People often use the terms "share market" and "stock market" interchangeably. The major stock exchanges in India are National Stock Exchange (NSE) and Bombay Stock Exchange (BSE).
What is traded in the stock market?
Following are the four categories of financial instruments traded in the stock market.
Shares
A share represents a unit of equity ownership in a company. Shareholders receive dividends from the income generated by the firm. They also have to bear the burden of any loss that such establishment may incur.
Bonds
A business needs a large sum of money to start long-term, profitable projects. Issuing bonds to the public is a method of raising funds. These bonds represent a "debt" taken by the company. Bondholders receive timely interest payments in the form of coupons and are considered creditors of the company. From the point of view of bond holders, these bonds act as fixed income instruments where they get interest on their investment and the amount invested at the end of the fixed period.
Mutual Funds
Mutual funds are well-managed investments that pool the capital of several individuals and invest in various financial assets. A number of financial vehicles such as equity, debt or hybrid funds are available as mutual funds.
Derivatives
A security that derives its value from an underlying security such as stocks, bonds, cash, or commodities is called a derivative. Derivatives are like buyers and sellers entering into a betting contract on the price of an asset.