How the stock market works

What if you could own a tiny piece of a company?

Imagine a bakery that wants to grow, but needs money to buy a bigger oven.

So the owner cuts the bakery into a thousand tiny pieces, called shares, and sells them to people.

If you buy one share, you own a tiny slice of the bakery. That slice is called a stock. The bakery gets money for its oven, and you become a part owner. Everybody gains something.

• Share = tiny piece of a company

The place where people buy and sell these shares is called the stock exchange, like a big busy marketplace.

In India, the two big exchanges are the BSE in Mumbai and the NSE. You trade through a broker app. Now the price. If many people want the bakery's shares, the price goes up. If few want them, it falls.

This push and pull of buyers and sellers is called demand and supply. It moves prices every second. Here is an example. You buy one share at 100 rupees. Next year the bakery earns well and the price becomes 130.

You can sell it and keep the 30 rupees profit. Some companies also share their earnings with owners, called dividends. But prices can fall too. If the bakery does badly, your share may be worth only 80, and you lose money. That is the risk. So smart investors spread money across many companies and stay patient for years.

• Profit = 130 minus 100

Quick check. What makes a share price go up? A stock is a tiny piece of a company, and its price moves with buyers, sellers, and how well the company does.