Stocks

In the very first episode of Groww Academy, we will touch upon the basics. We will understand what do we mean by stocks and how did the stock market came into being? Finally, we also cover the various benefits of owning stocks of a company.

What is a stock and what is stock market?

This episode is all about the stock market. Here, we explain the concepts of primary market and secondary market, and how they are different from one another.

Primary and secondary stock markets

In this episode, we explain the entire stock market ecosystem and its' key players. From exchanges like BSE and NSE to brokers and SEBI, we will cover everything you need to know. We also touch upon the details of demat account, depository participants, and clearing houses.

Key players in the stock market

This episode will see us clarifying all your doubts about the various charges and taxes involved in the stock market. Account charges, brokerage and transactional charges are some of the many charges we will cover. Moreover, we will also cover LTCG and STCG taxes.

Costs of investing in the stock market

This module answers question like what is a stock, what are primary and secondary markets, who are the key players in the stock market and what are the various charges involved in a stock market transaction

Basics to know before investing in stock markets

KEY PLAYERS INTRODUCTION In our last video, we got familiar with some common terms that you&rsquo;ll come across while looking at any stock. Now it&rsquo;s time to talk about what happens when you click on buy to invest in a stock.See, there&rsquo;s an entire ecosystem. The stock market functions because of this ecosystem and today, we&rsquo;ll introduce you to its key players. EXCHANGESNumber 1, exchanges.Remember BSE? We spoke in our first video about how it&rsquo;s the first and oldest stock exchange in India. Not just that, Bombay Stock Exchangeis the oldest one in Asia as well. It was founded in 1875 and has over 5000 companies listed on it.Another major exchange is NSE. National Stock Exchange. This one started in 1992 and has about 1,799 listed companies.NSE is number 4 in the world in terms of total trading volume of stocks. It is also the first Indian exchange to provide a modern, fully-automated electronic trading system.Companies are first listed on one or both of these stock exchanges. Then, BSE or NSE has to engage traders and investors like you and me, so there is liquidity in the stock market.&nbsp;Which means, they have to ensure there&rsquo;s enough trades going on smoothly in the market so when you want to buy stocks, there are sellers available and when you want to sell, there are buyers available. And, make the trade happen quickly. They also make sure that buyers and sellers get a fair deal and anything related to the trade is communicated to the investors.If we have to compare these 2 exchanges, volume-wise, NSE has a higher volume of trades than BSE. That means, NSE is more liquid than BSE. Now, when we say NSE has higher liquidity, it does not mean BSE has no liquidity. It&rsquo;s just lesser than NSE. If you look at the screen here, you can see the option for choosing an exchange while buying or selling a stock.You might ask, which exchange should I choose then?It depends on the companies you want to invest in.Not all companies are listed on both BSE and NSE. In that case, you don&rsquo;t have a choice.But if a company is listed on both, it depends on your choice as an investor.Both BSE and NSE are major exchanges and important parts of the Indian financial market. DEMAT ACCOUNT Number 2, demat accounts by NSDL and CDSL. When you buy anything from a store, you always get a receipt, right?The same way, when you buy a stock, you get a share certificate that shows you as the owner of the stocks in a company.Before 1996, these certificates used to be in paper format. After that, they converted them to digital. When something goes from paper format to digital, it is generally called &ldquo;dematerialisation&rdquo;. In short, demat. That&rsquo;s how the name &ldquo;Demat account&rdquo; happened.A demat account is where these share certificates are deposited and stored digitally.&nbsp;Who can give you a demat account? Depositories.There are only 2 depositories in India. NSDL, which isNational Securities Depository Ltd. &hellip; and CDSL, Central Depositories Services India Ltd. Both are government registered and SEBI regulated. There&rsquo;s virtually no difference between the two.So, to sum up, NSDL or CDSL gives you a demat account in your name, which can hold all the stocks you buy. Like your own vault of stocks.But, you can never contact NSDL or CDSL directly and say, &ldquo;I want a demat account.&rdquo;Which brings us to... DEPOSITORY PARTICIPANTS OR DPs Number 3, depository participants or DPs. DPs are the registered agents of a depositorylike NSDL or CDSL. You can open and maintain a demat account via a DP. Who are DPs though? Brokers, financial institutions, banks. Basically, anyone who is a link in between you, the investor and depositories. We&rsquo;ll talk about what a DP charges for maintaining your demat account and selling stocks in the next video. BROKERS Number 4, brokers. A broker is a middleman. It can be a person or a company like Groww.Why do they exist? Because investors like you and me, we cannot buy or sell stocks on the exchanges directly. Which is where brokers come in. They have the authority to buy or sell stocks on your behalf.To be able to do that, you have to first open a trading accountwith the broker and contact them whenever you want to trade. Since they&rsquo;re providing a service to you, brokers charge a commission or a fee. That&rsquo;s what we know as &ldquo;brokerage&rdquo;. It&rsquo;s usually a percentage of the value of the stocks traded. We will talk about brokerage charges a little more in the next video. Till now, you&rsquo;ve been given a demat account by a DP and trading account by a broker. But, why 2 accounts?Let me answer with an example.Say you want to buy 100 stocks of TCS.To buy the stocks and make the transaction, you use the trading account. Once the transaction is done, the role of the trading account ends there.Then, your demat account comes in. The 100 stocks are automatically deposited to your demat account within 2 working days.When you want to sell these stocks, you use the trading account again. Automatically, the stocks are moved out of your demat account within 2 working days. Often people ask, what if my broker goes out of business? What will happen to my stocks?Remember, your broker only gives you a trading account. All your stocks stay in your demat account, which is safe with NSDL or CDSL. So, no matter what happens with your broker, your investments will remain safe. You can shift to another broker in case your current broker goes bankrupt. CLEARING HOUSES Number 5, clearing houses.With so many trades and transactions happening in the market, someone has to ensure that no one defaults, right? That&rsquo;s the job of a clearing house slash corporation. They make sure that all trades and transactions are cleared and settled.There are 2 clearing houses in India, which are established and regulated by SEBI.For trades executed on BSE, the clearing house is ICCL, which is Indian Clearing Corporation Ltd.and a subsidiary of BSE. For trades executed on NSE, the clearing house is NSCC, which is National Securities Clearing Corporation Ltd. and a subsidiary of NSE. SEBI Number 6, SEBI.We kept mentioning SEBI throughout this video whenever we wanted to say anything is regulated or safe.That&rsquo;s what SEBI does! In India, the entire stock market is regulated by SEBI, which is the Securities and Exchange Board of India.You must have heard of the 1992 Harshad Mehta scam. Even those who didn&rsquo;t earlier, now know it because of the Scam 1992 web series. While SEBI was established in 1988, it had limited power to prevent such scams. At that time, the only authority with jurisdiction was the CBI to look into the Harshad Mehta case.Because of this, the government realised that there is a major gap in the stock market regulation and granted greater power to SEBI.SEBI now has the statutory authority to protect, develop, and regulate the stock market. It ensures that the stockbrokers, stock exchanges, investors, and all other participants in the stock market conduct their business fairly and are transparent. There are a set of rules and legal framework for every one of these participants that they have to abide by. CLOSING STATEMENT Now that you&rsquo;ve been introduced to everyone in the stock market ecosystem, let&rsquo;s talk about charges you&rsquo;ll come across in the next video.

Key players in the stock market

Transcript