Stock Market Basics

What are Stocks?

Ever wondered what you actually ‘own’ when you buy shares of a company on Upstox? You do not just bet on current prices, but own a small piece of a publicly traded company. Let us understand what is stock and how you can become a company’s potential investor.

Stocks represent ownership in a company. When you buy a company’s stock, you essentially purchase a small portion of the company, known as a ‘share’. This makes you, the investor, a shareholder in the company and the proportionate owner of the company. You can participate in voting (if holding equity shares) and in shareholder meetings.

A public company in India can issue shares when capital is required for expansion or growth. These shares, such as the BSE and NSE, are traded on the stock exchange. The value of a stock can rise or fall depending on how the company performs and how investors perceive its future potential.

What is Share Market?

The share market, or a stock market, is a platform where investors trade shares of publicly listed companies. It acts as a giant marketplace where stocks are bought and sold as per their demand and supply. The two terms (stock and share market) are often used interchangeably. However, in a share market, you can trade shares, whereas on a stock exchange, you can trade different securities such as bonds, mutual funds, derivatives, shares of a company, etc.

In India, the two major stock exchanges are the NSE (National Stock Exchange) and BSE (Bombay Stock Exchange). These exchanges facilitate transparent and regulated trading. Let us find out more about share market basics.

How Does the Stock Market Work?

You might wonder how the share market works. The process sounds complicated, but it is quite straightforward. Companies raise capital by issuing shares to the public through IPO (Initial Public Offering) or FPO (Follow-on Public Offering). Once these shares are allocated to the public, they are also listed on the stock exchanges to facilitate buying and selling between investors. Stock prices move based on supply and demand, influenced by factors like company performance, economic indicators, global events, and investor sentiment.

Brokers and platforms like Upstox act as intermediaries, allowing individuals to place buy or sell orders electronically. Behind the scenes, regulatory bodies like SEBI (Securities and Exchange Board of India) ensure fair practices, transparency, and investor protection.

Understanding the Stock Market Basics - Important Terms

Here are some of the common terms you should know before starting your investment journey:

Stock Market Glossary

Types of Stocks and Markets

The following are the types of stocks and markets you will come across while investing:

Stock Market Categories Explained

Common Mistakes to Avoid in the Stock Market

Here are a few mistakes you must avoid while investing in the stock market:

• Investing without research

• Panic selling during market corrections

• Putting money in a single stock/sector (ignoring portfolio diversification)

• Having a short-term perspective (unless you are a seasoned intraday or swing trader)

• Trying to time the market

FAQs

What is the minimum amount needed to start investing in stocks?

You can start investing in Indian stocks with as little as ₹100. Platforms like Upstox allow you to buy fractional shares or low-cost stocks easily.

Is it safe for beginners to invest in the stock market?

Yes, but it's important to start with research and a long-term mindset. Use trusted platforms and avoid investing based on tips or emotions.

How do I open a Demat and Trading account?

You can open both accounts online through SEBI-registered brokers like Upstox using your PAN, Aadhaar, and bank details.

Can I lose all my money in the stock market?

If investments are not chosen wisely, there is a risk of loss. Diversification, research, and patience help reduce this risk.

What’s the difference between the stock market and mutual funds?

Stocks are direct investments in companies. Mutual funds pool your money with others and are managed by professionals who invest in a basket of stocks or other assets.