Equity

Equity can be defined as the stock of an entity. It is basically the amounts invested by its owners in the company. It refers to the proportion of the stock held by the promoters in relation to the total capital. In a private limited company all equity is owned by the promoters and in a public limited company, the equity may be diluted due to certain corporate actions like bonus issues, right shares, private placement etc.

What are equity markets?

Equity markets are basically the markets that trade in the equities of the various companies. It is possible only in case of public limited companies. It refers to an association, organization whether incorporated or not for the purpose of assisting, regulating and controlling the business in dealing with securities.

Evolution of equity markets in India
  • The first stock exchange was established in 1875 at Bombay. The initial stock market meetings were done in natural environs till a permanent place was found called the Dalal Street. It is the oldest stock exchange in Asia. The BSE is considered to be one of the fastest exchange with a median trade speed of 6 microseconds.
  • Up until early 1990’s came another exchange popularly known as the National Stock Exchange. It was the first exchange to provide a modern fully automated screen based trading to facilitate easy trade.
  • The NSE and BSE are the two prominent stock exchanges in India with their presence felt pan India with a huge market capitalization.
  • The Indian markets have seen a major transformation from its initial levels to the existing ones. From the outcry method to the modern automated trading methods the Indian stock markets have seen a much transition.
  • The BSE index is called the Sensex which consists of the top 30 stocks based on market cap and the relative volatility. Nifty 50 is the flagship index on NSE which consists of top 50 stocks with the largest and highly liquid securities.
  • The Right Investing is the investing in such a way that helps investors earn high returns on their investments with calculated risks.
For smart investing, following should be done
  • Know your risk appetite and then invest.
  • Stay invested.
  • Getting the stock market jargons.
    • Ask Price- The Ask is what you need to know when you're buying. This is the rate at which there is seller ready to sell his stock.
    • Bid Price- The Bid is the buyer’s price. Bid is the rate/price at which there is a ready buyer for the stock, which you intend to sell.
    • Blue Chip Stocks- These are the large leading companies. They offer good dividends and have a sound and an efficient financial management.
    • Beta- A measurement of the relationship between the price of a stock and the movement of the market.
    • Earnings per Share- Profit available for distribution/ No. of shares outstanding. A high ratio indicates a worthwhile investment.
    • Hedge- This is to minimize your losses. This can be done by offsets.
    • Price-Equity Ratio (P/E) - Market Price per Share/ Earnings per Share. Higher the P/E, higher is the stock’s worth.
    • Spread- This is the difference between bid and the ask prices of a stock.
    • Yield- It refers to the amount of dividend received in relation to the return on such investment.
  • Execute an order after studying such terms.
BSE
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