Stocks Markets

How Does The Share Market Work In India?

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When a person hears the words ‘stock market‘, their mind may picture Wall Street in New York. However, the stock market is not confined to one particular location. It is a global phenomenon that has consequences for investors everywhere. 

India’s stock market is the world’s largest and most liquid stock exchange. The stock market is divided into two segments: capital markets and secondary markets. Capital markets are for listing new stocks, while secondary markets are for trading existing stocks. This article will briefly explain how the Indian stock exchange operates. To help you make a well-informed choice, this article will also cover some potential pitfalls of buying stock.

What are Trading Stocks?

The stock market is a major financial hub. It facilitates the buying and selling of a company’s shares at a predetermined price. To own a portion of a firm is to invest in its shares. Investors put money into a corporation when they purchase shares and withdraw it when they sell shares. The stock market capitalisation of a firm is its overall worth, as measured by the value of all its outstanding shares. Share prices rise and fall according to the demand for and supply of the asset being traded. When there is high demand for a certain stock, its price rises. An increase in a stock’s price is expected if demand exceeds supply. If more shares are available than buyers, the price will go down.

Stock Market Pricing

The band system is a predetermined pricing structure for the share market in India and is the method by which stock prices are determined. The same normally works according to supply and demand. Investors acquire stock in a firm hoping to make money on the fluctuations in the stock price. A stock’s price rises when demand increases for it. Conversely, when supply exceeds demand, prices drop.

To better comprehend the stock market‘s pricing mechanism, consider the following:

  • In the simplest terms, the share market is where companies sell shares to the public. This allows people to invest in these companies and get a piece of their future profit potential.
  • The share price reflects how much the company is worth on the open market and will vary depending on supply and demand. A high demand for shares means that investors are eager to buy them, and a low demand means fewer buyers, which could lead to a lower price.
  • Shares can also be traded on platforms like the Bombay Stock Exchange (BSE) or the National Stock Exchange of India Limited (NSE), allowing investors to buy and sell shares quickly and easily without going through an intermediary such as a broker or dealer.

Finally, it is important to remember that no two markets are ever identical, so what works in one country may not work in another. It is therefore important to research your specific investment before making any decisions.

Indian Stock Market Investment Steps

To get you started on investment, here are 5 steps:

  • Step 1: Analyze your investment objectives carefully. You must ensure that the stock you are considering investing in will serve your long-term financial goals.
  • Step 2: Consider your risk tolerance. It is important to understand how much risk you are willing to take when investing in the Indian stock market. With so many potential scams and risky investments on the market, it is important to do your research before deciding.
  • Step 3: Obtain professional advice. It is always a good idea to consult an independent financial advisor before making investment decisions. They can help and guide you through the entire process and ensure you get the most out of your money.
  • Step 4: Look for quality stocks. When investing in the Indian stock market, make sure you are selecting quality companies that have strong fundamentals. Look for companies with positive earnings growth, low debt levels and a healthy balance sheet.
  • Step 5: Stay disciplined. One of an investor’s biggest mistakes when investing in the Indian stock market is being too aggressive too quickly. Taking on too much risk can quickly result in losses, so it is important to stick to a gradual investment strategy if possible.

Types of Indian Stockbrokers

There are several types of stockbrokers in India:

  • Full-service brokers offer comprehensive services such as margin trading, day trading, foreign exchange services and mutual fund investments.
  • NBFC-based brokers are essentially platforms that connect investors with participating NBFCs. They offer lower costs than full-service brokers but lack support for margin trading and other advanced services.
  • Online brokerages are a recent development in the Indian markets and offer a simplified investing experience compared to traditional brokerages.

Key Concepts

Here are 4 important concepts you need to know about the share market in India:

  • Stock: A stock is an ownership interest in a company or enterprise. It may be traded on a stock market which is a marketplace where stocks and other securities are bought and sold. The value of a stock depends on the company’s financial condition, its prospects and the actions of its shareholders (owners of the stock).
  • Shareholders: A shareholder is an individual or organisation with an ownership interest in a company. A shareholder may hold shares directly or through one or more beneficial owners. Shareholders have two primary goals: to maximise their return on investment (ROI) and to protect their rights.
  • Investment: Investment is the purchase of equity in a company, which may bear risks such as loss of money if the company fails. The purpose of investment is to generate capital gains or losses over time, which can be used to increase one’s wealth and/or pay taxes.
  • Financial statements: Financial statements show whether a company is healthy and solvent by revealing its assets, liabilities, expenses, profits and cash flow. Financial statements also provide information about how much money shareholders have left after paying taxes, dividends and other payments to holders of common stock (the main class of shares), which helps gauge overall investor sentiment about the company.


Understanding how the share market in India works can be challenging at first, but understanding will be easy with little effort. The share market works in India as it does in other countries, i.e., the investor buys and sells shares of a company through the exchange, which creates liquidity for the stocks. This liquidity then drives the prices up and down. To read more information on trading in India’s stock markets, you can read more helpful articles like this one by visiting Piramal Finance and receiving guidance on getting started on your investments.