors to expand their business outreach. However, SSC couldn’t hold for long and the Company went bankrupt soon. In the end, in 1773, the first stock exchange was officially formed in London before the New York Stock Exchange (NYSE).
Glance through the Indian Stock Market
India is a rich investment destination if you have sound knowledge and understanding of its potential. Though still a developing nation, India has always ensured to give tougher competition to all its developed competitors. The country is ahead in most of the trending and uprising technologies.
As we turn the spotlight towards the Indian Stock Market, one might notice several investing opportunities. In India, people do majorly trade in two stock exchanges: the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). BSE came into existence in 1875 while NSE was formed in 1994.
Let us look into the key salient features of the Stock Market:
Public Money Involvement
Companies go public in order to pool funds from the general crowd into their business. On accepting money from the public, the firms are obliged to provide a shareholding to the stock buyer. In the middle of such a handshake, the money flows within the economy with extra momentum. This way the overall economy is also helped to fight against any potential money clogging in the system.
Here let’s take a scenario, a stock price has gone up today. Now, one might interpret in a complimentary style to the other. But, whatever is the confusion prevailing among the buyers and sellers, the stock market has already discounted the news even before you knew it. So, never underestimate the power of the stock market.
Key Regulating Intermediaries
Earlier when the stock market was at an early stage, insecurities and risks were at the top edge. Buyers and sellers used to get cheated in the absence of middlemen. Fortunately, now we have multiple regulatory organizations to safeguard the public interest. In India, we have SEBI (Securities Exchange Board of India) and in the US we have SEC (Securities Exchange Commission). There are various courts and other firms where one can file petitions for any kind of fraud reporting.
If you are a trader, then that means you are focussing the grab the maximum within few minutes/hours/days. The risk is quite high at this point. Along with the surge in risk, the reward too will remain high. But, if you are someone who wants to play it safe and just want to invest, then the market might reward lesser, weighing your risk profile. Hence, the stock market is strict in this case and ensures to regulate the risk-reward ratio properly.
The Market loves long game players than the short game players
The stock market keeps on fluctuating in the near term. One cannot actually predict the market in the near term and go always right.
A sudden twist might happen at any point.
However, the market ensures to reward the player who possesses more patience over the long run. In the shorter term, the technicals might play out. Anyhow, the fundamentals always dominate at the end.
Every national economic indicator is linked with its Stock Market Index. The direction of the index talks a lot about the overall economic condition in the state. If the market is falling that means the economy has started losing its momentum and might lead to various other significant problems.