How Does the Stock Market Work?

The stock market works based on supply and demand principles, meaning stock prices change depending on how many people are willing to buy or sell shares.

Step-by-Step Explanation:

1. Companies List Shares on the Stock Market
   Companies issue shares through an Initial Public Offering (IPO). These shares get listed on stock exchanges like NSE and BSE in India.

2. Investors Buy and Sell Shares
   Investors buy shares expecting the company’s value to grow. If demand is high, the stock price increases. If many investors sell their shares, the price decreases.

3. Stock Prices Fluctuate Based on Market Conditions
   Prices change due to company performance, news, economic conditions, global events, and investor sentiment.
   Example: If a company announces record profits, its stock price rises. If it reports losses, the price falls.

4. Investors Make Profits or Losses
   If you buy a stock at ₹100 and its price rises to ₹150, you can sell it and make a ₹50 profit. However, if the price falls to ₹80, selling it results in a ₹20 loss.

5. Long-Term vs. Short-Term Investing
   Long-term investors hold stocks for years, benefiting from company growth, while short-term traders buy and sell quickly to profit from small price changes.