In this video we will understand what is a stock market and how does it work? Have you ever been to any supermarket or a local general store or to any market place to buy things? Well, stock markets are also like a marketplace where securities are bought and sold wherein prices are determined by the basis of market conditions.

In this video we will understand what is a stock market and how does it work? Have you ever been to any supermarket or a local general store or to any market place to buy things? Well, stock markets are also like a marketplace where securities are bought and sold wherein prices are determined by the basis of market conditions. So a share market is an exchange place where buyers and seller meet to buy and sell shares of a company.

Now coming to the working of the stock market: The stock market works on the basis of continuous interaction between the buyers and sellers. Here investors sell and buy shares among themselves based on the prices which are profitable to them. Let us understand how these prices are determined. Suppose an Investor A sells shares at Rs 100 each to an investor B

The price of the share rises to Rs 120 each and investor B sells it to Investor C. Investor C purchases the shares at Rs 120 because he anticipates that there will be a further increase in the share price and that is the reason why he purchases the shares at Rs 120 each. What makes Investor C anticipate rise in prices can be some external news, or his own research about the future performance of the company or any change in the Government regulations favouring that particular company? So it can be anything. So in case the company makes good profits in future and the prices rise to Rs. 150/ share, Investor C earns a profit of Rs 30/ share in case he sells or he may keep just keep the shares thinking of further growth prospects of the company. So from Rs 100 the price turned out to be Rs 150/-.

There are multiple factors which go into the price determination for a company and its upto one’s interpretation and research that leads to supply and demand of a particular stock. So the entire working of share market depends largely on how the external factors surrounding the working of the economy and the company to be specific. So today if you want to buy the share of a company, you not only need to research well about that company internal and management conditions but also the market conditions or external factors surrounding that particular company. A stock market is a secondary market as opposed to an IPO which is a primary market . The shares are bought and sold at certain prices.

The prices of the shares of a company are determined both by the internal and external factors related to the company. Internal factors can be the management of the company, growth process, demand of the product of that particular company etc whereas external factors can be the ones which are not specific to that particular company but the sector or the industry in general. Remember to collate both the external and internal factors in your research before investing in any company.

Thank you for watching the video!