The Basics- Stock Markets
For a moment, let's forget about stocks, trading and all that. Just think of the word 'Market' in a general sense and what it means.
Market is a place where a buyer and a seller can meet, discuss, bargain and exchange things for money.
Stock Markets too are just a place. A place where stocks are sold and bought. With technology, you can access this market via the internet. You don't need to be physically present in the market. So stock markets are almost virtual now.
In the past, number of people who were interested in the buying and selling of stocks was limited. Over time, the stock markets started getting growing with more and more money being exchanged there.
There were and are many exchanges in India.Apart from the BSE and NSE there are stock exchanges at Calcutta, Pune, Bangalore, Ahmedabad and many more cities.
As money and people started increasing, there were cases of cheating and unfair practises. So the stock markets overtime evolved and became more systematic.
They introduced rules and started allowing only a few set of people to directly access this market. They called these middlemen 'Brokers' and if anyone else wanted to access the stock markets they needed to go through these broker.
Rules were set for these brokers as well. The commissions they would charge. Timings were decided for when markets would be open. Strict rules were set for which companies could allow their shares to be exchanged in this market.
Of all the stock exchanges, the Bombay stock exchange(BSE) and the National stock exchange (NSE) became popular and more advanced than the rest and as of today they are the most used markets in India for stocks.
The main question you may be asking after understanding that the stock market is like any other market is why was it ever needed.
The answer is simple. To make things more systematic and organised.
When people are selling things and exchanging money worth crores of Rupees, it's better to have a well organised market instead of a haphazard random system.
If you really think about it, stock markets are just a normal market to buy or sell something. How we use them is where things get more complicated.
In the next few posts, I will continue to dig deeper into the basics and simplify things for you. I plan on covering the Nifty and Sensex in the next post.
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