Jun 19, 2025
Stock market is a marketplace where investors can buy and sell shares of publicly traded companies. Simple speaking, its a place to buy and sell shares of a company. Shares are a small part of a company that is issued to the public to buy and sell in order for companies to raise some capital.
Example: Lets say a company ABC ltd. wants to raise a capital of 1,00,000 Rupees and the company decides to raise capital by selling shares. Now, The company ABC goes public and starts issuing shares at a price of 10 rupees each. So the total number of shares available is 10,000. Any individual who has a demat account can buy shares of the company and sell them at will. When someone buys a share they own a small chunk of the company.
This interaction forms the backbone of economic growth and wealth creation in modern economies. It serves as a platform for companies to increase their capital for the growth and development of the company and for investors to potentially earn returns through dividends and capital gains. Shareholders may also get the rights to vote on some companies' matters.
Share prices depend on the supply and demand. Stock market consists of two main segments: the primary market and the secondary market. In the primary market the company has to issue the shares to the public through IPO enabling them to raise funds. In the secondary market, investors buy and sell shares amongst themselves according to what they think the company is worth. The secondary market enables the efficient transfer of ownership of securities between buyers and sellers, without direct involvement from the issuing company. Shares provide liquidity which means investors can easily convert their shares into cash. Investors can invest in different companies to avoid losses in case one of the companies they invested in does not give them proper gains. Investing in stocks offers the potential for higher returns compared to traditional savings or fixed-income investments like bonds. A shareholder can own a piece of the company and may benefit from its profits through dividends and capital appreciation if the share price rises. However, stock prices can be volatile, and investments are subject to market risks. Understanding the basics—such as how shares are traded, the role of stock exchanges, and the importance of regulatory bodies like the Securities and Exchange Commission (SEC) in the US or the Securities and Exchange Board of India (SEBI)—can help investors make informed decisions. Over time, investing in the stock market has been a proven way to build wealth for individuals and institutions. Over time, investing in the stock market has been a proven way to build wealth for individuals and institutions. In addition to these fundamentals, the stock market is also shaped by technological advancements such as automation, algorithmic trading, and high-frequency trading, which have transformed how trades are executed and how liquidity is provided.