What is Share Market?
A share market is a platform where buyers and sellers come together to trade on publicly listed shares during specific hours of the day. People often use the terms share market and stock market interchangeably.
India Stock Market
The Indian stock market takes place on its two stock exchanges: the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) .
Timing:
Normal Market Open : 09:00 hrs.
Normal Market Close : 17:00 hrs.
Trading on the equities segment takes place on all days of the week (except Saturdays and Sundays and holidays declared by the Exchange in advance).
The market timings of the equities segment are:
Pre-open session
- Order entry & modification Open: 09:00 hrs
- Order entry & modification Close: 09:08 hrs
with random closure in last one minute. Pre-open order matching starts immediately after close of pre-open order entry.
Regular trading session
- Normal / Limited Physical Market Open: 09:15 hrs
- Normal / Limited Physical Market Close: 15:30 hrs
Closing Session
The Closing Session is held between 15.40 hrs and 16.00 hrs
Block Deal Session Timings:
- Morning Window: This window shall operate between 08:45 AM to 09:00 AM.
- Afternoon Window: This window shall operate between 02:05 PM to 2:20 PM.
If you want to get more details about the market timing and holidays, check NSE India website
US Stock Market
The United States has several stock exchanges, but the two major ones are the New York Stock Exchange (NYSE) and NASDAQ.
US stock market time is based on the Eastern Time Zone or ET. This time zone has 2 variables –
-
Eastern Standard Time or EST: EST is observed during the autumn and winter months in New York and other cities in US. It is 5 hours behind the Greenwich Mean Time (GMT) / Coordinated Universal Time or (UTC).
-
Eastern Daylight Time or EDT: In summer and spring seasons, daylight saving time is observed. EDT is 4 hour behind UTC or UTC-4.
Timing:
| Pre-market session | NYSE | NASDAQ |
|---|---|---|
| Pre-Market Trading Hours | 4AM to 9:30AM (ET) | 4AM to 9:30AM (ET) |
| Normal Trading Hours | 9:30AM to 4PM (ET) | 9:30AM to 4PM (ET) |
| After Hours Trading | 4PM to 8PM (ET) | 4PM to 8PM (ET) |
US Stock Market in India
| Market | Opening Time | Closing Timing |
|---|---|---|
| NYSE | 7PM | 1:30AM |
| NASDAQ | 7PM | 1:30AM |
Types of Share Markets
Stock markets can be further classified into two parts: primary markets and secondary markets.
Primary Share Markets
When a company registers itself for the first time at the stock exchange to raise funds through shares, it enters the primary market. This is called an Initial Public Offering (IPO), after which the company becomes publicly registered and its shares can be traded within market participants.
Secondary Market
Once a company’s new securities have been sold in the primary market, they are then traded on the secondary stock market. Here, investors get the opportunity to buy and sell the shares among themselves at the prevailing market prices.
Typically investors conduct these transactions through a broker or other such intermediary who can facilitate this process.
What is Traded On The Share Market?
There are four categories of financial instruments that are traded on the stock exchange.
Shares
A share represents a unit of equity ownership in a company. Shareholders are entitled to any profits that the company may earn in the form of dividends. They are also the bearers of any losses that the company may face.
Bonds
To undertake long term and profitable projects, a company requires substantial capital. One way to raise capital is to issue bonds to the public. These bonds represent a “loan” taken by the company. The bondholders become the creditors of the company and receive timely interest payments in the form of coupons. From the perspective of the bondholders, these bonds act as fixed income instruments, where they receive interest on their investment as well as their invested amount at the end of the prescribed period.
Mutual Funds
Mutual funds are professionally managed funds that pool the money of numerous investors and invest the collective capital into various financial securities. You can find mutual funds for a variety of financial instruments like equity, debt, or hybrid funds, to name a few.
Each mutual fund scheme issues units that are of a certain value similar to a share. When you invest in such funds, you become a unit-holder in that mutual fund scheme. When instruments that are part of that mutual fund scheme earn revenue over time, the unit-holder receives that revenue reflected as the net asset value of the fund or in the form of dividend payouts.
Derivatives
A derivative is a security that derives its value from an underlying security. This can have a wide variety such as shares, bonds, currency, commodities and more! The buyers and sellers of derivatives have opposing expectations of the price of an asset, and hence, enter into a “betting contract” with regards to its future price.
How does stock market work?
Mostly, a stock exchange in India works independently as no market makers or specialists are present in them.
The entire process of trading in stock exchange/stock market in India is order-driven and is conducted over an electronic limit order book.
In such a set-up, orders are automatically matched with the help of the trading computer. It functions to match investors’ market orders with the most suitable limit orders.
The major benefit of such an order-driven market is that it facilitates transparency in transactions by displaying all market orders publicly.
Brokers play a vital role in the trading system of the stock exchange market, as all orders are placed through them.
Both institutional investors and retail customers can avail the benefits associated with direct market access or DMA. By using the trading terminals provided by stock exchange market brokers, investors can place their orders directly into the trading system.
Benefits of listing with Stock Exchange
Listing with a stock exchange extends special privileges to company securities. For instance, only listed company shares are quoted on a stock exchange.
Being listed on a reputed stock exchange is deemed beneficial for companies, investors and the public in general and they tend to benefit in these following ways –
Increased Value
Only stocks listed with a reputable stock exchange are considered to be higher in value. Companies can cash in on their market reputation in the stock exchange market by increasing their number of shareholders. Issuing shares in the market for shareholders to acquire is a potent way of increasing shareholder base and base, which in turn increases their credibility.
Accessing Capital
One of the most effective ways of availing cheap capital for a company is by issuing company shares in the stock exchange market for shareholders to acquire. Listed companies can generate comparatively more capital through share issuance owing to their repute in a stock exchange market and use it to keep their company afloat and its operations running.
Collateral Value
Almost all lenders accept listed securities as collateral and extend credit facilities against them. A listed company is more likely to avail a faster approval for their credit request; as they are deemed more credible in the stock exchange market.
Liquidity
Listing helps shareholder avail the advantage of liquidity better than other counterparts and offers them ready marketability. It allows shareholders to estimate the value of investment owned by them.
Additionally, it permits share transactions with a company and helps them to even out the associated risks. It also helps shareholders to improve their earnings from even the slightest increase in overall organisational value.
Fair Price
The quoted price also tends to represent the real value of a particular security in a stock exchange in India.
The fact that the prices of listed securities are set as per the forces of demand and supply and are disclosed publicly, investors are assured to acquire them at a fair price.