Stock Market Overview

By Nigel Merriden

Stock Market has a huge arena and has diversified fields in it. It is not possible to give every detail of every topic of the wide array of Sock Market in this single article. Stock Market Overview gives a bird’s eye-view on this vast field. A person interested in the Stock Market would appreciate our sincere effort to give a Stock Market Overview in Question-Answer format.

Stocks are certificates which represent ownership rights of the holder in a company.

Stock Market is an organized market where shares are issued and traded. These shares are either traded through Stock exchanges or Over-the-Counter (OTC) in physical or electronic form. Stock Market plays an important role in channelizing capital from the investors to the business houses which consequently leads to the availability of funds for business expansion.

The Stock Market can be divided into two parts, one is Primary Market and the other is the Secondary Market. Primary Market deals with securities that are channelized through the Initial Public Offer (IPO) route. After the issuance of the stocks to the general public, these stocks are then bought and sold by the investors between themselves in the Secondary Market. Here, the stock issuing corporation has no direct influence on these trades.

Stocks in the Stock Market are either traded through Stock Exchanges or Over-the-Counter. Stock Exchanges are organized market places where stocks, bonds are other equivalents are traded between the buyers and sellers. The contracts are standardized ones. But in case of Over–the–Counter, the trade takes place through a network of dealers and the contracts are bilateral customized ones.

Stock Prices are determined through price mechanism where the demand and supply of stocks work against one another and determine the price. If there is an excess demand for stocks then the price will rise and vice versa. Many economists refer this as the invisible hand of the market which determines the stock price known as the demand–supply mechanism.

Stocks basically are of three types, namely, Common Stock, Preferential Stock, and Convertible Preferential Stock. Common Stock gives ownership right to the holders of the stock. The holders are entitled to receive dividends whenever the company announces. Preferential Stock gives ownership right to its holders. Its holders enjoy the privilege of receiving dividends from the company in preference to any other common share holders. Convertible Preferential Stock give its holders the option of converting them into common stocks of the issuing company. The dividends in these stocks are comparatively higher.

The participants of a Stock Market are Buyers, Sellers and Stock Brokers. Buyers are investors who buy a script in the belief that the market will rise. If his hinge becomes right then he makes profit otherwise he suffers loss. Seller of a stock sells in the hope that the stock price will go down. Stock Brokers are persons or firms who execute buy/sell order on behalf of the investors and charge a commission for rendering the service.

The platforms through which the stocks are traded are 1) Offline Stock Trading, and 2) Online Stock Trading. In case of Offline Stock Trading, the customer has to place order to the dealer of the stock broking firm either in person or over phone. But in case of the Online Stock Trading, the client could place his order on his own from any place he wants, provided he has a computer with an internet connection.

From The Financial Times