What Is Share Market?

People often wonder about the difference between the stock market and the share market, often using the terms interchangeably.

 

A stock market is akin to a share market. In a share market, shares are issued or traded. The key disparity between the two lies in the scope of assets traded. The stock market facilitates the trading of bonds, mutual funds, derivatives, as well as shares of companies, among others. Conversely, a share market restricts trading solely to shares. Typically, a stock exchange is defined as 'a body of individuals, whether incorporated or not, established to regulate or oversee the buying, selling, or dealing in securities.'

 

'Securities' encompass shares, bonds, scrip, stocks, debentures stock, and other marketable securities of incorporated companies or similar entities, government securities, as well as rights or interests in securities.

 

In India, the term 'share market' commonly denotes the two primary stock exchanges in the country—the Bombay Stock Exchange (BSE) and the National Stock Exchange of India (NSE). Additionally, there exist 22 regional stock exchanges.

What is stock market and how does it works?

The stock market functions as a platform where companies sell ownership stakes, known as shares of stock, to investors in exchange for capital. By listing shares on stock exchanges, companies raise funds needed for operations and expansion without incurring debt. Investors purchase shares on the stock market, potentially benefiting from capital gains as companies grow and their stock values rise. Additionally, companies often pay dividends to shareholders from their profits. Capital gains occur when the value of shares increases over time, allowing investors to sell them for a profit. Dividends are payments made by companies to shareholders as a portion of their profits. While individual stock performances vary, historically, the stock market has provided average annual returns of around 10%, making it a reliable method for growing investments over time.

History Of The Indian Share Market

Investing in stocks today may seem relatively straightforward, but it's undergone significant evolution. Let's take a brief journey through history to understand how the stock market has developed in the country.

 

The trading of securities in India traces back to the 18th century when the East India Company initiated trading in loan securities.

 

1830s: Corporate shares began trading in Mumbai, notably stocks of banks and cotton presses.

 

1850s: The first version of a stock exchange emerged in Mumbai's Horniman Circle, initiated by a group of brokers.

 

1874: Dalal Street in downtown Mumbai became a hub for brokers, symbolizing the Indian financial sector, akin to Wall Street in the US.

 

1875: 'The Native Share & Stockbrokers Association' was formed by a small group of brokers, later known as the BSE (formerly Bombay Stock Exchange).

 

Late 19th and early 20th century: Exchanges appeared in Ahmedabad, Calcutta (now Kolkata), and Madras, with BSE maintaining dominance due to Mumbai's status as a commerce hub, albeit with limited stock trading access.

 

1956: India enacted the Securities Contracts Regulation Act, formalizing stock trading.

 

1964: UTI launched India’s first mutual fund scheme, US 64, raising significant capital by 1988.

 

1977: Reliance Industries, led by Dhirubhai Ambani, listed, generating immense retail investor interest and initiating the 'cult of equity'.

 

1986: BSE SENSEX, a 30-share index, was established, becoming India’s first equity index.

 

1988: SEBI was established to address transparency and reliability issues in clearing and settlement systems, though it gained statutory powers only in 1992.

 

1992: NSE was founded, coinciding with heightened stock market interest fueled by Harshad Mehta's bull market.

 

1994: NSE introduced a modern, fully automated screen-based electronic trading system, pioneering technological advancements.

 

April 22, 1996: NSE launched the Nifty 50 index, representing the weighted average of 50 large Indian companies, revolutionizing benchmarking methods in Indian stock markets.

 

Present day: India ranks among the top five stock markets globally by market capitalization, boasting consistent performance, exemplified by the Sensex's impressive growth rates.

 

Current Day Of The State Of Affairs:

India, with its vast population and dynamic economy, has emerged as a significant driver of global growth. On January 22, 2024, India's stock market capitalization exceeded that of Hong Kong for the first time.

According to Bloomberg data, the total value of shares listed on Indian exchanges soared to $4.33 trillion, exceeding Hong Kong's $4.29 trillion.

As of January 30, 2024, the Bombay Stock Exchange (BSE) boasted 5,315 listed firms, while its competitor, the National Stock Exchange (NSE), had 2,266 listed firms as of December 31, 2023. India's stock market now ranks as the fourth largest in the world.

 

The two primary market indexes in India are the Sensex and the Nifty, reflecting the performance of the country's leading companies.

Frequently Asked Questions

 

1. What is the stock market in simple terms?

The stock market is a place where people buy and sell ownership in companies, called shares or stocks. It's like a marketplace where companies sell their shares to raise money, and investors buy them as an investment. The stock market includes official exchanges where stocks are traded, as well as informal markets where trading happens directly between investors.

 

2. What is trading stocks?

Stock trading involves the buying and selling of company shares. By owning shares in a company, you possess a stake or ownership interest in that specific company. Someone who trades stocks on behalf of a financial firm is called a stock trader.

 

3. What is stock market and how does it works?

The stock market functions as a platform where companies sell ownership stakes, known as shares of stock, to investors in exchange for capital. 

 

4. How do beginners use the stock market with Enrich Money?

To begin investing in the secondary share market with Enrich Money, open a Demat and trading account linked to your banking account, then log in to your trading account and select the shares you wish to buy or sell, ensuring you have adequate funds available for transactions.

 

5. How do investors benefit from the stock market?

Investors can benefit from the stock market through capital gains, where the value of their shares increases over time, allowing them to sell for a profit. Additionally, companies often distribute dividends to shareholders from their profits, providing additional income.