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How does stock market work in India? June 11 2021How does stock market work in India?

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How does stock market work in India?

Stock investing is a tried and tested approach to grow your money and safeguard your financial future. The number of investors in the Indian stock market has significantly increased in recent years. People are becoming more aware of how to invest directly in stocks, and modern-day brokers are assisting in this process by sharing investing advice and stock market expertise, resulting in a generation of well-informed investors.

The first step in becoming an investor is to learn how the stock market works.

Investors can trade in a variety of financial assets such as stocks, bonds, and derivatives on the stock market. The stock exchange acts as the intermediary, facilitating the buying and selling of shares.

The Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) are India's two primary stock exchanges (NSE). In addition, there is a primary market where businesses first list their stock. Investors can buy and sell shares issued during the initial public offering (IPO) on secondary markets.

A few basic concepts to understand about how the stock market works:

How does stock market work in India?

Before you can understand the fundamentals of trading, you must first understand how the stock market works. Here is an explanation of how it works.


Stock exchanges, brokers, and traders/investors are all participants of the Stock Exchange Board of India (SEBI).

The stock exchange serves as a trading platform for financial products. Before trading, companies must register with SEBI and the exchange (BSE, NSE, or regional exchanges), as well as brokers, traders, and investors.

Securities Exchange Board of India (SEBI)

SEBI is the market regulator whose major responsibility is to ensure that the Indian stock market runs smoothly and without glitches. The board is in charge of ensuring market openness and integrity, so that ordinary people can invest without fear. SEBI''s guidelines must be followed by the exchange, companies, brokerages, and other market participants.

Stockbrokers: Stockbrokers are exchange members. They are the intermediaries who, in exchange for a fee, carry out the purchase and sell orders of investors. Investors in India must trade through broking houses/brokers, who operate as intermediaries.

Investors and traders: In the market, there are two categories of participants: investors and traders. Investors purchase company shares with the intention of holding them for the long term and earning a profit. Traders, on the other hand, are involved in the buying and selling of equities.

Investors are influenced by a variety of factors, including company performance, long-term growth prospects, dividend payouts, and so on. Traders, on the other hand, are impacted by price changes as well as demand and supply variables.

Now let us talk about 2 types of Stock markets.

Primary Market

The primary market, in simple terms, is where companies list themselves for the first time on the exchange in order to become publicly traded companies.

To fund their business plans, companies must borrow money from the market. One method is to sell a portion of the company to general shareholders, which involves the issuance of an IPO (initial public offering).

Secondary market

 In theory, the secondary market is where traders go to buy and sell stocks. Company stocks become accessible for trading in the stock exchange once they have been listed, and price movement is based on changes in supply and demand variables. Traders and investors are the key participants in the secondary market. It's a marketplace where buyers and sellers may meet directly.

The process of matching the buyer and seller in the stock market is known as trading. Your broker sends your purchase request to the stock exchange, which matches it up with a seller. Once the deal is set and the price is agreed upon, the exchange notifies your broker, and the transaction is completed.

The process used to take days, but thanks to digitization, it can now be completed in T+2, or two days after the transaction.

Price mechanism of the Indian stock market.

The market price of stocks is determined by demand and supply factors. When there are more buyers interested in the stock, the price rises. In the same way, as demand falls, so does the price. Identifying the correct stock value is one technique for making money in the stock market. It necessitates determining the share''s fair value. Otherwise, you''ll end up buying overpriced stocks.

The market capitalization value of a firm is equal to the total of the firm''s stock price multiplied by the number of outstanding stocks. Because a change in stock price affects a company's market cap, it affects your investment return.

Stock Exchange Indices

Indices are also offered on stock exchanges. Nifty and Sensex are different indices of the NSE and BSE in India. These indices are made up of shares in the largest large-cap companies based on market volume and popularity. Indices move up or down in response to the performance of underlying equities, and general investors use them to determine market direction.

Steps involved to trade in the Indian stock market.


The SEBI receives a draft offer document from the companies. This document contains information about the company, such as the number of shares that will be diluted, the price band, and other information. Following approval, the company launches an initial public offering (IPO) on the primary market to sell its stock to investors.

Share allotment

The company issues and allots shares to some or all of the investors who bid during the initial public offering. The shares are subsequently listed on the secondary market (stock exchange) to allow for trading. This platform offers a way for first-time investors to exit their stock market investments. Furthermore, investors who did not receive an allotment during the initial public offering (IPO) are offered the opportunity to purchase shares on the secondary market.


Investors and the Indian stock market are connected through broking agencies (registered with SEBI and the stock exchange). Brokers put orders on the market after getting instructions from clients. The trade is completed after a buyer and seller are matched. The stock exchange issues a confirmation, which is emailed to both the buyer and the seller.

This technique was previously manual, making it time-consuming and inconvenient. Online trading platforms, on the other hand, manage the complete process of matching buyers and sellers over the internet. The transaction time has been decreased to a few minutes as a result of this.

Order processing

When brokers put orders on behalf of their clients on the exchange where they are processed, order processing occurs. Several stakeholders are involved throughout the entire procedure. To avoid defaults, the stock exchange delivers a confirmation to both buyers and sellers when they are matched.

Understanding the basics of the stock market and how it operates will help investors make more money and avoid taking excessive risks.

Visit to open a demat account and start your trading journey in the Indian stock markets. 

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Prevent Unauthorized Transactions in your demat and trading account --> Update your Mobile Number/Email id with your Depository Participant and Stock Broker. Receive alerts on your Registered Mobile for all debit and other important transactions in your demat/trading account directly from CDSL and Stock Exchanges on the same day.........issued in the interest of investors...

1. Stock Brokers can accept securities as margin from clients only by way of pledge in the depository system w.e.f. September 1, 2020.

2. Update your Mobile Number & Email Id with your Stock Broker/ Depository Participant and receive OTP directly from Depository on your Email Id and/ or Mobile Number to create pledge.

3. Pay 20% upfront margin of the transaction value to trade in cash market segment.

4. Investors may please refer to the Exchange's Frequently Asked Questions (FAQs) issued by NSE vide. Circular No. NSE/INSP/45191 dated: July 31, 2020 and NSE/INSP/45534 and BSE vide Notice No. 20200731-7, dated: July 31, 2020 and 20200831- 45 dated: August 31, 2020 and dated: August 31, 2020 and other guidelines issued from time to time in this regard.

5. Check your Securities/ MF/ Bonds in the Consolidated Account Statement issued by NSDL/ CDSL every month.


  • 9 out of 10 individual traders in equity Futures and Options Segment, incurred net losses.
  • On an average, loss makers registered net trading loss close to ₹ 50,000.
  • Over and above the net trading losses incurred, loss makers expended an additional 28% of net trading losses as transaction costs.
  • Those making net trading profits, incurred between 15% to 50% of such profits as transaction cost

Dear Investor,
As you are aware, under the rapidly evolving dynamics of financial markets, it is crucial for investors to remain updated and well-informed about various aspects of investing in securities market. In this connection, please find a link to the BSE Investor Protection Fund website where you will find some useful educative material in the form of text and videos, so as to become an informed investor.
We believe that an educated investor is a protected investor !!!

"As per the directives of CDSL and esteemed Exchanges, it has been made mandatory for every client to furnish their latest KYC details viz. Valid Mobile No., Email- Id & Income range on or before 31.05.2021 else your Account will be marked as Non Compliant and will be Freezed till the compliance of such requirement."
"No need to issue cheques by investors while subscribing to IPO. Just write the bank account number and sign in the application form to authorize your bank to make payment in case of allotment. No worries for refund as the money remains in investor's account."
"KYC is one time exercise while dealing in securities markets - once KYC is done through a SEBI registered intermediary (broker, DP, Mutual Fund etc.), you need not undergo the same process again when you approach another intermediary."
Dear Investor if you wish to revoke your un-executed eDis mandate, please mail us with ISIN and quantity on by today EOD."

INDIRA SECURITIES PVT.LTD. (SEBI REG.NO.):NSE TMID: 12866, BSE TMID: 663, CDSL DPID: 17000 SEBI REG. NO.: INZ000188930, MCX TM ID: 56470, NCDEX TM ID: 01277, CDSL REG. NO.: IN-DP-90-2015, CIN : U67120MH1996PTC160201




Indrendu Joshi. Email: Call : 0731-4797275

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