What should be your first step if you want to enter the stock market? There are a lot of people who have not even heard the S of the stock market. They do not know what the stock market is. They just heard that the market went up, the market went down, people benefited, and people suffered losses. But how does it work, how do invest in it, how money is made, and how you people can grow your wealth by investing in the stock market.

stock market

From the name of the stock market, it is understood that there is a market. There is a market of stocks, some people call it a share market, and some people call it an equity market. So what are these stocks? The simple meaning of stocks is that you are a shareholder in a company. It is a simple thing, you should understand. If you own a stock in a company, you have a stock of a company, we call it a share. So the meaning of share has become simple. Ownership, you become the owner of the company. You say that I bought a share of Reliance, so I became the owner of Reliance. You did not become the owner of the whole company, but you have become the owner of the company. What does this mean? The owner of the company will be the one who has more shares of the company. This does not mean that the owner of the company will be the one who has started the company. You will say that we have seen this around. 

A man starts a shop, the shop belongs to him. If he lists the shop, what is the listing? I am going to tell you now and he will take money from people, then he will give the shares of his company. understand here. Let's assume that you just talked that there is a sweet shop, there is a sweet shop. Till now you know that this is a company, let's assume that the sweet shop is a private limited company. Now this private limited company needs money because what they have to do now is expand. Let's assume that he says that we will open 10 or 100 more shops, we will open 100 more stores. Now we need money for this. So what will we do to get this money? They will go to an exchange. Exchange, I am telling you words like this. Exchange means that we will give shares of our company and we need money in return for the share. So this private limited company also had shares. Now they want to exchange the shares. They want to exchange the shares in return for the shares. Now who will give this money? This money will be given to the public. Now there are different types of people in the public. There are people like you and me. People like you and me, if you say this public, then in this public participation, you and I will come in retail. Retail category, which buys shares. 

Then there is one more category, which we call the HNI category.  So there can be a sweet shop here, there can be a jewellery shop. Anything can happen. Any business that wants to do business, wants to expand and needs money. Many strategies exist for generating income. You will say that I could have taken a loan. I could take it. One way is of this loan. And one way is to take money in return for shares. When we take money from the public, then it is called IPO. Initial Public Offering. Now this HNI is understood. What happens in the same way? Like you have a company, LIC. 

You say that it is an insurance company. Now what does it do? It also invests a lot in the stock market. Because it has a lot of public money. Banks also invest. There are very big such funds, mutual funds that invest. So what happens is that they become institutional buyers. You can also call it CBB. Qualified Institutional Buyers. So you can understand that the money that will come, that money will come from the public, but there are three faces of the public, which you understand. There is a retail participation of you and me and many people like us. There is an HNI, High Net Worth Individuals and then there are Qualified Institutional Buyers. Okay, you understand this much. There will be a list on an exchange. So that is the name of the exchange.

What is the name of the exchange?

NSE, National Stock Exchange, Bombay Stock Exchange. These are two popular exchanges. Okay, just understand this much. So if Lala ji was running a shop, let's assume that he has been running a shop for the last 40 years. Now he thought that my name had become a lot, but I needed money. Today I have 5 shops, but I have to do 50 or 100 and it will take a lot of money and I have to open it myself. 

He could take the money in instalments. He could take it in exchange for shares. Now he has sold a share of his company to the public. He sold some percentage of shares. Now those shares have come to the public. If he continues to sell those shares and those shares will come to people, then people will become owners. The same thing happened with Steve Jobs. Everyone knows that Steve Jobs started Apple. But do you know that there was a time when Steve Jobs was removed from the Apple company?

How can this happen to you?

It can happen exactly like this. If Lala ji sells all his shares or sells majority shares, then he will no longer be the owner of this company. Someone else will become the owner who will have those shares. So the owner of the company is always the one who has shares. The one who has more shares is the owner. If he dilutes his shares, then he will not remain the owner. You need to understand this.

What is the benefit to the owner?

If the company grows, then the company's valuation will increase. Now you will say what is valuation? What is market cap? I will give you a very simple answer. Let's assume that Lala Ji's company had 100,000 shares. We just said that Lala Ji's is a sweet shop private limited company. So SS is the name of a private limited company. For example, it has 100,000 shares. Now when Lala ji came up with an IPO, then for example, there was a share of 100 rupees. 

You will say that the company's market cap has become 1 crore rupees. All the shares are multiplied by their price. It is market cap and I am telling you in layman's terms. So here the market cap of Sweetshop Private Limited is 1 crore rupees. But the value of this company will increase. If its share price increases.

How will the share price increase?

The price of the shared depends on many factors. But the most important factor depends on how much the business is earning. If today Lala Ji, for example, makes a profit of 1 lakh rupees in a month from a shop and that profit will be 2 lakhs or 3 lakhs, then the price of the share will increase automatically. It will increase automatically. So in the long term, this is the most important thing I am telling you. The share price of the company may be affected by some news. It may be affected by many external circumstances. 

Ultimately, the stock of the company, you will see the graph, it will follow the company's earnings graph. If the earnings graph goes up, then the price of the stock will also go up. Simple if the earnings are falling, then the price of the stock will fall. In the short term, you can say that the price of the company's stock can make a difference. Let me give you an example. 

HUL now you know that Hindustan Unilever has a lot of products. From your bathroom to your kitchen, from the powder that is put in your washing machine, HUL makes a lot of products, right? So what happened is that once Ghadi, Ghadi detergent came, he started marketing very aggressively. He did aggressive marketing and the price was cheap. Now because the price was cheap, HUL, which was making detergent, their profits fell on that detergent. And because of the fall in profits, the profits fell on detergent. Because of that, the share price of the company broke. About, you can check exactly. About 20% of the stock was corrected. Now you will say that this is a different thing. 20% of the stock broke. However, there are numerous items present. There are some things that people need to understand HUL doesn't just make detergent. 

HUL makes a lot of products and 20% of the stock broke because of detergent and news but the company's earnings were not majorly due to detergent 90% of the company's earnings were due to other products and the earnings didn't increase so ultimately because the company's earnings increased here we are talking about a company which is a very stable company and we all use their products this is just an example, not a recommendation. I just want to tell you that in the short term due to some news or hype in the market the stock price will affect the company in the short term but in the long term, the company's stock price will follow the earnings graph.