What is Stock Market?
The stock market is a marketplace where investors can choose from numerous financial instruments to park their funds. These financial instruments can be shares, bonds, commodities, mutual funds, derivatives, etc. SEBI (Securities and Exchange Board of India) regulates the Indian stock markets and all trading activities of market participants.
stock exchanges serving operate the market online. The two primary stock exchanges in India are the NSE (National Stock Exchange) and the BSE (Bombay Stock Exchange). Other exchanges are the MCX (Multi Commodity Exchange) and IEX (Indian Energy Exchange) to trade commodities. NSE and BSE primarily list Most companies.
All exchanges manage their indexes or indices. An index that allows investors to gauge the trend in the stock market. An index is the collection of stock traded on the exchange and represented in terms of its performance. The index can be said to be a theme, based on size or industry, that can be followed by investors to choose the right stocks of a company for them.
- The most common indices utilized by investors and traders in India are the NSE’s NIFTY and BSE’s SENSEX. NIFTY is the index of the top 50 stocks on the NSE. SENSEX represents the top 30 stocks of the companies listed on the BSE.
Investment opportunities in the stock market
Stock investments mean owning a part of the company’s stake and its profits. Stocks are the most utilized opportunity in the market with a Demat and trading account. demat account Opening process with a trading account online is the primary requirement to invest in the stock market.
An investor gains from stock investing if the stock price increases. Investors need to follow many strategies while buying or selling stocks to gain.
To earn regular income from stocks, you need to look for fundamentally strong companies paying regular dividends.
Value investing is one of the strategies to invest in undervalued stocks. It is an investment portfolio that focus on undervalued stocks trading at less than their book value. Stocks perform better when the inflation rate is lower.
You can invest in the stock market through Initial Public Offering (IPO). It is the process of inviting the general public to get capital to fund the company’s prospects. The investors issue The shares of a company for the first time. After issuing an IPO, the company’s status changes from government to private. Your investment grows with the company’s growth.
Generally, investors look at upcoming IPOs for long-term profits. After getting an allotment of IPO shares, you can sell them in the secondary market on exchanges at a significantly high price.
An asset management company (AMC) or fund house pools money from several investors to invest in a professionally managed portfolio. A mutual fund can be an investment in a portfolio of equities, bonds, money market instruments, etc. Mutual fund managers follow specific strategies to pick many stocks aligned with the investment objective. Investors can make periodic installments through a Systematic Investment Plan (SIP) through mutual funds.
In the case of mutual fund investments, indexes are the benchmark to determine the performance of fund managers and stocks. A mutual fund using NIFTY to benchmark its performance offered 15% returns this year while the NIFTY did 20%. Here the mutual fund is underperforming. It means investors would have been better off with those 50 NIFTY stocks on their own instead of relying on the fund managers.
Investing in commodities means an investment in wheat, coffee, cotton, crude oil, natural gas, propane, coal, gold, silver, copper, aluminum, etc. Commodities are more volatile than stocks as commodity prices fluctuate hugely based on demand and supply. If the oil price is low, it represents a weak stock market. Future contracts with an underlying commodity can trade on the commodity exchanges to hedge against price fluctuations. Gold is relatively stable among all commodities.
Thus, with the new heights of the stock market indexes, retail investors can grab profitable opportunities in the stock market via several investment vehicles, depending on investors’ financial objectives and risk appetite to bear losses. You can invest from any point in the country using a stockbroker trading app. It is always better to diversify your investment portfolio to minimise the risk and maximise the returns.
Read also:- Trading CFDs: how not to make mistakes