What is Equity Share

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WHAT IS EQUITY SHARES?
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What is Equity Shares

• By buying equity shares on share market investors
  can become partial owners of a company. These
  shares, offered by companies in return for money,
  are called equities.
• An equity market, also known as the stock market,
  is a platform for trading in company shares. It
  is the place where buyers and sellers meet to
  trade in listed companies.

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Understanding an Equity

• Equity consists of funds that shareholders invest
  in a company plus a certain amount of profit
  earned by them that is retained by the company
  for further growth and expansion.
• Equity is a primary asset class when it comes to
  investing and diversifying ones portfolio.

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Trading Equity

• Equity may be traded in the primary market, when
  a company makes an Initial Public Offering (IPO)
  and new securities may be bought.
• Shares that have already been issued are bought
  and sold in the secondary market.
• Investors may also own private equity, that is,
  shares of a company that is still private and not
  listed on the bourses.

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Benefits of Equity

• Equity, while being a risky investment, offers
  historically higher returns than any other asset
  class
• It is possible to minimize risks and maximize
  profits through the use of equity derivatives,
  specifically by trading in the Options market
• Investing in the equity of reputable companies
  has the added benefit of dividends. While giving
  them out is not compulsory, established
  businesses do pay dividends to increase their
  shareholder base.

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Types of Equity Markets

• Primary Market
•  Every company that proposes to go public must
  come out with an initial public offering (IPO).
  During the IPO, the company offers a certain
  portion of its equity to the public. After the
  closing of the IPO, the shares are listed on one
  of the stock exchanges.
• Secondary Market
• After the listing of the IPO shares, these are
  traded on the secondary market. This platform
  offers the initial investors an option to exit
  their investments. In addition, investors who
  failed to procure shares during the IPO can
  purchase these from the secondary market.

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Equity Market Procedures

• Trading
• The stock exchanges provide an automated
  screen-based trading platform that is fully
  automated and computerized.
• Clearing and Settlement
• The exchanges clear and settle all the trades
  that are executed during the trading day. These
  exchanges operate well-defined settlement cycles
  without any deviations and/or deferments from the
  procedures. The trades during the trading session
  are aggregated and positions are netted off with
  the objective of determining the liabilities of
  the trading members.
• Under the T2 cycle, buyers receive credits of
  the shares in their demat account, and sellers
  receive the sale proceeds in the bank accounts
  that are linked to the trading account within two
  days.
• Risk Management
• The stock exchanges have developed a
  comprehensive system for risk management. This
  system ensures the investors interests and
  prevents fraudulent activities by the companies..
  Some components of the risk management system
  include margin requirements, pay-ins, and
  voluntary close-out facilities, and liquid assets.

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