The stock market is a financial marketplace where shares of publicly listed companies are bought and sold by investors and traders.
When a company needs capital to expand its business, it can raise money from investors by offering ownership shares. Once a company becomes publicly listed through an IPO (Initial Public Offering), its shares can be traded on a stock exchange.
How the Stock Market Works
- Company raises capital — A company issues shares to raise funds for business growth.
- IPO — The company offers its shares to the public for the first time.
- Stock exchange listing — After the IPO, the shares are listed on a stock exchange.
- Investors buy shares — Investors purchase shares and become partial owners of the company.
- Shares are traded — Investors and traders can buy or sell shares in the secondary market.
- Price changes — Share prices fluctuate based on demand and supply, company performance, economic conditions, news, and market expectations.
Stock Market in India
The major stock exchanges in India include:
- NSE — National Stock Exchange
- BSE — Bombay Stock Exchange
The Indian securities market is regulated primarily by SEBI (Securities and Exchange Board of India).
Stock Market vs. Company
Owning a company's stock means owning a fractional ownership interest in that company. However, shareholders generally do not directly own the company's individual assets; their rights are defined by the type of shares they hold and applicable corporate law.
Why Does the Stock Market Matter?
The stock market performs two important functions:
For companies: It provides a mechanism to raise capital for expansion and other business purposes.
For investors: It provides an opportunity to participate in the growth and financial performance of publicly listed companies through ownership of shares.