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how does the indian market work

How does the Indian Stock Market Work?

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How does the Indian stock market work?

The Indian Stock Market is a financial market where many securities like stocks, bonds, exchange-traded funds, derivatives, commodities, currencies etc. are traded at prices determined by supply and demand. The stock market is a centralized, organized venue that connects investors and businesses intending to generate money by selling shares for corporate development.

The stock market provides one of the biggest investing opportunities in India. Due to its strong returns, particularly in the core sectors, the Indian stock market is well-liked by its retail investors, institutional investors, and even foreign investors. 

There are two ways to invest in the share market or the stock market: long-term via equity investments and short-term via debt investments.

The stock indices in India

There are two major stock exchanges in India; the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). 

In addition, there are two distinct markets listed below:

The Primary Market: Securities are first issued on the primary market. Companies ‘float’ or offer their stocks and bonds on this market for the first time through an Initial Public Offering (IPO).

The Secondary Market: In the secondary market, existing securities are traded directly between shareholders. Investors can purchase the shares which are already traded.

Role of SEBI

The Securities Exchange Board of India (SEBI) is the governing body that regulates the stock market and supervises its functions. It ensures the transparency of the stock market. SEBI monitors all market intermediaries to ensure they they do not engage in illegal activities with investors.

An issuer company must get SEBI authorization before it can publicly offer its shares. The company’s accounting systems need appropriate checks and balances to pass the approval process.

Additionally, market intermediaries like brokers, depositories, depository participants, merchant bankers, R&T Agents, Investment advisors, research analysts etc. need to register themselves with SEBI before extending securities market access to the investors.

Basics for Beginners To Participate in The Indian Stock Market

So how does one participate in the Indian stock market? A beginner must get a basic understanding of the companies they wish to invest in before participating in the stock market. Anyone can invest in the shares through brokers. Brokers aid the transaction by matching the buyers and sellers in share trade. 

When someone purchases a company’s share, they own a part of that company’s assets for a duration as a shareholder. They receive dividends or payments made to shareholders from a company’s profits. 

When an investor is looking to purchase shares, they must consider the dividend yield of a firm before investing in its stock. It is crucial to only invest in a company with a basic understanding of its business and its strategy for long-term success. Additionally, the price of the share at the moment also plays a considerable role before purchasing a company share.

Brokers and brokerage firms make share trading accessible for everyone. There are over thousands of investors interested in participating in the share market. They cannot individually collect at the stock exchange to place their orders. Hence, the brokers act as go-betweens for investors and the Stock Exchange. 

Your broker will submit your buy order to the exchange when you instruct them to purchase shares at a specific price. A sale order for the same is found and matched. Both the buyer and the seller agree upon terms and once satisfied, the exchange verifies and completes the order.

Pricing of Shares

The market value of a firm, which is impacted by its performance and development prospects, can establish the value of its shares. However, as previously mentioned, the supply and demand of a company’s stock play a crucial role in determining stock prices. When there is high demand for a certain stock, its price rises.

Each day, the stock market determines the price of shares based on the supply and demand of the stock market. The final price at which a trade is made is referred to as the closing price.


Investors find India’s stock market to be an avenue for substantial returns. It provides an opportunity to put investor’s money to work and get significant profits. However, investors must understand the risks of volatility in the stock market. Understand that there is no guarantee for returns. Participate in the stock market with caution and a clear understanding of the company shares you purchase.

Marwadi makes participating in the Indian stock market easier. Our specialists provide foundational guidance so you can make smarter investment choices. We are committed to managing your portfolio with care, based on your needs to minimize risks and increase profits. All you need to do is open a Demat account with us to start trading. A demat account is mandatory for everyone who wants to trade shares on the Stock Market.

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