Equity and Stock Markets

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What are stocks?

Are markets in which shares are issued and traded either through exchanges or over-the-counter markets. Also known as the equity market, it is one of the most vital areas of a market economy as it provides companies with access to capital and investors with a slice of ownership in the company and the potential of gains based on the company's future performance

Stock?

Plain and simple, stock is a share in the ownership of a company. Stock represents a claim on the company's assets and earnings. As you acquire more stock, your ownership stake in the company becomes greater. Whether you say shares, equity, or stock, it all means the same thing. The importance of being a shareholder is that you are entitled to a portion of the company’s profits and have a claim on assets. Profits are sometimes paid out in the form of dividends. The more shares you own, the larger the portion of the profits you get.

The securities market has two interdependent segments: the primary (new issues) market and the secondary market. Primary market is where new issues are first offered, with any subsequent trading going on in the secondary market. The primary market provides the channel for sale of new securities. Secondary market refers to a market where securities are traded after being initially offered to the public in the primary market and/or listed on the Stock Exchange. Majority of the trading is done in the secondary market. Secondary market comprises of equity markets and the debt markets

Why should you invest in Equity?

The Definition of Equity

Plain and simple, equity is a share in the ownership of a company. Equity represents a claim on the company's assets and earnings. As you acquire more equity, your ownership stake in the company becomes greater. Whether you say shares, equity, it all means the same thing.

Being an Owner

Holding a company's equity means that you are one of the many owners (shareholders) of a company and, as such, you have a claim (albeit usually very small) to everything the company owns. Yes, this means that technically you own a tiny sliver of every piece of furniture, every trademark, and every contract of the company. As an owner, you are entitled to your share of the company's earnings as well as any voting rights attached to the equity.

A stock is represented by a stock certificate. This is a piece of paper that is proof of your ownership. Today it’s in dematerialized form i.e. in electronic form shares have been kept safe. This is done to make the shares easier to trade. In the past, when a person wanted to sell his or her shares, that person physically took the certificates down to the brokerage. Now, trading with a click of the mouse or a phone call makes life easier for everybody. Being a shareholder of a public company does not mean you have a say in the day-to-day running of the business. Instead, one vote per share to elect the board of directors at annual meetings is the extent to which you have a say in the company. For instance, being a Reliance shareholder doesn't mean you can call up Mukesh Ambani and tell him how you think the company should be run.

The management of the company is supposed to increase the value of the firm for shareholders. If this doesn't happen, the shareholders can vote to have the management removed, at least in theory. In reality, individual investors like you and I don't own enough shares to have a material influence on the company.

Understanding the Terms

Stock Symbol

- This is the unique alphabetic name which identifies the stock. If you watch financial TV, you have seen the ticker tape move across the screen, quoting the latest prices alongside this symbol. If you are looking for stock quotes online, you always search for a company by the ticker symbol.

52-Week High and Low

- These are the highest and lowest prices at which a stock has traded over the previous 52 weeks (one year). This typically does not include the previous day's trading

Security Name & Type of Stock

- This column lists the name of the company. If there are no special symbols or letters following the name, it is common stock. Different symbols imply different classes of shares.

For example, "eq" means the shares are equity.

Total Traded Quantity

-This figure shows the total number of shares traded for the day. It’s the volume for the day.

Day High and Low

- This indicates the price range at which the stock has traded at throughout the day. In other words, these are the maximum and the minimum prices that people have paid for the stock.

Close

- The close is the last trading price recorded when the market closed on the day. Keep in mind, you are not guaranteed to get this price if you buy the stock the next day because the price is constantly changing (even after the exchange is closed for the day). The close is merely an indicator of past performance and except in extreme circumstances serves as a ballpark of what you should expect to pay.

Net Change

- This is the rupee value change in the stock price from the previous day's closing price. When you hear about a stock being "up for the day," it means the net change was positive.

Order Book

– On the right hand side you see “Buy Qty”, “Buy Price”. This shows the top 5 bid and asks figures at which the security is trading. This basically shows the demands and supply of a particular stock. It actually shows the market breadth which will give you the number of buyers and sellers.

 

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