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Equity Market

The equity market is a marketplace for traders where they buy or sell stocks. Investors can invest in public or private stocks. Public stocks are traded on exchanges, unlike private stocks which are traded privately. Initially, when an organization is set up it is private and later it goes on to launch its IPO. IPO launch makes the private company available to public investors. Whereas private stocks of a company are available to limited investors like employees or other specific traders. Companies get listed on stock exchanges with a motive to earn capital from public investors and use it for their growth or expansion.

How is the Equity Market in India?

In India, equities are traded on exchanges called as

1) National Stock Exchange:- The National Stock Exchange of India Limited (NSE) is India's largest financial market and the fourth largest market by trading volume. The National Stock Exchange of India Limited was the first exchange in India to provide modern, fully automated electronic trading.

2) Bombay Stock Exchange:- The Bombay Stock Exchange (BSE) is the first and largest securities market in India and was established in 1875 as the Native Share and Stock Brokers' Association.

3) Metropolitan Stock Exchange:- Metropolitan Stock Exchange of India Limited (MSE) is a government-owned stock exchange recognized by the Securities and Exchange Board of India (SEBI) under Section 4 of the Securities Contracts (Regulation) Act, 1956. It is under the ownership of the Ministry of Finance, Government of India.

How Do Equity Markets Work?

The equity market operates similarly to a house auction where buyers and sellers bid different prices to the trade. In this case, the house is an equity market and things are the shares of the companies listed on the stock exchanges. Investors can buy these shares through IPO in the primary market or the secondary market. The stock market is regulated and maintained by stock exchanges and various other financial entities.

Types of Equity Market

Primary market

When a company wants to make its shares available to the public for trading the company must launch its IPO. When the company launches its IPO, it offers a fraction of its equity to the public investors. Once the IPO is closed the company is listed on the primary exchanges of India mainly NSE and BSE.

Secondary market

After the listing of the IPO shares on the exchanges, these shares are traded on the secondary market. The secondary market allows investors who failed to procure shares during the IPO. Even the initial investors can exit their investments in the secondary market. Investors in India commonly trade in the stock market with the help of brokers. The brokerage firms act as intermediaries between the stock exchanges and the investors.