How do stock markets work in India?

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n today’s time, stock market is a term that most of the working individuals are very well familiar with. Everyone wants to invest their money the right way so as to get desired returns. For one to make the right investment it’s important to understand the market and the basic terminologies related to the same.

Stock refers to a unit of a company that can be bought by an individual of the company (if private limited) or by any person (in case of public limited) in a market known as stock market. Now, for the buying and selling of stocks or share to happen, which is also known as trading, there needs to be an intermediary where trading process can take place fairly. That intermediary is known as stock exchange.

In India, we have two primary stock exchanges namely National stock exchange (NSE) and Bombay Stock exchange (BSE). The companies who want to sell their shares in order to raise money from the market, list their shares on these stock exchanges. The brokers, who act as an intermediary between the investors and the stock exchange, place order once they receive a request from their client. Once, the perfect match of buyer and seller is made, both the parties are notified by the stock exchange. Once that is settled, the sellers receive their funds and the buyers their share within T+2 days i.e., two days after the trading is done. Though with the introduction of online trading, stock brokers can be eliminated, still their role remains crucial when it comes to huge investments. However, before any of this process can begin all the components of market such as stock exchange, stock broker, investor and the company need to be registered with SEBI (Securities Exchange Board of India).

Now that we know how the whole trading process takes place, let’s understand how the stock market works. There are two types of trends that a stock market follows namely the bear and the bull trend.

Bear-ish trend refers to downfall in price of shares of a company whereas bull-ish trend refers to upward rise in price of shares of a company. People generally sell their shares when the market follows bullish trend.

Though one can never be hundred percent sure with regards to the market, by carefully following the trend of the market, a person can surely make the right investment and avoid huge losses.

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