Basics Of Share Market


Everyone wants to know which share to purchase when share prices rise. Investors want to be part of wealth creation. Stock markets can be a powerful engine of economic growth in a country. India is fortunate to have a vibrant stock market. Investors have many options to participate.


Stocks can be divided into different categories based on many parameters, including company size, dividend payments, industry, risk, volatility, and fundamentals.

  • Stocks based on ownership rules:This parameter is the most fundamental for classifying stocks. This is where the issuing company determines whether it will issue preferred, common, or hybrid stock.
  • Common stocks & preferred stocks:
    Common and preferred stocks differ in their promise of dividend payments. Preferred stocks promise investors that they will receive a set amount of dividends each year. This promise is not made for common stock. A preferred stock's price is less volatile than a common stock. A preferred stock has a higher priority when the company distributes surplus money. This is another key difference between a stock and a stock.

    If the company is being liquidated, which means its assets are being sold to investors, then preferred shareholders' claims rank lower than those of creditors and bond-, or debenture-holders. A distinction is made that preferred shareholders may not be eligible for voting rights like common stockholders.

  • Hybrid stocks
    Hybrid stocks are also issued by some companies. These preferred shares often have the option to be converted into common stock at a specific time. These stocks are known as "convertible preferred stock". These hybrid stocks may or not have the same voting rights as common stocks because they are hybrid stocks.

  • Stocks with embedded derivative options:
    Stocks may include an embedded derivative option. It could be either 'callable or 'putable. An 'appelable' stock allows the stockholder to buy it back at a specified price or time. Stockholders have the right to sell their shares to the company at a specified price or time. These stocks are rare.


  • Stocks based on market capitalization:
    The market value of all shares in a stock is also used to classify it. Market capitalization is used to calculate this. This involves multiplying the share price by total shares issued. On the basis of market capitalization, there are three types of stocks:
  • Small-cap stocks:
    - The abbreviation for Capitalization is 'Cap'. These stocks have the lowest market values, as their name implies. These stocks often represent small-sized companies. Companies with a market capitalization of at least Rs. Small cap stocks are those with a market capitalization of less than 250 crore.

    These stocks offer the best opportunity for investors who want to make significant long-term gains. As long as they don't require any current dividends or can tolerate price volatility, these stocks are the best choice. Because small businesses have the potential for rapid growth in the future, this is why they are so attractive. An investor might profit from buying stock at a time when it is scarce in the initial stages of a company. These companies are often relatively young. It is therefore difficult to predict how these companies will perform in the market.

    Small businesses can experience rapid growth, which can have a dramatic impact on their revenues and values, sending prices skyrocketing. These companies' stocks can also be volatile and could plummet.

  • Mid-cap stocks
    Mid-cap stocks are stocks that are mainly held by medium-sized businesses. Companies with a market capitalization between Rs.. 250 crore and Rs. Mid-cap stocks are those worth more than 4,000 crore.

    These stocks are those of well-respected companies that are known for being seasoned market players. These stocks offer the double advantage of having both the stability and growth potential of larger companies.

    Baby blue chips are also included in mid-cap stocks. These are companies that have shown steady growth and have a proven track record. These stocks are similar to blue-chip stocks, but they are smaller than large-cap stocks. These stocks are more likely to continue growing over the long-term.

  • Large-cap stocks
    Large-cap stocks are those that hold shares of large-cap companies such as Tata, Reliance and ICICI. These stocks are often associated with blue-chip companies.

    They are established businesses and have large cash reserves to take advantage of new business opportunities. The sheer size of large-cap stocks doesn't allow them to grow as quickly as smaller companies, and they tend to outperform smaller stocks over time.

    - Investors have the advantage of receiving higher dividends than small- or mid-cap stocks while also protecting their capital over time.

Stocks based on dividend payments:

  • Dividends are the main source of income, until shares are sold for profit. The amount of dividends paid by a company can help you classify stocks.
  • Income stocks
    These stocks pay a higher dividend relative to their share price. These stocks are also known as dividend-yield, or dog stocks. So, a higher dividend means larger income. These stocks are often called income stocks.

    - Income stocks are stable companies that pay consistent dividends. These companies are often not high-growth. The stock's value may decline as a result. Because they promise regular dividend payments, preferred stocks can also be income stocks.

    Investors who seek a second source of income will be more inclined to invest in income stocks. These stocks are low-risk.

    Dividend income is not subject to tax by investors. Another reason why long-term investors who are willing to take a low risk investment prefer income stocks is because they can earn a steady stream of income.

    How do you find these stocks? To identify stocks that pay high dividends, you can use the dividend yield measure. Dividend yield is a measure of the investor's return on investment in total dividends. This is done by taking the share price and dividing it by the dividend. The percentage format is then used. A stock that has a price of Rs. 1000, a dividend of Rs. The dividend yield for Rs. 1000 is 0.5% per share.

  • Growth stocks
    Stocks do not pay high dividends. Companies prefer to reinvest earnings for company operations. This helps companies grow faster. These stocks are sometimes called growth stocks.

    The company's growth rate is faster than the share price, which means that the shares are worth more. Investors can earn higher returns when they sell stock, but this is at the cost of lower income from dividends.

    Investors choose these stocks because of their long-term potential for growth and not as a secondary source for income.

    - If the company stops growing, however, it can't be considered a growth stock. These stocks are more risky than income stock.

Stocks based on fundamentals:

  • Value investing advocates believe that the share price should be equal to the intrinsic value the company's shares. These value investors compare the following. recent share price  With per-share earnings and profits, you can calculate the intrinsic value per share.
  • Stocks that have a price higher than their intrinsic value are considered overvalued. The stock is undervalued if its price is less than its intrinsic value.
  • Value stocks are stocks that have been undervalued. Value investors prefer them because they believe that the share price will rise in the future.

Stocks based on risk:

  • Certain stocks are more risky than others. Because their share prices fluctuate, they are more risky. Investors should not avoid stocks that are considered risky. Stocks that are risky can make you more money. You will get lower returns if you choose low-risk stocks.
  • Blue-chip stocks
    These stocks are those of established companies that have stable earnings. These companies are less likely to have debt. Companies receive regular dividends because of this.

    Blue-chip stocks can therefore be considered stable and safe. Because blue-colored poker chips are the most valuable, they are called blue-chip stocks.

  • Beta stocks
    Analysts use volatility to measure risk (or beta) Beta values can be positive or negative. The sign simply indicates if the stock will move in line with the market or against it.

    The absolute beta value is what really matters. The beta value is a measure of volatility. It also indicates the level of risk. Beta values greater than 1 indicate that the stock is more volatile then the market. High beta stocks are therefore more risky. But, smart investors can take advantage of this to increase their profits.

Stocks based on price trends:

  • Stock prices often move with earnings. The following two categories can be applied to stocks:
  • Cyclical stocks
    Economic trends can have a greater impact on some companies than others. Their growth slows in a slow economy or accelerates in an economy that is booming. Accordingly, the prices of these stocks are more susceptible to fluctuations as economic conditions change.

    They rise in economic booms and then fall when the economy slows. The best example of cyclical stock are stocks of automobile companies.

  • Protective stocks:
    Companies issue defensive stocks that are not affected by economic conditions, unlike cyclical stocks. Stocks of companies involved in the food, beverage, and insurance sectors are some of the best examples.

    These stocks are most commonly preferred in times of poor economic conditions, while cyclical stocks can be preferred when the economy's booming.


Stocks can be divided into different categories based on many parameters, including company size, dividend payments, industry, risk, volatility, and fundamentals.


Step 1

You can open trading and demat accounts. You cannot trade on the stock market without these accounts. You can learn how to open a trading account and a demat account.

Step 2

Analyze stocks first and then choose the ones that best suit your investment profile. Learn How to Conduct Stock Market Analysis.

Step 3

After you have chosen your stock, keep an eye on it for a while. This will ensure that you purchase at the best price in the short-term. Learn how the stock market moves.

Analyze stocks first and then choose the ones that best suit your investment profile. Learn How to Conduct Stock Market Analysis.

Step 4

You can choose when you would like to place your order: after market hours or during market times. This will depend on the share price that you are targeting. You can only buy stock at a fixed price if the stock closes at that price. You should place your order when the market is open if you think you will get a better price.

Step 5

Choose the type of order that you wish to place. There are three types of orders: a limit order (or market order), a stop-loss order (or IOC) and a market order (or stop loss order). The simplest order, a market order, is simply the one you place. Limit orders allow you to set a maximum cost.. Let's say you place a limit order of 10 shares at Rs. 100 if the share price is Rs. 99 Trades will only be accepted if shares are available at Rs. 100 or less. If only 8 shares are available for purchase, then only 8 of the 10 required shares will be sold. This will ensure that you don't have to pay more than the specified amount.

Step 6

Once you've decided on the details of your order you can either place it online through your trading account or call your broker. For the purchase money to be taken from your account, you will need to provide your bank account details.

Step 7

Once you've decided on the details of your order you can either place it online through your trading account or call your broker. For the purchase money to be taken from your account, you will need to provide your bank account details.

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