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What is NIFTY50?

If you are from a typical Indian household, you might have hated your results day during your school days. The reason obviously was being compared to, “Sharmaji ka beta” a class topper. This Sharmaji ka beta was a perfect representation of how an ideal kid should be at that age. Well, in stock market terms we have a market index called “NIFTY50” that depicts similar things as this “Sharmaji ka beta” did in our school. Nifty is used by many investors and fund managers as a means to measure the performance of the Indian capital markets and our economy at large. Read ahead to understand more interesting things about Nifty50.

What is Nifty 50?

Nifty or Nifty50, is a flagship index by National Stock Exchange (NSE), representing the top 50 companies being traded on NSE from 13 major sectors. This index gives investors a bird’ eye view of the market sentiments and performance. Hence, it is known to be a true reflection of the Indian stock market and economy at large. Due to this, many consider the performance of this index as a benchmark against their portfolios’ performance over a period.

It was launched on April 22nd, 1996, which means it turned 25 this year! What an amazing journey it has seen from 1,107 on April 22nd, 1996 to a new record high of 15,901.60 on 15th June 2021.

Who manages Nifty?

All Nifty indices are managed and owned by NSE Indices LTD (formerly known as India Index Services & Products Limited-IISL). It is an NSE group company that was set up in May 1998 to develop, construct and maintain indices on Indian equities. NSE Indices Ltd came up with 14 broad market indices that represent large, mid, and small-cap segments listed on NSE efficiently. Below is the structure of the same. 

What are the inclusion and exclusion/replacement criteria for Nifty?

Nifty is reviewed semi-annually based on the data for six months ending January and July every year. The exchange will give us a notice about the same four weeks before the date of the change. 

To be included in the 50 stocks index, the following criteria must be met:

  • The company must be domiciled (based) in India and traded on NSE.
  • It should form a part of the Nifty 100 Index and be available for trading in NSE’s F&O segment.
  • It should have traded at an average impact cost of 0.50% or less during the last 6 months for 90% of the observations (trades) for a portfolio of Rs. 10 Crores. To put it simply, impact cost is the percentage change in buying/selling price for the desired quantity compared to its ideal price (calculated as [best buy + best sell]/2)
  • Its average free-float market capitalization is at least 1.5 times the average free-float market capitalization of the smallest constituent in the index.
  • Its trading frequency should be 100% for the past six months.
  • For a company that has recently launched its IPO the period for fulfilling the above criteria is reduced to 3 months instead of 6 months.
Replacements, if any, takes place from the last trading day of March, June, September, and December with four weeks prior notice. Stock/s will be excluded/replaced from Nifty if:
  • It's undergoing demerger, spinoff, delisting, etc.
  • It’s withdrawn from trading in the F&O segment
  • It’s suspended from trading in Capital markets

How is it calculated?

Since June 26th, 2009, Nifty has been calculated using the Free-float Market Capitalization weighted method. Before that, it was calculated using the full market capitalization-weighted method. So, what brought this change? For that, we first need to understand what free float mcap means. It’s quite simple, free float mcap will include public holding in the company only. This means that the promoter and promoter group holding and any other strategic investments by entities/ promoters (Government, FDI, Employee trust, ADR/GDRs, etc.) are excluded from the total mcap of the company. By excluding these holdings, the index can reflect the true market sentiment better for the 50 stocks and ultimately overall capital market. Hence, the index calculation method was changed to Free-float Market Capitalization weighted method. 
Now, let’s have a look at how Nifty is calculated in 3 simple steps :

Formula:
Index value = (Current Market Value (CMV)/Base Market Capital) * Base value
Step 1: Calculation of CMVCMV is nothing but the sum of all 50 stocks’ free-float weighted mcap.
Step 2: Divide CMV by Base market capital
For Nifty50, the base date is November 3rd, 1995. Hence, the base capital is the closing mcap of the index as of this date which was Rs.2.06 trillion. This divisor is adjusted from time to time considering the corporate actions of the constituents as they take place.
Step 3: The result is then multiplied by the Base value.
The base value is the closing price of Nifty as on the base date - November 3rd, 1995, which was 1000. Hence, the result will be multiplied by 1000 to derive the Nifty value.
Nifty is calculated on a real-time basis as the market price of the constituents keeps changing. The closing price of the index is calculated by taking a weighted average of the closing prices of its constituents during the last 30 mins of the trading session.

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Why is rebalancing Nifty important?

Over the past 3 decades, India has shifted from manufacturing to services. With the rise of the private sector along with the IT revolution, our market index needed to adapt accordingly and replicate what’s happening in our economy. If you check the table given below for sectoral representation in Nifty50, you will observe that there was no weightage for the IT and telecom sector during its inception. However, now that India has become more technologically evolved with adequate government measures, the IT sector has earned 16.16% weightage whereas the telecom sector enjoys 1.92% weightage in the index as of May 2021. Financial services still have the highest weightage in the index, almost twice as during inception. 
Interestingly, 13 stocks namely- HDFC Bank, RIL, HDFC, ITC, HUL, L&T, SBI, Tata Motors, Dr. Reddy’s Labs, Tata Steel, Grasim, Hero, and Hindalco have been a part of the index’s journey since its inception (Source: CNBCTV18) Back in 1996, the State Bank of India (SBI) had the highest weightage at nearly 8.6%, followed by Tata Motors at 6.9%. As of May 2021, RIL (10.36%), HDFC Bank (9.79%), and Infosys (7.66%) held the highest weightage in Nifty50.
As a part of its semi-annual review, stocks that have fallen in terms of market cap criteria would be replaced with emerging stocks fitting into eligibility criteria mentioned above thereby increasing the exposure of the index to emerging stocks and sectors. This way Nifty has reflected the changing trends in the equity market with increasing/ introducing representation of emerging sectors in the economy.

Bottom line:

The Nifty 50 index covering 13 sectors, represents 66.8% of the free-float market capitalization of the stocks listed on NSE as of March 29, 2019. The total traded value of NIFTY 50 index constituents for the last six months ending March 2019 was approximately 53.4% of the traded value of all stocks on the NSE. No wonder why it represents our capital markets worldwide. If you want to know the daily movement in nifty and its constituents, just click here and if you want to know about the current constituents and their weightage in the index, click here.
I hope you enjoyed this extensive yet unique blog on Nifty 50. If you wish to level up a little, you can check out my course on “Basics of Stock Market” wherein I have explained everything you need to know before starting your investment journey. Click on the link to know more. Until next time!
Zerodha
Click next image to Know the Basics of Initial Public Offering (IPO)
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How to start learning stock market in India?

The Stock market is intriguing if you can dedicate your time and devotion to learning and applying it practically. It is rightly said that “Practice makes you perfect”, and that is exactly what we need to apply here as well. Even Spider-Man had to learn how to use his power and figure out the best possible way to apply it while fighting the bad guys. So, what makes us any different when it comes to learning about the stock market?

People have different opinions on how one should initiate this journey. However, I am sharing the top 5 things you can do as a beginner to learn about Stock Market below. Let us find out, without further ado.

1. The first step is to track news related to the stock market daily. You can watch news channels like CNBC, Zee Business before 9 am and/or after 3.30 pm wherein you can watch shows parting knowledge on the subject. If you watch these channels between 9 am to 3.30 pm (which is market hours) you might get overwhelmed with all the information being telecasted about the market throughout the day. So, remember one day at a time. You can also download media apps like Economic Times, Livemint, moneycontrol, etc. which will further add to your knowledge basket.

2. For my reader folks, you can subscribe to market-related magazines like Dalal Street Investment Journal, Money life, Business Today, Outlook Money, etc. Apart from this, you can also read books related to investments and trading to understand the market in depth. You can check out my book suggestions here.

3.You can also use your Google skills to read about the market via various websites available on the internet. Blogs on Investopedia, Groww, Zerodha Varsity provide good content which a beginner can easily comprehend. You can also check out my Blogs here for easy reference.
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4. If you are not a reader, no worries, I got you covered. There are so many YouTube channels that can help you understand basic concepts in the stock market. You can check out my YouTube channel where I have explained numerous concepts right from the ‘Basics of the Stock market’ in the most simplified manner that even a non-finance person can understand, that too ‘FOR FREE!’

5. If you are keen on learning about the market in a detailed and structured format, you can check out my readily available courses here. I have designed all of my courses from beginner level with ‘Basics of Stock Market’, ‘Basics of Technical Analysis’, ‘Magic of Mutual Funds’ to advance level with ‘Art of Value Investing’. I am sure you won’t be disappointed.

Now you are all geared up and eager to invest. But wait, to participate in the market, you need to open a Demat A/c with a SEBI registered broker. This process is very simple and completely online. Click on the image below to know more.

Dmat

 

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Going beyond the basics of stock market

If you have watched Pokémon, you might know how all the Pokémon’s used to evolve when they reached a certain level. Pikachu would evolve into Raichu, Charmander would evolve into Charmeleon, etc. After their evolution, they turn into an advanced version of themselves with new looks, moves and, even skills. So, why not take inspiration from our favourite childhood show and advance ourselves in this journey of learning about the stock market. Till now, we have learned so many basic concepts about the stock market in the most simplified manner through my YouTube channel, course, and blogs. But now the question remains on how do we go ahead from here and what should be the next step. This is exactly what we are going to discuss in this blog.

KYS- Know yourself

You are at a stage where you know about financial markets and how they work, nifty, corporate actions, IPO terminologies, etc. but do you know yourself enough to step into the stock market? It is crucial to find out how much risk you can take. You may check out this video to understand how to check your risk profile. Other important points include understanding your investment horizon, capital and keeping your short-term liquidity intact with an emergency fund.

But wait, what factors could you consider in deciding all of this? Factors like your monthly income expenses, the number of dependents in your family, your/family’s medical expenses, your age, and your other financial goals will help you find out the answers you need before jumping into the market. Another important question to ask yourself is whether you possess the required skills to make well-informed investment decisions ahead. There are 2 branches in equity analysis namely- Fundamental analysis (FA) and Technical analysis (TA) and I think understanding both works the best to make good investment decisions. Let’s find out more about them as you read ahead.

Why learning Fundamental analysis is important?

FA helps us understand the actual value or the intrinsic value of a company based on its financials, economic environment, competitive position, and other qualitative factors. More focus is given to finding stocks that are undervalued i.e., stocks available at a cheaper price than their fair value. Investors believe that as the company is performing better, it will be recognized soon by the market, leading to a rise in its price because of the increased demand. This will help investors grow their wealth exponentially with not the only capital appreciation but also dividends and compounding. Hence, FA will help you pick financially strong and well-positioned stocks at a better price to gain the best out of the investments.

So, how to start learning about Fundamental Analysis. To find an undervalued stock, first, you must understand how to perform a financial analysis of a company. You can find out all about it in my "Fundamental analysis" course. After gaining confidence in FA, you can level up a little to learn more about the “Art of value Investing” which will help you fetch undervalued stocks.

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Why learning Technical analysis is important?

To put it simply for you, Technical analysis involves observing past price movement and patterns of a financial asset to predict future price direction. TA will help you understand the current market trend. This is possible by studying various candlesticks, charts, and indicators. Investors and traders both need to learn TA. Now, you might be wondering, “For traders, it’s understood, but why do investors need to learn TA?” The answer is simple. After performing an extensive FA of a company, don’t you wish to get the stock at the best possible price available in the market? Of course, you do! Hence, you must learn TA to know the best time and best price to enter/exit a stock. Now the big question is how do you know what is the best time & price to enter/exit stocks. I got you covered. I have designed a course on “Technical analysis” which will help you understand TA in the most systematic, simplified, and practical way. 

Bottom line

“Safar khoobsurat hai manzil se bhi..” I am sure you would totally relate to this line from the song - Ae Dil Hai Mushkil, while you are on this amazing journey of learning about the stock market and investing. But the question that remains is what sequence you should follow while watching the courses. First, get your basics in place by completing the Basics of Stock Market course. Then you can go ahead with Fundamental Analysis, Art of value investing and lastly Technical Analysis to reach on that advanced level manzil you all wished for. I have designed these courses in the most simplified manner such that a person from a non-finance background, housemaker, student, retired, everyone, will understand it.

Zerodha

 

Going beyond the basics of stock market
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Should you quit your job to trade in Stock Market?

 

The stock market can be an attractive option for individuals looking to make a quick profit. With the rise of online trading platforms and increased accessibility, it has become easier than ever to trade stocks. However, the question of whether to quit your job to trade in the stock market is complicated and requires careful consideration. In this blog, we will explore the advantages and disadvantages of quitting your job to trade in the stock market.

Advantages of quitting your job to trade in the stock market

1. Flexibility: One of the biggest advantages of full-time trading in the stock market is its flexibility. You can set your own schedule, work from anywhere, and have the freedom to pursue other interests or hobbies.
2. Potential for higher earnings: Trading in the stock market has the potential for high returns, especially if you have a good understanding of the market and are willing to take risks.
3. Personal fulfillment: If you have a passion for investing and trading, pursuing it full-time can be personally fulfilling and rewarding.

Disadvantages of quitting your job to trade in the stock market

1. Risk: Trading in the stock market is inherently risky and can lead to significant losses. If you rely solely on trading to make a living, you run the risk of losing your entire income if the market goes against you.
2. No guaranteed income: Unlike a traditional job, trading in the stock market does not offer a steady income. Your earnings will depend entirely on your ability to make successful trades.
3. Limited benefits: When you quit your job, you will lose access to benefits such as health insurance, retirement plans, and paid time off.
4. Lack of experience: Trading in the stock market requires a high level of skill and experience. If you are new to the market, you may not have the knowledge or experience to make successful trades consistently.
5. Emotional toll: Trading in the stock market can be emotionally taxing, especially when you are risking your own money. The stress and pressure of constantly monitoring the market and making decisions can take a toll on your mental health.

So, should you quit your job to trade in the stock market?

The answer depends on your individual circumstances and goals. If you have significant savings, a solid understanding of the market, and a proven track record of successful trades, quitting your job to trade in the stock market may be a viable option.
However, if you are new to the market, have little experience, and rely on a steady income, quitting your job to trade in the stock market is not advisable. It is important to consider the risks, benefits, and your personal financial situation before making any decision.

In conclusion, trading in the stock market can be a lucrative and fulfilling career, but it is not for everyone. Before making any decision, take the time to evaluate your financial situation, experience, and goals. Seek advice from professionals, and remember that there is no one-size-fits-all answer.
Ultimately, the decision to quit your job and trade in the stock market should be a well-informed and carefully considered one. I have also made a separate video on this topic on my YouTube channel you can watch it below. Until then…

 

                                                                                                                   

 

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What are Derivatives?

Just imagine, how amazing it would be if we could predict the future. Hold this thought and imagine further how amazing it would be if we could predict the future prices of various financial assets and make money out of them. I am sure my last statement might have created some sort of excitement amongst you all. But the question remains of “How?” Well, there’s something known as derivative instruments in our financial market which can help us do this. But obviously, it’s not as easy as it sounds and as usual, I have got you covered! So, sit back as we unfold the complex world of the Derivatives market in the most simplified manner. Let’s get started!

What are Derivatives?

Derivatives are financial contracts that derive their value from the underlying assets. Confused? Let’s break it down one by one. A derivative instrument is a contract between a buyer and a seller based on their views about an underlying assets’ future price movement. An underlying asset can be any financial instrument like stocks, bonds, commodities, currencies, interest rates and even indices. So, the value at which this contract or derivative instrument is traded is based on the value of its underlying asset. For instance, in the case of a stock derivative say- RIL, the contract/derivative value will increase when RIL’s value increases. Note that you are trading a contract and not the underlying itself. Since its value is derived from an underlying (RIL from our example), this contract is known as a “Derivative instrument”.

History of the Derivatives market

Right from the Greek civilization to the present electronic trading, derivative instruments are believed to be present in the financial markets’ history for a long time. They are said to have existed in the cultures of Mesopotamia during the Greek civilization. Once, one of Aristotle’s followers named Thales, studying meteorology predicted that the olive crops would give a good yield that year. So, he went ahead and purchased all the olive produce around Athens even before they were harvested. As predicted by Thales, the olive produce turned out great and he made profits ahead with the help of derivative instruments.

What about the world’s largest economy, the US? In the 19th century, American farmers could not find buyers for their commodities. Later, they went ahead and formed the Chicago Board of Trade which evolved into the first-ever derivatives market dealing in standardized contracts. But where was India when the financial market was witnessing this essential change? Well, in the case of India, derivative instrument trading started in 1875 with the establishment of the Bombay Cotton Trading Association. There was a time post-independence when cash settlement and options trading was banned however, later it was uplifted with the creation of the National Electronics Commodities Exchange. And the rest is history.

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What is the purpose of Derivatives?

Derivatives are primarily used for hedging and speculation purposes. Now, don’t get scared by these big words, I am here to make it easy for you.

 

1. Hedging

To put it very simply for you, hedging means taking a position to limit your losses due to price fluctuations in the market. As derivatives are considered to be high-risk instruments, hedging plays an important role in minimizing the losses by taking an opposite position. This proves to be a good cushion for both investors and businesses to protect their portfolios during volatility.

 2. Speculating

We all speculate about certain things on a daily basis. For instance, if you observe cloudy weather, you speculate that it will rain soon and hence carry an umbrella. Similarly, in the derivatives market, if you think the markets might go up and take a position accordingly then you are speculating. Speculating purely involves taking a position based on your views about an asset with an intent to generate profit. These are usually hunches or guesses based on the price movement. Unlike hedgers who try to minimize their risk, speculators try to make profits by taking a high risk.

3. Arbitrage

The main aim of arbitrage is to earn profits from the difference in the price of an asset in different market segments. It involves buying an asset from a market (say spot market) where the price is lower and simultaneously selling it on another market (say futures market) where it is trading at a higher price. Arbitrage involves relatively low risk. However, due to market efficiency theory, such opportunities can be hard to find.

Bottom line

Derivatives are often used by businesses that can be largely affected on an operational level due to fluctuating prices of certain commodities. This helps them to reduce their market risk and protects their bottom line. Retail investors must note that even though there’s huge profit potential in derivatives there’s an equal or more probability of losing. It is important to have extremely good knowledge about the stock market, technical analysis and derivatives, to trade in the derivatives market. There’s a lot more to learn about derivatives and their various types, mainly Futures and Options. I am very excited and thrilled to share that my most awaited course on Futures & Options is releasing tomorrow. Make sure you check it out here to learn many more interesting concepts and strategies in the most fun and simplified manner. Until next time!

Zerodha

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How I opened Demat A/C with Zerodha?

 

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What is a Demat A/c?

Demat A/c is simply short for Dematerialized A/c. Its purpose is to hold all your Financial Securities in an electronic form, eliminating the need and hassle of physical handling of securities and related documents.

There are 2 depositories in India, namely National Securities Depository Ltd (NSDL) & Central Depository Services Ltd. (CDSL). These depositories hold all the securities in our Demat A/c, in order to offer efficient trading and settlement in the markets. For this, we must open a Demat A/c with a broker (also known as a depository participant) recognized by SEBI.

Just like we have a Bank A/c to keep our cash, we need a Demat A/c to store our securities in an electronic form.

Today, I am going to share my story of how I opened my Demat A/c with Zerodha. There are 2 ways through which this is possible: offline & online. I opened my a/c online; however, I will quickly walk you through the offline process as well. So, let’s begin!

a) Offline account opening

First, you need to download the application forms from their website. Take a printout, fill it up, sign it and send the application to Zerodha via courier at the address mentioned on their website. 
After this, you should schedule a meeting with a Zerodha representative who will complete your in-person verification. The representative will guide you with all the documents needed and take signatures wherever necessary, to complete the account opening process. Right now, all of this might take more time than before due to the pandemic. However, you can open an account online as I did. How? Let’s find out...

b) Online account opening

Before I started with the process, I ensured to keep a scanned copy of my PAN card, Aadhar, signature, and canceled cheque/bank statement in the device from which I was opening my account. 

Step 1: Mobile Number & Email verification

I visited the Zerodha website and clicked on the “Sign up” section to start my account opening procedure. The first step was mobile number verification wherein I had to enter my number. After I hit the ‘Continue’ button, I received a 6-digit OTP number which I had to key in on the screen. 

Next was email verification. I entered my email id and received a 6-digit OTP in my mailbox. I entered it and pressed continue.

Step 2: PAN verification

For this step, I had to enter my PAN and DOB as per my PAN. The portal asked me to pay a sum of Rs. 300 as an account opening fee. Various payment options like UPI and Net banking were available for the same. I had to fill in all the necessary bank details to complete the payment.

Step 3: Digilocker

After the transaction was successful, the Zerodha portal redirected me to the “Digilocker” window. Digilocker is an online locker wherein we can keep our government-issued documents in an electronic form. I had to separately sign in for Digilocker with my Aadhar, so Zerodha could access necessary documents uploaded in the locker.

Step 4: Personal Details

This step was very simple. Here, I just had to enter my personal details like Name, occupation, trading experience, and bank details carefully. 

Step 5: Webcam IPV

For In-person verification (IPV), all I had to do was give my webcam access to Zerodha, write the code flashed on the screen on a blank paper, hold it up to the camera and click a picture. I had to save this picture as my IPV and move ahead with e-signing.

Step 6: E-sign

E- signing was done by uploading my PAN, Aadhar, Income Proof, and signature which I kept handy before starting the process. A Digio dialog box appeared on my screen for registration with the NSDL. I verified my email again. After this, I could see my complete form, check everything, and click on ‘Sign now’.

Voila! I successfully applied for opening a Demat A/c. Within 24 hours I received a mail from Zerodha with a PIN to activate my account. I was instructed to Log in using the same and change my password immediately and that was all.

Isn’t opening a Demat a/c easy peasy lemon squeezy? So, hurry up and click the link below to open your Demat A/c today! 

zerodha

Click the following image to read about financial markets.

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What is the Financial Market?

 

It is close to the month-end and you realize you need to go for your monthly shopping. Let’s say you need to get some snacks, fruits, clothes, personal care products, stationery, and utensils but you don’t have the time to go around the town visiting different shops for different items. Where would you go? Supermarket! A supermarket would be like your one-stop solution for all the things you need.
Now, think of the Indian Financial Market as a supermarket, where all kinds of financial assets/instruments can be bought and sold. Would you like to know more? I got you! In today’s blog, we will be understanding what is a Financial Market. Who are the market participants? Why is it important? and What is the structure of the Financial market in India? So, let’s get started!

What is the Financial Market?

I guess the name suggests itself. The Financial Market is a marketplace, where buying and selling of various financial asset/instrument take place. The financial assets being traded in this market can be stocks, bonds, currencies, commodities, etc. It brings together the buyers and the sellers who are interested to trade in a particular instrument. So, the stock market, bond market, forex market, commodities market, and any other market trading in financial instruments together, fall under a single umbrella, which is the Financial market. These markets operate in a proper structure but, more on that later.

Who participates in the Financial Market?

Participants include investors (institutions, individuals, government, etc.) wishing to invest in various investment avenues, entities /governments wishing to raise funds, financial intermediaries (exchanges, brokerages, banks, mutual funds, etc.) and regulatory bodies (RBI, SEBI, etc.).

What is the importance of the Financial Market?

  • Enables smooth circulation of Funds :

The market participants continuously interact with each other. Thus, funds flow efficiently from investors to businesses/government and vice versa.

  • Encourages people to invest :

Various financial instruments like stocks and bonds have given better returns than traditional options like FD’s or Savings. Improved transparency, proper regulation and rising financial literacy in India have ultimately encouraged people to trust and earn good returns by investing in markets.

  • Reflection of economic growth :

    I think the 2008 crisis would be the best example to understand this point. The financial market and economic growth go hand in hand. The performance of financial markets is reflected in the strength of the economy.

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Structure of Indian Financial Market

The Financial market in India is divided into Money Market and Capital Market.


1.Money Market :
It is a marketplace where short-term borrowing and lending of funds take place. This happens through various money market instruments with maturities ranging from a day up to a year. Banks usually use money market instruments to borrow money and meet their short-term liquidity requirements as per RBI guidelines. Types of money market instruments include T-bills, Certificate of Deposits (CD), Commercial papers (CP), Money market MF, etc. Individuals and institutions invest their excess or idle funds in these instruments and earn interest in a short period.
2.Capital Market :
In simple words, the Capital market is a marketplace where funds can be raised by businesses and governments for more than a year. These raised funds are utilized for their plans and growth. Interested investors can lend their surplus funds to earn good returns. This happens via various capital market instruments like stocks, bonds, etc. So, the Stock market and the Bond market comes under this umbrella. If you want to understand what bonds are, you can check out my YouTube video.
                                                                                                             

The Capital market is further divided into Primary markets and Secondary markets.

  • Primary Market :
    It is a marketplace where companies and the government raise funds for the long term by issuing shares or bonds for the first time to the public. Because of this, it is also known as the New issue market. Here, the transaction happens between a buyer and the company/government issuing the security. When a company comes up with an IPO (Initial Public Offer), it takes place in this market.

    Let’s take the example of Happiest Minds IPO. Investors who applied for the IPO had to go through the Primary market. To do so, they submitted their bid price to the company via their brokers. Later, the investors who got the allotment in this IPO received the shares directly from the company via their brokers again.
  • Secondary Market :
    It is a marketplace where already-issued securities from the primary market are bought and sold. Hence, it is also known as the after-market. Here, new securities are not created, unlike the primary market. Trading and investing take place in already existing shares or bonds. A company or government is usually not involved in the transactions. It purely happens between a buyer and a seller through exchanges

    Let’s continue with our previous example of Happiest Minds IPO. There might have been so many investors who were interested in the company but did not get the allotment. Also, there might be investors who got the allotment but want to sell their shares. So, these investors will now buy and sell their shares when the company gets listed on the stock exchanges. This is nothing but the secondary market. Once the company is listed, buyers and sellers can trade in these shares on the stock market.

    There’s a lot more to learn about the primary and secondary market. If you are keen on learning what exactly goes around in these markets and how they work in detail, you can check out my course “Basics of Stock Market” at the link below.
   BASICS OF STOCK MARKET COURSE    

Bottom line:

Our Indian financial market has come a long way since Independence. It has opened up so many options for us to invest in and to take advantage of growing businesses and the national economy. It’s always a better idea to understand the overall structure and operations of the Financial market before we make trading or investing decisions.

Click the following image to know what is Nifty and its calculation.

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