What is Consumer’s Equilibirum with Indifference Curve analysis
The Share Market and Its Various Branches
The Share Market is a marketplace where buyers and sellers trade shares, bonds, and other financial instruments. It plays a crucial role in the economy by providing companies with a platform to raise capital for growth and expansion, while investors have the opportunity to earn profits through dividends and capital appreciation.
Types of Share Markets
The share market is broadly divided into two categories:
Primary Market:
The primary market is where companies issue new shares to the public for the first time through Initial Public Offerings (IPOs).
It provides companies with fresh capital, which can be used for expansion, debt repayment, or other purposes.
Once shares are sold in the primary market, they are listed on the stock exchange for further trading.
Secondary Market:
The secondary market is where existing shares are bought and sold among investors.
It provides liquidity to investors, allowing them to buy or sell shares at market prices.
Trading in the secondary market occurs through stock exchanges like the New York Stock Exchange (NYSE), National Stock Exchange (NSE), and Bombay Stock Exchange (BSE).
Branches of Share Market
The share market can be further divided into several branches based on the nature of trading and the types of financial instruments involved:
Equity Market:
Deals with the trading of company shares or stocks.
Investors can earn profits through dividends (a share of the company’s profits) or capital appreciation (increase in share price).
Debt Market:
Deals with the trading of fixed-income instruments such as bonds, debentures, and government securities.
Investors receive regular interest payments and the principal amount upon maturity.
Derivatives Market:
Deals with contracts whose value is derived from an underlying asset, such as stocks, commodities, or currencies.
Common derivatives include Futures, Options, Swaps, and Forwards.
It is used for hedging risks or speculating for profits.
Commodity Market:
Deals with the trading of physical commodities like gold, silver, oil, agricultural products, etc.
Commodities can be traded through spot markets or futures markets.
Forex Market (Foreign Exchange Market):
The largest and most liquid market in the world.
Deals with the trading of currencies from different countries.
Investors make profits based on the fluctuation of currency exchange rates.
Mutual Funds Market:
Involves pooled investments managed by professionals.
Investors can buy units of mutual funds instead of directly purchasing individual stocks or bonds.
Provides diversification and is suitable for long-term investment.
Exchange-Traded Funds (ETFs):
Similar to mutual funds but traded on stock exchanges like individual stocks.
They offer the benefits of both mutual funds and stock trading, providing flexibility and liquidity.
Importance of Share Market
Wealth Creation: Provides opportunities for investors to earn profits over the long term.
Liquidity: Easy buying and selling of shares through stock exchanges.
Economic Growth: Helps companies raise capital, boosting industrial growth and employment.
Transparency: Regulated by government authorities, ensuring fair trading practices.
