What is Stock Exchange? how does it work? [2022] krcofficial.com

What is Stock Exchange? how does it work? 

If you are investing in share market then you must have heard about stock exchange, if you do not understand stock exchange well then do not worry in this blog post I am going to give you all information about stock exchange in easy language. . 

The question of many people remains that what is stock exchange? How does work? How many types of stock exchanges are there? What is NSE and BSE? In this blog post you are going to know the answer to all these questions – Stock Exchange Meaning.

What is Stock Exchange?

Stock Exchange is made up of two words, first is “ Stock ” which means shares of a company and second word is “ Exchange ” which means to buy and sell . 

A stock exchange is a market where companies list their stocks and investors buy and sell shares of the company from the stock exchange . 

Whenever a company needs money to grow, it lists itself in stock exchanges like NSE & BSE by following the rules of SEBI and this is called IPO .

You cannot buy shares of any company by going to the stock exchange directly, for that you need stock brokers like Groww , Upstox , and Zerodha , you can buy shares from the stock exchange using this. 

According to the rules of SEBI , companies are listed on the stock exchange, after which people can buy and sell shares, bonds, and commodities of the company according to the specified day and time. 

All the work that happens in the stock exchange is done according to the rules of SEBI so that fraud can not happen in it. 

The most famous stock exchange of India is NSE & BSE: 

BSE (Bombay Stock Exchange)   

NSE (National Stock Exchange)

How does Stock Exchange work?

Stock Exchange was created so that investors can buy shares of companies , Stock Exchange works like an intermediary.

When a company needs money, they list some of their shares on the stock exchange so that investors can buy their shares at a fixed price and when the share price rises, investors can also get benefits.  

First the company lists its shares on the stock exchange according to the terms and conditions of SEBI , after that investors can buy the shares of the company listed on the stock exchange with the help of stock brokers, such as Groww and Zerodha .

Example, suppose a company has to raise Rs 10 lakh from the share market and it has a total of 2 lakh shares, out of which 1 lakh shares are with the founders of the company, then now they will list their remaining 1 lakh shares on the stock exchange and Investors will buy that share of his. 

Benefits of getting listed on the stock exchange 

Let us know that if a company lists its shares on the stock exchange, then what are the benefits they get. 

Company can raise money 

Any company automatically lists in the stock exchange mainly to raise money. When the company has to expand then they need more money and they can list their company's shares on the stock exchange to get that money. 

company price rises 

When a company lists its shares on India's best stock exchange such as BSE or NSE, people buy their shares, which increases the price of their company. 

liquidity advantage 

Liquidity means that if you sell your shares on the same day or anytime, then how soon the people who buy your shares will buy, the more liquidity it means, the more people buy the shares of that company. 

The investor gets the benefit of liquidity abundantly on the stock exchange because crores of people buy and sell shares on it. 

fair share price 

Whenever a company is listed on a stock exchange, due to the terms and conditions of SEBI, it cannot list at any other price than the original price of its share, so the shares are available to the investors at a right price. 

Ways to invest in Stock Exchange 

There are two ways to invest through the Stock Exchange of India:

Primary Market 

Secondary Market 

Primary Market

In the primary market, the investor buys the shares of any company directly from the company, like in IPO , whenever a company is listed on the stock exchange for the first time , you buy the company's shares directly from the company and not from any investor who has Have already bought. 

Secondary Market 

Secondary market is called share market, in which you buy shares of any company from another investor who has already bought and not directly from the company. 

You can also do trading in the secondary market because people buy a share at a lower price and sell it at a higher price so that they can profit. 

India's largest stock exchange

Although there are many stock exchanges in India, BSE (Bombay Stock Exchange) & NSE (National Stock Exchange) are the two largest stock exchanges. 

Bombay Stock Exchange – BSE

BSE was established in 1875 on Dalal Street in Mumbai, it is the '8th largest stock exchange in the world'.

The Bombay Stock Exchange has an estimated market capitalization of $4.9 trillion as of April 2022 and has about 6000 publicly listed companies. 

full form Bombay Stock Exchange

Year of establishment 1875

Location Dalal Street, Mumbai

index Sensex

current chairman Susil Kumar

The performance of the BSE is measured by the Sensex, and it was at its all-time high when it touched 40312.07 in June 2019. 

National Stock Exchange – NSE 

NSE was established in 1992 in Mumbai and opened as a demutualised electronic stock exchange. The main objective of creating NSE was to end the monopoly of BSE. 

The National Stock Exchange had an estimated market capitalization of $4.1 trillion in March 2016 and is the 9th largest stock exchange in the world. 

full form National Stock Exchange

Year of establishment 1992

Location Mumbai

index Nifty50

current chairman Ashok Chawla

Nifty 50 is an index of the NSE, and is widely used by investors across the world to assess the performance of the Indian capital markets.

By now you must have understood that what is a stock exchange? How does work?, Because if you are investing in the stock market then you should know all the information about the stock exchange. 

Once again let me explain to you that stock exchange is a market from where you can buy and sell shares of any listed company. However, you cannot buy directly from the stock exchange, for that you need a stock broker like Zee Upstox and Zerodha. 

We hope that after reading this blog post your question is What is stock exchange? How does work? You will get the answer easily. 

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