What is the Stock Market?#
The stock market is a collection of exchanges where stocks (shares of ownership in businesses) are bought and sold. It serves as a marketplace connecting buyers and sellers.
Key Concepts#
Exchanges#
- NSE (National Stock Exchange) - India's largest exchange by volume
- BSE (Bombay Stock Exchange) - Asia's oldest exchange, established 1875
- NYSE, NASDAQ - Major US exchanges
How It Works#
- Companies list their shares through an IPO (Initial Public Offering)
- Shares are then traded on the secondary market
- Prices are determined by supply and demand
- Market makers provide liquidity
Market Participants#
| Participant | Role |
|---|---|
| Retail Investors | Individual traders/investors |
| Institutional Investors | Mutual funds, FIIs, DIIs |
| Market Makers | Provide bid-ask liquidity |
| Brokers | Facilitate trades |
| SEBI | Regulatory authority |
Why Invest in Stocks?#
- Wealth creation over long term (historically 12-15% CAGR in India)
- Dividend income from profitable companies
- Inflation hedge - equity outpaces inflation
- Ownership in growing businesses
Important Terms#
- Bull Market: Rising prices, optimistic sentiment
- Bear Market: Falling prices (20%+ decline)
- Market Cap: Total value of a company's shares
- Index: Benchmark (Nifty 50, Sensex)