Share Marketing

Share market is where buying and selling of share happens. Share represents a unit of ownership of the company from where you bought it. For example, you bought 10 shares of Rs. 200 each of ABC company, then you become a shareholder of ABC. This allows you to sell ABC share anytime you want.

The primary and secondary share markets constitute the two types. Here’s a brief to each of them:

1. Primary share market

It is here that companies first register themselves – by furnishing details about itself and stocks that it wants to issue – and follow it up by issuing shares with the objective to raise capital – a process referred to as ‘listing’.

Should a company issue shares for the very first time, they would have to do it through a process called Initial Public Offering (IPO). Simply said, IPO is the process through which a company goes public.

2. Secondary market

Once the company is listed and its stocks issued, the subsequent trading happens over the secondary market. This is the marketplace for investors (buyers and sellers) to come together, transact (at a price that has been agreed upon already), and in the process, make a buck for themselves. Once shares are sold, investors can exit the secondary market.

Basis the financial instrument that is traded, a share market can be further classified into an equity market and a derivative market.

3. Equity market

Here, stocks are traded with the buyers quoting what is known as a bid price and the order is transacted, usually by a broker, at a negotiated price (ask price) quoted by the sellers in the market. The buyer pays up the entire sum of the stocks, a calculation arrived at by considering the total number of stocks multiplied by the ongoing share price.

On payment of the amount (including brokerage fees and transaction charges), the stocks are deposited to the buyer’s account.

4. Derivative market

Here, trading is executed primarily through two instruments – the Future contract and Option contract. In both the cases, stocks are purchased and sold in a big lot. Should you want to trade in the derivative market, you’d have to use either instrument.