Share Market in India: Definition & How to Invest as a Beginner in 2025

What is a share market?

A share market is a market where you can buy and sell shares. It is where companies seeking capital and investors looking for investment opportunities meet. Investors participate in the stock market to diversify their portfolio, to create wealth, or to earn returns on their investments.

Why does a company issue shares?

Companies usually fund their own expansion strategies through their accumulated profits, but in case of large capital requirements, they issue shares or bonds. A company can raise capital by either issuing shares and bonds or obtaining a loan.

Most companies prefer to issue shares, as the interest payments on the loans eat away a huge chunk of the profit.

How does a share market work?

A share market facilitates the movement of capital from investors to the companies that need it. This exchange of capital is done on a stock market exchange like the BSE and the NSE.

You should start your investing journey with indices like the Nifty 50 or the Sensex as a beginner.

Types of share markets

There are different types of share markets you need to know about:

Primary Market

The primary market is where companies issue their shares for the first time in an IPO (Initial Public Offering). These shares are sold at a fixed face value or within a fixed price range. The proceeds from this IPO go directly to the company.

Secondary Market

In the secondary market, existing shares are traded amongst the traders on the stock exchange. The price of the shares is primarily influenced by the supply and demand in the stock market and other factors.

Equity Market

In an equity market, companies share a portion of their ownership with the investors in the form of shares. When you buy a share, you own a small portion of the company, where the company’s profit or loss will affect your returns.

Derivatives Market

In a derivatives market, contracts are traded whose price is derived from the price of the underlying asset. The buyer and the seller enter into a contract at a fixed price that is to be executed at a future date.

What determines the price of a stock?

The following are the factors influencing the share prices:

• Supply and demand Supply and demand dynamics affect the share price, the bulls and bears constantly push down and pull up the share price.

• Economic conditions A country's economic conditions significantly impact the stock market and the shares traded. If a country is facing economic downturns, the stock market suffers, and during economic progress, the stock market rises.

• Regulatory changes Regulatory changes like changes in taxation, government policies, or changes in sector-specific laws can affect the share prices of that sector.

• Company-specific news Company-specific news, like changes in top management, lawsuits, and annual financial reports publications, impacts the share price of that company.