Basics of Stock Market - Beginner

Basics of the share market

Have you ever wondered what shares and share market are all about? This section will explain the basics of share markets. Every person has a set of goals and time limits. You might plan to travel, buy a car or build a house. You need to plan your finances well in order to achieve these goals. This means that investing must become a habit. High returns are possible with financial assets and share markets. Therefore, it is important to start investing young and continue investing for a long time.

The share market can be a short-term or long-term investment depending on your needs. You can trade or invest in the sharemarket depending on your risk tolerance, age, and dependency. Markets are always subject to risk so make sure you read the fine print. There are many investment options available in India's share market, including equity, mutual funds and SIP.

How do you invest in the share market?

Demat and trading accounts:

What are the steps to get started investing in the sharemarket? First, open an online demat and trading account with a broker. Next, link your bank account to that account. Opening a demat account is very easy . Once you have opened your trading and demat account, you are ready to invest in the Indian stock market. It is important to familiarize yourself with the functions and stock exchanges. Buying and selling of share takes place in stock exchange. SEBI (Securities and Exchange Board of India) regulates stock exchanges. India's two most important stock exchanges are NSE (National Stock Exchange), and BSE (Bombay Stock Exchange).

You can choose which financial asset you want to invest based on your goals. Indian sharemarket is your one-stop destination for all of your needs. You can choose to invest in debt instruments such as bonds if you care more about regular income and capital preservation. Equity is for you if you are looking to increase capital and take on risk. Do a thorough study of the company and its financials before you invest in shares. Here are the steps you need to take to reach your goals.

  • Define your life goals
  • Learn more about financial assets
  • Select the asset that best suits your needs
  • Regularly invest
  • Your goals will be achieved

We hope you now have a good understanding of the share market. Now it is time to learn about the various financial instruments.

Different Stocks You Can Invest in the Share Market

You can buy shares and become a preferred shareholder or a common shareholder depending on your ownership.

Common shareholders are allowed to vote at shareholder meetings, and are eligible for dividends. You will not receive your share of the liquidation proceeds if the company in which you invested goes bankrupt unless all creditors and preferred shareholders are paid.

You may not be eligible to vote as a preferred shareholder. However, you will receive dividends prior to common shareholders.

Market capitalization is the measure of how much you can invest in small, medium, and large cap stocks. Market capitalization is the sum of share price and number of outstanding shares

Outstanding shares are shares that can be purchased and sold on public markets. Let me give you an example. Let's say that A has 100 shares outstanding and that the share price of A is Rs. If the share price is Rs. 100, then the market capitalization for the company would be 20*100=Rs. 2000

Stocks with large caps:

These companies are established and have a strong market presence. This category includes companies like Wipro, Infosys, and TCS. These companies offer lower risk investments.

Stocks of the mid-cap:

These companies are more risky than large-cap companies, but they have the potential for great growth.

Stocks of small size:

This category includes start-ups and is more risky than the other two. They can be a huge success in a short time.

Next, you need to be familiar with IPO (Initial Public Offering). A company raises money by going public via an IPO. The company sells its shares to raise capital for future growth. Because of the power and potential of compounding, your yield will be high when you invest in shares. The price of a share that you own today could be Rs. If you keep the share for a longer time, it could double or triple.

Key Financial Instruments traded in the Stock Market

Shares/ Equity:

You can own a company by purchasing shares, stocks, or equity. A broker can help you buy and sell shares.

Mutual funds

This is where money is pooled together from several investors and then invested into various financial instruments. Unit holders are investors. Unit holders receive the profit generated in proportion to their units.


These fixed income instruments, also known as debt instruments, are where a government or company borrows money at an agreed interest rate from investors for a specified tenure. These are safer than shares.


A derivative is a financial contract or a product whose value is derived from value of other asstes know as underlying. You can use it to reduce a variety of risks. You can use derivatives to hedge your risks.

Share market tips

  • Do your research before you invest.
  • Rumours are not a good basis for making decisions.
  • You should monitor your investments to eliminate loss-making stocks.
  • Investors need patience.
  • Before you make an investment decision, consult research experts.
  • Keep up-to-date with the latest news from the share market

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