What is the Share Market?
The share market, also called the stock market, is a place where shares of publicly listed companies are bought and sold. These shares represent ownership in a company. When you buy a share, you become a partial owner of that company.
It includes two main segments:
- Primary Market: Where companies issue new shares (IPOs) to raise capital.
- Secondary Market: Where investors buy and sell existing shares among themselves (e.g., NSE, BSE in India).
Why Should We Use the Share Market?
There are several benefits and purposes for participating in the share market:
- For Individuals (Investors/Traders):
- Wealth creation: Historically, shares have given higher returns than many other assets over the long term.
- Ownership: Buying shares means owning a part of the company.
- Dividends: Many companies share profits with shareholders via dividends.
- Liquidity: Shares can be bought and sold easily on exchanges.
- Passive income: Some people invest for long-term dividends and appreciation.
- For Companies:
- Raise capital: Companies sell shares to raise funds for expansion, R&D, or paying off debt.
- Public visibility: Listed companies gain more trust and visibility in the market.
Who Can Use the Share Market?
Anyone can participate in the share market, including:
| Type of User | Description |
|---|---|
| Individual Investors | Salaried employees, students, retirees, etc., investing their savings. |
| Traders | Individuals or institutions who buy/sell frequently for short-term gains. |
| Institutional Investors | Banks, insurance companies, mutual funds, pension funds, etc. |
| Foreign Investors | Foreign Institutional Investors (FIIs) who invest in a country’s markets. |
| Companies | To list their shares and raise capital through IPOs. |
Prerequisites to Use the Share Market (for Individuals):
- Demat Account – To hold your shares electronically.
- Trading Account – To place buy/sell orders.
- Bank Account – To transfer money in/out of your trading account.
- PAN Card and KYC – Required for regulatory purposes in India.
