What is a share?
A share represents a portion of ownership or equity in a company. When a company issues shares to raise capital for its business, people who buy those shares become part owners (shareholders) of the company.
Each shareholder participates in the company’s profits, and sometimes even in decision-making processes, based on the portion of shares they hold. The price of shares fluctuates based on market demand and supply, which can result in profit or loss when buying or selling shares.
Investors purchase shares with the expectation of benefiting from the future growth of the company, and if the company performs well, they can earn a profit.
What is Share Market?
The share market is a place where shares of companies are bought and sold. Here, individuals and institutions purchase and sell ownership stakes (shares) in companies. When a company goes public, it offers its shares for sale in the market to potential shareholders.
People invest in these shares hoping that their value will increase over time, leading to a profit. The prices of company shares fluctuate in the share market, making it a risky endeavor.
Two Main Types of Share Markets:
- Primary Market
- Secondary Market
Primary Market
The primary market is where companies sell their shares or securities to investors for the first time. This market is mainly for new issues, where companies raise funds by selling new shares.
When a company goes public for the first time and issues shares, it does so through an Initial Public Offering (IPO). The price of shares in the primary market is fixed, and the transaction happens directly between the company and the investors.
Through the primary market, companies can raise the capital they need to run and grow their businesses.
Secondary Market
The secondary market is where investors buy and sell previously issued shares and securities. In this market, companies are not directly involved; instead, investors trade shares with one another.
In the secondary market, shares are traded on stock exchanges like the BSE (Bombay Stock Exchange) or NSE (National Stock Exchange). Share prices here are determined by market demand and supply, and they constantly fluctuate. Investors can make a profit by selling shares or grow their investment by buying more.
The secondary market provides investors with liquidity and flexibility to trade their shares.