1. What is the stock market?
The stock market is a place where buyers and sellers come together to trade shares of publicly listed companies. When you buy a share, you become a part-owner of the company.
A stock represents a unit of ownership in a company or a collection of shares from multiple companies.
2. What is a share?
A share represents a unit of ownership in a specific company. As a shareholder of a company, you own a percentage of the company’s ownership and are responsible for the company’s profits and losses. You also receive additional benefits such as dividends, bonus shares, and rights issues.
3. Demat Account
A Demat account allows you to hold your shares in electronic form.
The Demat account not only makes stock trading quick and easy, but it also eliminates all the risks and complications associated with share certificates that represent ownership in a company.
You can use a Demat account to store various types of investments such as equity shares, mutual funds, bonds, government securities, and exchange-traded funds.
In India, holding a Demat account is mandatory if you want to invest in the stock market.
4. Bombay Stock Exchange (BSE)
The Bombay Stock Exchange (BSE) is the oldest stock exchange in India and Asia.
It was established in 1875 under a banyan tree by five stockbrokers. Currently, 5,400 stocks are listed on the BSE.
5. National Stock Exchange (NSE)
The National Stock Exchange (NSE) was established in 1992 after the Harshad Mehta scam.
It is the leading stock exchange in India and the fourth largest in the world.
More than 1,600 stocks are listed on the NSE.
6. NIFTY 50
NIFTY 50 is an index or a collection of the 50 largest and most actively traded stocks listed on the NSE.
It helps investors measure the overall market sentiment. The term “NIFTY 50” is a blend of the National Stock Exchange and fifty (50).
7. SENSEX 30
SENSEX is the abbreviated form of the Bombay Exchange Sensitive Index – which is the benchmark index of the Bombay Stock Exchange (BSE).
When we say “SENSEX,” it refers to a collection of 30 large and most actively traded stocks on the BSE.
8. Equity
One of the most essential terms in stock trading, equity indicates the amount of shares owned in a company.
As an investor, when you purchase shares of a company, you are buying equal ownership in that company. The stock market is the place where these shares and their stocks are bought and sold from one investor to another.
9. Bid
A bid represents the highest amount of money a potential buyer is willing to pay for a share in an auction.
If there are multiple buyers for a stock, they each place their bids, leading to a bidding war.
This concludes only when a buyer places a bid that other buyers cannot match or are unwilling to.
10. Volatility
An important aspect to know about before investing in a stock is its volatility.
Volatility indicates the rate of price fluctuations of a stock.
For example, a highly volatile stock is one that experiences daily price fluctuations. Some traders profit from the risks in highly volatile stocks, while others prefer to invest in less volatile stocks for the long term.
11. Bull Market
A bull market is a market condition in which prices are continually rising. Investors make money regardless of the purchase price, hence, the market is in an upward trend.
12. Bear Market
A bear market is a situation where people sell a large number of shares, expecting the prices to decrease, thereby making a profit by buying back the shares after a short period.
