Stock exchanges are vital for the economy of any particular country. In India, there are two major stock exchanges: the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE). These stock exchanges provide a safe marketplace for traders to buy and sell securities. They prove to be a means for companies to issue their shares and raise capital. Besides stocks, bonds, derivatives, rights, warrants, and other financial securities are traded on stock exchanges. Individuals willing to succeed through stock market investments must be aware of the trading trends. Let us discuss more about the trading trends on BSE.
A Brief Recap of BSE
Stock trading has been around in India since the eighteenth century. It all started in the 1850s when a group of stockbrokers gathered under a banyan tree in Mumbai. Brokers would gather at a pre-decided place to trade stocks with each other. Mr Premchand Roychand established a formal marketplace for traders in 1875, the Bombay Stock Exchange (BSE). Besides India’s oldest stock exchange, BSE is Asia’s first stock exchange.
In the initial phase, physical trading occurred at BSE. Over the years, BSE transformed and incorporated digital trading facilities for brokers. You can now benefit from the BOLT (BSE Online Trading) system.
Activities of the BSE are monitored by the Securities and Exchange Board of India (SEBI). Due to the popularity and reliability of BSE, it is a base for many market indices. The most popular market index is the BSE Sensex, which demonstrates the stock performance of the top 30 companies in the country. It is used as a benchmark to evaluate the overall performance of the stock market by investors. Anyone can open a trading account and start buying or selling securities on the BSE. However, opening trading and Demat account will not guarantee success on BSE. You must steer through bull and bear markets to buy and sell profitable securities on the BSE.
Understanding the Concept of Bull Market on BSE
To make better stock market investments, traders must understand the market conditions. A bull market denotes an upward rise in the stock prices of different companies. To make things clearer, when the stock prices on BSE witness an upward trend for an extended period, the market is said to be bull. During a bull market, investor optimism is high, and market sentiment remains positive. The demand for stocks is usually more than the supply in a bull market. The trading volume on BSE increases significantly when the market is bull. Companies issuing shares on BSE experience profits during a bull market. The unemployment rates in the country decrease and the economy witnesses an upward trend.
Now that you have understood a bull market, here are some actions to take in order to ensure profitability:
- Hold Securities: Stock prices tend to rise during a bull market. If you stay invested, you might benefit from capital appreciation. You can sell securities for a profit when the bull market begins to fade.
- Focus on Diversification: Even though securities experience an upward price trend during a bull market, there might be some risks. It is better to diversify your investments in different asset classes to minimise risks.
- Reinvest: During a bull market, you might earn higher returns on your investments. Collect your profits and reinvest them in profitable securities.
- Follow the Investment Strategy: You might be compelled to make emotional decisions during a bull market. It is essential to stick to the investment strategy and stop making compulsive decisions.
- Invest in Steady Companies: Many companies might grow during a bull market. However, some companies might fail to maintain their financial performance after the upward price trend stops. It is better to invest in steady companies that maintain their financial performance even during a bear market.
Understanding the Concept of Bear Market on BSE
A bear market denotes a time when the stock prices witness a downward trend over a period. During a bear market, market sentiments are negative. Investors do not prefer to buy or sell securities in bulk during a bear market. In short, a bear market is the opposite of a bull market. The volume of stock market investment decreases significantly during a bear market. During a bear market, stock prices fall, and there are speculations for a further decline in prices. When a bear market prevails for long, it acts as a kryptonite to the country’s economy. However, investors can steer through bear markets by using the right investment strategies.
Here’s what investors must do during a bear market:
- Review Your Financial Objectives: During a bear market, investors must review their objectives. Since investments might not perform as expected, the investment strategy might need to be adjusted.
- Avoid Panic: Stock prices might fall during a bear market, and your profits may decrease. However, there is no need to panic and make investment decisions which might be regretted later.
- Focus on Diversification: Portfolio diversification is equally important during bull and bear markets. By diversifying their investments, traders might prevent a loss during a bear market.
- Assess Your Risk Tolerance: Invest the amount you can afford to lose during a bear market. You cannot invest in bulk during a bear market and expect high returns.
- Focus on Quality Stocks: Stock prices of most companies might witness a downward trend during a bear market. However, some companies with blue chip stocks might still offer reasonable returns.
Conclusion
Understanding BSE trading trends is essential to become a successful investor. You must identify bull and bear markets for informed decision-making. If you are new to the market, open a trading accountwith a reliable company today and start buying or selling on BSE.