What is the stock market?

What is the stock market?

Investing in equities is an important investment that we make in order to generate inflation-beating returns. This was the conclusion we drew from the previous chapter. Having said that, how do we go about investing in equities? Clearly, before we dwell further into this topic, it is extremely important to understand the ecosystem in which equities operate.

Just like the way we go to the neighborhood Kirana store or a supermarket to shop for our daily needs, similarly, we go to the stock market to shop (read as transact) for equity investments. The stock market is where everyone who wants to transact in shares goes to. Transact in simple terms means buying and selling. For all practical purposes, you can’t buy/sell shares of a public company like Infosys without transacting through the stock markets.

The main purpose of the stock market is to help you facilitate your transactions. So if you are a buyer of a share, the stock market helps you meet the seller and vice versa.

Now unlike a supermarket, the stock market does not exist in a brick and mortar form. It exists in electronic form. You access the market electronically from your computer and go about conducting your transactions (buying and selling of shares).

Also, it is important to note that you can access the stock market via a registered intermediary called the stockbroker. We will discuss more the stockbrokers at a later point.

There are two main stock exchanges in India that make up the stock markets. They are the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). Besides these two exchanges, there are a bunch of other regional stock exchanges like Bangalore Stock Exchange, Madras Stock Exchange that are more or less getting phased out and don’t really play any meaningful role anymore.