Understanding Stock Market

"Secondary Markets is a market place where the trading of Equity share of a company takes place Second time, earlier in primary markets the seller was the Promoter group of the company now here the seller as well as the buyer are investors and the ownership of the share is in public’s domain."

Secondary markets are synonym to Stock exchanges in India as all the Secondary market activity takes place in Stock Exchanges.

Stock Exchange

 
A stock exchange or share market is a corporation or mutual organization which provides facilities for stock brokers and traders, to trade company stocks and other securities. Stock exchanges also provide facilities for the issue and redemption of securities as well as other financial instruments and capital events including the payment of income and dividends.

There are 2 recognized Stock Exchanges in India for Share Trading:

1. BSE- Bombay Stock Exchange
2. NSE- National Stock Exchange

BSE Bombay Stock Exchange is the oldest stock exchange in Asia with a rich heritage, now spanning three centuries in its 133 years of existence. What is now popularly known as BSE was established as "The Native Share & Stock Brokers' Association" in 1875, there are around 5000 + shares listed on BSE.

NSE National Stock was incorporated in November 1992 and currently has around 1500 shares listed and has a trading facility for Cash, Derivative and Currency derivative products. The highest turnover in Indian Equity markets happen on NSE currently.

These are an Electronic platform based trading exchanges graduated from the traditional OTC ( over the counter) mode of trading.

Trading Mechanism

 
Trading & Demat Account : Any trader who wants to trade in Equity markets need to open a Demat and trading account with a SEBI registered Broker/ Sub Broker by filling up a KYC ( Know your client) form with necessary documents.

A Trading account is used for the purpose of trading which stores information regarding the Buy, sell price, average price, Limits, Profit and loss statement of the client.

A Demat account acts as a warehouse to store shares bought through the Trading account of the Client,  demat account is an electronic account similar to the bank account the only difference being a demat account is used to store Dematerialized shares of a company.

Trade time : The normal trading time is between 9:15 am to 3:30 pm Monday to Friday.

Pre open session: This session is basically to decide the opening price of the markets in Normal trading session, where trading for only Nifty 50 shares takes place the session is from 9am to 9:15 am daily.

Closing price calculation: The closing price of a stock is not the LTP ( Last traded price) of the stock but the average price between 3:00 to 3:30 pm, this calculation takes place between 3:30 to 3:40 pm daily.

Post close trading: The post close trading happens between 3:40 pm to 4:00 pm, basically used for squaring off some positions created by mistake, the prices in this segment do not change and trading is done only on the adjusted closing prices.

Margining/ Trading limit

 
Every Trader is given a Leverage on the amount of cash and non-cash margin deposited with the member broker, the leverage could range from 4- 8 times on Intraday basis.

Ex: If a client has 50,000 Credit balance in his Trading account he can get limit up to 4 lakh ( 8 times 50,000)

NCL (Non cash limit) Brokers give trading limit not only on the cash available in the trading account of the client but also on the shares deposited with the broker, remember this is only an intraday limit, useful for HNI clients having huge holding with them.

"An offline trader normally gets more limit/ leverage than an online trader."

About DreamGains

Dreamgains Financials India Private Limited formed in 2004 as an independent and privately owned company is build upon the principles of teamwork and partnership.It is a trusted name in the financial service arena and provides you with an entire gamut of services under one roof. It today has emerged as a premium Indian stock consultancy, with an absolute focus on business and a commitment to provide “Real value for money” to all its clients.