Equity

The stock market refers to the collection of markets and exchanges where the issuance and trading of equities or stocks of publicly held companies, bonds, and other classes of securities take place. A stock exchange facilitates trading in company’s stocks and other securities. A stock may be bought or sold only if it is listed on an exchange. Thus, it is the meeting place of the stock buyers and sellers. There are four broad segments of stock market, viz, Equity, Derivative, Debt, & MF.

It is a market where financial instruments are issued & traded. Stock market facilitates mobilization of funds from those with excess of it (Investor) to those who are in need for funds (Business). Business owners raise fund from the market by way of issuing shares to investors.

Primary vs Secondary market

• Primary Market – Primary market is the market where investors can buy shares directly from the issuer company. A company comes up with an Initial Public Offer (IPO) for raising fund from general public to meet its fund requirement. Investors are issued shares in proportion to their investment in these company. These shares are listed on the stock exchanges to facilitate easier, speedier, & efficient transfer of shares. This whole process is called getting the company/shares listed on stock exchange.
• Secondary Market – Secondary Market is the market where stocks, which are issued to the investors through IPO, are traded. Secondary market provides existing shareholders a platform where they can exit from their investment by selling shares in the market. Those investors desirous of buying shares of a company but couldn’t get in IPO can buy shares from secondary market. This buying and selling activity is carried out on screen-based trading platform of Stock Exchange facilitated by the stock brokers.

Type of Investors

Investors are broadly categorized as (i) Institutional Investors, & (ii) Non – Institutional Investors

• Institutional Investors Large organizations (such as banks, insurance companies, pension funds, finance companies, mutual fund) which have considerable funds to invest are referred to as Institutional Investors. Such investors originated within the country are called Domestic Institutional Investors (DII), and those located outside the country are known as Foreign Institutional Investors (FII).
• Non – Institutional Investors Non – Institutional Investor is an individual investor. It includes Retail investors, High Net Worth (HNI) investors, & Corporates.