In India, where the population is over 1.45 billion, only around 3% to 6% of the people invest or trade in the stock market as of 2025. One of the biggest reasons for people to shy away from the markets is a lack of proper knowledge. If you really want to understand how it works, you must enroll in a stock market basics course.
Here in this article, you can get an overview of how the Indian stock market works, its structure, participants, and more. For a detailed understanding of the same, you must join the Indian stock market basics for beginners.
Contents
What is the Stock Market?
The Indian stock market, like any other stock market around the world, is a marketplace for companies to raise capital. The companies issue their shares, which the investors buy, and the amount adds to the capital of the company. When a person buys a share of a company, he or she becomes a part-owner of the company, who gets voting rights and is known as a shareholder of the company. The shareholders are entitled to receive a share of profits of the company either via dividends or a rise in share prices; however, they also share the risk of losses.
Structure of the Stock Market
To understand how the stock market works, you need to understand the structure of the stock market. To understand the market structure in detail, you can join indian stock market basics for beginners.
The Market
The stock market, often known as the equity market, is a part of the entire capital market where stocks of different companies are traded. It is further divided into two sub-markets, which are –
- Primary Market: This is the market where the companies issue their share for the first time. So, mostly the private limited companies that want to get listed on stock exchanges, or want to raise capital, issue their shares via an initial public offering (IPO). Once the IPO is launched, subscribed, and shares are allotted, then the company gets listed on the stock exchange.
- Secondary Market: After listing, the stocks become available on the secondary market. Here, all the trading, investments happen. So, if you want to trade in any stock, whether in the intraday segment, or take delivery or invest for the long term, you need to buy from the secondary market and sell here as well.
The Exchanges
The stock exchanges are the backbone of the stock market. All the buying and selling of stocks happens on stock exchanges. In India, there are two stock exchanges –
- NSE: The National Stock Exchange was established in the year 1992, and it is the largest by trading volume. The benchmark index of this stock exchange is Nifty 50, which is constituted of 50 largecap stocks across sectors to give a sense of market performance daily.
- BSE: The Bombay Stock Exchange is the oldest stock exchange not only in India, but in the entire Asia. It also has the maximum number of listed companies, and the famous benchmark index Sensex is a product of BSE.
The Regulator
SEBI: SEBI or Securities and Exchange Board of India is the market regulator in the Indian stock market sector. It watches every move of the stock exchanges, stock brokerage houses, investment advisors, and anyone participating in the stock market.
It has the sole responsibility of framing regulations to protect the investors’ interests and develop the stock market. It makes sure that the market works ethically and remains transparent and fair.
For trading and investment, understanding the rules and regulations is as important as understanding the asset classes, participants, and other factors. For this, you must try some of the share market free courses where you can understand the compliance and regulations applicable to the market.
The Participants
Coming to the participants in the stock market, they are –
- Companies: First and foremost, the companies, the domestic companies that issue shares to raise capital and get listed on stock exchanges
- Stock Brokers: The next are the stock brokerage houses, which are the link between an investor and he stock exchanges. The investors or traders cannot directly trade with NSE or BSE. They have to trade or invest using the trading platforms offered by the stock brokerage houses. They provide these services and others against certain charges and fees.
- Depositories: The depositories are like banks where stocks, securities are held in electronic format.
- Investors: Finally, the investors are the main participants in the market. They can be individuals, institutional investors, HUFs, organizations, and others.
How stock market work in India?
When orders are placed by the investor on trading platforms offered by stock brokerage houses, they go to the stock exchanges, and if executed, the stock exchange communicates the same to the depositories, and according to the nature of the transaction, the depository either releases the shares help in the Demat account or gets credited with the shares purchased.
If you are beginning in the stock market, you need to understand how the market works in depth. For this, you must join the best stock market course where the mentors can help you understand the details of the market.
Types of Stocks
- As per Market capitalization: The stocks can be classified as per market capitalization as Largecap, midcap, or smallcap. The largecap stocks are the companies that come within the top 100 listed stocks as per market capitalization. The next 150 stocks, that is, up to the 250th stock as per market cap, are referred to as midcap, and the remaining are smallcap.
- As per Dividends, the stocks can also be classified as growth stocks or dividend stocks. The dividend stocks offer a portion of their profits via regular dividends, while growth stocks are stocks of those companies that are in their high-growth phase and reinvest most of the profits into the business, and thus the investors can see growth in the stock prices but may not receive dividends.
- As per Market Sensitivity: Furthermore, the stocks can be classified as cyclical stocks and defensive stocks as per economic cycles and scenarios. The cyclical stocks are those that boom when the economy performs well, while becoming sluggish during economic downturns. The defensive stocks are relatively stable than cyclical stocks as they are not greatly affected by economic cycles.
It is crucial to understand the classification of stocks for investing wisely, and a free stock market basics course can help you a lot.
Common Investment Methods
There are some common investing methods that investors follow to generate returns. It depends on their investment goals and risk tolerance level.
- Value investing: The most popular method is value investing, which Benjamin Graham introduced and Warren Buffett made popular. In this method, the stocks that are undervalued are picked, and investors invest in them so that when they reach their fair value, they can reap the profits.
- Growth investing: Often confused with value investing, but growth investing is different. It is where the stocks that are in their high-growth phase, or are about the enter the high-growth phase, are picked for investments. When the company grows, the stock price usually increases, and this in turn helps the investors generate returns.
- Income Investing: This is for those who are looking to build an investment portfolio to generate regular income. Mostly, it involved investing in dividend stocks as regular dividends can help them earn regular income. Also, this is for risk-averse investors who are looking to safeguard their capital while earning a decent income on the same.
- Passive Investing: Passive investment includes investing for the long term, where the investor invests in certain stocks or mutual funds and holds them for an extended period to accumulate wealth.
To get a grasp of these investing methods, you need a mentor, and for that, you need to join a good share market learning course.
Wrapping up
So, as beginners, you have a lot to learn, but once you get the idea of the market right, it has a plethora of opportunities for you. All you need to start and for that you need to join a stock market basics course, and to apply your learnings, you need to start investing, and for that, you need to open a free demat account.
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