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Basics Of Share Market Explained
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WHY INVEST IN SHARE MARKET? Convenience through partnerships

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We invest in shares to build our wealth in the long run. While some people view shares to be a risky investment, many studies have proved
that putting your money in the right shares for a long period of time (five to 10 years) can provide inflation-beating returns — and be a better
investment option than real estate and gold.

People also have short-term strategies while investing in share markets. While shares can be volatile over a short period of time, investing
in the right shares can help traders make quick profits.

Earlier, stockbrokers would converge around Banyan trees to conduct trades of stocks. As the number of brokers increased and the streets
overflowed, they simply had no choice but to relocate from one place to another. Finally in 1854, they relocated to Dalal Street, the place
where the oldest stock exchange in Asia – the Bombay Stock Exchange (BSE) – is now located. It is also India’s first stock exchange and
has since then played an important role in the Indian stock markets. Even today, the BSE Sensex remains one of the parameters against
which the robustness of the Indian economy and finance is measured.

If you’ve heard recently that Indian share markets are at record high, you can read about Stocks that took Sensex to a new high.
(/ksweb/meaningful-minutes/stocks-that-took-sensex-to-a-new-high?
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Knowledgebank&utm_term=Knowledgebank)

In 1993, the National Stock Exchange or NSE was formed. Within a few years, trading on both the exchanges shifted from an open outcry
system to an automated trading environment.

This shows that Indian stock markets have a strong history. Yet, at the face of it, especially when you consider to invest in share market, it
often seems like a maze. But once you start, you will realize that the investment fundamentals are not too complicated. One of the basics
of investment fundamentals is financial planning. Read more about the importance of financial planning
(http://www.kotaksecurities.com/ksweb/Research/Investment-Knowledge-Bank/financial-planning-overview?
utm_source=fa_knowledgebank&utm_medium=fa_knowledgebank_ShareMarketBasics&utm_campaign=Knowledgebank&utm_content=
Knowledgebank&utm_term=Knowledgebank).

SO LET’S START WITH SHARE MARKET BASICS.

WHAT IS SHARE MARKET?

A share market is where shares are either issued or traded in.

A stock market is similar to a share market. The key difference is that a stock market helps you trade financial instruments like bonds,
mutual funds, derivatives as well as shares of companies. A share market only allows trading of shares. Click here to start your journey on
derivatives market. (http://www.kotaksecurities.com/ksweb/Research/Investment-Knowledge-Bank/what-is-derivative-trading?
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The key factor is the stock exchange – the basic platform that provides the facilities used to trade company 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. India's premier
stock exchanges are the Bombay Stock Exchange and the National Stock Exchange. Click here to understand how stock market works.
(http://www.kotaksecurities.com/ksweb/Research/Investment-Knowledge-Bank/how-share-market-works?
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TYPES OF SHARE MARKET
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THERE ARE TWO KINDS OF SHARE MARKETS – PRIMARY AND SECOND MARKETS.
Primary Market:
This where a company gets registered to issue a certain
amount of shares and raise money. This is also called
getting listed in a stock exchange.
A company enters primary markets to raise capital. If the
company is selling shares for the first time, it is called an
Read more factors to consider before investing in an IPO
(http://www.kotaksecurities.com/ksweb/Meaningful-
Minutes/6-things-to-keep-in-mind-while-investing-in-IPOs?
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intermediary such as a broker, who facilitates the process.
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Secondary Market:
Once new securities have been sold in the primary market, Get Quote
these shares are traded in the secondary market. This is to
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offer a chance for investors to exit an investment and sell the
shares. Secondary market transactions are referred to trades
where one investor buys shares from another investor at the
prevailing market price or at whatever price the two parties
agree upon.
Normally, investors conduct such transactions using an
Different brokers offer different plans. You can visit this page
(http://www.kotaksecurities.com/ksweb/Our-
Offerings/Brokerage-Options?
utm_source=fa_knowledgebank&utm_medium=fa_knowledgebank_ShareMarketBasics&utm_campaign=Knowledgeba
Knowledgebank&utm_term=Knowledgebank) to understand
the different plans that Kotak Securities has to offer. Or, you
can read about the features that Kotak Securities has to
offer. (http://www.kotaksecurities.com/ksweb/Our-
Offerings/Value-Added-Features?
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HOW TO INVEST IN SHARE MARKET

First, you need to open a trading account (/ksweb/Our-Offerings/Account-Types/Trinity-Online-Trading-Account?

utm_source=fa_knowledgebank&utm_medium=fa_knowledgebank_ShareMarketBasics&utm_campaign=Knowledgebank&utm_content=
Knowledgebank&utm_term=Knowledgebank) and a demat account (/ksweb/account-types/demat-account) to invest in share market. This
trading and demat account will be linked to your savings account to facilitate smooth transfer of money and shares. Note that demat and
trading account are different, read more about difference between demat and trading account
(http://www.kotaksecurities.com/ksweb/Research/Investment-Knowledge-Bank/difference-between-trading-account-and-demat-account?
utm_source=fa_knowledgebank&utm_medium=fa_knowledgebank_ShareMarketBasics&utm_campaign=Knowledgebank&utm_content=
Knowledgebank&utm_term=Knowledgebank).

We offer various trading tools to buy and sell shares that caters to our diversified set of traders and investors :

Online trading (/ksweb): Want to take charge of your stock investing decisions? Our robust online trading system will help invest in share
market online with sheer ease and convenience. To buy shares online, log in to your trading account using your User ID, Password and
Security Key/Access code.

KEAT PRO X: A jet speed online trading software (/ksweb/Our-offerings/Trading-Tools/Keat-Pro-X?

utm_source=fa_knowledgebank&utm_medium=fa_knowledgebank_ShareMarketBasics&utm_campaign=Knowledgebank&utm_content=
Knowledgebank&utm_term=Knowledgebank ) to Invest in share market online in real time

Kotak Stock Trader: Just tap and buy stocks on the go using our mobile trading app (/ksweb/Our-Offerings/Trading-Tools/Kotak-Stock-
Trader-App?
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Knowledgebank&utm_term=Knowledgebank) on your smartphone.

Dealer assisted trading: Looking for some guidance to buy a stock? This is an assisted trading service which will help you make an
informed investment decision.

Call and Trade: Don’t have access to your laptop or computer. You can call us And invest in the share market over the phone.

Fastlane: A light and fast Java based trading platform that makes share trading easy even on slow and age old computers

Xtralite: An extra light and a superfast trading website that’s works best even if you have a slow internet connection.

WHAT ARE THE FINANCIAL INSTRUMENTS TRADED IN A STOCK MARKET?

Below are the main four key financial instruments that are traded in Stock market:
1. Bonds
2. Shares
3. Derivatives
4. Mutual Fund

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Bonds: Secondary Market:

Companies need money to undertake projects. They then pay Investing in share market is another place for raising money. In
back using the money earned through the project. One way of exchange for the money, companies issue shares. Owning a
raising funds is through bonds. When a company borrows from share is akin to holding a portion of the company. These shares
the bank in exchange for regular interest payments, it is called a are then traded in the Indian share market. Consider the previous
loan. Similarly, when a company borrows from multiple investors example; your project is successful and so, you want to expand
in exchange for timely payments of interest, it is called a bond. it.
Click here to read about the importance of tracking bond yield
Now, you sell half of your company to your brother for Rs 50,000.
movements.
You put this transaction in writing – ‘my new company will issue
(http://www.kotaksecurities.com/ksweb/articles/what-stock-
100 shares of stock. My brother will buy 50 shares for Rs 50,000.'
market-investors-can-learn-by-tracking-bond-yield-movements?
Thus, your brother has just bought 50% of the shares of stock of
utm_source=fa_knowledgebank&utm_medium=fa_knowledgebank_ShareMarketBasics&utm_campaign=Knowledgebank&utm_content=
your company. He is now a shareholder. Suppose your brother
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immediately needs Rs 50,000. He can sell the share in the
For example, imagine you want to start a project that will start secondary market and get the money. This may be more or less
earning money in two years. To undertake the project, you will than Rs 50,000. For this reason, it is considered a riskier
need an initial amount to get started. So, you acquire the instrument.
requisite funds from a friend and write down a receipt of this
Shares are thus, a certificate of ownership of a corporation.
loan saying 'I owe you Rs 1 lakh and will repay you the principal
Thus, as a stockholder, you share a portion of the profit the
loan amount by five years, and will pay a 5% interest every year
company may make as well as a portion of the loss a company
until then'. When your friend holds this receipt, it means he has
may take. As the company keeps doing better, your stocks will
just bought a bond by lending money to your company. You
increase in value. Read more about different types of stocks
promise to make the 5% interest payment at the end of every
(https://indane.co.in/images/Form4-LPG-Linking-Form-v2.pdf?
year, and pay the principal amount of Rs 1 lakh at the end of the
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fifth year.
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Thus, a bond is a means of investing money by lending to others.
This is why it is called a debt instrument. When you invest in
bonds, it will show the face value – the amount of money being
borrowed, the coupon rate or yield – the interest rate that the
borrower has to pay, the coupon or interest payments, and the
deadline for paying the money back called as the maturity date.
If you’re looking for a bond option that helps you save tax, you
can read about tax free bonds
(https://indane.co.in/images/Form4-LPG-Linking-Form-v2.pdf?
utm_source=fa_knowledgebank&utm_medium=fa_knowledgebank_ShareMarketBasics&utm_campaign=Knowledgebank&utm_content=
Knowledgebank&utm_term=Knowledgebank).

Mutual Funds: Derivatives:

These are investment vehicles that allow you to indirectly
investing in share market market or bonds. It pools money from
a collection of investors, and then invests that sum in financial
instruments. This is handled by a professional fund manager.
Every mutual fund scheme issues units, which have a certain
value just like a share. When you invest, you thus become a unit-
holder. When the instruments that the MF scheme invests in
make money, as a unit-holder, you get money.
This is either through a rise in the value of the units or through
the distribution of dividends – money to all unit-holders. Click
here to start your journey into mutual funds
(http://www.kotaksecurities.com/ksweb/Research/Investment-
knowledge-Bank/introduction-to-mutual-funds?
utm_source=fa_knowledgebank&utm_medium=fa_knowledgebank_ShareMarketBasics&utm_campaign=Knowledgebank&utm_content=
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The value of financial instruments like shares keeps fluctuating.
So, it is difficult to fix a particular price. Derivatives instruments
come handy here.
These are instruments that help you trade in the future at a price
that you fix today. Simply put, you enter into an agreement to
either buy or sell a share or other instrument at a certain fixed
price. Read more to underdtand how to buy or sell a futures
contract
(http://www.kotaksecurities.com/ksweb/Research/Investment-
Knowledge-Bank/how-to-buy-and-sell-futures-contracts?
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WHAT DOES THE SEBI DO?

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Investing in the share market is risky. Hence, they need to be
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of India (SEBI) is mandated to oversee the secondary and
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primary markets in India since 1988 when the Government of
India established it as the regulatory body of stock markets.
Within a short period of time, SEBI became an autonomous body
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through the SEBI Act of 1992.

SEBI has the responsibility of both development and regulation

of the market. It regularly comes out with comprehensive
regulatory measures aimed at ensuring that end investors
benefit from safe and transparent dealings in securities.

Its basic objectives are:

Protecting the interests of investors in stocks

Promoting the development of the stock market

Regulating the stock market

You can read about the 5 changes that SEBI recently made.
(http://www.kotaksecurities.com/ksweb/Meaningful-Minutes/5-
Important-market-reforms-by-SEBI-to-know-about?
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WHAT NEXT?

Now that you have understood what a share market basics are, what it means to invest in share market and other stock market
fundamentals, you need to understand how it works and how you can invest in the share market.Click here to find out.
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