A mutual organization providing trading facilities to stockbrokers and traders to buy or sell stocks and other securities is known as Stock Market.
Stock Market trades in securities that include shares issued by companies, investment bonds and other products.
A common location usually deals with record keeping.
However, the stocks are traded at different places and on different electronic networks that are speedy and involve less transactional costs.
Only the members are eligible to trade on a stock exchange.
A Stock Market is basically divided into two categories - Primary Market and Secondary Market.
Primary market deals with the initial presentation and offering of stocks and bonds to investors while secondary market does the subsequent trading.
For companies, the most important source of raising money is the Stock Market.
The business houses can trade here publicly and raise additional capital or funds by selling the shares owned by the company in the Stock Market.
The flexibility and liquidity provided by the Stock Market allows investors to sell and buy securities easily.
This characteristic of Stock Market attracts more investors towards it rather than going in for real estate investment.
If we go into the history, we will learn that the share prices have a great influence on the economy and the social atmosphere of a state.
The wealth of households and their consumption greatly relies on the prices of shares held by them.
Thus, the central banks always analyze the behavior of the Stock Market so that the financial system works smoothly.
It is beneficial to invest in shares as it leads to a more lucid savings scheme as compared to the idle deposits with banks or consumption of the savings.
Investment in shares especially promotes economic sectors such as, agriculture, commerce and industry, eventually leading to economic growth and higher productivity levels.
It is generally observed that the companies whose shares are publicly-acquired gain more economic benefits than the privately-held companies.
This is because the public companies have more scope to change owners and thus they are inclined towards improving their management standards and efficiency in order to satisfy the public shareholders, which ultimately leads to more returns to them.
Even a small stock investor can invest in shares as there is no investment limit in Share Market.
Thus, it is the wish of a stock investor to decide about the investment amount.
Here, a person buys the number of shares he can afford.
On the contrary, there are a large number of business houses that require huge capital investment.
Sometimes, the government needs funds to finance infrastructure projects like water treatment plants and hospitals.
In such cases, the government decides to sell a category of securities known as bonds.
The Stock Market raises such bonds and the public buys them.
It eventually leads to the provision of funds to the government.
This prevents the need to directly tax the citizens.
The fluctuations in the share prices can be of great help in order to analyze the trend in the economy.
This is due to the fact that the share prices rise and fall depending mainly on the market forces.