What is Equity Market

What is Equity Market. We will be discussed about the Equity Market: What It Is, How It Works, Types, and Examples.

[Audio] What Is an Equity Market? “An equity market is a market in which shares of companies are issued and traded, either through exchanges or over-the-counter markets. Also known as the stock market, it is one of the most vital areas of a market economy. It gives companies access to capital to grow their business, and investors a piece of ownership in a company with the potential to realize gains in their investment based on the company's future performance.” “From the end of a listed company, equity means the funds that the shareholders have invested. whereas from an investor’s point of view, equity is a primary asset. As an investor, you can also choose to invest in derivatives – like currencies, commodities and bonds – which allow equities to diversify beyond stocks.” “An equity market is a platform for trading shares or stocks of publicly listed companies. It provides a space where buyers and sellers come together to trade shares in a transparent and regulated manner. Equity markets play a crucial role in the economy as they help companies raise capital and provide investors with an opportunity to invest as well as benefit from the future growth of these companies. The equity market is also commonly known as the stock market or the share market.” KEY TAKEAWAYS: Equity markets are meeting points for issuers and buyers of stocks in a market economy. Equity markets are a method for companies to raise capital and investors to own a piece of a company. Stocks can be issued in public markets or private markets. Depending on the type of issue, the venue for trading changes..

[Audio] Understanding an Equity Market Equity markets are the meeting point for buyers and sellers of stocks. The securities traded in the equity market can either be public stocks, which are those listed on the stock exchange, or privately traded stocks. Often, private stocks are traded through dealers, which is the definition of an over-the-counter market. When companies are born they are private companies, and after a certain time, they go through an initial public offering (IPO), which is a process that turns them into public companies traded on a stock exchange. Private stocks operate slightly differently as they are only offered to employees and certain investors. Companies list their stocks on an exchange as a way to obtain capital to grow their business. An equity market is a form of equity financing, in which a company gives up a certain percentage of ownership in exchange for capital. That capital is then used for a variety of business needs. Equity financing is the opposite of debt financing, which utilizes loans and other forms of borrowing to obtain capital..

[Audio] Equity Market An equity market is a platform that allows companies to raise capital via different investors. A company thus issues stocks that investors or traders purchase in expectation of earning gains from future sales of said stock. Often, the equity market is also interchangeably used with the stock market, which more or less, serves the same purpose of facilitating stock trading. Nevertheless, equity markets also encompass over-the-counter trading markets alongside exchanges. Thereby, equity markets serve as a platform for both private stocks traded over the counter and public stocks listed on exchanges such as BSE, NSE, etc. Traders can realise gains based on the future performance of a stock they have invested in. Equity markets can also be represented as a common point where sellers and buyers of the stock meet to trade. Here’s an elaboration on the sub-parts of an equity market. Sub-parts Description Stock exchanges : The primary purpose of channelising trading through stock exchanges is to keep the process of trading fair and ethical. Traders buying or selling securities through these exchanges can thus assume protection as it mandates companies to abide by certain standards. Under this purview, a stock exchange facilitates trading of stocks, securities and derivatives. Over the counter markets: Over the counter markets do not lay down such stringent rules as exchanges, and offer comparatively lesser privacy to both traders and listed companies..

[Audio] Here’s an elaboration on the sub-parts of an equity market. Types of Equity Market Equity markets comprise structured trading and investment and can be defined into two types of platforms, i.e., primary and secondary markets. Primary market Each company plans to offer its shares for public trading must start with Initial Public Offering or IPO. In this process, the company offers a part of its total equity to the public for raising capital initially. Once the IPO is complete, the stocks so offered are listed on the stock exchange for further trading. The entire process of introducing the IPO by a company takes place in the primary market. In other words, this market comprises only the IPO introduction and investment. Secondary market Once the shares have already been listed on either of the exchanges, further trading for them is held in the secondary market. Here, the initial investors get an opportunity to exit their investments via stock sale in this live equity market. These stocks can comprise shares, along with other types of securities that can include convertible bonds, corporate bonds, etc. While investors who failed to purchase shares in the primary market can do so here, it also opens up an opportunity for a wide range of traders to invest in such stocks. Also, another typical characteristic of the secondary equity market is that trading here is usually done via intermediaries known as stockbrokers.

[Audio] Top Stock Exchanges in the Indian Equity Market Shares and securities in India are primarily traded through two stock exchanges, i.e., NSE and BSE. Here’s a detailed look at these two exchanges. NSE or National Stock Exchange Established back in 1992, the National Stock Exchange aimed to bring transparency in the equity share market of India. Currently, NSE holds the 12th spot in the ranking of the world’s biggest stock exchanges. As the first exchange in the country, it came up with an end-to-end automated electronic system to facilitate stock trading for investors. Trading in the capital market on NSE started in 1994 while the year 2000 saw the commencement of derivatives trading on this platform. BSE or Bombay Stock Exchange Situated in Mumbai’s Dalal Street, the Bombay Stock Exchange was established back in 1875. As against NSE, BSE ranks 11th globally in terms of stock exchange market size and operations. Also, with a median trading speed of 6 microseconds, it also stands as the fastest stock exchange in the world..

[Audio] Equity Trading in the Stock Market Trading in the equity market primarily entails the seller fixing a price and a buyer agreeing to pay that price to purchase the security, thus executing a sale. In a general context, the understanding of what is equity in the share market extends to all types of shares and securities traded that are also termed as stock. Equity and stock are thus used interchangeably for the purpose of trading..

[Audio] Procedures Involved in the Equity Market An Equity Market Does Not Solely Serve To Facilitate Trading. It Is Functioning Also Encompasses Other Procedures. Here’s A Gist Of These Procedures. Trading As Explained Earlier, Trading Is A Fundamental Procedure That Involves Buying And Selling Of Securities Belonging To Listed Companies. The Procedure Is Completed Through The Screen-based Automated System, With Brokering Agents Providing These Services To Individual Traders Against Stipulated Fees. It Serves As An Open Platform Where Buyers And Sellers Can Place An Order As Per Trade Option Availability. Risk Management Risk Management Is Another Specific Procedure Associated With Stock Markets. As Investing In The Equity Market Involves Risk, The Comprehensive System Of Risk Management Ensures That Investors’ Interest Remains Protected While Exercising Any Curbs On Frauds From A Company’s End. The System Also Enables The Stock Market To Remain Updated With Any Changing Trading Mechanisms And Hedge Possible Market Failures. Settlement And Clearing Every Investment Or Trading Made Throughout The Day Is Cleared And Settled By The End Of This Particular Day. A Stock Exchange Does This Through A Well-defined Cycle Of Settlement. In Indian Exchanges, The T+2 Cycle Is Adopted For Such Settlements, Which Means The Settlements Are Made Within Two Days After The Trade Has Been Concluded For A Specific Day, Considered Day 1 And Now It’s T+1 Cycle. Also SEBI Introduce It In To The T+0 Cycle..

[Audio] Benefits of investing in equities Investment in stocks provides the highest returns, especially over a long-term investment horizon. Investment in equities can also provide you income through dividend issuance. Issuing dividends is a corporate action, where listed companies share their profits with existing shareholders. Equities have greater exposure to market volatility. Hence, conducting market research is important before investing. You can minimize the associated risks by choosing to invest in equity instruments, like Futures and Options (F&O)..

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