What is the Stock Market

The stock market is a place where investors buy and sell shares of publicly listed companies. It serves as a marketplace where companies raise money by selling shares, and investors trade these shares to earn profits.

Example: Understanding the Stock Market with a Simple Analogy

Imagine you and your friends start a business selling fruit juice. Initially, you invest your own money to buy ingredients and set up the stall. As the business grows, you need more money to expand.

Instead of borrowing, you decide to sell small ownership shares (stocks) of your business to investors. You divide your company into 100 shares and sell each share for ₹10. Investors buy these shares, becoming part-owners of your business.

As your juice business becomes popular, more people want to buy shares. The demand increases, and the price of one share rises from ₹10 to ₹20. If an investor had bought 10 shares at ₹10 each (₹100 total), they can now sell them for ₹20 each (₹200 total), making a ₹100 profit.

In real life, stock exchanges like the NSE (National Stock Exchange) and BSE (Bombay Stock Exchange) facilitate similar transactions. Companies like Tata, Reliance, and Infosys list their shares on these exchanges, and investors track stock prices, news, and financial reports to decide when to buy or sell.