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Basics of share market for beginners - Part 1 | Beginners to Advance series - YouTube
Channel: Groww
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A lot of people come to the stock market
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and what happens to them?
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People invest their money
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and sometimes destroy their wealth.
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They tell everyone that
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share market is like gambling.
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That it is impossible to make money from it.
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But friends,
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if you do thorough research
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and give your investment some time
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and keep your investment for long period
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then you can become a good investor
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in the share market.
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I, Jagdeep Sigh, welcome you to Groww channel.
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This is the first video in the
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share market for beginners series.
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In which, if you are interested in the share market,
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but you don't know anything about it
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We will help you become a good investor
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from a beginner.
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Let's start today's video.
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First of all,
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let me tell you what the market
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in the share market stands for.
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In any market there will be two parties
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who exchange something
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or the other with each other.
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Similarly when I talk about financial market,
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there are two parties.
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One party that needs money
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to run its business.
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Second party who has extra money
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that needs to be invested somewhere.
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Imagine there is a company
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that needs money to run its business.
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It uses financial market
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to get money from investors
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which it uses for running its business.
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How does the investor give money
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to the company?
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How does this transaction happen?
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This transaction happens in two ways.
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First method is shares.
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Imagine that a company is worth 100 rupees
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It has ten shares.
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So one share is worth ten rupees.
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To get money,
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the company sells its two shares.
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Two shares were sold,
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so one investor gave twenty rupees for two shares.
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In this way, the company gives away its shares
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and the investor gives money for those shares.
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A feature of share market is that
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for every share,
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an investor gets a certain percentage
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of ownership in a company.
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How much shares they buy
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they become owner to that much of the company.
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The second method is debt.
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Debt, like when we take loans.
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Likewise, companies take loans
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and pay interest from time to time.
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After a point of time,
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they have to pay the full principal amount.
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Now you must be thinking why
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the investor bought the shares of this company.
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How does it benefit the investor?
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An investor can benefit from buying
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shares in two ways.
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First: price appreciation.
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To explain it in simple terms
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The first investor bought
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the shares of the company for ten rupees.
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Assume that the price of the shares
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doubled and became twenty.
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So the investor got ten rupees profit on each share.
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This is called share price appreciation.
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Second:
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which investors like us commonly ignore.
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But friends,
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dividends are very important.
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What are dividends?
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Imagine that the company
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after running its business
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made a profit
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of rupees 100 in a year.
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Out of 100 rupees,
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the company kept 30 rupees
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for future expansion
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How much has it left?
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Seventy rupees.
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This 70 rupees of profit is distributed
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among the shareholders.
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Assume that the company had ten shares
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then each shareholder gets seven rupees.
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This is called the dividend.
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To explain it again,
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out of its profits,
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the amount after deducting
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what the company saves for future expansion
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what remains is distributed among the shareholders,
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the portion each investor get
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is called a dividend.
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An attribute of the dividend is that
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it is entirely upon the company to
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decide whether or not it wants to give out dividend.
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Because many companies don't give dividends
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saying that it invests all of its profits
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on itself.
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To give you an example
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of price appreciation
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a good example would be MRF shares.
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The shares that used to trade at 1500 rupees.
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For those who bought it then,
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it became 70,000 at some point in time.
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Whenever we talk about price appreciation
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many examples come to our mind.
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But we don't pay enough attention to dividends.
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Come on, let's talk about a company
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that has paid dividends to its investors
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from time to time.
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Because dividends are also
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a good means of income.
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And investors should pay more attention to it.
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To talk about dividends,
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a good example is
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Coal India.
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The current share price of Coal India
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is around 200.
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And this company has till now
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paid over hundred rupees of dividends
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to its investors.
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So you can imagine
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how much profit you can make via dividends too
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if you choose a company
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that gives good dividends.
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If you are still confused about dividends,
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dividends come directly
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to your bank account whenever the company
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declares dividend.
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If I were you,
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I would be thinking
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I understood that dividends come
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from company's profits.
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But how does the share price of a company increase?
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If the share price of a company
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is now hundred rupees,
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how does it increase and become more?
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What is that factor that
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takes the price up?
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Now let's talk about that.
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If try to tell in you
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in three words
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how share price rises or falls
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Those three words are "demand and supply".
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You must be thinking
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that I am confusing you by throwing big words.
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What does demand and supply really mean?
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Let me tell you.
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Imagine that a company started.
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The share value of that company
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was one rupee.
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There were hundred shares.
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The sales of this company was only ten rupees.
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After ten years the sales
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of the company
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increased to hundred.
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So the company grew ten times.
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Even then what was the number of shares
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in the company? The shares were still hundred.
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But since the company grew
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more people would want the shares
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of this company
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because it is growing.
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When a company grows, more investors
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come forward to buy its shares.
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But the number of shares will remain the same.
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The supply will remain the same.
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Then what happens?
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More investors willing to buy
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means that the existing investors will
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increase the price.
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So when demand increases
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of a company's shares,
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its share price increases.
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How does demand increase?
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Demand increases with business growth.
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When a company performs well,
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the demand for its shares increase
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and its price increases.
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But friends,
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if the company does not perform,
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if the sales were worth ten rupees today
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and it became 1 rupees tomorrow,
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what will happen?
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The investors will think about selling its shares
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and buying shares from another company.
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In that case, there will be more
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sellers than buyers.
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Then the share price will start falling.
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This is what is meant by
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demand and supply
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on the basis of which
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share prices rise and fall.
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Demand and supply is controlled
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by many factors.
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Is a company's growth a reason for
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increase in its share price?
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No, friends.
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There are multiple factors involved.
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There are a few macroeconomic factors
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that depends on the economy.
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Some are company-specific--
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based on how the company performs.
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Do not be confused.
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We will talk about these factors
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in detail in the upcoming videos.
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Now you must be thinking
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that if an investor has bought
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a company's shares
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and they want to sell it
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how can it be sold?
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how will this transaction take place?
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Will I spread word on the road
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that I want to sell it?
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No, friends. For this
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there are exchanges in India.
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Exchange is a place where
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transaction of shares take place.
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A share from one person is sold to another person.
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Now I will tell you how many exchanges
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there are in India
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and how they function.
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To talk about stock exchanges,
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there are two stock exchanges in India.
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First, Bombay Stock Exchange
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which is our oldest stock exchange.
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Second, NSE, National Stock Exchange.
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where currently the most
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volume trade happens.
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To explain volume,
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it is where the most number of shares are bought and sold.
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So does investors like you and me
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go to the exchange to buy and sell?
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No. That's where stock brokers
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come into the picture,
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who are situated between the seller
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and the exchange
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and facilitate the trade.
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They take orders from us
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and give us confirmation.
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To trade without brokers,
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for investors like us
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is almost impossible.
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When we talk about banks,
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the banks are regulated by RBI.
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RBI is the entity that regulates all the banks.
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Similarly,
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in the share market
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all the exchanges in the share market
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is regulated by SEBI.
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SEBI is such an entity that
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protects regular investors like us.
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When a problem arises for the investors,
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SEBI works to resolve it.
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SEBI also makes sure that
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there are no wrongful transactions taking place.
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Shares are not used in wrong ways
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and the market is neutral.
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Friends,
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in this video,
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I explained the basics
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of share markets,
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regulators and exchanges.
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If you didn't understand something in this video,
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and would like a clarification,
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let us know in the comments.
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Because in the next video,
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I will answer your questions first
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and then move on to the next topic.
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Friends, this series is going to get
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even more interesting
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because when we analyse stocks of different companies
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we will use real life examples
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to analyse companies.
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So please follow the series
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and do not forget to subscribe to our channel.
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We will help you become a better investor.
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Please like this video
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and subscribe to our channel
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and comment to give us more ideas on
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what we should include in the series.
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