02/12/2025
Basics of Stock Market
Investment
Using savings in order to get return on it in the future is called Investment. Reasons why one needs to invest wisely is to meet the cost of Inflation.
When to start Investing?
Invest early
Invest regularly
Invest for long term and not short term
Interest?
Interest is an amount charged to the borrower for the privilege of using the lender’s money.
Options available for investment?
Physical assets like real estate, gold/jewellery, commodities etc. and/or Financial assets such as fixed deposits with banks, small saving instruments with post offices, insurance/provident/pension fund etc. or securities market related instruments like shares, bonds, debentures etc.
Stock Exchange?
The Securities Contract (Regulation) Act, 1956 [SCRA] defines ‘Stock Exchange’ as any body of individuals, whether incorporated or not, constituted for the purpose of assisting, regulating or controlling the business of buying, selling or dealing in securities.
‘Equity’/Share?
Total equity capital of a company is divided into equal units of small denominations, each called a share.The holders of such shares are members of the company and have voting rights.
‘Debt Instrument’?
Debt instrument represents a contract whereby one party lends money to another on predetermined terms with regards to rate and periodicity of interest, repayment of principal amount by the borrower to the lender.
What is a Derivative?
Derivative is a product whose value is derived from the value of one or more basic variables, called underlying.
Mutual Fund?
A Mutual Fund is a body corporate registered with SEBI (Securities Exchange Board of India) that pools money from individuals/corporate investors and invests the same in a variety of different financial instruments or securities such as equity shares, Government securities, Bonds, debentures etc.
Index?
An Index shows how a specified portfolio of share prices are moving in order to give an indication of market trends.
Depository?
A depository is like a bank wherein the deposits are securities (viz. shares, debentures, bonds, government securities, units etc.) in electronic form.
Dematerialization?
Dematerialization is the process by which physical certificates of an investor are converted to an equivalent number of securities in electronic form and credited to the investor’s account with his Depository Participant (DP).
SECURITIES
‘Securities’?
The definition of ‘Securities’ as per the Securities Contracts Regulation Act (SCRA), 1956, includes instruments such as shares, bonds, scrips, stocks or other marketable securities of similar nature in or of any incorporate company or body corporate, government securities, derivatives of securities, units of collective investment scheme, interest and rights in securities, security receipt or any other instruments so declared by the Central Government.
Function of Securities Market?
Securities Markets is a place where buyers and sellers of securities can enter into transactions to purchase and sell shares, bonds, debentures etc.
Securities one can invest in?
Shares
Government Securities
Derivative products
Units of Mutual Funds etc., are some of the securities investors in the securities market
can invest in.
Regulator
Need of Regulators?
The regulator ensures that the market participants behave in a desired manner so that securities market continues to be a major source of finance for corporate and government and the interest of investors are protected.
Who regulates the Securities Market?
Department of Economic Affairs (DEA), Department of Company Affairs (DCA), Reserve Bank of India (RBI) and Securities and Exchange Board of India (SEBI).
SEBI and what is its role?
The Securities and Exchange Board of India (SEBI) is the regulatory authority in India established under Section 3 of SEBI Act, 1992. SEBI Act, 1992 provides for establishment of Securities and Exchange Board of India (SEBI) with statutory powers for (a) protecting the interests of investors in securities (b) promoting the development of the securities market and (c) regulating the securities market.
Participants
Participants in the Securities Market?
The securities market essentially has three categories of participants, namely, the issuers of securities, investors in securities and the intermediaries, such as merchant bankers, brokers etc.
Is it necessary to transact through an intermediary?
It is advisable to conduct transactions through an intermediary.
Segments of Securities Market?
the primary (new issues) market and
the secondary market.
The primary market provides the channel for sale of new securities while the secondary market deals in securities previously issued.
