Everyone will be hearing, reading about the increase, decrease, buying, selling of shares etc. on daily basis, but many of us ignore those and carry out our regular activities . Even the Regular News channel will end up their day to day news by sharing us with the Sensex details, this is actually interesting and many do this as a job for their incomes and some do it as a part time, of course money cannot be circulated better than this. So let’s know about Sensex and nifty which will definitely help’s every individuals, before knowing the tricks lets understand the basics.
- Sensex can be simply called as the figure indicating the relative process of shares on the BSE (Bombay Stock Exchange). In other words we can consolidate the sensex as an index of the stocks in BSE. Sensex is a list of stocks (n. numbers).
- BSE is the one which decides the stocks that are to be listed on sensex. The more volume of the trade of that stock and total volume of the stock in BSE decides the list on Sensex. With this basic criteria’s BSE regularly prepares a set of stocks which is together called as SENSEX.
- Each stock is allotted a weight-age based on the criteria and the criteria also keeps on changing with time. Stocks in general are normally traded in BSE every day and the price of stocks is framed based on the demand and supply.
- Now a calculation is done with all the stock prices and they come up with a number which is called as SENSEX. So when we hear that the SENSEX is going up it actually means that the weighted total of all the stocks is going up, by this it doesn’t mean that all the stocks are going up, it is possible that some stocks are diminishing and still SENSEX is going up due to huge gains in other stocks.
All the company has its own share and as a first step every company sells the shares in the form of IPO (Initial Public Offering)
- IPO , the name itself explains it’s role, the very first sale of stock by a company to the public
- The company which has never issued equity to the public is known as IPO
- Money can be raised by a company by issuing debt or equity
Then when all the shares are sold out, the shares will be mutually traded among the parties using a stock exchange through two markets
- Primary Market – As told above the best understandable example is IPO in which company sells it shares to public and public can sell the shares back to the company on agreed price mutually.
- Secondary Market – Here a stock exchange like BSE(Bombay stock exchange) or NSE (National Stock Exchange) which facilitates the transfer of shares from one to another. The nature of BSE & NSE is that they buy the shares from sellers and sell the shares to buyers. These both Exchanges buy the shares only when there is a demand for shares and with this we call tell BSE & MSE are just an exchange platform.
So now you can ask on how and what determines the price of share exchanged
In general they hold a software which has the quantity of shares demanded by the buyers and the quantity supplied by the sellers, this is being entered in the software. By doing this they get a standard price and that price would be the stock price for that moment.
There is a rule named SEBI (Securities and exchange board of India) and as per the rules every public company should declare their profit/loss results in every quarter and the same should be published on their website and should publish the results in at least 3 National Newspapers.
Now immediately we can think as, the company which has high profit will have their shares at higher rates !! But it is not like that and there are reasons for this
- Investor in general has their own expectations on the company’s growth rate, profit and they invest in stocks well before the company releases their results. Ultimately if the growth doesn’t meet their expectations they used to sell the shares since they can make more money by investing in some other stock, because of which there is a possibility of share getting decreased.
- In other side, even though the company has sound profit and if the company doesn’t declare good dividends, the investors will lose hope on the growth rate and intern they sell the share which will be the cause for further fall in price.
- Dividend – We spoke about dividends, but what does it mean here ? the shareholders are like owners of the company and hence when a company earns profit, the board of directors decide the price that should be paid in the form of dividends, for example let us take Doubtsclear.com earns several crores as profit, the board of directors decide how much percentage of the earning to declare as dividends.
NIFTY – The NIFTY and Sensex are both same. Sensex refers the BSE and Nifty refers to NSE. If BSE is holding a stock market index of 30 companies, NSE holds 50.
Tips for the Share market
- Do a thorough research before investing, this will provide you with the courage for the next step as you can learn the history completely
- Do not trust blindly
- Know the track record and the experience of the companies
- The fundamentals and growth aspects of the company
- The legal aspects of the company
- Of course know the sentiment of market
- Beginners are advised to invest in small and middle companies instead of directly starting from BSE, NSE
- Make an attempt to learn the trading difference between the BSE and NSE
- Learn when and what to do
- Try Virtual trading which will help you to learn the actual techniques without losing/gaining your money
- After virtual trading you will automatically gain momentum
Hope this has made you understand about Sensex and if you have more tips to be shared kindly comment below as it will be useful for everyone.
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