What is the share market What is the financial market How is it beneficial for shareholders

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  • What is the share market?
  • What is the financial market?
  • How is it beneficial for shareholders?

Section 2: Summary of the Video

  • The stock market is the platform for sale and purchases the shares.
  • Financial market means the place where financial transactions take place.
  • The things that can be traded in the financial market are stocks/shares, commodities, and currency.
  • The share market is divided into the primary market and the secondary market. 

Section 3: Main Content of the Video

Key Note #1: Stock Market

For example:

  • You go to a vegetable market.
  • You also know that many people do not know anything about the vegetable market.
  • Many times, they purchase vegetables at a low price and sometimes at a high price.
  • They bargain and purchase the vegetables.
  • Many times, you purchase low priced vegetables by compromising against its quality.
  • It may also happen that despite purchasing high-priced vegetable sellers sells you rotten vegetables saying that the vegetables are of high quality.
  • So, you should know to properly check the vegetables at the market.
  • Many times, there is an increase in the supply of vegetables to the vegetable market and it causes the low price of vegetables.
  • In the rainy season, the supply of vegetables gets reduced and this causes the high price of the vegetables.
  • When you are aware of all these things, then you can easily negotiate in the market.

You might be thinking that how the share market is related to the vegetable market.

You have to use the same fundamentals either you go to a share market or a vegetable market.

When you go to a share market, you find the following:

  • The quality of shares causes an increase or decrease in the price of shares.
  • The share prices increase having high demand.
  • The share prices decrease having low demand.

You have to keep in mind the above fundamentals and negotiate in the share market too.

Negotiation here does not mean that you start bidding that you will purchase Rs. 100 shares in Rs. 50.

You have to wait in the share market for the rate of shares to come down at the level you want to purchase.

Key Note #2: Financial Market

Financial market means the place where financial transactions take place.

The following things are transacted in the financial market:

1. Stocks/shares

2. Commodities

  • Crude oil: It impacts the prices of petrol and diesel. Increase in prices of crude oil cause an increase in petrol and diesel prices and vice versa.
  • Gold/Silver: Many times, there is a sudden increase or decrease in the price of gold or silver.
  • Copper

3. Currency: It includes all the form of money used for buying and selling, like:

  • Rupee
  • Dollar
  • Euro

Key Note #3: Share Market

  • It is the platform that companies use to invite the public for investment and buy shares.
  • Companies get the benefit of funds from this.
  • Public gets the benefit of holding shares in the company.
  • Shareholding in the company provides ownership to the investor.
  • Companies sell their shares and take funds from the public.
  • They can take funds from the bank also.
  • If the companies get into a loss, then the bank will ask for a loan repayment along with the interest.
  • Companies land in problems in such a situation either they are in profit or loss.
  • This is because they have to return the principal amount along with the interest to the bank.
  • Bank does not think about the future of the company, it cares only about its loan.
  • In such a situation the thinking of the share market is different.
  • Whenever a company gets listed in the share market it provides shareholdings to the investors.
  • The company takes funds from investors in return for providing shareholdings in the company.
  • You will be benefited when the company performs well as an increase in the share price of the company will also increase the value of your shares. 
  • Many people often think about the benefit of the stock market to the public and company.
  • The stock market is now a very big part of India’s economy.
  • In the absence of a stock market, from where the companies will get funds for growth. Bank does not lend money without interest.
  • It is the public only which can provide interest-free funds to the companies.
  • That is the reason why companies enter the share market, to raise the funds at the time of requirement.
  • Many people also think that the stock market is a platform for betting, speculation, and gambling.
  • Share market is important for the economy of the country, so there is no possibility of gambling and speculation.
  • You might have noticed that fluctuations in the share market make the government worry about the market.

Key Note #4: Benefit of Share Market to the Public

For example:

  • A person has a small company with a market value of Rs. 1 Lakh.
  • The owner of the company wants it to grow.
  • The owner does not have funds for that.
  • The owner has one option to approach the bank, take the loan, and repay the loan with interest.
  • The other option is that the owner takes Rs. 1 Lakh from 3 different people and gives 1/4th shareholding of the company in return.
  • Suppose the market value of the company raised to Rs. 10 Lakh in some years.
  • The shareholders of the company will get benefitted in this case.
  • Your shares value keeps on increasing with the growth of the company.

Similar things happen in the share market.

The growth of the company makes an increase in the value of shareholders.

If you as a small investor take such a huge risk, then you also get a huge reward for that.

For example:

  • Numerous people are aware of Apple Company.
  • Many people even use iPhone.
  • Apple Company is quite old, although iPhones started coming after the year 2007.
  • The company is since 1980 in the market.
  • The share growth of Apple Company did not show any impressive growth from 1980 to 2007.
  • The reason was that iPhone was launched after 2007.
  • After that only its shares show the growth.
  • The investors who purchased shares from 1980 to 2007 were most benefited.
  • This is because they were early buyers who spend $ 0.5 to $ 10 per share to buy it.
  • After the launch of the iPhone, the fate of the company changed.
  • The shares of Apple Company have a present share price of $460 (Rs. 34,000) per share.
  • The early buyers of the Apple Company share hugely benefited for showing faith in the company and holding the shares till the date.

Key Note #5: Types of Share Market

It has the following forms:

1. Primary Market

Companies come with their issue, it means:

  • The company does its IPO listing in the share market
  • Offers its shares to the investors

2. Secondary Market

It is the platform where shares issued in the primary market are traded.

Key Note #6: Primary Market  

  • A company has to do an IPO listing when for the first time it sells the shareholdings of the company through the stock exchange and raises the funds by investors.
  • The companies have to get the registration done for this purpose.
  • If you are thinking that any company can raise the funds through IPOs in the market and after that closes the business, then it is wrong. No company can do this.
  • Companies need to make the registration done.
  • After that, the shares are available for the general public to buy.

The stock exchanges, you would have heard are:

  • BSE (Bombay Stock Exchange)
  • NSE (National Stock Exchange)

The companies get listed on the stock exchange and through the primary market, it reaches to investors.

A company has to provide the following information to the market before launching IPO and shares:

  • Finance
  • Promoters
  • Investors
  • Numbers of shares
  • Share Price

Key Note #7: Secondary Market

  • After the IPO issue and subscription of shares in the primary market, the shares reach the secondary market.
  • The shares can be sold and purchased in the secondary market.
  • A person whenever purchases share in the secondary market it is based on the real-time transaction.
  • Generally, the sale and purchase are done through a broker.

Massive Action Plan

  • The share you are interested in purchasing in the share market, do the following:
  • Start researching from today
  • Read about the companies
  • Read about the shares
  • Research and understand the following 5 shares:

1. Wipro

2. Eicher Motors

3. MRF

4. SBI Bank

5. Reliance Industries Limited

  • You have to find the following things about the above-mentioned shares:
  • At which date shares listed on the stock exchange?
  • At what rate were they listed?
  • Highest share price until now?
  • What is their current share price?
  • You will get all the information on the website, like moneycontrol.com.

Section 4: Key Outcomes of the Video

  • Analyse the company details before buying the shares
  • Find out the history of shares in which you want to invest
  • Negotiate in share market by waiting for the share prices to decrease

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