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STOCK MARKET BASIC 2022 - Free A to Z

Stock market basic - Friends, many such terms are used in the stock market industry which can be confusing for new investors. In this post, we are going to understand some of the terms occurring in the stock market which can be important for any investor.

Table Of Content (toc)

Read More:- How to Become a Successful Investor

Stock Market Basics For Beginners

  1. Shares:- A share is a share in the ownership of a company and it represents the claim in the company's assets and earnings. Their price goes up and down according to different market factors and can be exchanged on stock exchanges. If we acquire more shares, accordingly our ownership stack in the company also increases.
  2. Shareholder:- An individual institution or corporation which legally owns one or more shares in a public or private company is called a shareholder. The shareholder has ownership in the company according to the stake.
  3. Portfolio:- A stock portfolio consists of all the shares held by you. The portfolio shows us all how much quantity of shares we have with us. It is important that we become a good portfolio so that we can maintain the risk and profit.
  4. Primary Market:- This is also called NIM i.e. New Issue Market. This is the market where new shares are issued and the public is directly bought from the company, in which the company gets money after selling the shares.
  5. IPO:- When a private listed company offers its shares to the public for the first time to enter the share market, it is called IPO Initial Public Offering. The IPO takes place through the primary market.
  6. Secondary Market:- After the shares are issued for the first time, those shares are traded in the secondary market, that is, the shares are bought and sold indirectly between the investors in the secondary market. When a share is sold, brokers and investors get money from it.
  7. Intraday:- When we buy shares and sell them on the same day, we call it intraday. Here we do not buy shares for investing but are done intraday to earn profit from the movement of the market.
  8. Delivery: - When we buy a share and hold it for more than a day, that is, we do not sell it, then it is called delivery. It is not necessary that we sell it for a week, a month or a year, if we hold more stocks one day, then it is called delivery.
  9. Broker:- A stockbroker is an organization for an individual who is a registered member in a stock exchange and has a license that these directories can buy and sell shares in the stock market in favor of their clients and in return, charge a commission. does.
  10. Dividend:- Whenever a company in which we have invested makes a profit, then the company either reinvests that profit or distributes that money to its shareholders according to the share proportionate, then in this profit which we are sharing. This is what we call a dividend.
  11. Bull Market:- This is a term that is used to tell the condition of the market. When the price of the stock is increasing and the public feels that the price is going to increase further in the coming time, then it is called a bull market. In this market, the buying of shares gets increased.
  12. Bear Market:- The bear market is the opposite of a bull market. When the prices of the shares are falling and people think that there is going to be a bad hall of the market, it is called Bear Market. People think that in the coming time, the share price will fall further, so the selling of shares in the market increase.
  13. Blue Chip Stocks: - These are the stocks of those well-known companies which have been in the market for a long time, are financially strong, and have good growth and track records in the past year, they have less risk than other stocks.
  14. Stock Exchange:- Buying and selling of shares takes place through the stock exchange in the same way as there is buying and selling of things in a normal market. Two major and popular stock exchanges in India are BSE Bombay Stock Exchange and NSE National Stock Exchange.
  15. Index: - Thousands of companies are listed in the stock market, so if we want to find out the performance of the stock market, then it will be difficult to track the stock of each company, so a sample of some companies from different sectors is taken which is the whole market. represents the. This small sample is called an index which is derived from the prices of the selected stocks.
  16. Public Float:- Public float means the violence of the shares of a company which is with the public investors.
  17. Market Capitalization:- Market capitalization is the total rupee value of the company's shares. It is calculated as Total Number of Shares x Present Market Share Price. This is done to define large cap mid-cap and small-cap companies.
  18. Trading Session:- The most important thing to pay attention to is the trading session ie the timing of the stock market. The stock market in Indian remains closed on weekends and national holidays. The timing of the normal trading session or continuous trading session is from 9:15 am to 3:30 pm, within this time period you can buy and sell shares.
  19. Limit Order:- Limit order means to buy or sell any shares at a limited price. If we want to buy or sell a share at a specific price, we place a limit order.
  20. Market order:- When we want to buy or sell a share at its current market price, then we place a market order. Order gets placed in the market order.
  21. Margin:- Buying on margin means taking loans from brokers to buy shares. With the help of margin trade, we are able to buy more stocks than normal, for this we need a margin account.
  22. Day Order:- These orders can be placed by the investors when they have to buy or sell that stock on a specific day and if the order is not fulfilled then the order gets processed automatically.
  23. Demat and Trading Account:- The full form of a Demat account is Dematerialized account Demat account is like a bank account. Just like we keep money on our bank savings account, in the same way, all the shares we buy are kept in our Demat account, and from the trading account, we do buy and selling of stocks from the stock market.
  24. Trading Volume:- Trading volume means the total no of shares traded in a particular period of time. When securities are traded actively, their trade volume is high. Higher trade volume for a stock means higher liquidity, better order execution, and a more active market to connect to Buyer sellers.
  25. Volatility:- Volatility means how quickly the price of a stock goes up and down. More volatile assets are considered riskier than less volatile assets as it becomes difficult to trade on shares.
  26. Liquidity: - Liquidity means how easily we can buy that share without affecting any share price. A high liquidity stock means it can be easily bought or sold and low liquidity means it is difficult to find buyers and sellers of that stock.
  27. Annual Report:- The Annual Report of a company contains the most valuable information about that company. Such as money management strategies and annual cash flow. These reports are prepared so that investors and the public can get an idea of ​​the value and financial position of the company.
  28. Going Long:- Going long means buying shares with the expectation that their price will increase. When a trader says I am going long or go long it shows his interest in buying a particular stock.
  29. Average Down:- Average down is such an approach that investors do to buy more shares when the price of the shares starts falling due to which the share price of that shares becomes lower.

Read More

  • Upcoming IPO List
  • Grey Market Premium Of IPO
  • Commonly Used Mutual Fund Terms
  • Benefits Of Stock Investing

Q: What is IPO?

A: The full form of IPO is Initial Public Offering. When a private company is listed in the market for the first time and wants to sell its shares for the first time, then it is IPO. After releasing the IPO, the private company does not remain private but becomes public because it also involves public money.

Benefits of IPO?

The first advantage is whenever a new company comes into the share market and its IPO comes out, it is usually very low at the lowest price and at the same time the share is available and after some time its price increases by 2 to 3 times.

Whenever a company releases an IPO, either the company is thinking of expanding itself or it may be thinking of servicing its loan, in a way the company is thinking of moving forward. If you are thinking about expanding the company, then there are many chances of increasing the share price of that company. The risk is less than your money will sink and there will be more chances that your money will increase a lot.

These are the benefits of buying an IPO, I have told you that your money will be doubled and tripled, but do not blindly buy the IPO of any company, it is very important to do your own research. Because many times the share price goes down even later when the company is not performing well.

Q: Why do companies choose IPO for expansion?

A: The company can use all the capital coming from IPO for its extension. If there is a debt on the company, then the company can use that capital to reduce that debt and the company also wants to take the benefit of indulging in the stock market.

To engage in the stock market, the company has to sell its 25% stake to the public, through which the private company becomes a public company and the company can use that money for its expansion.

And after listing, the company can use that money for many different purposes.

Q: Before investing in IPO, investors should decide whether they want to invest in IPO or the company. Why so?

A: If the investor only invests in the IPO, then his purpose is to book profit after listing the shares. Investors not interested in the company should sell the shares on the day of listing.

But, If you have invested in the IPO of any company on the basis of performance then it is better that you ignore the volatility of that company on the day of listing.

Q: What is the difference between IPO and FPO?

A: Initial Public Offerings are called IPOs. FPO means follow on public offer. An already listed company sells some of its stake in the FPO.

Q: How can investors know whether the price fixed in the IPO is correct or not?

A: Investors in IPO can be divided into two groups. The first group is QIBs i.e. Qualified Institutional Buyers. These investors have the necessary resources to gather information about a company. Also, before the IPO comes, companies can properly evaluate the QIB company with the help of experts.

However, small and retail investors do not have access to information about the company. Keeping this in mind, since 1999, 50-60 percent of the IPO is reserved for QIBs. With the open book building system, retail investors can find out how the IPO is getting responses from QIBs.

SEBI has directed QIBs to deposit a 100% margin for IPO. Retail investors should also keep an eye on the book of the company. At present, the company's book-building happens only on the last day of the IPO. In such a situation, retail investors have to take cues from the QIB itself.

However, one should not rely solely on the signals of QIBs while investing in IPOs. Investors should get complete information about the promoter of the company. Also, investors should find out whether the venture capital or private equity company has invested before the IPO or in the IPO itself. In both cases, retail investors should avoid such IPOs.

Q: What are the things that investors should keep in mind while investing in an IPO?

A: It is impossible to read the entire pages offer the document. But, it is also important for investors to know who is the promoter of the company that brought the IPO.

While investing, it is important to know the company along with the price. While investing money in an IPO, invest only if the promoter is trustworthy or if the profits of companies are growing continuously.

FAQ

What is face value?

Whenever a company starts legally, its shares are issued. And the price at which those shares are issued is called face value. That is the initial price of those shares which are listed in the certificate. Initially, the shares are held by the owners and promoters of the company. Which can later be sold to the public through IPO to raise funds.
let's assume that person XYZ started company ABC limited and divided them into 6 lakh shares and the price of each share was kept at 10 rupees, then we can say that the face value of the company is Rs10. The face value of most companies is kept only at 10 rupees because this makes accounting and calculations easy. And if after some time Mr. XYZ wants to raise funds, then he will have to come out with IPO i.e. Initial Public Offering to sell his shares to the public. If he keeps his IPO price at Rs 100, then we can say that he has sold his shares at a premium of Rs 90.
Just a few days back Root Mobile's IPO was launched its face value was Rs 10 and its IPO issue price was 350 ie 340 rupees premium was sold from it so any price is more than its face value then this is called the share premium. Let's talk about the use of face value. So when a company announces dividend in percentage terms like if a company announces a 20% dividend then here 20% pay is of that face value and not the share price.

What is market value?

Market value is the price at which a share is being traded on a listed stock exchange. It shows the market capitalization of a public traded company. For example, if a stock is trading at Rs 500 share price, then it is the market value per share of that company. Market Value is mostly used by market analysts and investors to tell the value of the company because the market price of the shares keeps changing throughout the day, so the market capitalization of the company also changes accordingly.

What is book value?

It means the value of the shares in the books of the company. It specifies the share amount that shareholders can get if the company becomes liquidated, ie, gets closed down or its assets are sold to pay off liabilities. The formula to calculate book value is
book value Per Share = Total Assets - Total Liabilities / Number of Shares Issued by the Company
Why book value is important, when you divide the current share price of a company by its book value per share, we get the price to book value.

Conclusion:- I hope this article basic of stock market India is help for you. If you have any query regarding this you can comment down below.

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