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Introduction to Stock Markets

Let‘s now look from the side of investors. How an investor buys or sells his share? What are the major procedures one must follow to be a part of this whole mechanism? How would an investor choose the right share with regard to its future returns?

 In modern world, the stock markets play a vital role in sustaining the global economy. It has significantly diverted the course of capital investment trends that could only be achieved through a lot of research and experience. They provide a secure and regulated environment where market participants can transact in shares and other eligible financial instruments with confidence, with zero to low operational risk. In this post-Covid era, a major shift occurred in the stock market users as the active investor accounts increased by a record 104 million in India and the retail stock ownership in the 1500 companies listed on the National Stock Exchange (NSE) rose 9% in Q3 2020, the highest rise since March 2018. So, it is clear that the growth of stock markets is integral to the growth of global economy, where the consistent fluctuations in the stock prices possibly alter the overall economic position of a country.

Obviously, the term stock market refers to several exchanges in which shares of publicly held companies are bought and sold. They are components of a free-market economy as they enable democratized access to investor trading and exchange of capital. Sometimes, the word stock market‘ and stock exchange‘ used interchangeably as they bear almost the same meaning in principle. The stock exchange is a marketplace or the infrastructure that facilitates equity trading while a stock market is an umbrella term representing all of the stocks that trade in a particular region or country. Currently, there are 60 major global stock exchanges that range in size and trading volume, scattered worldwide in which seven stock exchanges belong to India. Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) are the most popular ones from Indian standards; both of them are registered with 5000+ and 2000+ companies respectively.

The primary reason most people invest in stocks is the potential return compared to alternatives such as bank certificates of deposit, gold, and Treasury bonds. On the same coin, the investments in stocks also need high risk and patience as the majority of investors fail in handling the strategic viewpoint of the stock markets. In contrast to other investment platforms, it is difficult to predict the volatility rate of stocks due to the consistent fluctuation in the demand and supply of each share. In each moment, the stock prices may rise, may fall, like the heartbeats of a man. Therefore, before investing in a stocks, one needs to study about it, to take deep research on each share, to experience them through the ages and beyond all, to keep patience even at the extreme loss.

Another factor that makes stocks different from other investment strategies is the functioning of the stock market is a bit complicated and intricate. It is a mechanism of multiple techniques and contains a systematic approach to save the money in more secured way. In Indian standards, Securities and Exchange Board of India (SEBI) maintains the functioning of the stock exchanges properly, and scrutinizes any spams or frauds happen in its conduct. Likewise, the trading (buying and selling) of the shares are done through brokers, who act like an intermediary between the buyer and the seller. Nowadays, the brokerage system is done through online apps like Groww, upstox, angelone, Olymptrade and etc... which facilitate the trading straightforward.

Above all, it is an undeniable fact that the stock market is like a sea with waves of all shapes and sizes. While some waves are good, others may be devastating. Millions of investors enter the stock market every year, but only a handful make profits. There are several things one must be vigilant while choosing a share and trading in a stock. There is no shareholders could generate crores in one day, it is a gradual and cautious process that takes time and patience with regard to an ordinary man.


 The history of the first stock exchange dates back to 16th century where the first incarnation of the stock markets formed in Antwerp, Belgium. The Brokers and moneylenders would meet there to deal with business, government, and even individual debt issues. In fact, there were no real stocks, there were many flavours of business-financier partnerships that produced income as stocks do, but there was no official share that changed hands. In 1600s, the British East India Company called for some money from the people to support their voyage to different parts of the world. Unfortunately, it was a complete failure and the voyage couldn‘t succeed the mission.

 A proper form of Stock exchange was actually formed by Dutch East India Company in 1611. They built a stock Exchange in Amsterdam, the capital of Netherlands to raise the capital in order to sell stock and pay the dividends of the shares to investors. For many years, the only trading activity on the exchange was trading shares of the Dutch East India Company.

 Nevertheless, the stock markets weren‘t popular on those times and everyone feared of losing their money by investing in such a strange market. A bona fide form of stock market or stock Exchange has actually revived in 1792s from the beneath of a tree in New York City. It was then that a small group of merchants made the Buttonwood Tree Agreement. A group of men met daily to buy and sell stocks and bonds, which became the origin of what we know today as the New York Stock Exchange (NYSE). In 1903, the doors of NYSE opened with hundreds of stock certificates held underground in vaults, and now, the NYSE becomes the largest stock Market in modern world.

Subsequent to the growth of NYSE, multiple stock Exchanges emerged in different parts of the world. In Europe, the London Stock Exchange sprung up as one of the foremost stock exchanges in the prevalent world. Besides, most of the companies that were listed internationally were also listed in New York. Many other countries including Germany, France, the Netherlands, Switzerland, South Africa, Hong Kong, Japan, Australia, and Canada developed their own stock exchanges, but these were largely seen as proving grounds for domestic companies to inhabit until they were ready to make the leap to the LSE and from there to the big leagues of the NYSE. Some of these international exchanges are still seen as a dangerous territory because of weak listing rules and less rigid government regulation.

Evolution of Indian Stock Markets

 Indian stock market marks to be one of the oldest stock market in Asia. It dates back to the close of 18th century when the East India Company used to transact loan securities. In the 1830s, trading on corporate stocks and shares in Bank and Cotton presses took place in Bombay. Though the trading was broad but the brokers were hardly half dozen during 1840 and 1850.

 Subsequently, number of stock exchanges evolved in different localities. In 1894 the Ahmedabad Stock Exchange was started to facilitate dealings in the shares of textile mills there. The Calcutta stock exchange was started in 1908 to provide a market for shares of plantations and jute mills. Then the madras stock exchange was started in 1920. At present there are 24 stock exchanges in the country, 21 of them being regional ones with allotted areas. Two others set up in the reform era, viz., the National Stock Exchange (NSE) and Over the Counter Exchange of India (OICEI), have mandate to have nation-wise trading.



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