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Frequently Asked Questions

The stock market or stock exchange is a marketplace (mandi) where individuals and institutions can buy and sell stocks/securities of listed companies. ‘Securities’ or ‘Stock’ refers to equity shares that offer ownership in a company.

The activity of buying and selling stocks is also known as trading in shares.

When you buy a stock, you get ownership of the company in proportion to your investment. Additionally, you become eligible to receive a proportionate share of the company’s profit in the form of ‘dividend.’

The Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) are the leading stock exchanges in India. Other prominent stock exchanges are Calcutta Stock Exchange and NSE IFSC.

In India, stock trading of publicly listed companies dates back to 1875, when a couple of traders gathered under a banyan tree and traded physical share certificates of the companies. Now, with digitization, stock trading is just a click away.

At Paytm Money, with 100% paperless account opening and digital KYC, you can become investment-ready within minutes.

Like a common marketplace, in a stock market, buyers and sellers negotiate on prices and trade stocks.

The stock market involves two types of trades: Intraday and Delivery.

Intraday means ‘during the same day’. In intraday, a trader buys and sells on the same day without taking delivery of the stocks bought. He/she uses real-time charts to keep a close eye on the stock price movements. The aim is to take advantage of short-term price fluctuations.

In delivery based trading, the trader buys the shares and holds them in his/her Demat Account for a long time. Here, the stock delivery is done after two days, once the procedure of share transfer is done.

The process to identify the stock price begins from the time when a company decides to get listed to raise a large amount of capital. It hires merchant bankers/underwriters to start off the Initial Public Offering (IPO) process. These entities study the company’s current performance, analyze its assets and liabilities, and project its future performance.

They may arrive at a fixed price or a price band at which to offer the IPO. Once the IPO is through and shares are allotted to investors according to their application. Post that, they get listed, and then the market forces i.e. demand and supply enable stock price discovery.

If the sellers (supply) are more than the buyers (demand), then the stock price falls due to excess supply. On the other hand, if the buyers exceed the sellers, the stock price rises due to excess demand.

Stocks are of different types based on factors like the size of the company, dividend payment, industry, risk, volatility, and fundamentals, among others.

a. Based on Ownership

Based on ownership, there are two types of stocks - preferred and common stocks. Preferred stocks guarantee stakeholders a fixed dividend. Owing to this, these stocks aren’t much volatile. However, preferred stocks do not give voting rights to stakeholders. When we refer to stocks in general, those are common stocks. The majority of stocks are issued in this form. In this, you get voting rights and can be a part of the major decisions of the company. Even though prices of these stocks are highly volatile, you get to enjoy long term capital growth.

b. Based on Market Cap

On the basis of market capitalization, stocks can be large-cap, mid-cap, and small-cap.

Large-Cap companies have a market capitalization of more than Rs. 20,000 crore. On the other hand, Mid-Cap companies have a market capitalization of Rs. 7,000 crore-Rs. 26,000 crore. Lastly, Small-Cap companies have a market capitalization of less than Rs. 7,000 crore. These are new players in the sector who are looking to establish themselves.

c. Based on Dividend Payments

When a company earns profits, it has two options- either to retain it with itself or pay it off in the form of dividends to its stakeholders. Accordingly, there are two categories of stocks- income stocks and growth stocks.

Income stocks regularly pay huge dividends to shareholders even though their growth rate is low. Growth stocks pay you lower dividends and the frequency of paying dividends is also irregular. These companies invest their profits in growth opportunities instead of distributing it off to shareholders as dividends.

d. Based on Price Trends

In terms of pricing, stocks can be cyclical or defensive.

Cyclical stocks are highly price-sensitive to economic trends and broader economic news or data such as GDP or inflation.

Defensive stocks are the ones that defend the otherwise falling market trend. These stocks will usually rise at a time when broader markets are in the red zone and vice versa.

Investing in the stock markets can be rewarding in ways more than one. Markets have always passed the test of time, they have risen in value over a period of time, even though individual stock prices fluctuate daily. Here are a few advantages of investing in stocks:

Grow with the market leaders - Investing in companies that showcase stable growth and clock higher profit every quarter may help you to build long term wealth. Also, investing in sectors that add to the country’s economic growth would increase the value of your investment over a period of time.

Enjoy liquidity - Stocks are highly liquid assets. You may sell them off easily and convert them to cash at any given point of time.

As opposed to this, in real estate, finding a buyer may become an uphill task. It could take months to cash in the investment made in a property.

Trade without hassles - With the Paytm Money app in your smartphones, hassle-free stock trading is just a click away.

Additionally, you can research the markets, create customizable watchlists, explore market movers, and enjoy a host of other features in a simple and convenient manner from the comfort of your home.

Start Small - Investing in stocks does not require huge amounts of money. Besides, you get a lot of flexibility to invest as per your needs and growth opportunities. In fact, you can start with smaller amounts and later step-up your investments.

At Paytm Money, you can start a weekly/monthly SIP in your preferred stocks and we will buy stocks on your behalf.

Earn regular income - With stocks, you get a chance to earn regular income in the form of a dividend. It can help fund a retirement or pay for even more investing as you grow your investment portfolio over time if it is reinvested in the market.

Stock markets have various kinds of entities like daily traders who usually trade intraday and pocket daily profits, retail investors who prefer taking delivery, and foreign investors among others. Stockbrokers enable these entities to conduct smooth transactions.

Given below is a brief overview of the key players:


A stock trader holds a stock for a short period intending to make profits by continuous buying and selling of stocks. A trader often holds stocks for a day or a week. Trading is timing the market and generating the profit out of price fluctuations.

Retail investors

An investor looks at the company fundamentals rather than technical charts and the intention of a retail investor is to generate profit by the principle of buy and hold for a longer-term. They research the business to understand its structure and revenue yielding mechanism and stay with the company during its ups and downs.

Foreign Institutional Investors (FIIs) and Foreign Portfolio Investors (FPIs)

FIIs and FPIs are entities that reside outside India. These can be both traders and long term investors. They trade in a large volume on a daily basis. FIIs include foreign trust funds, pension funds, government institutional funds, and other individual traders.