Stock Market is the most important market of the modern capitalist economy. Now-a-days, the performance of an economy is judged on the basis of the rise and fall of its financial market. The stocks reflect the performance of the performance of the respective companies and the index shows the overall picture of the entire market. This helps in gauging the health of the economy as a whole. Stock Market gives indication to the investors (both domestic and foreign) about their potential of their investment and the expected return from it.
Stock Market plays the coveted role of channelization of idle savings fund of the households (general public) to the corporates for productive investment. On one hand, the investors get the chance of becoming the shareholder of the company and on the other hand, the businesses, especially the small ones, get the required funds for expansion.
Stock is the ownership of certificate (either in physical or dematerialized form) of any company.
Stock Market believes in unhindered functioning of the market and considers that the market itself produces optimum results through its invisible hands (demand-supply mechanism). It considers market to be supreme and it discounts every incident (domestic economy, world economy, specific company news, etc.) around the world.
The underlying theory behind the functioning of Stock Market is the supply side economics which emphasizes the economic concepts such as Laffer Curve. Share Market generally advocates the philosophy of laissez-faire (free market) economy and always argue in favor of less restrictive import and immigration policies.
Share Market is an organized market where shares are issued and traded. These shares are either traded through Stock exchange or Over-the-Counter in physical or electronic form.
Share Market can be divided into two parts :-
- Primary Market
- Secondary Market
Primary Market deals with securities that are channelized through the Initial Public Offer (IPO) route.
Secondary Market is the market where the investors trade securities among themselves in the quest of making profit.
Common stocks, bonds, preferential stocks, convertible preferential stocks, warrants, etc are part of the stock market.
Some of the major Stock Markets around the world are :-
- New York Stock Exchange (NYSE)
- NASDAQ
- London Stock Exchange
- Tokyo Stock Exchange
- Hong Kong Stock Exchange
Indian (National Stock Exchange of India and Bombay Stock Exchange)and Chinese (Shanghai Stock Exchange and Shenzhen Stock Exchange) bourses are also coming up very fast and are performing magnificently. They are projected to be the future front runners of the world along with USA.