Secondary market refers to a market where securities are traded after being initially offered to the public in the primary market and/or listed on the Stock Exchange. Majority of the trading is done in the secondary market. Secondary market comprises of equity markets and the debt markets.
In equity markets, one can buy/sell shares of company through a stock broker.These shares can be equity shares, rights issue, bonus shares, etc..Now a days all shares are dematerialised and all trading is screen based. An investor needs to pay the broker a small brokerage for each transaction conducted by the client. This brokerage shouldn't exceed 2.5%.
Next coming to the factors influencing the price of a share are:
(1) stock specific: The stock-specific factor is related to people’s expectations about the company, its future earnings capacity, financial health and management, level of technology and marketing skills.
(1) stock specific: The stock-specific factor is related to people’s expectations about the company, its future earnings capacity, financial health and management, level of technology and marketing skills.
(2) market specific: The market specific factor is influenced by the investor’s sentiment towards the stock market as a whole. This factor depends on the environment rather than the performance of any particular company. Events favourable to an economy, political or regulatory environment like high economic growth, friendly budget, stable government etc. can fuel euphoria in the investors, resulting in a boom in the market. On the other hand, unfavourable events like war, economic crisis, communal riots, minority government etc. depress the market irrespective of certain companies performing well. However, the effect of market-specific factor is generally short-term. Despite ups and downs, price of a stock in the long run gets stabilized based on the stock- specific factors.
Other terminologies :
1. Contract Note
It is a confirmation of trades done on a particular day on behalf of the client by a trading member.It imposes a legally enforceable relationship between the client and the trading member with respect to purchase/sale and settlement of trades.
This contract note generally consists of :
- Name, address and SEBI Registration number of the Member broker
- Name of partner/proprietor/Authorised Signatory
- Contract number, date of issue of contract note, settlement number and time period for settlement.
- Order number and order time corresponding to the trades.
- Trade number and Trade time.
- Brokerage and Purchase/Sale rate.
- Signature of the Stock broker/Authorized Signatory.
2. Portfolio
A Portfolio is a combination of different investment assets mixed and matched for the purpose of achieving an investor's goal(s). For most investors a portfolio has come to signify an investment in financial instruments like shares, debentures, fixed deposits, mutual fund units. Its important to have a diversified portofolio so that risk is spread out across the portfolio and losses are limited.
3. Equity Shares
An equity share, commonly referred to as ordinary share, represents the form of fractional ownership in a business venture.
4. Rights Issue/ Rights Shares
The issue of new securities to existing shareholders at a ratio to those already held, at a price. For e.g. a 2:3 rights issue at Rs. 125, would entitle a shareholder to receive 2 shares for every 3 shares held at a price of Rs. 125 per share.
5. Bonus Shares
Shares issued by the companies to their shareholders free of cost based on the number of shares the shareholder owns.
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