Saturday, 6 October 2018

Stock Market

What is the stock market?

Stock Market is a place where an investor can go and buy and sell shares of publicly listed companies.
Stock Market
credit: pixabay

Now, what is a stock or share?

A stock or share means a part of a company when you buy a stock of a particular company you're buying ownership of that company when a company needs to raise money for further growth it has a choice to go public by making an initial public offering (IPO). The company who want to go public have to be registered with the stock exchange and securities and exchange boards ( like SEBI in India and SEC in the USA )

How prices of stocks are determined?

The listing price of IPO is decided by the syndicate of investment banks, performing the process of IPO through a process called book building.
Once the public offering is completed, the stocks issued can be traded by the investors in the secondary market, in secondary market buyers and sellers gather to make profits or losses.
Economics of demands and supply determine the price of the share that is traded. If the share of a company attracts more buyers, the price of the share increases on the other hand if a company attract more sellers than buyers its price of share decreases.
Some other factors which affect prices of shares are economy of the country, earning reports of the company, political events, economic news etc.

Credit : pexels

Market Capitalization

Market Capitalization ( market cap) is a measurement of the value of business enterprises which is equal to share price times the number of share outstanding ( shares that have been authorized, issued on purchased by investors )
-So, today if you want to purchase a company like Reliance Industries Ltd. What you have to do is? Buy all shares of the company and pay the market price for each share.
-If reliance has 100000 shares and price per share is 1000 then you have to pay 1,00,00,00,000

Market capitalization = Market price of shares * Number of common shares outstanding.

Free- float market capitalization

Free-float market capitalization takes into consideration only those shares issued by the company that is readily available for trading in the market.It generally excludes promoters' holding, government holdings and other locked-in shares that will not come to the market for trading in the normal course.

Free float market value = Market price of share * Number of free float shares.

Thank you for reading.

Here are the some useful books for learn stock analysis and investing :

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