Stock Market Basics

•The stock market is a platform where people can buy and sell shares of publicly traded companies. It allows investors to own a portion of a company's ownership and potentially profit from its success. Stock prices fluctuate based on various factors, such as company performance, market conditions, and investor sentiment.

• India has two stock exchanges - the Bombay Stock Exchange (BSE) and the National Stock Exchange

(NSE). There were many other exchanges earlier, but none of them survived. So when you talk about the stock markets in India, you are essentially referring to either NSE or BSE. Older stock exchanges like Bangalore Stock Exchange (BgSE), Madras Stock Exchange (MSE), Calcutta Stock Exchange (CSE) have either merged with BSE/NSE or shut shop.

In simple terms, if Ram wants to sell 10 shares of Reliance Industries at Rs 1990/ share, he will place a sell order on the stock exchange. The stock exchange will then find a buyer who wants to buy 10 shares of Reliance Industries at Rs 1990/ share. So, the stock market is a virtual market where the buyers and sellers meet to trade shares. 

The two types of stock markets are: 

• Primary markets
• Secondary markets

Primary market is a marketplace where companies raise capital for the very first time. The process of issuing shares to the general public for the first time is known as an Initial Public Offering, or IPO.  

Once the shares are issued in the primary market, they are traded i.e. bought and sold in the secondary market via a stock exchange. 

What is the Purpose of a Stock Market? 

The main purpose of a stock market is to facilitate the movement of funds (capital) from the savers (investors) to the borrowers (companies). 

When companies require capital for growth and expansion, it can either raise this capital by taking a debt from investors (debentures) and banks (bank loans) or it can issue equity shares to shareholders. 

Companies issue equity shares to the shareholders via the stock market. So, the primary purpose of a stock market is to help companies raise capital for growth and expansion. The secondary purpose of a stock market is to help individual investors (savers) participate in the growth and profits of the borrowing companies. 

How does Stock Market Works