Learn What is Share Market in Simple Words | How does Stock Market Work in India 2024

what is Share market and How it Works in Simple Words

If you have reached this blog, then you have an interest in the share market and want to learn how it works. So in this post, we will learn the basics of the stock market and how it works. we will also understand the categorization of the share market and Financial instruments that are traded on the stock exchange. 

What is Share Market in simple words?

Share market is an esteemed organization where governments as well as publicly listed Companies, are registered. It is a place where these listed companies are used for investing as well as trading purposes. Share market as a term is also known as the Stock market but the only difference between the two is that the share market is used for investing purposes. Still, the stock market permits you to trade in various derivatives, forex, mutual funds, bonds, etc. 

The share market or stock market uses different exchanges to list various companies in India, there are two types of exchanges the BSE and the NSE. The BSE stands for Bombay Stock Exchange and the NSE stands for national stock exchange. Here, the Companies listed are categorized into small medium, and large capital share companies based on their market capital. These categorizations help you choose the type of share you would require based on your risk and reward management. Here, when you choose to invest and buy a share of a particular company, then you tend to become a shareholder of the company.

The company in which you research and invest is a particular method that is used to generate wealth whereas when the companies who choose to register themselves into the stock exchange, generally do that because they need money to run their business. So, they liquidate a certain amount of shares for the general people like us to put our precious money into that particular share so that when the company makes a profit, then you and I as an investor of that company can also make a profit by the rise in the share price of that stock.

Types of Share Market 

The share market can be categorized into two parts that are mainly primary markets and the secondary market

Primary Share Market

When a particular company wants to Raise funds for the development of their firm, they register themselves at the market. This is called an initial public offering (IPO) Which is how it enters the primary market once it’s registered its shares Can be traded by the registered participants.

Secondary Share Market

After getting registered in the stock exchange and new securities being sold in the primary share market, then it opens up for the investors on the secondary stock market. Hear the investors are allowed to trade the shares at the fluctuating market prices. Buying and selling are conducted among the investors through a broker, by paying a small amount to charge for every trade they make.

How does the Share Market Work?

Here, the companies get listed on the stock market to raise money, and to do so they sell their ownership stakes to investors which is known as the share of stock.

By converting their ownership stakes into Equity Stakes which go up for sale on the stock exchanges. Companies get the capital amount which helps them in operating their business as well as in their expansion without incurring any debt. On the other hand, investors benefit by exchanging their money for a particular number of shares and become a part of a stakeholder of the company.

The investor's money is used for the company's expansion and growth. With time if it makes profits, it also profits. The investors as the share of the stocks becomes more valuable companies also reward their shareholders by paying dividends as their profitable

Various performances of the individual shares vary depending on the performance of the companies. But in general, the stock market is been rewarding its investors with an average annual return of 10 to 12% which makes it the most efficient way of growing your money.

Common terminology is used in the Share Market

Here are some of the commonly used terminologies when talking about Share Market




The Securities and Exchange Board of India (SEBI) is the regulatory body for security and commodity markets which comes under the administrative domain of the Ministry of Finance, India. It looks for any fraudulent transactions made by any of the companies, brokers, investors, etc


A Dematerialised account is a portfolio of an individual where its company shares and other securities are stored. A Demat account is stored under a broker through which buying and selling can be done.

Stock index 

A stock index measures financial market fluctuations. It is a performance indicator that indicates the status of a certain market segment or the overall market.

Bull market 

 When in a trend of Bull Market, stock prices tend to move higher at a rapid pace due to the growth of an economy. Also, the company indicates a generation of more revenue.

Bear market 

Bear Market indicates a slowdown in an economy where the consumers are in a state of fear and I likely to spend less, which eventually lowers the GDP

Nifty 50 

Nifty 50 is an index with a collection of the top 50 fundamentally strong companies listed on the National Stock Exchange (NSE)


Sensex is an index with a collection of the top 30 companies in market capitalization listed on the Bombay Stock Exchange (BSE)


Bombay Stock Exchange is India’s first securities exchange market established in 1875 as the native share and stock Brokers Association


The National Stock Exchange is India’s first exchange to implement screen-based electronic trading in India. It stands as the fourth largest stock exchange in the world in terms of equity traded volume.


Initial public offering comes when a company is ready to sell a certain number of company stakes to the public and this marks the entry into the world of the share market


The dividend is a kind of reward that a company presents to its stakeholders When it makes profits. The reward can be distributed in any form such as cash payments, more stocks, etc


The stock market can be considered as the mirror of the economy of a country. It is a great place to generate long-term wealth by investing in a company in which you believe. By making a strategic investment you can earn while the company works hard to grow. 

So friends what are you waiting for, Upgrade your knowledge by going step by step through my other post and start your journey in the world of Derivative markets.

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