Money Rotation in the market

Nithin sorry to bother you again…

how exactly is money rotated in the market…

suppose i transfer 10lakhs from my bank account to my trading account and then i INVEST that in a company… then does that money stay with the NSE or it goes to the company account …

if it stays with the NSE then NSE would be having lakhs of crores at its disposal …what do they do with so much money (give it to RBI or …) ??

if it goes to the company then my guess is that the company would use that money for its day to day working… right ??

now suppose after a year i want to sell the shares and take out my money (consider i made a profit) then what is the course or route of that money flowing into my account…

thankyou

(this question is just for knowledge about markets)

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I think you are getting confused with Primary market(IPO) and the Secondary market.

If you are investing your money through NSE for buying a company shares in the secondary market, someone on the other side would be present to sell u the same quantity of share that u r planning to buy. That person wud get your money for selling his shares of the company to u.

The vice-versa happens when u want to sell the shares after a year.

Company gets money when shares are first issued through IPO.(this is also called primary market) This money company invests in running of the company. Now there are number of share holders who hold the shares of the company. Technically they are owner of the company proportional to the shares they are holding. They get the benefits of the company owners like the dividends, which is their part of profit from the company. Now these shareholders can sell their owner ship of shares through secondary market, this is the daily share trading that happens in exchanges. Now when someone buys share in this market, money is transferred to the original owner and the ownership of share transferred to buyer. Depending on the demand for a company’s share, which is related to profit or dividend it is yielding, the price of share also fluctuate in secondary market.

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When you buy shares worth 10 lakhs, the money goes from your trading account to another person’s trading account (say some retail seller like you) who sold you the shares. That seller would have bought those shares some time back and held it in his demat account for sometime. He is selling it now to you.

The same shares if you sell after a year, you get 10 lakhs to your trading account from some other buying person’s trading account. Money rotates among traders/investors.

Money does not go to the company’s account.

Money does not go to NSE.

It is simple:

When I sell to you, you buy by spending your money. Eg. I sell to you, 1 share of xyz company which is worth say Rs. 100/- in the market, you pay me Rs. 100/- , I give you one share. I might have bought the share at an earlier date for Rs. 90/- and I sold it to you for Rs. 100/-, so I pocketed a profit of Rs. 10/-. Now, at a later date you can sell the share to me/someone for Rs. 110/- and you will pocket a profit of Rs. 10/-

In this full process, Nithin (Zerodha) gets Rs. 20/- and NSE gets a small share out of Nithin’s Rs. 20/-

Hope you got it.

thanks for the info