Stock Market Knowledge for Beginners

 

            

    

Stock Market Knowledge for Beginners

Hello friends, so in the previous chapter we learned why should invest, now we will know what is the stock market, which attracts everyone so much, how does it start.

What is stock market :-

In fact, it attracts everyone because of the good returns of the stock market, which has the ability to give returns much higher than the inflation rate. Now the question comes that how to invest in it? Before knowing the answer, it is very important to know who invests or can invest in equity and how this whole system works.

Who can participate in the stock market:-

1. Indian citizens who live in India, that is, you and I, Indian citizens settled abroad.

2. Big Indian companies, like LIC Domestic mutual fund companies such as mutual funds,  Fidelity Investments, HDFC AMC etc.

3. Foreign companies, foreign asset management companies, hedge funds etc. (adsbygoogle = window.adsbygoogle || []).push({});

Share Market Knowledge for Beginners

We have told you that who can invest in the share market, it becomes very important to answer a question that what is this IPO and why do companies bring it, if you have heard about the share market so you must have heard also that the IPO of this company has come.

There are many such questions & we will discuss one by one, so let us know what is IPO and why it is brought, but before that you need to understand something else, then you will understand well.

How to start a business:-

Answer this question, before we know how a company starts. Let us try to understand this through a story, so that it can be known that how the system of raising funds for the business works.

Let's say a businessman who has a great business idea. That idea is food Business. These food items will stand out, their prices will also be attractive to the customers and good quality has been used in their production.

The entrepreneur is sure that this business will be successful and he is also very excited to turn this idea into a business. But he does not have the money which is needed in huge amount for the smooth running of the business.

In such a situation, what will he do, either he will take a loan from the bank or he will borrow from his relatives / friends, he will have to pay interest immediately in taking a loan from the bank and it is difficult to get such a huge amount from relatives.

He invests his deposits and simultaneously convinces two of his friends to invest money in the business. These two friends are investing money early in the business and are kind of betting on the new trader. These two friends are called " Angel Investors ". The money these people invest is not a loan but an investment.

When the business is earning money, the promoter goes to the investors who invest money in the new business. He talks to one such investor, who is ready to pay him Rs 10 crore in return for 14% stake in the company, and the company allots 14% of the authorized capital to the VC,

After a few years of investment, the business of the company has grown tremendously. The company has added many products and has also established branches in many big cities of the country.

Income is also getting very good now. But the promoter is still not satisfied with it. And now he wants to spread business abroad also. This time the capex requirement is bigger than ever and the management estimates that it needs Rs 500 crore.

These are the paths in front of the company

1. Further loan from bank

2. Issue of Bonds

3. Internal Accruals - Internal Sources

4. Issue of Shares through IPO

5. Series D Funding from PE Fund

The company now decides to raise some part from internal sources and the rest from IPO to raise funds. And when the company brings IPO, it sells its shares to the general public.

Now the company is selling its shares to the public for the first time, hence it is called " IPO ". By the way, its full name is " Initial Public Offer ".

Now you must have understood what is " IPO " and what is the need to bring it.

In the next chapter we will know what happens after IPO and how public can participate or invest in it - If you have any thing that I have told and you do not understand then you can ask by commenting in comment section & also please follow us so that you can get the notification first of all my upcoming post.

- thank you

Stock market trading is highly risky & the users agree to assume full responsible for all trading decisions that they make.As we are not SEBI registered, this blog is only for educational purposes only, We do not prefer or advise for investment in any stock.