The main function of the stock market is to enable trade in the shares of public companies, which in turn reflect the performance of the companies whose shares are traded in the stock market. Here is providing you with a detailed Stock Market Overview. Stock markets are also a vital part of an economy or the economic system of a country. Today most economies around the world are judged by the performance of their stock markets.
The stock markets serve a vital purpose in the growth and development of a company that wants to expand. Such companies with expansion plans and new projects are in need of funding and the stock market serves as the best platform from which a company can ‘sell’ itself to the discerning public on the basis of merit among other things. To trade in the stock market a company has to be absolutely transparent about its vital fundamentals such as revenues, income, assets, liabilities, infrastructure, etc. as this allows the investing public to make a fair assessment of the said company’s market worth.
The stock markets function on the basis of two principles, which are better known as:
Primary markets – When a company decides to sell its shares to the public through an (Initial Public Offer) IPO then it can be said that it is operating in the primary market. In fact, for companies that offer their shares to the public for the first time, this process is a mandatory requirement and involves a few stages of compliance with the market regulator that eventually allows it to trade in the stock market.
Secondary markets – After a company has successfully completed its IPO it is allowed to get listed in the particular stock market where it has applied for membership. Here it may be said that the company has entered the secondary market and its shares are available for trade as those of other companies listed on the stock market. The market regulator determines the listing price but thereafter the company’s shares are traded on a regular basis and the price is determined by the market forces, primarily demand and supply.
Most stock markets around the world have undergone a process of steady evolution and have changed in relation to the process known as ‘globalization’. With information technology changing the way we do business all over the world it was but natural for stock markets to also integrate their functions in an IT enabled electronic environment. This has not just revolutionized the way companies raise money for expansion or new ventures but also brought about a level of transparency and ease in the functional areas of trade in shares that was never seen before.
The most famous stock markets of the world are:
- London Stock Exchange
- New York Exchange
- Tokyo Stock Exchange
- Hong Kong Stock Exchange
- Singapore Stock Exchange
The most famous stock exchange in India is the Mumbai Stock Exchange whose market movement indicator the (Bombay Stock Exchange) BSE Sensex is still an icon of India’s economic performance. However, in an IT enabled environment it is the far more sophisticated and advanced (National Stock Exchange) NSE that has gradually gained in prominence due to more substantive profile.