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Learn Basics About Stock Market in India

Learn Basics About Stock Market in India
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The world of the share market is an exciting and dynamic environment where opportunities abound. Sometimes the stakes might be high, but the potential rewards are also immense, making it an enticing arena for those willing to take calculated risks and seize the moment.

Share market is a place where businesses come to raise capital, investors come to grow their wealth, and traders come to make a quick buck. Sounds interesting, right? So, whether you are a seasoned investor or a curious beginner,  just stick to this share market guide to understand the trading basics of share market for beginners. Let us now learn everything about what is stock market and the Indian share market.

What is Stock Market? 

The share market, also known as the stock market is a place where publicly traded companies can raise capital by selling their shares to the public. 

These shares represent a portion of ownership in the company and give the shareholder certain rights, such as the right to vote on significant decisions and receive a portion of the company’s profits in the form of dividends. Now that we know what is stock market and share market let us learn about the types of share market India. 

Types of Share Market 

There are mainly two types of share market – 

  • Primary Market
  • Secondary Market

The primary market is where new securities, such as stocks or bonds, are first issued and sold to the public for the first time. In contrast, the secondary market is where securities that have already been issued in the primary market are traded among investors without the involvement of the issuing company.

Both the primary and secondary markets play important roles in the financial system. The primary market helps companies raise capital to finance their operations, while the secondary market provides liquidity for investors and helps to determine the value of securities. Together, they create a dynamic marketplace that drives economic growth and shapes our financial world.

Participants in the Share Market

The main participants in the share market include:

  • Investors: Individuals or institutions that buy stocks as a minimum investment in share market concepts with the expectation of making a profit through capital gains or dividends.
  • Traders: Individuals or institutions that buy and sell shares and stocks frequently, often in the short-term, with the goal of making a profit through market fluctuations.
  • Stockbrokers: Professionals who act as intermediaries between buyers and sellers, executing trades on behalf of clients.
  • Stock Exchange: A stock exchange is a platform where securities are traded between buyers and sellers. The primary stock exchanges in India are NSE and BSE. 
  • Regulators: Government bodies that oversee the share market, ensuring that it operates fairly and transparently and protecting investors from fraudulent activities.
  • Issuers: Companies that issue stocks and shares to raise capital and finance their operations.

Now that we have a basic knowledge of share market, let’s find out how share markets work.

How does the Share Market Work?

A share market operates on the principle of supply and demand. The value of a company’s shares is determined by their demand. When there is more demand than supply, the price of the shares goes up, and when there is more supply than demand, the price goes down.

The stock exchange plays a crucial role in the stock market for beginners. It provides a platform for buyers and sellers to come together and trade shares. The share trading in India mechanism involves buyers placing bids for shares at a specific price and sellers offering shares at a certain price. Once a buyer and seller agree on a price, the transaction is completed.

The brokers also play an essential role in the share market by connecting buyers and sellers and facilitating transactions. If you have been struggling with how to understand share market, our next section will probably be a helpful guide to you.

Why Invest in Share Markets?

Investing in the share market offers a pathway to potential financial growth through ownership of shares in publicly traded companies. The share market, or stock market, serves as a marketplace for buying and selling these shares. Here are key reasons why individuals and institutions engage in share market investments:

  • Ownership in Profitable Companies: Shareholders own a portion of the company’s assets and earnings, enabling them to benefit from its profitability and growth.
  • Capital Appreciation: Share prices can appreciate over time, providing investors with the opportunity to sell their shares at a higher value than their initial purchase.
  • Dividend Income: Some companies distribute a portion of their profits as dividends to shareholders, offering a steady income stream.
  • Diversification: Investing in a variety of stocks allows for portfolio diversification, spreading risk across different sectors and industries.
  • Liquidity: The share market provides liquidity, allowing investors to buy and sell shares relatively easily compared to other investment avenues.

How to Invest in Share Market for Beginners?

Consider the following steps to invest in all stock markets and to understand fully what is ahre marketing:

  • Educate Yourself: Understand key terms such as stocks, dividends, and market indices. Diversify your knowledge across different industries.
  • Define Financial Goals: Establish clear objectives and assess your risk tolerance based on factors like age, financial obligations, and investment timeline.
  • Choose a Brokerage Account: Research and select a reputable brokerage platform that aligns with your investment goals, comparing fees and features.
  • Thorough Research: Before investing, analyze company financials, industry trends, and overall market conditions. Stay informed through reliable financial news sources.
  • Create a Strategy: Develop a disciplined approach by setting a budget and adhering to it. Avoid emotional decision-making and periodically review and adjust your portfolio.
  • Implement Your Plan: Open the brokerage account and start executing your investment strategy based on thorough research and a well-defined plan.
  • Stay Informed: Keep up with market changes and news that may impact your investments. Continuous learning is crucial for success in the stock market.
  • Consider Professional Advice: If needed, consult with a financial advisor to refine your strategy and ensure alignment with your overall financial plan.

How to start investing in share market via smallcases? 

smallcase is a basket of stocks or ETFs representing a specific investment theme or strategy, allowing investors to build their diversified, low-cost portfolios.

Investing in smallcases is quite easy and convenient. You can effortlessly buy and sell the entire basket of stocks or ETFs with a single transaction. This saves much time and effort compared to selecting and buying individual stocks.

Moreover, smallcases are created and managed by professional investors and financial advisors. Therefore, you can begin investing in smallcases even if you don’t know much about the financial market. 

You can begin investing in smallcases by following the steps below: 

  1. Choose a portfolio
  2. Subscribe to the manager 
  3. Invest and chill! 

Yes, it’s that easy to start investing in smallcases. So, what are you waiting for? Hurry up and start investing in financial instruments via smallcase!

Why Do Companies Get Listed in the Stock Market?

Understanding the concept of the stock exchange, let’s explore why companies choose to list their shares. Firms, regardless of their size or industry, opt for stock exchange listings to raise capital, thereby boosting their overall company value. This capital infusion serves diverse objectives, ranging from straightforward expansion to acquiring machinery, especially pertinent for manufacturing entities.

The reasons behind accumulating capital are unique to each company. Consequently, when a company goes public and shares are bought by the public, the funds generated are employed to enhance and develop the company’s business.

Functions of a Stock Market

The stock market fosters transparency, liquidity, price discovery, and equitable trading. It ensures that all participants access data for buy and sell orders, facilitating fair pricing. Efficient order matching is guaranteed, enabling qualified traders to promptly execute orders at a fair price.

Stock markets play a vital role in determining share and stock prices collectively through the interaction of buyers and sellers. Immediate order placement is granted to those eligible to trade, and the market ensures fair execution.

Market participants, including investors, traders, speculators, and hedgers, engage in various strategies. Investors may opt for long-term holdings, traders swiftly enter and exit positions, market makers provide liquidity, and hedgers utilize derivatives for trading.

What are the Stock Market Indices?

The two main stock market indices in India are:

  1. Sensex
  2. NIFTY

Let’s look at what these two indices are in more detail below:

What is Sensex? 

The Sensex was first introduced in 1986 with a base value of 100, and it has since become one of the most widely followed stock market indices in India. 

It refers to a stock market index that measures the performance of the top 30 companies listed on the Bombay Stock Exchange (BSE), which is the first stock exchange in India, based on market capitalization. It is often used as a benchmark index for the Indian stock market and reflects the overall performance of the Indian equity market.

What is NIFTY?

NIFTY is a stock market index that represents the performance of the top 50 companies. These companies are listed on the National Stock Exchange (NSE) of India. It stands for National Stock Exchange Fifty and is known as the NIFTY 50. Whenever the price of these 50 stocks fluctuates, NIFTY moves accordingly. The index is a benchmark for portfolio performance and to track the overall health of the Indian stock market.

Understanding the stock market begins with a key understanding of these stock indices.

Factors Affecting the Stock Market 

There are several factors that can affect the share market, including:

  • Economic indicators: Economic indicators such as gross domestic product (GDP), inflation, interest rates, and employment data can affect the share market details to a certain extent. 
  • Company-specific: Company-specific factors such as earnings reports, mergers and acquisitions, and product launches can affect the share price of individual companies.
  • Political events: Political events such as elections, policy decisions, and international conflicts can affect the share market. Political instability and uncertainty can lead to volatility in the market.
  • Natural disasters and pandemics: Natural disasters, such as earthquakes and hurricanes, and pandemics, such as the COVID-19 outbreak, can have a significant impact on the stock market. These events can disrupt supply chains, reduce consumer demand, and affect business operations.
  • Investor sentiment: Investor sentiment can also affect the share market. Positive sentiment can increase demand for stocks, while negative sentiment can lead to a decrease in demand.
  • Geopolitical factors: Geopolitical events such as wars, political unrest, and trade disputes can create uncertainty and volatility in the share market. Favourable events may positively impact the share market and vice versa. 

Exploring the advantages of the stock market is an essential when one wants to learn stock market basics. 

Things to Consider Before Investing in the Share Market

When purchasing shares in India, consider vital factors:

  • Company’s Financial Health: Examine financial statements, annual reports, and assess sales, profits, and their consistent growth (3-5% annually) as positive indicators.
  • Share Liquidity: Assess future selling potential by checking daily trade volume and the stock’s premium/discount compared to its actual value.
  • Current Price Evaluation: Determine if the current share price aligns with actual value, considering similar quality stocks or companies of similar size and growth trends. Verify if the stock trades below book value per share.
  • Dividend Payout Ratio: Opt for shares in companies with a stable dividend payout ratio, indicating profitability. This ratio reveals the company’s commitment to reinvesting capital for growth when high.

Advantages of the Stock Market

These advantages not only amplify the significance of what is a stock exchange, but also contribute to its continued relevance and appeal.

  • Unlocking Financial Growth: Company stocks, when traded, offer a reliable pathway to sustained and stable long-term financial growth, facilitating business expansion.
  • Seamless Market Participation: Easily enter or exit the market by buying or selling shares at prices determined by supply and demand dynamics, making in stock market engagement straightforward.
  • Regulatory Safeguards: Investors benefit from a secure environment as listed companies must comply with stringent regulations and disclosure standards, ensuring a safeguarded investment landscape. Stockbrokers, too, follow guidelines set by SEBI.
  • Assured Clearing Process: Investors are guaranteed a dependable and secure clearing mechanism when purchasing stocks, with the assurance that the acquired stocks will be safely deposited into their Demat Accounts.

Tips for Beginners for Share Market Investing

Investing successfully in the stock market requires patience and discipline. Here’s a guide to help you:

  • Define Your Objectives: Avoid the misconception of instant wealth through stocks. Recognize the high-risk, high-return nature of stocks. If you expect regular income, be prepared to wait for dividends, possibly for years.
  • Assess Your Finances Realistically: Stock investment is not suitable for everyone. Ensure you have a significant disposable income after meeting living expenses. This safeguards against potential losses.
  • Limit Reliance on Tips: Avoid relying solely on tips or advice from others, even friends or relatives. Unless you possess stock analysis expertise, base your decisions on thorough research into the company and its business prospects.
  • Beware of Overnight Success Stories: Be skeptical of promises of overnight gains or quick wealth creation. Such scenarios are rare in reality. Any mention of “windfall profits” in advertisements should trigger doubts about the investment’s credibility.

To Wrap It Up…

The share market is a dynamic and exciting world that allows you to buy and sell shares of publicly-traded companies. It provides you with an opportunity to invest in companies you believe in and potentially earn profits by buying and selling shares at the right time. 

The stock market gives you an opportunity to grow your money, but at the same time, it also comes with risk. Hence, always do your own research on the share markets before investing in them.

And if you’re looking for expert-advice, you can invest via smallcase!


1. What is the share market in simple words?

The stock market comprises various platforms facilitating the buying and selling of company stocks.

2. Can I invest 500 rupees in share market?

Yes. Investing in stocks can start with just Rs 500.

3. How many shares of stock is 1?

A share represents the smallest unit of a company’s stock, signifying ownership in the company. Each stock unit is a share, and every share equals a portion of the company’s ownership.

4. What are stocks?

A stock, or equity, symbolizes partial ownership in a company. Termed as “shares,” these units grant the holder a share of the corporation’s assets and profits corresponding to their stock holdings.

5. How can I buy stock?

Engage a stockbroker, be it a human or an online platform. Stock exchanges don’t facilitate direct stock buying; you need a broker. Whether buying or selling, you decide the investment and specify trade preferences through your chosen broker.

6. What is stock market trading?

Stock trading involves buying and selling stocks, often associated with short-term investments by highly active investors. It poses challenges and risks, but education about the basics of stock market can mitigate risks and enhance the chances of success.

7. How are shares priced in the market and who determines the price?

The demand and supply of a share in the market determines the stock price of that particular stock. Favorable factors drive demand for shares and in turn, share prices. 

All You Need to Know About Starting Your Share Market Journey

Share market investments can seem a bit tedious at first but smallcase is here to simplify all your queries and worries. Right from “Share market for beginner”, “Portfolio Diversification” to “short term investments” we’ve got all the tips, just a single click away –