How does the stock market in India work? MintGenie explains

Most of us aim to grow financially and be secure for the rest of the future. The most common way to do this is through investments. An investment is generally directed towards the creation of an asset with a long-term objective of financial growth.

People tend to arm themselves with fundamental investment knowledge before making a foray into the stock markets. It is undoubtedly essential to know the basics of how the stock market works before investing in it.

What are the stock indices in India?

First, we must be aware that India has two main stock exchanges, namely the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). These are the two main destinations for making stock trades.

Moreover, there are two different markets which are the primary market and the secondary market. The primary market is where a company first lists its shares, also called the initial public offering (IPO). While the secondary market allows the buying and selling of publicly traded stocks.

Role of SEBI in Indian Stock Markets

For a stock market to work, several players are instrumental in its operation, including investors, brokerage firms, corporations, and banks.

Since a lot of public money is involved, there is a need for a government-led regulatory agency that can oversee the functioning of stock markets and ensure that companies do not resort to any illegitimate practices or use not misuse public money. This agency is known as the Securities Exchange Board of India (SEBI).

The regulator has full control over the stock markets. For a company to list its market share, it must obtain SEBI approval. The process of obtaining approval includes maintaining the proper checks and balances of company accounting.

How are stocks valued?

Stock prices are mainly driven by demand and supply factors. The price of a particular stock changes based on the demand for that stock. That said, stock value can also be determined by the market value of a company, regardless of the demand for its stock.

In a nutshell, it is the basic working process of the stock market that one should be aware of before investing in it.

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