Here comes an article which will let you know the basics of a stock market. So let’s straight away start the topic which I think is of interest to everyone in the country.
First of all for those who think that stock markets are the easiest ways to become rich, think twice as it is one of the most troublesome places. It can make one earn a crore a day and loose two the next day. So with this constraint in mind let’s try and know our markets a bit better.
Let’s start with what does bulls and bears mean. Bulls mean people who purchase stocks and bear the one who sells them. All of you must have heard of about market indices as BSE Sensex or Nifty. One see’s the value of indices jumping up and down throughout the day. What does the value mean? If we take example of BSE Sensex it is the weighted average of thirty stocks which are representative of all the sectors of the economy. Thus these indices change with the change in the underlying stock prices. The next question which must be floating in your mind is what causes the change in stock prices. Well there are several factors which can cause a change in the stock price. Some of them are:
1. Recession in the economy or industry
2. Lower than expected performance of the company
3. Getting a new contract
4. News of its merger or its acquisition
Seeing the factors listed above don’t one get a feeling that these factors are transient and one most see the long term growth prospects of the company. Well my friends the stock markets are driven by something known as “Market Sentiments”. Mostly these sentiments don’t take into account long term growth prospects of a company but are driven mostly by the things happening right know in the company or industry or economy of the country or the global economy as a whole.
Further, I would also like to add that demand and supply, which are yet again governed by the market sentiments play a huge part in deciding the price of the stock and in turn the index value.
Now as we have learnt about the stock price movements and index value movements let us move into a bit more detail to understand the kind of markets prevalent in the country. Now the place where shares do get traded are known as Capital Markets. These can further be classified into primary markets and the secondary markets. The primary market is one where the Initial public offer (IPO) of a company i.e. shares for the first time are on offer while secondary market includes the place where day to day trading happens. Now a few of you must be having doubts about how does the price of an IPO is decided as the share is still not out in the market. Well it a complex process and will discuss about it in the next article. So let’s wind up this article now and will be back with more articles related to the vibrant world of stock markets very soon.
First of all for those who think that stock markets are the easiest ways to become rich, think twice as it is one of the most troublesome places. It can make one earn a crore a day and loose two the next day. So with this constraint in mind let’s try and know our markets a bit better.
Let’s start with what does bulls and bears mean. Bulls mean people who purchase stocks and bear the one who sells them. All of you must have heard of about market indices as BSE Sensex or Nifty. One see’s the value of indices jumping up and down throughout the day. What does the value mean? If we take example of BSE Sensex it is the weighted average of thirty stocks which are representative of all the sectors of the economy. Thus these indices change with the change in the underlying stock prices. The next question which must be floating in your mind is what causes the change in stock prices. Well there are several factors which can cause a change in the stock price. Some of them are:
1. Recession in the economy or industry
2. Lower than expected performance of the company
3. Getting a new contract
4. News of its merger or its acquisition
Seeing the factors listed above don’t one get a feeling that these factors are transient and one most see the long term growth prospects of the company. Well my friends the stock markets are driven by something known as “Market Sentiments”. Mostly these sentiments don’t take into account long term growth prospects of a company but are driven mostly by the things happening right know in the company or industry or economy of the country or the global economy as a whole.
Further, I would also like to add that demand and supply, which are yet again governed by the market sentiments play a huge part in deciding the price of the stock and in turn the index value.
Now as we have learnt about the stock price movements and index value movements let us move into a bit more detail to understand the kind of markets prevalent in the country. Now the place where shares do get traded are known as Capital Markets. These can further be classified into primary markets and the secondary markets. The primary market is one where the Initial public offer (IPO) of a company i.e. shares for the first time are on offer while secondary market includes the place where day to day trading happens. Now a few of you must be having doubts about how does the price of an IPO is decided as the share is still not out in the market. Well it a complex process and will discuss about it in the next article. So let’s wind up this article now and will be back with more articles related to the vibrant world of stock markets very soon.
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