Investors interested in share trading must understand the basics of the equity market. An equity market can offer access to publicly listed shares of different companies. Besides understanding the equity meaning, investors must know the timings of different exchanges/markets and how the equity market works. Let us understand the concept of an equity market and its benefits in detail.
- What is the Equity Market?
- How Does the Equity Market Work?
- Equity Trading in the Stock Market
- Timings of the Equity Market
- Procedures Involved in the Equity Market
- In a Nutshell
Topics Covered:
What is the Equity Market?
An equity market facilitates the trade of publicly listed shares of different companies. You already know that public companies issue their shares to investors. Investors purchase these shares and offer funds to the issuer for expansion, business operations, and other purposes. An equity or share market is a place where companies can issue their stocks to investors and raise funds. Investors buy shares and secure ownership stakes in the respective companies. The equity market can be a marketplace, stock exchange, or platform. Shares can be traded over the counter at stock exchanges. Online trading platforms also offer access to the equity market for share trading.
How Does the Equity Market Work?
Investors must understand how the equity market in India works. Consider the equity market a place for buyers, sellers, and issuers to meet. Companies start by launching their IPOs in a primary market. Investors are allowed to gain early entries into public companies by applying for IPOs. Similarly, companies issue their shares in secondary markets with the help of stock exchanges. Buyers and sellers can make trades in the secondary markets with the help of online platforms.
Consider the equity market as a superset with several participants. Stockbrokers, stock exchanges, and dealers help regulate the equity market. The entire equity market in India is overseen by SEBI (Securities and Exchange Board of India). SEBI ensures fair trading practices in the share or equity market. SEBI also keeps a watch on companies issuing their shares in primary and secondary markets.
Equity Trading in the Stock Market
Equity trading in the stock market happens between buyers and sellers. For instance, let us consider that you are trying to sell shares of a company. In such a case, you must find a buyer to accept shares at the given rate. When your shares are highly liquid, there will be multiple buyers. However, the same cannot be said for illiquid or penny stocks. The stock market will determine the rates for shares of different companies based on financial performance, market conditions, and other factors. When trading in the primary market, you must apply for IPOs. Since the primary equity market consists of only IPOs, you must submit your application to stand a chance for allotment. With the convenience of online equity trading, investors can easily participate in both primary market IPO and secondary market transactions, managing their investments efficiently from anywhere with an internet connection.
Timings of the Equity Market
When trading in the primary market, the timing depends on the subscription period. Your IPO application will be accepted only when submitted within the subscription period. However, the same is not the case for timings in the secondary market. You must follow the timings of stock exchanges to trade shares in the secondary market. You cannot trade shares outside of trading hours on a stock exchange in India. The general timings for stock exchanges in India are between 09:00 AM and 04:00 PM. The pre-opening session lasts between 09:00 AM and 09:15 AM, whereas the closing session lasts between 03:30 PM and 04:00 PM. The timings might change from one stock exchange to another in some cases. Also, stock exchanges are not open on Saturdays, Sundays, and some public/national holidays.
Procedures Involved in the Equity Market
You must understand a few procedures to know about the equity market in India. These procedures are part and parcel of the equity market in India. Here are the common procedures in the equity market:
Securities Trading
As discussed above, the equity market is a place where investors can trade shares and associated securities. Trading is also the most essential procedure in the share or equity market. Trading refers to the buying and selling of shares and associated securities, like bonds and derivatives. Trading was physical back in the day. Investors used to carry paper certificates for share trades. However, it has all changed due to the launch of online share trading. Stockbrokers offer online trading platforms that allow investors to place real-time orders. Stockbrokers might charge a commission or a fee for every share market trade.
Risk Mitigation
Investors indulge in risk management to protect their portfolios. However, risk mitigation also occurs on a larger scale in the equity market. SEBI, prominent brokers, and other stakeholders in the market ensure protection from market failures. SEBI itself implements numerous laws to protect investors from fraud.
Settlement
It is an essential process in the equity market involving settling share market orders. When you place a share market order with the help of a stockbroker, the broker is responsible for the settlement process. Settlement refers to the delivery of securities to the concerned investor after payment. Indian brokers and markets usually follow the T+2 settlement process, which means trades are settled within two days of execution.
In a Nutshell
The equity market offers a chance to earn high returns. You can purchase shares of public companies in the equity market and build a strong portfolio. Companies launching their shares for the first time will work within the primary equity market. The secondary equity market consists of stock exchanges, brokers, and dealers. You can rely on a reputed stockbroker to trade shares on stock exchanges via an online platform. Beginners in the stock market must understand these basics before placing orders. Learn more about the equity market and how it works right away!
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