Indian Stock Market

Stock Market is a place where stock are traded between investors at a particular price that is purely determined by the demand and supply of the shares. For example, if the demand of the share is greater than the supply, the price of the share will keep rising until the demand is equal to supply. As a result the price of the share goes up. Alternatively, if the supply of the share is more than the demand, the price of the share falls till it equals demand.
Normally one would want to buy the shares of company that are performing good. This would result in a rise in demand of the shares and the price will start rising. The price will rise until the ivestors feel that the share price correctly co relates with the good performace of the company. Similarly one would try and sell shares of a company that is performing poorly and so the supply will rise. The price will continue to fall till investors feel that the price correctly corelates with the performance.It is worth noting that any news that has an effect on the performance of the company will be reflected in the price movement of the share. For example, if the government announces that there is an upward revision in the price of petrol, the most likely gainers will be companies like Indian Oil, BPCL, HPCL, ONGC, Reliance etc. Therefore, their stocks will start rising. Alternatively if the government announces that there is no revision in the price of petrol even though the price of crude is rising in the international market, the share prices of these companies will be under pressure and will probably fall.
Now a days shares are held in dematerialized or demat (i.e. in electronic form without any paperwork involved) form with a share broker who is registered with the stock exchange. In India, there are two stock exchanges viz - 1) The Bombay Stock Exchange 2) The National Stock Exchange. Both the exchanges are headquarted in Mumbai. A broker can be a member of either of the two or both. Sensex (Sensitive Index) is an index of the most commonly traded 30 stocks on the BSE. Time to time, the BSE allocates weightage to different stocks that reflect their importance in the stock markets. Take an example of two stocks RELAINCE and TATA POWER where both are included in the Sensex. If the stock price of Reliance goes up by Rs 10 and the stock price of TATA POWER falls by Rs 10, does it mean that they will balance each other? The answer is no. This is becuase the weight of the Reliance Stock is much more than Tata Power. In such a case the rise in the Reliance Stock will out weigh the loss in Tata Power's stock and the Sensex will rise (assuming other stocks remain where they are). It is to be noted that the sensex will either move upwards or downwards only the performace of these 30 stocks. Since the general mood of the market is reflected by the movement in the Sensex, it reamins in the news all the time. This explanation is a very simple explanation on the movement in the Indian Stock Market. There may be many other factors that determine the demand and supply of shares.