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Equities Section
Securities, which represent ownership right (equities, investment fund shares) are traded in the equities section. Besides these instruments also the structured products (certificates, ETFs) and special securities (compensation notes) are represented in this section.

Debt Securities Section
Debt securities are represented in the Debt Securities Section, such as government debt securities (treasury bills and government bonds), corporate bonds and mortgage bonds.

Derivatives Section
Derivatives Section of BSE is consists of futures and options contracts based on single stocks, equity indices, FX and interest rate.

Commodities Section
As a result of the BSE and BCE merge dated November 2005, there is commodity trading also on BSE, principally with grain products. Contrary to other sections spot and derivative commodity instruments are traded in one single section.

BETa Market
The BETa Market is BSE’s alternative market launched in November 2011. On this market, the largest and most liquid equities of mainly European companies can be traded under trading the conditions applied on BSE’s Equities Section. The clearing and settlement of the transactions executed on the BETa Market is done by KELER Ltd., and KELER CCP Ltd. guarantees the transactions.

What are Shares and Types of Shares?

In the past few months, the Indian Equity Market has made headlines every morning. Investing in shares has emerged as the most popular way of generating long term wealth and fulfilling your financial goals. In fact, FY20-21 witnessed a whopping increase of approx 150 lakh retail investors in Indian equity market itself. Today, stocks or equities account for approx 13% of the total investments in India. As an investor, one needs to understand the basics of what the share market comprises and how it works.

What Is the Meaning Of Share?
A share represents a unit of equity ownership in a company. Shareholders are entitled to any profits that the company may earn in the form of dividends. They are also the bearers of any losses that the company may face. In simple words, if you are a shareholder of a company, you hold a percentage of ownership of the issuing company in proportion to the shares you have bought.

Shares can be further categorized into two types. These are:
            
1. Equity shares    
2. Preference shares

They vary based on their profitability, voting rights and treatment in the event of liquidation.

Meaning Of Equity Shares
These are also known as ordinary shares and comprise the bulk of the shares being issued by a particular company. Equity shares are transferable and are traded actively by investors in stock markets. As an equity shareholder, you are not only entitled to voting rights on company issues but also have the right to receive dividends.

These dividends, however, are not fixed. Equity shareholders also partake in any losses faced by the company, limited to the amount they had invested. Equity shares can be further divided based on:

1. Share capital
2. Definition
3. Returns

Categorization of Equity Shares based on Share Capital

Here is a look at the categorization of equity shares based on share capital:

A- Authorised Share Capital: Every company, in its Memorandum of Associations, requires to prescribe the maximum amount of capital that can be raised by issuing equity shares. The limit, however, can be increased by paying additional fees and after the completion of certain legal procedures.

B- Issued Share Capital: This implies the specified portion of the company’s capital, which has been offered to investors through the issuance of equity shares. For example, if the nominal value of one stock is Rs 200 and the company issues 20,000 equity shares, the issued share capital will be Rs 40 lakh.

C- Subscribed Share Capital: The portion of the issued capital, which has been subscribed by investors is known as subscribed share capital.

D- Paid-Up Capital: The amount of money paid by investors for holding the company’s stocks is known as paid-up capital. As investors pay the entire amount at once, subscribed and paid-up capital refer to the same amount.

Categorization of Equity Shares based on Definition

Here is a look at the equity share Categorization based on the definition:

A- Bonus Shares: Bonus share definition implies those additional stocks which are issued to existing shareholders free-of-cost, or as a bonus.

B- Rights Shares: Right shares meaning is that a company can provide new shares to its existing shareholders - at a particular price and within a specific period - before being offered for trading in stock markets.

C- Sweat Equity Shares: If as an employee of the company, you have made a significant contribution, the company can reward you by issuing sweat equity shares.

D- Voting And Non-Voting Shares: Although the majority of shares carry voting rights, the company can make an exception and issue differential or zero voting rights to shareholders.

Categorization Of Equity Shares based on Returns

Based on returns, here is a look at the types of shares:

A- Dividend Shares: A company can choose to pay dividends in the form of issuing new shares, on a pro-rata basis.

B- Growth Shares: These types of shares are associated with companies that have extraordinary growth rates. While such companies might not provide dividends, the value of their stocks increases rapidly, thereby providing capital gains to investors.

C- Value Shares: These types of shares are traded in stock markets at prices lower than their intrinsic value. Investors can expect the prices to appreciate over some time, thus providing them with a better share price.

Preference Shares

Preferential shareholders receive preference in receiving profits of a company as compared to ordinary shareholders. Also, in the event of liquidation of a particular company, the preferential shareholders are paid off before ordinary shareholders. Here are the different types of shares in this category:

A- Cumulative And Non-Cumulative Preference Shares: In the case of cumulative preference shares, if a particular company doesn’t declare an annual dividend, the benefit is carried forward to the next financial year. Non-cumulative preference shares don't provide for receiving outstanding dividends benefits.

B- Participating/Non-Participating Preference Share: Participating preference shares allow shareholders to receive surplus profits, after payment of dividends by the company. This is over and above the receipt of dividends. Non-participating preference shares carry no such benefits, apart from the regular receipt of dividends.

C- Convertible/Non-Convertible Preference Shares: Convertible preference shares can be converted into equity shares, after meeting the requisite stipulations by the company’s Article of Association (AoA), while non-convertible preference shares carry no such benefits.

D- Redeemable/Irredeemable Preference Share: A company can repurchase or claim redeemable preference share at a fixed price and time. These types of shares are sans any maturity date. Irredeemable preference shares, on the other hand, have no such conditions.

Conclusion -
Investing in shares can prove to be a great source of long-term wealth generation for any individual investor. Stocks provide you with a variety of sectors and industries to choose from, helping you diversify your portfolio and mitigate your risks. Always remember to narrow down on trusted and reliable financial partners to open your Demat account and trading account, like top stock broker of India.

Stocks/Equities/Equity Shares?

Equities refer to small pieces of a company’s worth, considering all pending liabilities. If you are investing in a company by purchasing equities, you become an owner of the company in the same ratio as the equities bought. If you’re looking to turn a profit, the best way to do so is to sell the equities you’ve purchased when they grow in value. In some cases, depending on the percentage of equity shares owned, the shareholder can also have a right to vote on important decisions that are made by the Board of Directors.

Features of owning Equity

1. Redeeming capital: If you have purchased equity shares from a company, then only you can claim the company’s value in case of liquidation. Another way to get a return on investment on equities is dividends, and trade the share when its value moves above your purchase price.

2. Voting rights: If you purchase equity shares from a company, you become a partial owner with the right to vote at company meetings. Most people buy equities of publicly listed companies with a highly fragmented shareholder base, so it is usually left to the Board of Directors to handle all this as they are the appointed representatives of the company.

3. Limited liability: Ordinary shareholders of a company are not impacted directly by the losses of a company. The only impact they will feel is in the depreciation of the value of the shares they hold, which would impact their net worth and their profit-turning prospects.

Benefits of purchasing Equity

1.High risk, high reward: Equity shares can give high returns to the shareholders if the risk pays off. Investors enjoy the profits through dividend earnings as well as the appreciation of the company.

2.Easy and efficient: You can invest in equity shares at any company through a stockbroker or financial planner. All you need is a Demat account to trade.

3.Diversity: You can invest in equity shares across many thematic areas, from trading based on the capitalization of a company, to equities of companies in a particular sector. Thus, equities lend to greater diversity for better and more stable returns.

Disadvantages of owning Equity

A- High risk includes high losses too: The possibility to earn through high returns is present, but the risk of loss is also high.

B- Linked to performance: Since there is a link between the equity shares and the market, their performance can fluctuate greatly and often take a turn for the worse.

C- Inflation risk: If a country’s economy experiences inflation, the company’s worth can fall which in turn will affect its shares and not provide the returns that were expected and impact the profits that were to be generated.

D- Risk of Liquidity: When a company is unable to repay its debts, it may opt for liquidation which requires the shareholders to sell their shares at a price lower than the market price.

E- Social and Political fluctuation: The social and political climate of a country and the goals associated with the same can impact the growth of the company. This, in turn, impacts the profits generated and therefore the benefits that a shareholder could have received.

Types of Equity

1.Shares:
This is the simplest way of buying shares in a company that you have faith complete in The shares of the company will appreciate within the time frame in which you want a return.

2.Equity-Mutual fund investments:
This is when several investors collect funds and at least 60% of those are invested in equity shares of various companies. Mutual funds can be further divided into the following categories:

A- Large-cap equity funds: The fund invests only in large companies with stable returns.

B- Mid-cap: The fund’s investment thesis revolves around investing in companies of smaller size but with higher potential for growth. This is a balance between risk and potential reward.

C- Small-cap: investments are made in small and volatile companies with a high risk to reward ratio.

D- Multi-cap funds: These funds invest in companies of all sizes across a variety of sectors.

Mutual Funds are the way in which most people invest, as they are run by professional investors who take investment decisions for you.

3.Alternative Investment Funds:
In this, you invest in equity through various methods wherein each of those options have their investment theses. You have to see not only which one suits your needs, but also which one you can afford to invest in.

Conclusion:

Investing in equities is far from simple and while most do it through a mutual fund, that requires a great deal of research, performance and the fund manager’s credibility before deciding to park your money in such a fund. If you do have time and can dedicate the hours needed to understand trading equities or have a strong incentive to invest in a particular company, you may be able to dedicate yourself to the same entirely and invest directly in stocks. It is advisable to seek advice and help from someone with greater experience given how volatile the asset class can be, like the experts at some top stock broker of India.

Preference Shares

The Indian stock market has consistently outperformed almost all other financial instruments in terms of returns. With the inflation rate higher than the returns offered by other financial instruments, investors are looking to invest to reach their financial goals and look towards the Indian stock market to allocate a portion of the capital to enjoy better returns over time.

However, the one mistake almost all beginner investors make is to buy stocks without considering their types or performing adequate research. As diversification is a principle followed by every investor, there are various types of stocks available within the equity market. These types of stocks come with different features, risk profile, return potential, and legality. For example, an investor looking to invest for a steady income based on dividends may buy common stocks, which can prove counterproductive for the financial plan.

Among various types of stocks, this blog details a type of stock called Preference Shares. In your quest of achieving your financial goals through equity investing, understanding preference shares will prove vital in making informed investment decisions.

What are shares, and who are the shareholders?
In simple words, a share indicates a unit of ownership of the particular company. If you own the shares of a company, it implies that you, as an investor, own a percentage of the issuing company. These shares are listed on the stock exchanges through an Initial Public Offering, and investors can buy and sell them based on their current price.

If you buy the shares of a company, you become the owner of the company in the proportion of the percentage of bought shares. From the day you buy the shares, you are a shareholder. As a shareholder, you are entitled to receive a portion of the profit of the company. This amount is called the dividend amount, and the company declares it as per its financial performance. The shareholders can sell these shares anytime they want to another investor who would then become the shareholder.

What are Preference Shares?
As the name suggests, preference shares are those shares that are given priority over others by the company in the process of dividend payout. It means that if the company makes profits and announces dividends, preferred shares, and the shareholders will be the first to receive the payment. Only after preference shareholders are paid the dividends will the company move on to pay other types of shareholders.

Furthermore, if the company enters the liquidation process, preference shareholders are paid in full before any other type of shareholders. However, preference shares do not entitle the shareholders to have voting rights and are not involved in the internal decision-making of the company.

Understanding Preference Shares: Different types of Preference Shares
Preference shares generally come with a fixed dividend payout amount. There are four categories of preference shares:

A-Cumulative preferred stocks: These types of preference shares come with the provision of paying the shareholders with a dividend amount that includes any past arrears along with the currently announced payout. Only after this amount is paid to these shareholders can the company pay dividends to common stockholders.

B-Non-cumulative preferred stocks: These preference shares do not allow shareholders to get dividend arrears. In simple words, if the company chooses not to pay dividends, these shareholders can not legally bind the company to pay this year* dividend amount as arrears in the future.

C-Participating preferred stocks: This type of preferred stock allows the shareholders to receive a dividend amount that is equal to the specified rate of preferred dividends added with an amount based on a predetermined condition. Generally, this predetermined condition is when the dividend amount received by the common shareholders exceeds the predetermined per-share amount.

D-Convertible preferred stocks: These types of preference shares have an option for shareholders to convert their preference shares into common shares. Most companies have a provision on how the conversion works. However, the conversion is mostly done after a pre-established date by the company.

Features of Preference Shares
Numerous features make preference shares an attractive investment option for investors. Some of the most common features of preference shares are as follows:

A-Assets of the company: The preference shares are given the highest priority by the company in case the company is liquidating. These shareholders can claim their portion of the company* assets before non-preferential shareholders.

B-Dividends: All the preference shareholders are paid their dividends irrespective of all other stockholders not receiving dividends. The payouts are generally fixed but can be floating in some situations.

C-Powers: Unlike common shares, preference shares do not entitle their holders with voting rights. It means that these shareholders can not have their say in the internal policy-making of the company, even if the policies are negative and can hurt their investments.

D-Conversion: Preference shares come with the feature of converting the shares into common stocks. This is generally done if a holder of preference shares wants voting rights which is only possible if they are common stocks.

E-Callability: Preference shares have the feature of being called at any time by the company for repurchasing the shares in the future. The process is similar to conversion, where the preference shares can be reissued as specified by the company.

Benefits of the Preference Shares

Here are the benefits of preference shares:

A- Low risk: Preferred shares come with the feature where their holders are prioritized at the time of liquidation. Since a company going bankrupt is the highest risk an investor can take, preference shares safeguard the investment of the investor by ensuring that the preference shareholders are prioritized over other shareholders in claiming ownership over the company assets.

B-Regular returns: Preference shares accompany the benefit of realizing regular returns based on the dividend amount. However, the regularity of the dividend payout depends entirely on the selected type of preference share.

How to buy Preference Shares?
You would need a Demat and trading account to buy preference shares. You can open a Demat account with Any Stock Broker that offers highly competitive prices and unique features in just a few steps:

1. You can Visit any stock broker website Click on open a trading account Enter Basic details.
2. You will receive a one-time password (OTP) on the mobile number.
3. You will receive a link on your registered email ID. You need to enter the OTP received on your registered email id.
4. After verifying the OTP, you need to fill the online Account Opening Form.
5. Your Relationship Manager will then contact you for the necessary documentation.
6. Once the documentation process is completed, and the forms are received at HO, the account will be opened within 24 hours.

Once your Demat and trading account is opened, you can buy preference shares of any company you want and enjoy the benefits that come with them.

Final Words
Understanding all the types of stocks is vital in deciding which type of stock will be ideal for you based on your investment goals and the risk appetite. However, preference shares can prove to be the ideal entry point for you if you are looking to invest in the equity market. They are low-risk, steady returns and priority status if by any chance the company goes bankrupt. Overall, preference shares are one of the most sought-after types of stocks that can allow you to make profits along with getting dividends at regular intervals.

Frequently Asked Questions
Q.1: What happens if you own preference shares in a company that goes bankrupt?
Ans: If any company goes bankrupt, it is legally bound to pay back the invested amount of the investors in full. However, at times it happens that even after selling all the assets, the company falls short of paying the investors in full. However, preference shares and their holders are the first ones who the company pays before any other shareholders.

Q.2: Why should you consider investing in preference shares?
Ans: Preference shares and their holders are prioritized by the company to pay dividends over other shareholders. Furthermore, as in the case of liquidation, preference shareholders are the first ones who are paid in full; they can prove to be a low-risk investment.