Equity Market: Meaning, Benefits, Types & How it Works?

As an investor, it is vital to understand terms such as equity market, stocks, NSE, BSE, and other related terms. This also helps you avoid any risk while investing. Also, it is important to take advice from an expert before investing. Read more to learn about what is equity market (equity market meaning), the benefits of the equity market, and more details.

What is an Equity Market?

The equity market is often called the stock market and is used interchangeably. Before investing, you must assess your risk tolerance and research to manage potential risks.

Types of Equity Market

Primary Equity Market

Companies raise capital by listing themselves on the primary market first by raising an IPO (Initial Public offering) to the general investors. The shares of the company get listed on the stock exchanges I.e., NSE and BSE once the IPO is closed.

Secondary Equity Market

The listed shares on NSE or BSE are further held in the secondary market. In this process, the initial investors can exit via stock sale in the live equity market. This gives opportunity to other investors to purchase and sell the shares in the secondary market. 

Top Stock Exchanges in the Indian Equity Market

Following are the two top stock exchanges in the Indian Equity Market:

BSE
Founded in 1875, the Bombay Stock Exchange is one of the oldest stock exchanges. There are more than 5500 companies listed on the BSE. It holds the record for stock exchange with an average trading speed of 6 microseconds.

NSE
The National Stock Exchange (NSE) was established in 1992. In 1994, NSE started trading in the capital market, and in 2000, it introduced derivatives.

Equities vs Stocks

Timings of the equity market

The following are the timing for trading in the stock exchange market:  

Equity Shares Formula

You can use the below formula to find Equity shares:

Shareholders’ Equity = Total Assets - Total Liabilities

Equity Market Procedure

Trading

Buying and selling of stocks and securities through an electronic process is termed under trading. Before placing an order, traders can see the trades on the open platform.

Settlement and Clearing

At the end of a particular day, every investment or trading is cleared and settled that is made throughout the day. The T+2 settlement cycle is followed in stock exchanges in India. After the day’s trading session, the settlement is made within two days after the trade.

Risk Management

Investing in the equity market involves risk which requires a comprehensive system of risk management. Margin requirements, Liquid assets, Pay-ins, and Voluntary close-outs help reduce the risk of fraudulent activities.