What exactly is the Stock Market?

Business Transformation Expert cum Astro Strategist™ Hirav Shah explains, “A stock market equity market or a share market is the aggregation of buyers and sellers of stocks present on a business claim. This may include securities listed on a public stock exchange as well as stock that is only traded privately 50 shares of private companies which are sold to investors through equity crowdfunding platforms.

Hirav adds, “To be precise and concise, a stock market is where people buy and sell shares. The stock market is where the exchange of shares occurs between the stockbrokers and traders.

As per Hirav Shah, here are some common terminologies before moving into what exactly the share market or stock market is.

What is the meaning of Share :

A share is the single smallest denomination of company stock. Stock can be considered as a collection of shares. Shares are a part of something bigger that is the stocks. Shares represent the company’s ownership proportion, while stock is just a simple aggregation of shares in a company. Through these shares, you can earn profit. You can buy a share or sell shares if the share rate is high.
Trader- A stock trader is a person who attempts to profit from the Purchase and sale of stock shares. The stock traders can either be professionals trading on behalf of some huge company, or they can be individuals trading on behalf of themselves.

Investors- An investor is a term used to define a broader scope than a trader. Investors look for larger returns over an extended period by buying and holding the shares. A trader is someone who looks for a shorter scope, while an investor is a person who invests in shares for a long time.

Stock Exchange- stock exchange is just like a Marketplace where the shares of companies are bought and sold. Shares issued by various companies are traded on the stock exchanges after being issued in the market. Investors buy the shares available in the market, and through that, the company gets the money to grow its business. Once it has established itself, the prices of the shares increase, and as a result, it provides profit to the shareholders who have invested in the company’s shares.

NSE and BSE- NSE stands for National Stock Exchange, whereas BSE stands for Bombay stock exchange. Both of them are the most popular stock exchanges. Many other stock exchanges are also present, but these two are the most important ones. NSE is the biggest stock exchange in India, while BSE is the oldest stock exchange in India.

NIFTY- Nifty refers to the National Stock Exchange and 50. It is an abbreviation of the National Stock Exchange 50 Nifty, also known as Nifty 50 or CNX Nifty. Nifty is the index used for the National Stock Exchange. It is a collection of top-performing 50 Equity stocks actively trading in the index. The stock index is a measurement of the changes in the stock market; it measures price movement and market performance.

SENSEX- Sensex stands for stock exchange sensitive index. It is the stock market index of the Bombay Stock Exchange. The Sensex index comprises 30 stocks on BSE. These stocks are the largest and most actively traded stocks on the BSE. The Sensex is the oldest index in India, and people consider it a reflection of the Indian economy.

Explanation- How does all of this work?

Hirav Shah says, “Lastly, understand briefly how the stock market works using a simple example. Consider, a person wants to start a company that manufactures premium quality chocolates. To begin the company, the entrepreneur presents this idea to their potential investors. If the investor to whom the idea is presented lights the company’s concept, then they provide the initial investment or what is called an initial public offering to the company(IPO).

Hirav Shah adds, “The company has officially declared that its share is available in the public market. Any individual or company who believes that this particular chocolate company can make a good profit can invest in the same. They can buy shares of the company. By buying the company’s shares, they are investing as its partial owners in the business. More and more investors and individuals who might see the company’s potential come forward to invest in the shares, making the price of the shares go high. This, in return, causes a rise in the cost of the individual shares and does give profit to its shareholders.

Hirav Shah explains, “As the share rises, there is an increase in the demand for the company’s share, and does the company grow. It gets more funding to work on new initiatives that may tilt new profitable businesses. But if the company does not perform well, there can be a decline in the cost of the shares. The investors’ other shareholders might sell their shares to save themselves from the declining cost of the shares they might foresee. This can affect the overall stability of the company.

What might affect the market value of a company?

There is always a brief race between supply and demand. This is due to many factors which can be stated as –

  • Fluctuating prices of the raw materials being used
  • The change of the technology that is being implemented for the same
  • The shifting cost of the labors
  • Change in the leadership can also impact the sense new people who take charge might not be as trustworthy as the old ones in business.
  • Bad publicity cost to the company
  • Change in government policies and laws
  • Many investors Book Profit per personal needs and benefit

Final Word

Hirav Shah concludes by saying, “All these factors somehow lead to a situation where people might feel that a company is losing its market value. Due to this scenario, the company might lose many of the investors. As a result, the company might face a loss as losing investors might lower the company’s image in the stock market.