Stock market basics
A first-principles tour of how the Indian stock market is wired together.
What is a share?
A share is a unit of ownership in a company. When you buy one share of a listed company, you become a part-owner of that business — entitled to a proportional share of its profits (via dividends) and a proportional vote at shareholder meetings. Your downside is also limited to what you paid for the share — you can't lose more than your investment.
Primary vs secondary market
A company raises money from the public for the first time in the primary market via an IPO (Initial Public Offering). After listing, those shares trade between investors on the secondary market — the exchanges (NSE, BSE) — and the company itself receives no fresh money from that trading. Most of what people refer to as "the stock market" is the secondary market.
NSE, BSE and SEBI
- NSE — National Stock Exchange, set up in 1992, India's largest exchange by traded turnover.
- BSE — Bombay Stock Exchange, Asia's oldest (1875), home of the Sensex.
- SEBI — Securities and Exchange Board of India, the statutory regulator that oversees exchanges, listed companies, brokers, mutual funds, investment advisers and research analysts.
Indices: Nifty 50 and Sensex
An index is a basket of stocks used to summarise the market in a single number. The Nifty 50 tracks 50 large companies on NSE; the Sensex tracks 30 large companies on BSE. Both are weighted by free-float market capitalisation — bigger, freely-traded companies count for more.
Demat & trading accounts
To hold shares in India you need a demat account (held with a depository — NSDL or CDSL — via a broker) which stores your shares electronically. To buy and sell, you need a trading account with a SEBI-registered broker. The broker links the trading account, the demat account and your bank account.
Order types in plain English
- Market order — buy/sell now at the best available price. Fast, but the executed price can drift from what you saw.
- Limit order — only execute at your specified price or better. May not fill if the market moves away.
- Stop-loss order — a trigger that converts into a market or limit order once the price crosses a threshold. Used to cap losses or to enter on a breakout.
T+1 settlement
Indian equity settlement is on a T+1 cycle — if you buy today (T), the shares are credited to your demat the next working day (T+1). Money moves on the same schedule. This is among the fastest cycles in the world.
Trading hours
Equity markets are open 9:15 AM to 3:30 PM IST on weekdays, with a pre-open auction from 9:00 to 9:15 and a closing session afterwards. Holidays follow the exchange calendar.
Where to go next
Once these basics feel intuitive, move on to Fundamental analysis (how to read a business) and Technical analysis (how to read price action). Most serious learners study both, then pick a primary lens that matches their temperament.