WHAT IS THE FINANCIAL AND STOCK MARKET?

FINANCIAL MARKET Financial markets refer broadly to any marketplace where the trading of securities occurs, including the stock market, bond market, forex market, and derivatives market, among others. Financial markets are vital to the smooth operation of capitalist economies. A financial market is a market in which people trade financial securities and derivatives at low transaction costs. Some of the securities include stocks and bonds, raw materials and precious metals, which are known in the financial markets as commodities. The term "market" is sometimes used for what are more strictly exchanges, organizations that facilitate the trade in financial securities, e.g., a stock exchange or commodity exchange. This may be a physical location (such as the NYSE (New York Stock Exchange), LSE (LANDON STOCK EXCHANGE), JSE (JOHANNESBURG STOCK EXCHANGE), BSE (BOMBAY STOCK EXCHANGE)) or an electronic system (such as NASDAQ). Much trading of stocks takes place on an exchange; still, corporate actions (merger, spinoff) are outside an exchange, while any two companies or people, for whatever reason, may agree to sell stock from the one to the other without using an exchange. Trading of currencies and bonds is largely on a bilateral basis, although some bonds trade on a stock exchange, and people are building electronic systems for these as well, to stock exchanges. There are also global initiatives such as the United Nations Sustainable Development Goal 10 which has a target to improve regulation and monitoring of global financial markets.                 TYPES OF FINANCIAL MARKET 1.CAPITAL MARKET: A capital market is a financial market in which long-term debt (over a year) or equity-backed securities are bought and sold. Capital markets channel the wealth of savers to those who can put it to long-term productive use, such as companies or governments making long-term investments. ·  STOCK MARKET: A stock market, equity market or share market is the aggregation of buyers and sellers of stocks, which represent ownership claims on businesses. ·   BOND MARKET: The bond market (also debt market or credit market) is a financial market where participants can issue new debt, known as the primary market, or buy and sell debt securities, known as the secondary market. This is usually in the form of bonds, but it may include notes, bills, and so on. 2. COMMODITY MARKET: A commodity market is a market that trades in the primary economic sector rather than manufactured products, such as cocoa, fruit and sugar.  Hard commodities are mined, such as gold and oil. Futures contracts are the oldest way of investing in commodities. Futures are secured by physical assets. 3. MONEY MARKET: The money market refers to trading in very short-term debt investments. At the wholesale level, it involves large-volume trades between institutions and traders. At the retail level, it includes money market mutual funds bought by individual investors and money market accounts opened by bank customers. 4.derivatives market: The derivatives market is the financial market for derivatives, financial instruments like futures contracts or options, which are derived from other forms of assets. The market can be divided into two, that for exchange-traded derivatives and that for over-the-counter derivatives. NOTE: [Mainly, we are read about the first market (CAPITAL MARKETS)]                             SHARE MARKET Come, let us talk about share market. What is share market? Why is it in place? how does it work? What are its advantages and disadvantages? And how you invest money in it. What is share market? Stock market, share market and equity market-all three mean the same. These are market where you can buy or sell a company’s shares. Buying shares of a company means buying some percentage of ownership of that company. That is, you become the holder of a percentage of that company. If that company make a profile some percentage of that profit would also be given to you. If that company incurs a loss, a percentage of that loss would also be borne by you. Telling you example of this on the smallest scale presume you have to establish a startup. You have 10,000 rupees but that not enough .so, you go to your friend and tell him to invest another 10,000 rupees and offer him a 50-50 partnership. So, whatever your company profits in future 50% of it would by your 50%of it would be your friend’s.in this case, you’ve given 50% of the share to your friend in this company. The same thing happens on a larger scale in the stock market. The only difference being, instead of going to your friend you go to the entire world. And invite them to buy shares in your company. HISTORY AND PURPOSE OF SHARES The origin of share markets dates to around 400 years ago. Around the 1600s, there was Dutch east India company, like the British east India company, there was a similar company in the country of Netherlands today, known as Dutch east India company. In those times people used to indulge in a lot of exploration using ships.  The entire world map had not yet been discovered so the company is used to send their ships to discover new land & trade with faraway places. The journey used to be of over thousands of kilometers abroad a sheep.  There was a huge amount of money required for this not one person possessed search amounts of money individually in those times. So, they publicly invited people to invest money in their ships.  When these ships would travel long distance to go to others land and come back with treasures from there.  They were promised to a share of these treasures /money eventually. but this was a very risky affair. because during those times, more than half of the ships failed to come back. They got loss, or broke down or got looted. Anything could happen to them.so investors realized the risky nature of this entreprise.so, instead of investing in a single ship, they preferred to invest in 5-6 of them. So that at least one of them had chances of coming back. One ship used to approach multiple investors for money.so, this created somewhat of a share market. There were open biddings of the ships on their docks. Docks are the places where the ships come out from. Gradually, this system became successful because the money crunch faced by the companies. Was supplemented by the common people. And the common people got a chance to earn more money. You must have read in the history books also. About how rich the English east India company became during those times. Today, each country has its own stock exchange and every country has become greatly dependent upon the stock market. WHAT IS STOCK EXCHANGE? Stock exchange is that place, that building where people buy and sell shares of the companies. The market can be divided into two types- the primary market and the secondary market. Primary market: primary market is where is companies sell their shares. The companies decide what exactly would be their shares prices. Although there is some regulation in this too the companies cannot maneuver too much because a lot of it depends upon the demand. How much prize are the people willing to pay for the company’s shares. If the value of the company is 1 lakh rupees, its sales 1 lakh of its shares and offers shares at rs1 per share. If its demand is high and a lot of people want to buy its shares, the company would obviously be able to sell its shares for a higher price. What the companies do nowadays is decide upon a range. There’s a minimum price and a maximum price. They decide to sell their shares within that range. How many shares can a company have? A point to be noted here is that every share of the company has equal value. It is upon the company to decide how many of its shares it wants to make. If the total value of the company is 1 lakh, then it may make 1 lakh shares of rs1 each, or it may 2lakh shares of 50 paise each. When companies sell their shares in the share markets, it never sells 100% of them. the owner always retains majority of the shares to keep possession of his decision-making power. If you sell the shares, then all the buyers of the shares would become owner of the company. Since they all become owners, they all can take decisions regarding that company. The individually who has more than 50% of the share would be able to make decisions regarding the company. Therefore, the founders of the company prefer to retain more than 50% of the shares. For example, 60% of the shares of Facebook are retained by mark Zuckerberg. The people who have bought shares of the company can sell it to the other people. this is called the secondary market. SECONDARY MARKET: Where people buy and sell shares amongst themselves and trade in share. The companies cannot control the prices of their shares in the secondary market. The share prices fluctuate depending upon the demand and supply of the shares.so the prices of the shares fluctuate depending upon the demand and supply. INDIA’S SOCK EXCHANGE  Almost every big country has its own stock exchange. There are two popular stock exchanges in India. One is the Bombay Stock Exchange (BSE) which has around 5400 registered companies. The other is the national stock exchange that has 1700 registered companies. With so many companies registered in the stock exchange, if we want to observe, overall, whether the price of the shares of the companies are moving up or down, how do we view this? To measure this, some measurements have been put in place- 1.SENSEX: Sensex shows the average trend of the top thirty companies of the stock exchange. Averaging out, whether the shares of the companies are moving up or down. The full form of Sensex, the sensitivity index, displays the same.  The number of Sensex, that it has reached 40,000 marks. The number itself means not a lot the value of this number can be understood only upon comparison with the past numbers. Because this number has been randomly decided. So, gradually, the Sensex has been rising and it has reached the 44,000 mark in the past 50 years. 2.NIFTY: There is another similar index- NIFTY- National+ Fifty. Nifty shows the price fluctuation of the shares of top 50 companies listed on the National stock Exchange.                                 CONCLUSION A stock exchange is an exchange where traders and stock brokers buy and sell shares of stock, bonds and other securities. It also offers facilities for issue and redemption of securities and other financial instruments. Stock issued by listed companies and unit trusts, bonds and pooled investment products can be traded on a stock exchange. A stock exchange functions as a 'continuous auction' market where transactions are conducted between the buyers and sellers. A stock exchange plays an important role in the economy. It helps to raise capital for business, mobilize savings for investment, facilitates the growth of companies, and enables profit sharing. It assists in creating investment opportunities for small investors, and raising capital for development projects taken up by the government. It acts as a barometer of the economy.