Capital Market

Long-term money, not short-term cash

Capital market means trading long-term securities, such as shares, bonds and debentures.

The money market handles short-term funds. A company may use capital-market funds for projects lasting years.

Follow the money through two stages:

1. Primary market: An issuer sells new securities. An IPO is a company’s first public share offer.
2. Secondary market: Investors trade securities they already own, often through an exchange.

Worked example: Say a company sells 1 crore new shares at ₹100 each in an IPO. It raises ₹100 crore directly. Six months later, one buyer sells those shares to another buyer at ₹120 each. That trade happens in the secondary market. The company gets nothing from it — only the two investors’ money changes hands.

India’s two big exchanges

India has two major stock exchanges:

• BSE: The Bombay Stock Exchange traces its founding to 1875.
• NSE: The National Stock Exchange was incorporated in 1992. Trading began later.

SEBI is India’s securities-market regulator. It began in 1988 and gained statutory powers in 1992.

It regulates intermediaries and exchanges. Investor protection is one of its central aims.

Why this matters: before SEBI had real power, a company could vanish after collecting IPO money, with no watchdog to chase it. SEBI now sets disclosure rules an issuer must follow, and can fine or ban brokers who cheat investors. That is the practical difference a “regulator” makes.

Bondholders lend; stockholders own

A bondholder is a lender. Think of it like lending money to a friend. The company must pay it back, on the agreed date, with interest.

A stockholder is an owner. Buying a share is like buying a tiny slice of the company itself. You do not get a fixed payment. If the company grows, your slice becomes worth more. If it struggles, your slice loses value.

Worked example: You lend ₹1,000 to a company by buying its bond at 8% interest. Each year, you get ₹80, and the company returns your ₹1,000 at the end. Now compare a ₹1,000 share instead. You get no fixed payment. If the company does well, your share could be worth ₹1,500. If it does badly, it could be worth ₹400. The bond is steadier; the share can go either way, much further.

Mutual funds, and the two main types of investors

Mutual fund: Many people pool money in one fund. A manager invests it under the fund’s rules.

This lets a small investor hold a mix of assets. The mix does not remove all investment risk.

Foreign Portfolio Investors, or FPIs, are investors based outside India. They buy Indian shares and bonds from abroad, without moving to India.

Retail investors are ordinary people, like you or your parents, investing their own personal savings.

Large trades can move prices, but many forces shape the market at the same time.

Worked example: You invest ₹5,000 in a mutual fund. The fund manager splits that money across 50 different companies’ shares. If one company does badly, it barely dents your total — you never held all your money in that one company. This spreading of risk is the main reason small investors use mutual funds instead of picking individual shares themselves.

Why shares stopped being paper

Paper share certificates could be lost, damaged, or faked. So India stopped using them.

Dematerialisation is a big word for a simple idea: your shares now exist only as electronic records, like the balance in a bank account, not paper you can hold.

A depository, such as CDSL, is the organisation that keeps these electronic records safe. You access yours through a demat account — think of it as a bank account, but for shares instead of cash.

Market capitalisation = share price × outstanding shares. This estimates a listed company’s market value.

Worked example: A company has 10 crore shares outstanding. Each share trades at ₹250. Market capitalisation = 10 crore × ₹250 = ₹2,500 crore. That number can change every day the share price moves, even if the company’s actual profit stays exactly the same.

India’s huge options-trading boom

An option is a contract. It gives you the right to buy or sell a stock at a fixed price, before a set date. You are not forced to use that right — you only use it if it benefits you.

People use options two ways: to protect an existing investment from a price drop, or simply to bet on which way a price will move.

High trading volume does not make them safe. A buyer can lose the full premium paid for an option.

Worked example: You pay ₹50 for an option betting a stock will rise above ₹1,000 before a set date. If the stock never crosses ₹1,000, your option expires worthless. You lose the full ₹50 — not a portion of it. That full-loss possibility is what makes options riskier than simply buying the stock itself.

Market value holds above $5 trillion

Market capitalisation changes with share prices. A market-wide figure adds the values of all listed companies.

Check the dated figure in the BSE market-capitalisation report. Do not confuse market value with company profits.

Most options traders are still losing money

SEBI published its FY25–26 study of individual derivatives traders on 20 August 2026.

• 87.7% of individual traders lost money in FY26.
• Their combined net losses were about ₹91,685 crore.
• Options accounted for 92% of those losses.
• Active traders fell from 98.1 lakh in FY25 to 78.6 lakh in FY26.

These are group figures, not a prediction about any one trader. Source: SEBI study, 20 August 2026.