What is share market? Know the types of share market

share market

Many more people are attracted towards share market. Many people want to invest in share market but due to lack of proper knowledge & information they are still deprived from investing in share market. In this article we are going to share information, knowledge regarding investment in share market. If anybody wants to know about investing in share market must know about share market definition, how it work? Meaning of share? Types of market, procedures for investment, must know how one can be benefited investing in share market. Before knowing share market one must know what is share & its types.

What is share?

Share is certain portion of company’s capital. Share is direct investment over any company, firms, partnerships etc. Share is unit of ownership of companies. It is small equally divided portion of capital of company. Each unit of ownership represents an equal proportion of company’s capital. All shareholders are entitles to claim on profit & obliged for debts/ losses. A unit of share is called as “Kitta” in Nepal.  Most of company’s face value of share is Rs.100 & few companies have Rs.10.

Basically shares are of two types: Promoter share, public or ordinary share & preference share.

  • Promoter share: Promoter share are capital of company which are invested by founder of company at starting period. During the company registration they define the capital structure; how much will be authorized capital, issued capital & paid up capital. They further defined how much will be invested by founder & how much will be collected from public.
  • Ordinary or public share: Ordinary share are portion of capital which are raise by issuing share to general public after the establishment of company. Shares collected from public to fulfill the financial needs of company or for expansion of company operation are public shares.
  • Preference share: It is special types of shares which have first right on profit of company at determined fixed rate of dividend. They get shares amount return first during the liquidation than ordinary shareholders.

What is share market?

Share market is market where shares are traded. One can buy & sell the shares in the share market as per the needs & requirement. Share markets are the main source for companies to raise their capital/funds. Share market provides opportunities to become owner of any company at any times. Also investor can buy the part of ownership in the growing business & grow their wealth. Investors earn a part of profit for holding ownership as a dividend & take risk to bear losses if company fail to perform well.

Nepal stock Exchange (NEPSE) is only stock market of Nepal. NEPSE provides platform to buy & sell  stocks through 50 brokers & their 47 RWS. Broker offices are located in Kathmandu & their Remote Work Station (RWS) in different major cities of country.

Securities like, bond, shares, mutual funds, etc can be traded from stock market with help of brokers.

Any company wants to come in share market need to get approval from Security Board (Market regulator) & stock exchange to be trade in the stock market.

Share markets are of two types;

  1. Primary market  2. Secondary market

What is primary market?

Primary market is first steps for company to come in the share market. It is also called first hand market or IPO market. Hereby, company issue shares for general public to raise funds/capital. General public  get chance to become owner of grown company.  Company’s sole decision can’t sell shares to public. IPO/FPO is to be approved from the annual general meeting of company. Then company will choose issue manager for IPO (Initial public offering) because company can’t sell its shares by own. Than, company apply for the approval from Security board for the issue. After the approval from Security board, company must publish notice regarding details of IPO to general public from national media.

What is Secondary Market?

Secondary market is market where buying & selling of listed shares are done by investors through brokers. Numbers of transaction are made by buyers & sellers with helps of brokers. Buyers buy shares at prevailing price.

Shares allotted in primary market (IPO/FPO) must be sells from secondary market. Secondary market offers chance to buy & sell shares at any time any quantities where as primary market is for only one time.

Any one who buy shares become owner & shareholders. They have right to claim to profit & obliged to losses & debt.

Also Read: What is Primary Market & How to apply for (IPO/FPO) ? 

What is Secondary Market & How to BUY/SELL shares from broker?

upadted on Jan 06, 2022