Equity

In a company form of organisation, the total capital of the business is divided into smaller units known as equity share. When an investor subscribes to the equity share of a company, contributes to the total capital of the business and he becomes a shareholder. For the company, such a contribution is like a liability on which it needs to give returns to the shareholder.

Investors earn returns in equity investing by way of dividends and capital appreciation.  Along with monetary benefits, the holders of such shares also get voting rights in critical matters of the company. Basically, they are treated as owners of the company wherein the ownership is limited to the extent of the shares held by them.

A business issues shares primarily when it is in need of funds for growth and expansion. It approaches the investors by means of an Initial Public Offering (IPO). IPO is treated as a primary market wherein the equity shares of the company are offered to the general public for subscription for the first time. Afterwards, the shares get listed on a particular stock exchange and exchange hands through frequent trading.

You can subscribe to the IPO and these shares can be sold on a stock exchange like NSE once you are allotted shares. After you subscribe to shares of the company, the record is maintained at depositories like NSDL and CDSL. When the company needs to distribute dividends or bonus shares, it will get the shareholders’ list from these depositories and credit the dividends directly into your bank account.

stocks are volatile instruments whose prices change everyday. There are numerous reasons which explain the behaviour of stock prices. To start with, you can think of market forces i.e. theory of demand and supply. If the number of people who want to buy a stock are more than those who want to sell it, then the price of stock rises.