1️⃣ Why Companies Issue Shares

Companies need money (capital) to grow their business. Instead of borrowing money from banks, they sometimes raise money from the public by issuing shares.

When a company issues shares, it sells ownership stakes to investors.

Example:
If a company divides its ownership into 1,00,000 shares and you buy 100 shares, you own 0.1% of that company.

Main Reasons Companies Issue Shares

1. Business Expansion
To build new factories, offices, or enter new markets.

Example: Companies like Reliance Industries frequently raise capital to expand new businesses.

2. Reduce Debt
Companies may issue shares to repay bank loans and reduce interest burden.

3. Fund New Projects
Launching new products, technologies, or acquisitions.

4. Increase Company Value
Public companies often gain more visibility and credibility.

Advantages of Issuing Shares

✔ No obligation to repay investors
✔ Access to large capital
✔ Improves company reputation

Disadvantages

❌ Ownership dilution
❌ Public disclosure requirements
❌ Shareholder pressure

2️⃣ Primary Market vs Secondary Market

The stock market has two main segments.

Primary Market

The primary market is where companies sell shares for the first time to investors.

This usually happens through an IPO (Initial Public Offering).

Example: When companies like Tata Technologies launched their IPO, investors bought shares directly from the company.

Money goes to the company in the primary market.

Secondary Market

The secondary market is where investors buy and sell shares among themselves.

Example:

You buy shares of Infosys from another investor through a stock exchange.

The company does not receive money from this transaction.

Trades occur on exchanges like:

• National Stock Exchange of India

• Bombay Stock Exchange

Simple Comparison

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3️⃣ How an IPO Works

An IPO (Initial Public Offering) is the process by which a private company becomes publicly listed and offers shares to investors.

IPO Process

Step 1 — Hiring Investment Bankers
Companies hire financial institutions to manage the IPO.

Step 2 — Regulatory Approval
In India, IPO approval is given by
Securities and Exchange Board of India (SEBI).

Step 3 — Price Band Announcement
The company sets a price range for the shares.

Example: ₹500 – ₹550 per share.

Step 4 — Investor Bidding
Investors apply for shares during the IPO subscription period.

Step 5 — Share Allotment
Shares are allotted to investors.

Step 6 — Listing on Exchange
The stock starts trading on:

• National Stock Exchange of India

• Bombay Stock Exchange

Example of a Popular IPO

Life Insurance Corporation of India launched one of the largest IPOs in India in 2022.

4️⃣ How Stock Prices Actually Move

Many beginners think stock prices move randomly, but prices move mainly due to supply and demand.

Basic Principle

📈 More Buyers → Price Rises
📉 More Sellers → Price Falls

Example

If a stock has:

• Buyers willing to buy at ₹100

• Sellers willing to sell at ₹110

The price will move upward until buyers and sellers match.

Key Factors That Move Prices

1. Company Performance

Strong profits usually increase stock price.

Example: Companies like Tata Consultancy Services move based on earnings reports.

2. News and Events

Announcements such as:

• mergers

• government policies

• industry changes

can affect prices.

3. Institutional Buying

Large investors such as:

• Life Insurance Corporation of India

• BlackRock

can move markets because they trade large volumes.

4. Market Sentiment

Fear and greed strongly influence prices.

Bullish sentiment → prices rise
Bearish sentiment → prices fall

Important Concept

Stock prices move through an auction system where buyers and sellers continuously compete.

This is why charts show constant price fluctuations.