Introduction
Stock market investing might seem complex at first, but trust me, once you understand the basics, it gets a lot easier! Financial literacy is key to building wealth, and in today’s fast-paced digital era, having a strong grasp of stock market fundamentals is crucial for anyone looking to secure their financial future.
The main participants in the share market are individual investors, Institutional groups, government and private bodies, brokers, and other regulatory bodies Each group plays a distinct role in ensuring the market operates efficiently.
However, many beginners find the stock market intimidating due to complex jargon and technicalities. That’s where this guide comes in!
In this article, we’ll explore the most important and basic terms of the share market in a simple and easy-to-understand way, helping you take your first steps toward becoming a confident investor.
So let’s start with Us!
What is the Share Market?
The share market (or stock market) is where buyers and sellers trade stocks of publicly listed companies. It helps businesses raise capital while giving investors a chance to earn returns.
The Indian stock market is primarily governed by the Securities and Exchange Board of India, SEBI guidelines ensuring fair trading practices and investor protection.
Types of Share Markets
Primary Market: This is the time when companies offer new securities to investors, Companies use the primary market to raise capital by issuing new shares through Initial Public Offerings (IPOs) or Follow-on Public Offerings (FPOs).
Secondary Market: Where shares are traded among investors on stock exchanges like NSE (National Stock Exchange) and BSE (Bombay Stock Exchange). Once a company’s shares are listed, investors can buy and sell them based on market demand.
Key Players in the Indian Share Market
1. Retail Investors – Individual investors like you and me who buy and sell stocks for personal wealth-building.
2. Institutional Investors – Large-scale investors such as mutual funds, pension funds, insurance companies, and Foreign Institutional Investors (FIIs) who trade in bulk.
3. Stockbrokers – SEBI-registered intermediaries that execute trades for investors. Popular brokers in India include Zerodha, Upstox, Angel One, ICICI Direct, and HDFC Securities.
4. SEBI (Securities and Exchange Board of India) – The regulatory body that oversees the stock market, ensuring transparency, preventing fraud, and protecting investor interests.
Basic Share Market Terms Every Investor Should Know 2025
A. Stock-Related Terms
- Stock & Share – Stocks represent ownership in a company; shares are the individual units of that ownership.
- Equity & Debt – Equity represents ownership rights in a company, while debt signifies borrowed capital (e.g., bonds).
- Market Capitalization – The total value of a company’s shares, categorized into:
- Large-cap stocks – Well-established companies with stable earnings (e.g., TCS, Reliance Industries).
- Mid-cap stocks – Companies with moderate market value and growth potential.
- Small-cap stocks – Emerging companies with high growth potential but higher risk.
- Blue-Chip Stocks – Stocks of financially stable and reputed companies that provide consistent returns (e.g., HDFC Bank, Infosys, Asian Paints).
B. Share Trading Terms
- Bull Market – When stock prices are rising, signaling economic growth and investor confidence.
- Bear Market – When stock prices are falling, indicating an economic downturn or pessimism in the market.
Order Types:
- Market Order – Buying/selling at the current market price.
- Limit Order – Setting a fixed price for buying/selling to control trade execution.
- Stop-Loss Order – Automatically selling a stock when it falls to a certain price to minimize losses.
- Liquidity – The ease with which a stock can be bought or sold without impacting its market price.
C. Stock Investment Terms
- IPO (Initial Public Offering) – When a private company offers shares to the public for the first time (e.g., LIC IPO in 2022).
- Dividend – Profits shared by companies with shareholders, usually in the form of cash payments.
- P/E Ratio (Price-to-Earnings Ratio) – A valuation metric to determine if a stock is overvalued or undervalued based on its earnings.
- Portfolio Diversification – Reducing investment risk by spreading money across various asset classes and sectors (e.g., IT, banking, pharma).
D. Risk Management Terms
- Hedging – Using different strategies (like derivatives) to minimize investment risks.
- Stop-Loss & Take-Profit – Setting automatic limits to lock in profits and cut losses.
- Circuit Breakers – A safety mechanism that halts trading if the market crashes beyond a certain percentage (e.g., the March 2020 crash due to COVID-19 panic selling).
How to Start Investing in Stocks in India?
1. Open a Demat & Trading Account
- Choose a reliable stockbroker like Zerodha, Groww, Upstox, or Angel One.
- Complete KYC verification and link your bank account for seamless transactions.
2. Understand Stock Market Indices
- Sensex (BSE 30) – Tracks 30 top-performing companies listed on BSE.
- Nifty 50 (NSE 50) – Represents 50 major companies on NSE, offering a broad market view.
3. Learn Fundamental & Technical Analysis
- Fundamental Analysis – Evaluate company financials (balance sheets, profit margins, debt levels, etc.).
- Technical Analysis – Uses price charts, indicators (Moving Averages, RSI, MACD), and historical trends to predict stock movements.
Types of Shares in the Stock Market in 2025
Common Shares
Common shares represent ownership in a company and entitle shareholders to vote on corporate matters and receive dividends. These are the most common types of shares and are widely traded worldwide.
Preferred Shares
Preferred shares offer a fixed dividend and have priority over common shares in the event of a company’s liquidation, In this type of share, investors do not get voting rights in the company.
Types of Stock Exchange in India
The Indian stock market, with BSE & NSE, plays a crucial role in the country’s economy, featuring many prominent companies. Globally, other major stock markets.
Bombay Stock Exchange (BSE)
- Location: Mumbai, India
- Founded: 1875
- Specialty: Asia’s first stock exchange.
- Famous Companies: Includes giants like Tata Motors, Reliance Industries, and HDFC Bank.
National Stock Exchange (NSE)
- Location: Mumbai, India
- Founded: 1992
- Specialty: Known for its electronic trading system.
- Famous Companies: Home to major firms like Infosys, Wipro, and State Bank of India.
Basic Terms of Share Market Every Investor Should Know
Now we are going to share some of the basics to advanced terms in the share market.
So let’s start with Us!
- Sensex: The stock market index of 30 well-established and financially sound companies listed on the Bombay Stock Exchange (BSE).
- Nifty: The stock market index of 50 diversified stocks of the National Stock Exchange (NSE).
- Demat Account: An account that holds securities and shares in electronic form.
- SIP (Systematic Investment Plan): It’s a type of investment offered by mutual funds to their investors to invest a small amount periodically instead of the full amount in one go.
- SEBI (Securities and Exchange Board of India): This is a regulatory organization for the security and commodity market in India.
- Equity: This is the total value of the shares issued by a particular company.
- Mutual Fund: An investment vehicle that pools funds from various investors to purchase securities.
- Derivative: A financial security with a value that is reliant upon or derived from, an underlying asset or group of assets—a benchmark.
- Stock: It is a kind of asset that gives you the sense of security to have ownership in company earnings.
- Shareholder: An individual or institution that owns shares in a company and, therefore, has a claim to a part of the company’s profits and assets.
- Stock Market: A place where stocks are bought and sold.
- Broker: A person or firm that buys and sells stocks for you.
- Bull Market: When stock prices are rising.
- Bear Market: When stock prices are falling.
- IPO (Initial Public Offering): When a company sells its shares to the public for the first time.
- Dividend: A portion of a company’s earnings given to shareholders.
- Portfolio: A collection of investments owned by an individual or institution, including stocks, bonds, real estate, and other assets.
- Earnings Per Share (EPS): EPS measures a company’s profitability and is calculated by dividing net earnings by the number of outstanding shares.
- Blue Chip Stocks: Blue chip stocks are the top-rated stocks, which have large market capitalization and have more reputation in the market over the years, in simple words these stocks are the most trustable.
- Penny Stocks: Penny stocks refer to shares of small companies that trade at low prices, often below $5 per share. They are high-risk, high-reward investments.
- Market Capitalization (Market Cap): The total value of a company’s shares of stock.
- Index: A statistical measure of changes in a portfolio of stocks representing a portion of the overall market (e.g., S&P 500).
- P/E Ratio (Price to Earnings Ratio): It’s the ratio between the current price & earnings per share of a company.
- Volume: That is the period, where the number of shares traded in the market.
- Volatility: The degree of variation in the price of a security over time, indicating the level of risk or uncertainty.
- Order: An instruction to buy or sell a stock given to a broker or brokerage firm.
- Bid Price: That is the highest price for a particular share, that the buyer is willing to pay.
- Ask Price: That is the lowest price for a particular stock at which a seller is willing to accept the stocks.
- Spread: The difference between the bid price and the ask price of a stock.
- Stop Loss Order: It is an order to buy/sell a particular share immediately at the best current price.
- Market Order: A market order is a request to buy or sell a stock at the best available price immediately. It guarantees execution but not the price.
- Limit Order: A limit order specifies the maximum or minimum price at which an investor is willing to buy or sell a stock. It guarantees the price but not execution.
- Stop Order: A stop order triggers a market order once the stock reaches a specified price, known as the stop price. It helps limit losses or protect profits.
- Margin Trading: Borrowing money from a broker to purchase stock, allows you to buy more than you could with your available funds.
- Short Selling: Selling a stock you do not own, to buy it back later at a lower price to profit from the price decline.
- Leverage: Using borrowed money to increase the potential return on an investment.
- Hedge: An investment made to reduce the risk of adverse price movements in an asset, typically by taking an offsetting position in a related security.
- Options: Contracts that give the right, but not the obligation, to buy or sell a stock at a specific price within a specific time.
- Futures: These are the financial contracts for the buyer to buy/sell at the predetermined future date and price.
- Arbitrage: The simultaneous purchase and sale of the same asset in different markets to profit from small price differences.
- Alpha: The alpha technique to the measurement of your investment in the share market based on certain benchmark index.
- Beta: A measure of a stock’s volatility about the overall market.
- Gamma: A measure of the rate of change in delta for a derivative relative to the underlying asset’s price.
- Theta: A measure of the sensitivity of the value of a derivative to the passage of time.
- Yield: The income return on an investment, typically expressed as an annual percentage rate based on the investment’s cost, current market value, or face value.
- Algorithmic Trading: Using computer algorithms to trade stocks automatically.
- High-Frequency Trading (HFT): A form of algorithmic trading that involves executing a large number of orders at extremely high speeds.
- Quantitative Analysis (Quant): The use of mathematical and statistical methods in finance and investment.
- Technical Analysis: Analyzing statistical trends from trading activity, such as price movement and volume.
- Fundamental Analysis: Evaluating a stock’s value by examining related economic, financial, and other qualitative and quantitative factors.
- Candlestick Chart: A type of price chart used in technical analysis that displays the high, low, open, and close prices for a security.
- Resistance Level: A price point where a stock struggles to rise above.
- Support Level: A price point where a stock struggles to fall below.
- Yield Curve: A graph that plots the interest rates of bonds having equal credit quality but differing maturity dates.
- Call Option: A financial contract that gives the buyer the right, but not the obligation, to buy a stock, bond, commodity, or other asset or instrument at a specified price within a specific period.
- Put Option: A financial contract that gives the owner the right, but not the obligation, to sell a specified amount of an underlying security at a specified price within a specified time.
- Insider Trading: The trading of a public company’s stock or other securities based on material, nonpublic information about the company.
- Fundamental Analysis: A method of measuring a security’s intrinsic value by examining related economic, financial, and other qualitative and quantitative factors.
- Stop Limit Order: A combination of a stop order and a limit order to buy or sell a stock at a specified limit price, or better, only after the stop price has been reached.
- A-Group Shares: Highly liquid and actively traded stocks listed on the Bombay Stock Exchange (BSE).
- B-Group Shares: Stocks that are not as liquid as A-group shares but are still actively traded on the BSE.
- Bonus Shares: Additional shares given to existing shareholders without any extra cost, based on the number of shares already owned.
- Brokerage: The fee charged by a broker for executing a transaction.
- Circuit Breaker: A regulatory mechanism to temporarily halt trading on an exchange to curb panic selling.
- Intraday Trading: Buying and selling of securities within the same trading day.
- LTP (Last Traded Price): The price at which a stock was last traded.
- STT (Securities Transaction Tax): A tax levied on all transactions done on the stock exchanges.
- Upper Circuit: The maximum price limit to which a stock is allowed to move upwards during a trading session.
- Lower Circuit: The maximum price limit to which a stock is allowed to move downwards during a trading session.
- UTI (Unit Trust of India): A financial organization in India that operates mutual funds.
- Upper Circuit: The maximum price limit to which a stock is allowed to move upwards during a trading session.
- Lower Circuit: The maximum price limit to which a stock is allowed to move downwards during a trading session.
- UTI (Unit Trust of India): A financial organization in India that operates mutual funds.
- Z-Group Shares: Shares that are traded under the ‘trade-to-trade’ segment, meaning they cannot be traded intraday and must be settled through delivery.
- Rights Issue: Offering additional shares to existing shareholders at a discounted price before the shares are offered to the public.
- Capital Gains: The profit made from selling a security at a higher price than its purchase price.
- Initial Margin: The percentage of the purchase price of securities that an investor must pay for with their own cash or marginal securities.
- Free Float Market Capitalization: Market capitalization is calculated by taking only those shares that are freely available for trading and not held by promoters or insiders.
- Promoter: A person or group of people who are instrumental in setting up a company and who have a significant influence over its operations and management.
- Repo Rate: The rate at which the central bank of a country (RBI in India) lends money to commercial banks.
- Reverse Repo Rate: The rate at which the central bank of a country (RBI in India) borrows money from commercial banks.
- Red Herring Prospectus: A preliminary prospectus filed by a company with the SEBI before issuing an IPO, containing all the details about the company’s business operations except for the issue price and number of shares.
- Rights Entitlement (RE): A temporary credit of rights shares given to shareholders, allowing them to apply for additional shares in a rights issue.
- Systematic Withdrawal Plan (SWP): A facility offered by mutual funds to enable investors to withdraw a fixed amount at regular intervals.
- Trading Account: An account opened with a stockbroker that allows an investor to trade in securities.
- T+2 Settlement Cycle: The trade settlement cycle where transactions are settled two business days after the trade date.
- Zero-Coupon Bond: A bond that does not pay periodic interest and is sold at a discount to its face value.
- Bearish: A market outlook expecting prices to fall or displaying a negative sentiment.
- Bullish: A market outlook expecting prices to rise or displaying a positive sentiment.
- Cum-Dividend: A status indicating that the buyer of a security is entitled to receive the next dividend payment.
- Earnings Announcement: A public statement reporting a company’s quarterly or annual earnings, typically accompanied by a conference call with analysts and investors.
- Golden Cross: A technical analysis term indicating a bullish signal where a short-term moving average crosses above a long-term moving average.
- Market Maker: A broker-dealer firm that facilitates trading in a particular stock by maintaining a bid-ask spread and providing liquidity.
- Off-Market Transaction: A transaction conducted directly between two parties outside of the regular stock exchange trading platform.
- Options Contract: A financial derivative that provides the buyer the right, but not the obligation, to buy or sell an asset at a predetermined price before or at the expiration date.
- Circuit Breaker: A market mechanism to curb panic selling on stock exchanges.
- Bonus Issue: Free additional shares are given to current shareholders based on the number of shares that a shareholder owns.
- Buyback of Shares: The repurchase of its shares by a company to reduce the number of shares available in the open market.
- Rematerialization: The process of converting electronic shares back into physical certificates.
- Asset Allocation: It’s a kind of investment management of risk and reward according to the individual goal, risk tolerance, and investment horizon.
- 101 – Portfolio Management: It’s the art of maintaining your decision on an investment based on policies, facts, past figures, and individual institutions and maintaining a balance & risk and asset allocation.
These definitions should give you a solid understanding of the basic terms of the share market.
Basics of Share Market for Beginners 2025
Understanding the stock market may seem complex at first, but once you break it down, it’s simpler to grasp. Here are some basic terms for beginners in the stock market:
1. What is the Stock Market?
The stock market refers to the place where you can publicly buy or sell the shares of the companies to earn a commission on your investment.
2. Why Do Companies Sell Shares?
Companies sell shares to raise capital for growth, expansion, or other business needs. By selling shares, a company can get the money it needs without taking out a loan.
In return, investors who buy shares gain partial ownership of the company and can benefit from its growth.
3. What Are Stocks?
Stocks represent ownership in a company. When you buy a stock, you own a small percentage of that company. Stocks are also called shares, equities & securities.
4. How Do You Make Money in the Stock Market?
- Dividends: Some companies pay a portion of their profits back to shareholders in the form of dividends.
- Capital Appreciation: If the stock price rises after you purchase it, you can sell it at a higher price and make a profit.
5. What are the Risks?
- Market Risk: Stock prices can fluctuate due to economic changes or company performance.
- Individual Stock Risk: A specific company may perform poorly, causing its stock price to drop.
6. Long-Term vs. Short-Term Investment
- Long-Term Investment: Holding stocks for a longer period can yield significant returns, especially in stable companies.
- Short-Term Trading: Some investors trade stocks frequently to profit from daily market movements, but this can be riskier.
7. Tips for Beginners:
- Start with a small amount.
- Diversify your portfolio to spread risk.
- Do comprehensive research
- Consider consulting
By understanding these basic terminologies in the share market, you can begin your stock market journey with more confidence and awareness.
Stock Market vs Share Market
Although the terms “stock market” and “share market” are often used interchangeably, they have slightly different meanings.
- Stock Market: The stock market refers to the broader market where the buying and selling of stocks (also called shares) of publicly listed companies take place.
- It includes different exchanges like the New York Stock Exchange (NYSE), Nasdaq, and others. The stock market encompasses not only shares but also other financial instruments like bonds, mutual funds, derivatives, etc.
- Share Market: The share market, on the other hand, is more specific. It refers exclusively to the buying and selling of shares of companies.
In short:
- Stock market = Broader market, includes stocks, bonds, mutual funds, etc.
- Share market = Specific to the trading of company shares (stocks).
How the Share Market Works
Factors Influencing the Prices of Share Market
Economic Indicators
Economic indicators such as GDP growth, unemployment rates, inflation, and consumer confidence can influence share prices. Strong economic performance generally boosts investor confidence and share prices.
Market Sentiment
Investor perceptions and emotions, often influenced by news, events, and overall market trends, play a crucial role in share price movements. Market sentiment can lead to short-term price fluctuations.
Political Events
Political events, including elections, government policies, trade agreements, and geopolitical tensions, can affect market stability and share prices. Uncertainty or instability often leads to market volatility.
Interest Rates
Interest rates set by central banks impact the cost of borrowing and investing. Higher interest rates can reduce consumer spending and business investments, negatively affecting share prices, while lower rates generally have the opposite effect.
Investment Strategies in the Share Market
Fundamental Analysis: Fundamental analysis involves evaluating a company’s financial statements, management, competitive position, and industry conditions to determine its intrinsic value. Investors use this analysis to identify undervalued stocks.
Technical Analysis: Study and analyze the historic price fluctuations and predict future price movements, It involves using charts, patterns, and technical indicators to identify trading opportunities.
Value Investing: Value investing is a kind of trade that focuses on the undervalued stocks that are traded below the base prices investors believe these stocks will eventually reach their true worth, providing substantial returns.
Growth Investing: Growth investing targets companies with a high potential for future growth. These companies often reinvest earnings into expansion rather than paying dividends. Growth stocks may offer higher returns but come with increased risk.
Income Investing: Income investing prioritizes stocks that provide regular income through dividends. This strategy is popular among retirees and conservative investors seeking stable, predictable returns.
Above are the basic investing terms in the share market, By understanding all these terms you can make a clear informed decision.
Risks in Share Market Investing
Market Risk
Market risk is a kind of organized risk that affects the entire market, It includes economic recessions, natural disasters, and political instability, impacting all investments regardless of the company.
Credit Risk
Credit risk refers to the possibility that a company may default on its financial obligations, affecting its share price. This risk is particularly relevant for bond investors but can also impact stockholders.
Liquidity Risk
Liquidity risk arises when an investor cannot easily buy or sell shares without affecting the stock price. Illiquid stocks can lead to significant losses if the investor needs to sell quickly.
Operational Risk
Operational risk involves potential losses due to internal issues within a company, such as management failures, fraud, or technical problems. These issues can severely impact a company’s performance and share price.
Frequently Asked Questions
Which type of trading is best?
The “best” type of trading depends on your individual goals, risk tolerance, and time commitment. the common types are as follows:
- Day Trading:
- Swing Trading:
- Long-Term Investing:
The best type of trading for you depends on factors like how much time you can dedicate to trading, your risk tolerance, and your investment goals.
What are the 4 types of share markets?
- Primary Market: This is where new shares are issued for the first time through Initial Public Offerings (IPOs). Companies sell shares to raise capital, and investors buy these shares directly from the company.
- Secondary Market: Also known as the stock market or stock exchange, this is where existing shares are bought and sold among investors. It provides a platform for trading shares of publicly listed companies.
- Equity Market: that is the place or market, where shares and equities of the companies are traded together.
- Derivatives Market: This market deals in financial instruments derived from underlying assets, such as futures contracts and options. These instruments are used for hedging risks or speculation.
How can we get started in the share market?
To start investing in the share market, you typically need to open a brokerage account, research stocks or funds that align with your investment goals, and place buy orders through your broker.
It’s advisable to start with thorough research and consider your risk tolerance before making investments.
What are the basic terms used in the share market?
In the share market, there are several terms that you might come across when people talk about buying and selling stocks. First off, “shares” or “stocks” You might also hear about “bull markets” and “bear markets.”.
Indexes like the S&P 500 help to provide information about the bunch of stocks perform together. They help investors see the overall market trends. Lastly, a “broker” is someone who helps you buy and sell shares.
What are the basic concepts of the share market?
Understanding the share market involves several fundamental concepts. First and foremost, shares, also known as stocks, represent ownership in a company.
Investors buy shares either to gain from price appreciation or to receive dividends, which are portions of a company’s profits distributed to shareholders.
The stock market, or stock exchange, serves as the platform where these shares are traded. Investing in shares entails both potential rewards and risks, with higher returns often associated with higher risks.
What is the difference between stocks and shares?
Technically, “stocks” refer to ownership certificates of any company, while “shares” specifically denote ownership certificates of a particular company.
Final Thoughts
In Conclusion, Investing in the stock market isn’t gambling—it’s about making informed decisions based on knowledge and research. Now that you understand these key share market terms, you’re already ahead of many beginners.
Whether you want to invest in blue-chip stocks, explore IPOs, or trade actively, understanding these concepts will boost your confidence and decision-making ability.
Investing in the share market requires knowledge, strategy, and risk management. By understanding the fundamental concepts and staying updated on market trends, investors can make informed decisions and achieve their financial goals.
I hope you like this information about the “Basics Terms of Share Market” If you have any thoughts or suggestions then please write to us in the comment section below.
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