Stock Market FAQ 2025: Beginner's Guide with Detailed Answers
Get detailed answers to common stock market questions, updated for 2025. Learn how investing really works.
📜 History of the Indian Stock Market
The Indian stock market dates back to the 19th century with the establishment of the Bombay Stock Exchange (BSE) in 1875. It is Asia's oldest stock exchange. The NSE (National Stock Exchange) was launched in 1992 to modernize the market and bring in digital trading systems. Over the decades, major reforms by SEBI and the government have made the market more transparent and efficient.
Key milestones include the dematerialization of shares in the late 1990s, the Harshad Mehta scam of 1992 that led to significant regulatory overhauls, and the introduction of new instruments like derivatives and ETFs.
📚 Financial Instruments in the Market
- Equity Shares: Ownership in a company. Shareholders may get dividends and capital appreciation.
- Mutual Funds: Pooled investment vehicles managed by professionals that invest in equities, debt, or hybrid assets.
- ETFs (Exchange-Traded Funds): Trade like stocks but represent indices or a basket of assets.
- Derivatives: Financial contracts like futures and options whose value is derived from an underlying asset.
- Bonds: Fixed-income securities issued by corporations or governments.
⚖️ SEBI and Market Regulation
SEBI (Securities and Exchange Board of India) is the regulatory authority that ensures fair practices, investor protection, and smooth functioning of the markets. SEBI registers brokers, approves IPOs, monitors insider trading, and enforces disclosure norms for listed companies.
📉 What Factors Influence Stock Prices?
- Company performance (earnings, growth)
- Global market trends
- Interest rates and inflation
- Government policies
- FII (Foreign Institutional Investors) and DII (Domestic Institutional Investors) activities
- Public sentiment and media coverage
🧠Psychology of Investing
Investor behavior is often influenced by emotions rather than logic. Common biases include:
- FOMO (Fear of Missing Out): Chasing hot stocks without research.
- Loss Aversion: Holding on to losing stocks too long.
- Confirmation Bias: Believing only information that supports your view.
- Overconfidence: Making frequent trades believing one always knows best.
📘 Glossary: 20 Must-Know Stock Market Terms
- Bull Market: A market trend where prices are rising.
- Bear Market: A trend where prices are falling.
- IPO: Initial Public Offering — when a company goes public.
- Dividend: A portion of a company’s profit paid to shareholders.
- PE Ratio: Price-to-Earnings Ratio — used to value a stock.
- Portfolio: A collection of financial investments.
- Index: A group of stocks that represents the market (e.g., Nifty).
- Blue-Chip Stock: Large, reputable companies with stable performance.
- Stop-Loss: A pre-set level to sell a stock and cut losses.
- Intraday Trading: Buying and selling within the same day.
- Volume: Number of shares traded in a period.
- Market Cap: Total value of a company’s shares in the market.
- Volatility: Degree of variation in stock prices.
- Demat Account: Electronic account for holding shares.
- Technical Analysis: Using charts to predict price movement.
- Fundamental Analysis: Studying financials to find value.
- Rights Issue: New shares offered to existing shareholders.
- Bonus Shares: Additional shares given to shareholders free of cost.
- Brokerage: Fee charged by brokers to execute trades.
- Limit Order: A trade order with a fixed price condition.
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