2. What is a share, really?
Everyone talks about shares. "I bought Reliance shares." "My shares are down today." But what exactly is a share? Let me explain with a story.
Sunita in Pune makes amazing home-style tiffins. She starts with 20 customers from her building. Soon, 200 people want her food. To grow, she needs a bigger kitchen, two cooks and a delivery scooter. That costs ₹10 lakh. She has only ₹2 lakh.
She has two choices:
- Take a loan from a bank. She must pay interest every month, whether the business does well or not.
- Bring in partners. She divides her business into 100 equal parts. She keeps 60 parts and sells 40 parts to friends and family at ₹20,000 each. That brings in ₹8 lakh. No interest to pay. But now those friends own 40% of the business – and 40% of its future profits.
Each of those 100 parts is a share.
That is exactly what a company does on the stock market – just on a much bigger scale, with crores of shares and lakhs of owners.
2.1 A share = a small piece of ownership
When you buy one share of a company, you own a tiny piece of that company. As an owner (called a shareholder), you get some rights:
- Share in profits. When the company earns profit, it may pay a part of it to shareholders. This is called a dividend.
- Share in growth. If the business becomes more valuable, each share becomes more valuable too.
- A vote. Shareholders can vote on important company decisions, like choosing directors.
But you also share the risk. If Sunita’s tiffins stop selling, her partners’ parts lose value. Same with any company.
2.2 How do shares reach the stock market?
When a private company wants money from the public for the first time, it does an IPO – Initial Public Offering. It sells new shares to the public, and the money goes to the company (or to old owners who are selling).
After the IPO, the shares get listed on a stock exchange like NSE or BSE. From that day, anyone can buy and sell these shares with each other. The company is not involved in this daily buying and selling.
| Market | Who sells? | Who gets the money? |
|---|---|---|
| Primary market (IPO) | The company (or its old owners) | The company / the old owners |
| Secondary market (daily trading) | Other investors | The investor who sold to you |
When you buy a share on your trading app today, you are almost always buying it from another person – not from the company. Most beginners don’t know this. The company got its money long ago at the IPO.
2.3 Why does the share price keep changing?
Simple: demand and supply. Think of mangoes in the market in May.
- When many people want to buy mangoes and few are selling, the price goes up.
- When the season ends and everyone is selling, the price comes down.
Shares work the same way. When more people want to buy a share than sell it, the price rises. When more people want to sell, the price falls.
And why do people want to buy or sell? Many reasons:
- The company announced good or bad profits.
- News about the industry, the economy, or the government.
- Interest rates, foreign investors, global markets.
- Plain emotions – fear and greed.
Over long periods, a share price tends to follow the company’s profits. Over short periods, it follows the crowd’s mood. Charts help you read that crowd.
2.4 Market value of a company
If a company has 10 crore shares and each share trades at ₹500, the whole company is valued at ₹5,000 crore by the market. This is called market capitalisation (or "market cap").
- Very big companies (top 100 by market cap) are called large caps.
- The next 150 are mid caps.
- The rest are small caps.
Large caps are generally more stable. Small caps can move much faster – in both directions.
Daily trading happens in the secondary market, between investors. The company got money only at the IPO (or when it issues new shares).
50 crore shares × ₹200 = ₹10,000 crore. Market cap = number of shares × share price.
More demand than supply pushes price up. This one idea explains most of what you will see on charts.
- A share is a small part-ownership of a company.
- Shareholders can earn through dividends and through a rise in the share price – and can lose if the business does badly.
- An IPO is when a company sells shares to the public for the first time. After that, shares trade between investors on the exchange.
- Prices move because of demand and supply, which is driven by news, profits and emotions.
- Market cap = number of shares × price. Large, mid and small caps behave differently.
- Ek line mein: Share matlab company mein chhota sa hissa – company achhi chali toh aapka hissa bhi badhega, buri chali toh ghatega.