what is stock market and how it work?


If you like to read financial news or articles, then definitely you listen to the word stock market. But can you know about it? So today’s article, we know what a stock market? And how stock market works?

But first, we understand what exactly a stock (Shares, Equity) is?

What Is a Stock (share or equity)?

Stock represents a fraction of the ownership of the issuing company. When you buy a company’s stock, you become part-owner of that company. 

For example, if a company has 1,000 outstanding shares and an ABC investor owns a stock certificate for 100 shares, then ABC investors own 10% of the company’s stock. 

What Is a Stock Market and How it Works ?

A stock market is a place where traders and investors buy and sell shares of publicly traded companies that change in price constantly in response to the law of supply and demand.

The stock’s price primarily reflects the expectations of stock investors and market analysts on the company’s future earnings.

An investor who thinks a company will do well bid the price up, while those who believe it will do poorly bid the price down.

What Is stock exchange?

A stock exchange is a place where actual securities, such as stocks, bonds and commodities, are traded.

There are two largest stock exchanges in India: the Bombay stock exchanges (BSE) and National Stock Exchange (NSE). Combined, they are worth trillions of dollars in market capitalization, reflecting the value of all of the shares listed on the exchanges.

As of the end of 2021, the BSE Reported its market cap as $2.8 trillion. As of the end of 2018, the NSE reported its market cap as $2.27 trillion.

What Is stock market index?

A stock market index is any set of stocks that each fit a selected theme. These stocks are grouped together to replicate a market. Stock Index is also called a basket of stocks. This basket allows investors to broadly track securities as quickly as they might track one stock.

For example, 50 of the largest Indian companies are included in the NSE Industrial Average (nifty50) Index’s basket of stocks.

The movement of those 50 stocks in the basket affects the index’s performance. An investor who wants to add exposure to large-cap Indian stocks can use the nifty as a guide for which stocks to pick.

if majarity of stock are grown up then index are grow up and stock are down then indix aredown.

In index, not all stocks are equal weights. Their many methods define which particular stock is more weighted. For example, the Reliance industry is the highest weighting stock in nifty and Sensex.

The calculation of Index-Weight based on price
and market capitalization.

Also Read:

Related stock market FAQs:

  • Who controls the stock market in India?

    The overall responsibility of improvement, control, and administration of the stock market rests with the Securities and Exchange Board of India (SEBI), formed in 1992 as an independent authority. 

  • What is the minimum age to invest in the Indian stock markets?

    There is as such no age restriction for investing in stock markets of India. If you have a demat account, then you invest in stock market.
    To open a demat account, you must have 18 years old. If you underage, then you can open a join account whit parents.

  • Can I invest in the stock market in India Without a Stockbroker?

    Any person who wants to trade in Indian stocks cannot go directly to the stock exchanges to buy or sell shares. Buying and selling of stocks have to be made through stockbrokers. SEBI authorizes a stockbroker to trade in stock markets. They can act as your agent in share transactions of companies.

  • What is the difference between sensex and nifty?

    Sensex is an index of the top 30 listed stock in BSE, and nifty-50 is an index of the top 50 listed companies in NSE

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