A Stock Market, Equity Market, or Share Market is the aggregation of buyers and sellers of stocks (also called shares). A Stock Market is a marketplace where buyers and sellers interact to trade shares of publicly listed companies. The collection of markets and exchanges where the issuing and trading of equities or stocks of publicly held companies, bonds, and other classes of securities take place is called the stock market.
Share Market is where buying and selling of shares happens. The process where shares of a company are bought and sold in the exchange. A share represents a unit sold in the exchange. A share represents a unit of ownership of the company from where you brought it. For example, you brought 10 shares of Rs. 100 each from XYZ company then you become a shareholder of XYZ company. This allows you to sell XYZ shares anytime you want in the market.
The Two Kinds of Share Markets:
- Primary Market defines where the issuer of securities offers those securities directly to investors and the issuer receives the proceeds. A company or government raises money by issuing shares in the primary market by the process of IPO. The issue can be either through public or private placement.
The issue is public when the allotment of shares is made to more than 200 persons. The Issue is private when the allotment is made to less than 200 persons.
IPO stands for Initial Public Offer. When a company is going for a process of getting listed on the stock exchange and publicly traded, IPO is the first public offering, it is the main source of the company in acquiring money from the general public to finance its projects and the company allots shares to the investors in return.
2. The Secondary Market defines where investors buy and sell securities they already own. e shares bought in the primary market can be sold in the secondary market. The secondary market operates through Over-The-Counter (OTC) and exchange-traded markets. OTC markets are informal markets wherein two parties agree on a particular transaction to be settled in the future.
Market Share’s Understanding:
How to calculate a company’s market share?
- First, determine a period you want to examine. It can be a fiscal quarter, year or multiple years.
- Second, calculate the company’s total sales over that period. Then, find out the total sales of the company’s industry. Finally, divide the company’s total revenues by its industry’s total sales.
Advantages of Share Market:
- Share market plays a vital role in encouragement the companies to raise capital for expansion and growth. Through IPOs, companies issue shares to the public and in turn receive funds that are used for various purposes.
- You can be a investor or trader in the share market. Traders hold stocks for a short period of time whereas investors hold stocks for a longer duration.
- The investors in the company can use this investment to fulfill their life goals and major platforms for investment as it provides liquidity. For instance, you can buy or sell share anytime based on the need. That is, financial assets can be converted to cash anytime.
The Ways Through Which Your Money Grows:
- Dividend: These are the profits the company earns and it is distributed as cash among the shareholders. It is distributed according to the number of shares you own.
- Capital Growth: Capital growth is the increase in an asset’s or investment’s value over time. It is the aim of every investor. We measure it by comparing the asset’s current value with how much it originally cost. We also call it capital appreciation.
- BuyBack: The company buys back its share from the investors by paying a higher value than the market value. It buys back shares when it has a huge cash pile or to consolidate its ownership.
Impact Of Market Share
- Economies of Scale: An increase in a company’s market share can allow the company to operate on a greater scale and increase profitability. It also helps the company develop a cost advantage compared to its competitors.
- Increased Sales: An increase in market share also helps boost a company’s total sales. When consumers notice the brand loyalty of a majority of their peers, the remaining consumers are also driven to purchase that product.
- Increased Customer Base: An increase in market share also helps a company widen its customer base. When a majority of the consumer base is loyal towards one brand or product, the rest may also follow.
- Reputation: An increase in market share helps enhance the reputation of a company. A good reputation, in turn, helps boost sales and broaden the customer base.
- Dominating the Industry: With an increase in market share, a company increases its dominance over the industry it operates in.
- Increased Bargaining Power: With an increase in market share, a company starts to dominate an industry. With increased dominance over the industry, a company can exercise certain powers such as greater bargaining power.
How Market Share Increased?
- Invovation: Innovation is an excellent method of increasing market share. Innovation can be in the form of product innovation, production method innovation, or simply introducing new technology to the market that competitors are yet to offer. With innovation, a company can gain an edge over its competitors and dominate the industry.
- Customer Loyalty: By strengthening their existing customer relationships, companies protect their existing market and ensure no loss of the existing customer base owing to high competition. This also increases customer satisfaction, which in turn helps increase customer base through word-of-mouth.
- Acquisition: Acquiring a competitor is a sure method of establishing dominance over an industry. By acquiring a competitor, a company not only gains access to a new customer base, but it also reduces competition and helps establish dominance over an industry and increase market share.
- Increased Quality: Customers are getting increasingly conscious about the quality of a product in addition to its price. By ensuring higher quality standards, a company can increase its market share.
- Advertising: Advertising is an expensive yet effective way to increase market share. With heavy, cutthroat competition in the market, advertising is an excellent way of gaining an upper hand over competitors.
- Lowering Prices: A company can also expand its market share by lowering its prices. Lowering prices will attract more customers and help widen the customer base and increase sales, hence increasing the market share of the company.
Why Stock Market Of Nepal Is Booming Now?
Why are stock market prices so high when the real economy is so weak? One factor is almost clear that is the stock market has a relatively large impact on small businesses and low-income service businesses. The latest statistics of borrowing on the security of shares have been made public.
It seems strange to see and hear that even in the time of political instability and constitutional crisis, the stock market is taking new heights every day, making history, Nepse index and even the amount is increasing. The stock market is booming now. Investors have also been encouraged to take share loans. A new environment is being created in the share market as banks and financial institutions have increased the flow of credit on share security or guarantee.
According to the data of the Central Bank, out of the loans disbursed by banks and financial institutions in the last few months, the share mortgage loans (of margin nature) have increased at a higher rate.
Like most things in life NEPSE(Nepal Stock Exchange) also has its dark side full of risks and a huge amount of losses. One biggest risks of trading in the share market are the unpredicted loss of stock value.
In a share market, shares are bought and sold. The stock market is a share market, however, besides shares of companies, other instruments like bonds, mutual funds, and derivative contracts too are traded in the stock market.