Stock market is referred to a place where shares of publicly-listed companies get traded. Primary market is a place where companies offer shares to general public through initial public offering (IPO) to raise capital. These shares are then traded in the secondary market. Secondary market is a place where one investor purchases shares from another investor at prevailing market price or at the price on which both buyer and seller agree upon. Secondary market or stock exchanges are regulated. In India, both the markets secondary and primary are regulated by Security and Exchange Board of India (SEBI).
Stock exchange helps in facilitating stock brokers to trade stocks of the company and other securities. The company’s stock may be purchased or sold only if it is listed on an exchange. Therefore, stock exchange is a meeting place of buyers and sellers. India's premier stock exchanges include Bombay Stock Exchange and National Stock Exchange. Stock markets are referred as components of free-market economy as they allow democratized access to investor trading and exchange of capital.
Stock markets help in creating efficient price discovery and efficient dealing. A company needs to divide itself into numerous shares and then it sells some of these shares to general public at price per share. To facilitate and to execute this process, a company requires a marketplace where these shares can be sold. Therefore, stock market is that marketplace which helps such companies. At a later stage, any listed company can offer new and additional shares through rights issues or some other routes. The companies can also buyback or delist their shares.
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