Introduction of stock market
Stock markets refer to a market place where investors can buy and sell stocks. The price at which each buying and selling transaction takes is determined by the market forces (i.e. demand and supply for a particular stock).
Let us take an example for a better understanding of how market forces determine stock prices. ABC Co. Ltd. enjoys high investor confidence and there is an anticipation of an upward movement in its stock price. More and more people would want to buy this stock (i.e. high demand) and very few people will want to sell this stock at current market price (i.e. less supply). Therefore, buyers will have to bid a higher price for this stock to match the ask price from the seller which will increase the stock price of ABC Co. Ltd. On the contrary, if there are more sellers than buyers (i.e. high supply and low demand) for the stock of ABC Co. Ltd. in the market, its price will fall down.
In earlier times, buyers and sellers used to assemble at stock exchanges to make a transaction but now with the dawn of IT, most of the operations are done electronically and the stock markets have become almost paperless. Now investor’s don’t have to gather at the Exchanges, and can trade freely from their home or office over the phone or through Internet.
A STOCK EXCHANGE is a platform where buyers and sellers of securities issued by governments, finance institutions, corporate houses etc., meet and where trading of these corporate securities take place.
MUTUAL FUNDS: -
A Mutual fund is a trust that pools the saving of a number of investors who share a common financial goal.
FOREIGN DIRECT MARKET (FDI): -
This category refers to international investment in which the investor obtains a lasting interest in an enterprise in another country. Most concretely, it may take the form of buying or constructing a factory in a foreign country or adding improvements to such a facility, in the form of property, plants or equipment.
FOREIGN INSTITUTIONAL INVESTOR (FII):-
An investor or investment fund that is from of or registered in a country outside of the one in which it is currently investing. Foreign institutional investors have made a sizable investment in Indian financial markets. There are currently about 1324 FIIs registered in India.
FOREIGN PORTFOLIO INVESTMENT (FPI):-
FPI is a category of investment instruments that are more easily traded, may be less permanent, and do not represent a controlling stake in an enterprise. These include investments via equity instruments (stocks) or debt (bonds) of a foreign enterprise that does not necessarily represent a long-term interest.
BULL MARKET: -
A Bull market is a market that is consistently going up. It is a market where there is optimism of further rise batter, business results and other positive factors. Bull Market can sometimes continue for years, for investors this is the preferred market trend. However no bull market can continue for very long.
BEAR MARKET: -
Bear Market is a market that is showing a persistent downtrend. A 15-20% downward movement of the market generally termed as a bear market.
Diversification is the technique of investing in unrelated business sectors simultaneous so that risk that affects a particular sector does not affect your overall investment. For example your portfolio of share includes sectors like Information Technology, Real estate capital Goods, Autos etc. Exchange rate of a nation's currency- Currency like other commodities rises or falls in "price" with demand. When investors leave, they sell their holdings in a country's currency and as demand falls, the "price" of that currency will also fall.
ECONOMIES OF SCALE: -
Produces are often able to enjoy considerable production cost savings by buying inputs in bulk, mass-producing or retailing their end product. These lower costs achieved through expanded production are called Economies of Scale.
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