What is a Stock Market?
Stock market is a place or platform where shares of pubic listed companies are traded. We can simplify the definition of the stock market as an electronic market place where buyers and sellers meet and trade their point of view.
It is imperative to understand the difference between Primary and Secondary markets. The primary market is where companies offer shares to the general public in an initial public offering (IPO) to raise capital. In primary market the company fixes its offer price and there is no way the purchaser can offer another price. However, many companies offer their equity on a price band and allow the buyers to bid.
The liquidity for the shares happens in the secondary market. Once new securities have been sold in the primary market, they are traded in the secondary market—where one investor buys shares from another investor at the prevailing market price or at whatever price both the buyer and seller agree upon. The secondary market or the stock exchanges are regulated by the regulatory authority. In India, the secondary and primary markets are governed by the Security and Exchange Board of India (SEBI).
A stock exchange facilitates stock brokers to trade company stocks and other securities. A stock may be bought or sold only if it is listed on an exchange. So, it is the meeting place of the stock buyers and sellers. India's premier stock exchanges are the Bombay Stock Exchange and the National Stock Exchange.
07/09/2020