What is Share Market? A Complete Beginner’s Guide

Introduction

The Share Market has become one of the most popular avenues for people who want to participate in the growth of businesses and potentially build long-term wealth. At the same time, many beginners are unsure about how the market actually works.
Questions such as “What is Share Market?”, “How can I buy shares?”, “How does a share price increase?”, “Is Share Market risky?” and “How should a beginner start?” are very common.
The good news is that you do not need to be a financial expert to understand the basics. However, it is important to learn the fundamentals before putting your hard-earned money into the market.
Share Market investing is not simply about buying a stock because someone recommended it. It involves understanding companies, market behaviour, risk, valuation, trading mechanisms and your own financial objectives.
In this guide, we will understand the Share Market from the beginning and explain the important concepts that every beginner should know.

What is Share Market?
The Share Market is a marketplace where shares and other securities can be bought and sold.
A share represents a portion of ownership in a company. When a company issues shares and investors purchase them, investors become shareholders of that company.
For example, imagine a company has divided its ownership into a very large number of shares. If you purchase some of those shares, you own a small portion of the company.
If the company performs well and the market values its future positively, its share price may increase. If the company’s performance deteriorates or market expectations become negative, its share price may fall.
Therefore, buying a share means participating in the potential growth—and also the risks—associated with that investment.

Why Do Companies Issue Shares?
Companies require capital for different business activities.
They may need money to:

• Expand their existing business
• Build new manufacturing facilities
• Launch new products
• Enter new markets
• Repay certain obligations
• Invest in technology
• Fund future growth

One way for eligible companies to raise capital is by issuing shares to investors.
Instead of borrowing the entire amount from a bank or another lender, a company can raise equity capital by offering ownership to investors.
This creates a relationship between businesses and investors.
The company gets access to capital, while investors get an opportunity to participate in the company’s future performance.

How Does the Share Market Work?
The Share Market operates through an organised financial system involving companies, investors, stock exchanges, brokers, depositories and regulators.
In India, two major stock exchanges are NSE and BSE.
Investors generally place buy or sell orders through a stockbroker or trading platform. These orders are then processed through the market infrastructure.
Suppose you want to buy 20 shares of a company.
You select the company, enter the quantity, choose the appropriate order type and place the order through your trading account.
If your order matches with an appropriate seller in the market, the transaction is executed.
Similarly, when you want to sell your shares, you place a sell order.
This entire process happens electronically and can take place within a very short period, depending on the type of order and market conditions.

What are NSE and BSE?

NSE
NSE stands for National Stock Exchange of India. It is one of India’s major stock exchanges and provides an electronic platform for trading securities.

BSE
BSE is another major stock exchange in India and is one of the world’s oldest stock exchanges.

Both exchanges provide an organised marketplace where securities can be traded according to established rules and regulations.
A company may have its shares listed on one or both exchanges, depending on its listing.
For a beginner, however, knowing the names of NSE and BSE is only the starting point. Understanding how orders, prices, risk and analysis work is much more important.

What are Nifty and Sensex?
If you follow financial news, you will frequently hear the words Nifty and Sensex.
They are market indices.
An index represents the performance of a selected group of companies and can provide an indication of broader market movement.

Nifty 50 tracks 50 major companies listed on the National Stock Exchange, while Sensex tracks 30 prominent companies on the BSE.
When these indices rise or fall, they can provide a broad indication of market sentiment.
However, remember one important point:
If Nifty rises, it does not mean that every share in the market will rise.
Similarly, if an index falls, every individual stock does not necessarily have to fall.
Individual companies can perform differently from the overall market.

What is a Share Price?
The price of a share is the price at which buyers and sellers are willing to transact in the market.
Share prices continuously change because of demand and supply.

However, demand and supply themselves are influenced by many factors.

These may include:

• Company financial results
• Business growth
• Profitability
• Industry conditions
• Economic developments
• Interest rates
• Government policies
• Global events
• Investor sentiment
• Future expectations

For example, if investors believe that a company’s future earnings may grow significantly, demand for its shares may increase.
If more buyers are willing to purchase the share, its price may move higher.
The opposite can happen when market expectations become negative.

How Can Investors Make Money from Shares?
There are two commonly discussed ways investors may benefit from owning shares.
Capital Appreciation
Suppose you purchase a share at ₹500.
Later, its market price increases to ₹650.
If you sell the share at ₹650, the difference between the purchase and selling price represents a capital gain before considering applicable charges and taxes.
However, the opposite is also possible.
If the share falls from ₹500 to ₹400, you face a potential loss if you sell at that lower price.

Dividend
Some companies may distribute a portion of their profits to shareholders as dividends.
However, dividends are not guaranteed. Whether a company pays a dividend depends on factors such as its financial position, dividend policy and relevant corporate decisions.
Therefore, investors should not assume that every share will provide regular dividend income.

What is a Demat Account?
A Demat Account is used to hold securities in electronic form.
Earlier, physical share certificates were used, but securities are now generally held electronically.
If you purchase shares for investment, the securities are credited to your Demat Account after the applicable settlement process.
Think of a Demat Account as an electronic place where your investments in securities can be held.

What is a Trading Account?
A Trading Account is used to buy and sell securities through a stockbroker.
For example, when you want to purchase shares through your broker’s trading platform, you place the order using your trading account.
The Demat Account and Trading Account therefore have different roles, although they work together as part of the overall investment process.
A beginner should understand both before starting market transactions.

Trading vs Investment
Many beginners use the words “trading” and “investment” interchangeably, but they are not necessarily the same.

Trading
Trading generally focuses on taking advantage of price movements over shorter or medium periods.
Traders may use:

• Price charts
• Technical indicators
• Support and resistance
• Volume
• Price patterns
• Stop-loss levels
• Risk-reward analysis

Investment
Investment generally focuses more on the long-term potential of an asset or company.
Investors may study:

• Business quality
• Revenue
• Profitability
• Debt
• Competitive position
• Management
• Valuation
• Growth prospects

The right approach depends on an individual’s objectives, knowledge, risk tolerance and time horizon.

Is Share Market Risky?
Yes.

Share Market investments involve market risk.
The value of shares can rise or fall, and investors can lose part or, in some situations, a substantial portion of their invested capital.
This is why beginners should never enter the market believing that profits are guaranteed.
Some important principles include:

• Do not invest based only on rumours or social media tips.
• Understand the company before investing.
• Never assume that past returns will automatically continue.
• Avoid taking excessive risk.
• Do not use money needed for essential expenses for speculative trading.
• Learn proper risk management.
• Understand your investment time horizon.

A disciplined approach is much more important than trying to make quick profits.

How Should a Beginner Start Learning Share Market?
A beginner should ideally learn the market in a structured sequence.

A practical learning path can be:
Step 1: Understand Share Market basics.
Step 2: Learn Demat and Trading Accounts.
Step 3: Understand different order types.
Step 4: Learn charts and basic technical analysis.
Step 5: Learn fundamental analysis.
Step 6: Understand risk management.
Step 7: Learn trading psychology.
Step 8: Understand Intraday and Delivery Trading.
Step 9: Study Futures and Options only after understanding the basics.
Step 10: Practise and develop a disciplined approach.

This sequence can help beginners avoid jumping directly into complex strategies without understanding the underlying concepts.

Why is Share Market Education Important?
One of the biggest mistakes beginners make is entering the market without adequate knowledge.
A structured learning programme can help organise concepts in a logical sequence.
At Chaitanya Share Market Classes, Pune, the focus is on helping learners understand Share Market concepts from the basics through advanced topics in a structured learning environment.
The objective of education should not be to promise guaranteed profits. Instead, it should help learners understand how the market works, how to analyse opportunities and how to manage risk responsibly.

Practical Example
Suppose you are interested in investing in a company because you regularly use its products.
That alone is not sufficient reason to buy its shares.
Before making an investment decision, you could study:

• What does the company actually do?
• Is its revenue growing?
• Is it profitable?
• How much debt does it have?
• What is its competitive position?
• What are the risks facing the business?
• Is the share reasonably valued?
• Does the investment match your financial objective?
• How much risk can you afford?

This simple process demonstrates why research and education are important in the Share Market.

Important Points for Share Market Beginners
Before starting, remember these basic principles:

• Learn before you invest.
• Do not blindly follow stock tips.
• Understand risk.
• Start with concepts before advanced strategies.
• Avoid emotional decision-making.
• Do not chase every market movement.
• Keep your investment objective clear.
• Maintain discipline.
• Continue learning as the market evolves.

The goal should not be to predict every market movement. The goal should be to develop a process that helps you make informed decisions.