Module 1. Introduction to Stock Markets
2. Regulatory Bodies – Protectors of Financial Markets
2.1 – What is the Stock Market?
The stock market is a place where people buy and sell shares (also called stocks) of companies. When you buy a share, you become a part-owner of that company.
It works just like a bazaar, but instead of vegetables or clothes, you’re trading ownership in businesses. Companies list their shares on the stock exchange to raise money from the public. Investors then trade those shares hoping to make a profit.
There are two major stock exchanges in India:
NSE (National Stock Exchange)
BSE (Bombay Stock Exchange)
Key Terms:
Stock/Share: A unit of ownership in a company.
Stock Exchange: A platform where stocks are listed and traded.
IPO (Initial Public Offering): When a company sells its shares to the public for the first time.
Why Stock Markets Exist:
To help companies raise capital (money) for growth.
To allow investors to grow their wealth by buying and selling shares.
To create liquidity — you can buy or sell your investment anytime.
The stock market plays a big role in the economy by helping businesses expand and by giving people a chance to invest and earn returns.
2.2 – Market Participants and the Need to Regulate Them
Many different people and institutions take part in the stock market. Each one plays a role — but without proper rules, it could become risky and unfair.
Key Market Participants:
| Participant | Role in the Market |
|---|---|
| Retail Investors | Individuals like you and me who invest small amounts |
| Institutional Investors | Mutual funds, banks, insurance companies investing large sums |
| Brokers | Middlemen who help you buy and sell shares |
| Companies | Raise money by offering shares |
| Foreign Investors | Foreign institutions who invest in Indian markets |
Why Regulation Is Needed:
To protect small investors from being cheated or misled.
To ensure companies give correct and timely information to the public.
To prevent manipulation (like pumping prices artificially).
To ensure fair play among all market participants.
To make sure all trades are transparent and trustworthy.
Imagine if everyone could lie, cheat, or steal in the stock market — it would collapse. That’s why we need a strong and neutral authority to watch over everything.