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Tag: Indian Share Market

  • The Basic Concepts Of The Indian Share Market

    On the stock market, investors can buy and sell shares, bonds, and other types of financial assets. A stock exchange is a platform where investors and traders can buy and sell shares.

    The two biggest stock exchanges in India are the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). Also, businesses can list their shares for the first time on a market called the primary market. The shares are then bought and sold again on the secondary market.

    Roles of Stock Market Participants: A stock market is a place where financial products can be bought and sold. Brokers, traders, and investors must register with SEBI, the exchange (BSE, NSE, or regional exchanges), and the companies they work for before they can trade (listing their shares).

    Securities and Exchange Board of India (SEBI): SEBI is the market regulator whose main job is to make sure that the Indian stock market runs smoothly and openly so that average investors can invest without worrying. SEBI has set up rules that all exchanges, businesses, brokerages, and other participants must follow.

    Stockbrokers: Members of exchanges are stockbrokers. They are the middlemen who carry out investors’ buy and sell orders in exchange for a fee. In the Indian system, investors must trade through broking houses or brokers, who act as middlemen.

    Investors and traders are the two main types of people who take part in the market. When investors buy stock in a company, they want to keep it for a long time and make money from it. traders buy and sell stocks, while investors only buy and hold stocks.

    Investors’ actions are influenced by the success of a company, its potential for long-term growth, dividend payments, and other similar things. On the other hand, traders are affected by price changes as well as supply and demand.

    Let’s talk about the two types of markets we’ve already talked about.
    When you trade on the stock market, you try to match buyers and sellers. Your broker sends your offer to buy to the stock exchange, which then compares it to a seller’s offer. Once the price has been set, the exchange tells your broker that the trade is done. At that point, the transaction takes place. In the meantime, the bourse checks the information of the buyer and seller to avoid defaults. After that, the actual transfer of stocks takes place to end trading.

    The process used to take days, but digitization has helped cut the time down to T+2, or within two days of the transaction, and work is being done to get it down to T+1.

  • How Does Short Selling Work In The Indian Share Market?

    When an investor sells shares he does not own, this is called “short selling.” In a short sale, a trader borrows shares from the owner with the help of a brokerage. The trader then sells the shares at market value, hoping that prices will go down. The person who sells short buys the shares at a loss and makes money when the prices go down. It’s important to know that short selling is done by experienced traders and investors who think that the price of shares will go down before they are returned to the owner. Short selling has a high risk-to-reward ratio because you could make or lose a lot of money.

    Information about short sales:

    1. In a short sale, the seller does not own the stock that is being sold. They are borrowed from someone else.

    2. Both individual investors and large groups of investors can do short sales.

    3. Short selling is based on guessing what will happen.

    4. The seller bets that the price will go down by using short selling. If prices go up, the seller will lose money.

    5. Traders have to do what they have to do and give the shares back to the owner when the trade is settled.

    6. It’s important for investors to know that the deal is a short sale.

    7. Most of the time, short selling happens when the market is down and the price drop is big.

    On the stock market, a short sale is done when people want to make money quickly. Some people say it’s like holding on to stocks for a long time. Long-term investors buy stocks with the hope that their prices will go up in the future. Short-sellers, on the other hand, watch the market and profit when prices go down.

    How does the short sale process work?

    Pros of short-selling:

    Financial experts have had a lot to say about the benefits of short selling. Even though this approach has been criticised, market watchdogs all over the world support it because it helps fix irrational overpricing of any stock, provides liquidity, stops bad stocks from rising quickly, and makes sure promoters can’t change prices.

    Short-selling disadvantages

    Short-selling is an illegal practice that market manipulators often use to raise stock prices artificially. Because of this, there is a higher chance of market instability and more volatility. The planned drop in stock prices could hurt the company’s confidence and make it harder for them to raise money.

    A “naked short sell” when a trader sells shares without borrowing them or making plans to borrow them. If the trader doesn’t borrow the shares before the clearing time, he or she can’t give them to the buyer. The trade is said to have “failed to deliver” if the trader doesn’t close the position or borrow the stock. Since it goes against the laws of supply and demand, naked short selling is illegal in most countries. If a large number of naked short sales are made, the market can become unstable.

    Short selling is not a good idea for new traders and gamblers who don’t understand the risks. Short selling should only be done by people who know a lot about how the market works.