What should I know about Indian share market?

Prasanth Menon

20 Jun 2017

The Indian share market is a place where shares of public companies are listed for trading. Here, trading shares bifurcate to two sub-categories; the primary market and the secondary market. Investors buy shares directly from the companies in the primary market. In the secondary market, investors trade shares amongst themselves.

In recent times, India had always been a leader as per the GDP rate that averaged around 7-7.5%. The world GDP rate languishes at 2.5%. This portrays India as a growing and lucrative market. Worldwide, the USA contributes 23% of the global GDP, Europe does 20%, China provides 9.3%, Japan provides 8.7% and India provides 2.4%.

The Inside Story

As is the case, any person through a broker can purchase or sell stocks pertaining to one or many companies. This exchange takes place at primary stock exchanges in India; the Bombay Stock Exchange (BSE) and the National Stock Exchange(NSE). Both are situated in the financial capital of India, Mumbai. The Bombay Stock Exchange claims to be the world's fastest stock exchange while the National Stock Exchange was the first exchange in India that provided a computer based electronic trading system. As of March 2017, the BSE and NSE rank 11th and 12th worldwide, respectively.

The market opens for trading at 9.30am and shuts down at 3.30pm, with a pre-open trade session from 9.00am-9.15am. Trade in both the exchange processes through the electronic order book, which is like an electronic shopping list for shares, sorted by their prices. These markets follow a T+2 day settlement cycle period, where T is the day a share got traded and T+2 is the day when the order got settled.

More About Trading Shares

Typically, trading has to be done by choosing an appropriate SEBI registered broker. The broker can be an individual, investment firm or a corporate body. An investor must have a Demat(Dematerialized) account, which is required to trade shares. An order can be placed with the order, with instructions specifying details about buying/selling shares such as price range, stop loss etc. After the trade is executed and a contract has been signed, it would take T+2 days to settle the trade.

After the 1990s, India let in foreign companies to invest here. The investment by foreign companies is possible only after it is registered under the Foreign Institutional Investor(FII) or as a sub to an FII registered company. Lately, the government of India's 'Make In India' initiative has increased the FDI rate to 48%.

Summing It Up

It is to be noted that India is a service driven country. And it is only when the value of other currencies rise( specifically dollar) that many Indian IT/Service oriented companies would reap profits. More profit is equal to a greater capability of expansion, which is again equal to more employment. At present, as the rupee strengthens the IT and Pharmaceutical companies are making losses.

With the world making efforts towards shifting to non-renewable energy sources as primary energy source, prices of crude oil is unlikely to shoot up that adversely affects the Indian economy since India is a heavy importer of crude oil. Latest measures by the central government such as Make in India, Startup India, Skill India and Digital India provides a potential investor with optimism. India's fiscal deficit is around 3.2%, which perfectly in par with the international standard fiscal deficit of 3%. The Indian share market does look like it is heading towards creating another golden year.

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Why to Choose Mutual Funds Instead of Directly Investing Into Equities?

Whether to invest in equities or mutual funds is a question that has plagued every investor. As someone who needs the best value for his/her investment should you invest in equity directly or via mutual funds?

Let’s start by first understanding what these two terms ‘equities’ and ‘mutual funds’ stand for-

Equities- Equities generally represent ownership of a company. If you own any equity in a company, you are a part owner of the said company (depending on how much equity you own).

Mutual Funds – It is an investment scheme which is professionally managed by an asset management company. It pools together the resources of a group of people and invests their money in equities, debentures, bonds and other securities.

Why choose mutual funds over equities?

For people who’ve never invested in either stocks or mutual funds, it is hard to know which is better and where to start. Broadly speaking, if you are a novice investor, mutual funds are not only less risky but also way easier to manage. Here are some ways in which investing in mutual funds is beneficial as opposed to investing in equities -

Diversification

Mutual funds provide more diversification as compared to an individual equity stock. When you invest in equity, you are investing in a single company which has its inherent risk. For example, if you invest Rs.20,000 in buying equities of one company, you could face a total loss if that particular company performs poorly in the market.  

If you invest the same amount in mutual funds, it will be invested in different kinds of stocks and financial instruments, high-risk and low-risk both, so you might not face total loss even if one company does poorly.

Scale of Investment and Lower Costs

For an individual investor buying and selling stocks is a difficult task due to its high price. Thus, any gains made from stock appreciation are nullified if the overall trading costs are considered. Comparatively with mutual funds, as the money is pooled from a large number of investors, the cost per individual is lowered.  

Another advantage of mutual funds is that you don’t need to invest large sums of money. Buying equities for a profitable venture needs huge amounts of money, a minimum of few lakhs. With mutual funds, you can start with Rs.1000 and earn profits on that as well.

Convenience

Keeping an eye on the markets everyday is a time-consuming business, especially if you are investing as a side gig. There are people who spend their lives studying the market and still end up sustaining heavy losses. Though investing in mutual funds does not guarantee high returns, it is stress-free and needs less work as compared to investing in equities.

To sum it up

It is important to remember that mutual funds have their own disadvantages as well. Thus, as with any financial decision, educating yourself and understanding the suitability of all the available options is the ideal way to invest. 


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What should I know about Indian share market?

Prasanth Menon

20 Jun 2017

The Indian share market is a place where shares of public companies are listed for trading. Here, trading shares bifurcate to two sub-categories; the primary market and the secondary market. Investors buy shares directly from the companies in the primary market. In the secondary market, investors trade shares amongst themselves.

In recent times, India had always been a leader as per the GDP rate that averaged around 7-7.5%. The world GDP rate languishes at 2.5%. This portrays India as a growing and lucrative market. Worldwide, the USA contributes 23% of the global GDP, Europe does 20%, China provides 9.3%, Japan provides 8.7% and India provides 2.4%.

The Inside Story

As is the case, any person through a broker can purchase or sell stocks pertaining to one or many companies. This exchange takes place at primary stock exchanges in India; the Bombay Stock Exchange (BSE) and the National Stock Exchange(NSE). Both are situated in the financial capital of India, Mumbai. The Bombay Stock Exchange claims to be the world's fastest stock exchange while the National Stock Exchange was the first exchange in India that provided a computer based electronic trading system. As of March 2017, the BSE and NSE rank 11th and 12th worldwide, respectively.

The market opens for trading at 9.30am and shuts down at 3.30pm, with a pre-open trade session from 9.00am-9.15am. Trade in both the exchange processes through the electronic order book, which is like an electronic shopping list for shares, sorted by their prices. These markets follow a T+2 day settlement cycle period, where T is the day a share got traded and T+2 is the day when the order got settled.

More About Trading Shares

Typically, trading has to be done by choosing an appropriate SEBI registered broker. The broker can be an individual, investment firm or a corporate body. An investor must have a Demat(Dematerialized) account, which is required to trade shares. An order can be placed with the order, with instructions specifying details about buying/selling shares such as price range, stop loss etc. After the trade is executed and a contract has been signed, it would take T+2 days to settle the trade.

After the 1990s, India let in foreign companies to invest here. The investment by foreign companies is possible only after it is registered under the Foreign Institutional Investor(FII) or as a sub to an FII registered company. Lately, the government of India's 'Make In India' initiative has increased the FDI rate to 48%.

Summing It Up

It is to be noted that India is a service driven country. And it is only when the value of other currencies rise( specifically dollar) that many Indian IT/Service oriented companies would reap profits. More profit is equal to a greater capability of expansion, which is again equal to more employment. At present, as the rupee strengthens the IT and Pharmaceutical companies are making losses.

With the world making efforts towards shifting to non-renewable energy sources as primary energy source, prices of crude oil is unlikely to shoot up that adversely affects the Indian economy since India is a heavy importer of crude oil. Latest measures by the central government such as Make in India, Startup India, Skill India and Digital India provides a potential investor with optimism. India's fiscal deficit is around 3.2%, which perfectly in par with the international standard fiscal deficit of 3%. The Indian share market does look like it is heading towards creating another golden year.

Have Referral Code?