When it comes to investing money in the stock market, the name stock exchange is heard. But do you know what is a stock exchange, how a stock exchange works, and what is its history? If you do not know all this then read this article completely. In this, you will be told about the stock exchange in full detail.
What is the Stock Exchange?
A stock exchange is also called the share market. A market where the owner of any company sells the shares of his company and investors buy that share. Apart from shares, bonds, mutual funds, debentures, and derivatives, government securities are also traded on the stock exchange.
Why Does a Company Join the Stock Exchange?
When the owner of any company wants to increase his business, then he needs money. If the owner of that company does not have that much money, then the owner of the company joins any stock exchange to sell the shares of his company to collect money. This process is called IPO (Initial Public Offering).
How Many Stock Exchanges or Stock Markets are there in India?
Earlier there were 23 stock exchanges in India but at present, there are 7 active stock exchanges.
1. National Stock Exchange of India (NSE)
2. Bombay Stock Exchange (BSE)
3. Multi Commodity Exchange of India Limited (MCX)
4. National Commodity and Derivatives Exchange Limited (NCDEX)
5. India Commodity Exchange Limited (ECX)
6. The Universal Commodity Exchange (UCX)
7. Metropolitan Stock Exchange of India (MSE)
Metropolitan Stock Exchange is valid till 15 September 2022. After 15 September 2022, this stock exchange may also be closed.
Popular Stock Exchanges of India
Bombay Stock Exchange and National Stock Exchange are two popular stock exchanges in India. About 6000 companies are listed on the Bombay Stock Exchange and about 2000 companies are listed on National Stock Exchange.
Ways to Invest in Stock Exchange
There are two ways to invest or buy shares in the stock exchange. First from the primary market and secondly from the secondary market –
Primary Market
When a company is listed for the first time on the stock exchange, it is called Initial Public Offering (IPO). In this, investors invest by buying shares from the direct company, this is called the primary market.
Secondary Market
The stock exchange is a secondary market. When the shares bought in the primary market i.e. IPO are listed on the stock exchange, then we can sell them on the stock exchange. In the secondary market, only investors buy and sell shares from each other, the company is not involved in this.
How Does Stock Exchange Work?
Earlier, any investor used to buy shares from the stock exchange, then after buying stock or shares, he used to make a paper of the share so that later the investor could prove that he has bought the shares of a company, and trading was also done face to face. But with the advent of the Internet, now all the work is done electronically. At present, you have to open a Demat account to buy shares from any stock exchange.
Whenever you buy shares of a company, its data is saved in your Demat account. You can hold the purchased shares for as long as you want and you can sell them whenever you want.
How Does a Company get listed on the Stock Exchange?
Company listing in the stock exchange is done by SEBI, an organization of the government. Therefore, there is no fear of any fraud company being listed on the stock exchange and even though the Demat account is opened by a broker, the Demat account is also with the government. Because even if your broker company is closed in the future, then your Demat account will be absolutely safe.
History of Stock Exchange
The stock market started about 400 years ago. In the 16th century, a company named Dutch East India was in the Netherlands. At that time people used to trade from one country to another with the help of ships, but a lot of money was spent on trading with ships.
And no one person used to have this much money. Then the company offered to the people, come invest money in our ships and whenever these ships go to other countries and do business and come back after earning money, then your share will give to you from the profits earned.
In this way, the first stock exchange was created in the Netherlands by a company named Dutch East India, which is today known as Euronext Amsterdam Stock Exchange.
History of the Indian Stock Exchange
The first stock exchange in India was started in 1875 at Dalal Street, a suburb of Mumbai whose name is Bombay Stock Exchange, and the National Stock Exchange was started in the year 1992. It was the first stock exchange in India to start buying and selling shares electronically.