How the stock market works

Q1. Which statement best describes “Share”?

1. SEBI is India’s securities market regulator. It protects investors, registers intermediaries and writes the rules for exchanges and brokers.
2. A share is a unit of ownership in a company. A shareholder owns a small part of the business and shares in its profits and risks.
3. An initial public offering is when a company sells shares to the public for the first time to raise money, and then lists on an exchange.
4. A stock exchange is a regulated marketplace where buyers and sellers trade listed shares at transparent prices. India’s main exchanges are NSE and BSE.

Q2. Which statement best describes “Demat account”?

1. A stock split divides each share into more shares at a lower price. The number of shares rises but the total value you own is unchanged.
2. A demat account holds your shares in electronic form, like a bank account holds money. The depositories NSDL and CDSL keep the records.
3. A stop-loss order triggers a sale when the price falls to a level you set, to cap the loss on a position. In a fast fall it may fill below that level.
4. A trading account is the account through which you place buy and sell orders. It connects your bank account and your demat account.