What is Stock Market and how it works ?

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A fair, open and efficient stock market is vital to the proper trading of stocks around the world -- to the publicly-traded companies whose stocks are traded, and to the investors who buy and sell stocks.

Stock indexes provide investors with a capsule to look at a specific group of stocks at a single time.

Stock exchanges were originally conceived for the public interest and had a clear public purpose: to allow companies to raise equity from a large pool of investors and to provide a market for investors to later sell their shares in those companies.

Why do we need stock market?

The benefit to companies from having their shares publicly traded is that they can issue new shares to raise capital for future investment.

share prices are determined by the balance of demand and supply in the market at any point in time.

If there are more sellers than buyers, prices will fall and vice versa.

New york & Tokyo is the biggest stock market in the world.

A stock exchange in the platform where financial instruments like stocks and derivatives are traded.

Market participants have to be registered with the stock exchange and SEBI to conduct trades.

This includes companies issuing shares, brokers conducting the trades, as well as traders and investors.

Stock markets are one of the factors that affect the economy, but there are others as well. Interest rates affect the economy because rising rates mean higher borrowing costs.

Consumer spending and business investment slows down, which reduces economic growth.

Falling interest rates can stimulate economic growth.

Stock market is an important part of the economy of a country.

To issue shares for the investors to invest in the stocks a company needs to get listed to a stocks exchange and through the primary market of the stock exchange they can issue the shares and get the funds for business requirements.

It is one of the two stock exchanges operating independently in the People's Republic of China, the other is the Shenzhen Stock Exchange. Shanghai Stock Exchange is the world's 4th largest stock market by market capitalization at US$5.5 trillion as of April 2018.

If the thought of investing in the stock market scares you, you are not alone. Individuals with very limited experience in stock investing are either terrified by horror stories of the average investor losing 50% of their portfolio value – for example, in the two bear markets that have already occurred in this millennium – or are beguiled by "hot tips" that bear the promise of huge rewards but seldom pay off.

It is not surprising, then, that the pendulum of investment sentiment is said to swing between fear and greed.

The reality is that investing in the stock market carries risk, but when approached in a disciplined manner, it is one of the most efficient ways to build up one's net worth.

While the value of one's home typically accounts for most of the net worth of the average individual, most of the affluent and very rich generally have the majority of their wealth invested in stocks.

In order to understand the mechanics of the stock market, let's begin by delving into the definition of a stock and its different types.

A stock or share (also known as "equity") is a financial instrument that represents ownership in a company or corporation and represents a proportionate claim on its assets (what it owns) and earnings (what it generates in profits).

A stock is defined as a share of ownership of a publicly-traded company that is traded on a stock exchange. Common stocks are securities, sold to the public, that constitute an ownership stake in a corporation. They come in all sizes -- you can invest in a large, global company, like IBM (IBM - Get Report) , or a smaller, micro-cap company that shows potential for profit.