The past few years has seen a meteoric rise in retail participation in Indian stock markets. Individuals have turned towards this financial market in the hope of creating wealth. If you’re someone who is interested in investing in the stock market yourself, but aren’t really well versed with the concept, then this is for you. In this article, we’re going to be looking at a few of the most important stock market fundamentals that you must absolutely know as a beginner investor. So, without any further delay, let’s jump right in.
Stock Market Fundamentals for Beginners
As an investor who is new to the world of stocks, there are a few fundamentals of the stock market that you need to know about before you start investing. Here’s a quick look at some of them.
There are two premier stock exchanges in India
A stock exchange is an electronic marketplace of sorts where you can buy and sell shares of companies. In India, there are currently four stock exchanges operating. However, only two of them - the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) offer electronic trading. As an investor, you can choose to buy and sell stocks of your preferred companies through either of these two exchanges.
The stock market has multiple trading segments
Many beginner investors think that they can only trade in the shares of companies (equities) in the stock market. In fact, there are multiple other asset classes that you can trade in as well. There’s the debt trading segment, where you trade in debt instruments such as bonds and the derivatives segment, where you get to trade in derivative contracts like futures and options of stocks and indexes. You don’t have to just buy and sell stocks of companies to be able to generate wealth
There are many factors that influence the movement of the stock market
This is one of the most important stock market fundamentals that beginners must know. The prices of the stocks of companies tend to fluctuate very frequently. There are many factors that play a part in this price movement. Some of the key ones include demand and supply, economic conditions of the country, geo-political news, policies of the government, and company specific news and financial data. Therefore, when you’re trading in the stock market, it is advisable to keep an eye out for these factors seeing as they can influence the stock price movement.
The stock market is cyclical in nature
Contrary to popular opinion, the movement of the stock market can never be unidirectional. Although there might be extended periods of time where the market is in an uptrend or a downtrend, it can never be fully bullish or bearish. Understanding the cyclical nature of the market can help you make good investment decisions that can help speed up the process of wealth creation.
Conclusion
These four stock market fundamentals mentioned above are merely meant to be illustrative and not exhaustive. As a beginner stepping into the world of the stock market, it is crucial for you to be thorough with the fundamentals. There are plenty of online resources such as the ones in the website of Motilal Oswal that you can use to get to know more about the market.
Also, before stepping in to invest, make sure you have a demat account. Without it, you cannot take part in the stock market. Visit the website of Motilal Oswal today to open a demat account right away.
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