Imagine a made-up company called Sunrise Biscuits Ltd. To grow, it needs money for a new factory. One way to raise that money is to cut the company into many small, equal pieces and sell some of them to the public. Each piece is called a share (also called a stock or an equity share).
If Sunrise Biscuits has 1 crore shares and you own 100 of them, you own a tiny part of the company. You don't get free biscuits, but you do get a few rights: you can vote on some company decisions, and you may receive a part of the profit if the company pays a dividend.
Where are shares bought and sold?
In India, shares of listed companies are traded on two big stock exchanges: the National Stock Exchange (NSE) and BSE (earlier called the Bombay Stock Exchange). An exchange is like a very organised market. It doesn't own the shares; it just matches people who want to buy with people who want to sell.
To buy or sell, people use a stockbroker (often through an app) and keep their shares in a demat account. "Demat" means dematerialised: the shares are stored electronically, not on paper. Two depositories, NSDL and CDSL, hold these electronic records. All of this is regulated by SEBI, the Securities and Exchange Board of India. Anyone under 18 can only have a demat account opened and run by a parent or guardian.
Why does the price change?
A share's price is simply the last price at which a buyer and a seller agreed to trade. If more people want to buy than sell, the price tends to go up. If more want to sell, it tends to go down. News about the company, the economy, or even rumours can change how people feel, which is why prices move every day.
A rising price does not prove a company is doing well, and a falling price does not prove it is doing badly. Prices reflect what people expect, and expectations can be wrong.
Words you will see
- Listed company: a company whose shares trade on a stock exchange.
- Shareholder: someone who owns shares.
- Face value: the value printed on the share when it was created (often ₹1, ₹2 or ₹10). It is usually very different from the market price.