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