Equity refers to ownership interest in a company. When individuals invest in equity shares, they essentially become part owners of that company and are entitled to a share in its profits and assets. Equity is also known as share capital or stock, and represents a residual claim on the company's assets after debts have been paid.

Equities are a growth-oriented investment, and their returns primarily come through capital appreciation and dividends.

Equity investments grant three key entitlements:

1. Ownership

• Shareholders own a proportional claim in the company.
• Voting rights are provided (1 share = 1 vote).
• Significant shareholders may influence corporate decisions (e.g., board appointments, mergers).

2. Dividends

• Periodic income declared by the company from profits.
• Not guaranteed — paid at management's discretion.
• May be paid as cash or stock (bonus shares). 

3. Capital Gains

• Investors can sell shares at a price higher than the purchase price.
• Gains are realized through the secondary market (stock exchanges).
• Capital appreciation depends on company performance, market sentiment, and macroeconomic factors.

The Indian equity ecosystem is tightly regulated to ensure transparency, fairness, and investor protection.

1. Regulator: SEBI (Securities and Exchange Board of India)

• Regulates issuance and trading of equity shares.
• Mandates disclosures, governance norms, and fair practices.
• Governs IPO process, insider trading laws, listing obligations (LODR).  

2. Stock Exchanges: NSE & BSE

• Platforms for buying and selling listed shares.
• Enable price discovery, liquidity, and real-time execution.
• NSE Nifty 50 and BSE Sensex are leading benchmarks. 

3. Depositories: NSDL & CDSL

• Enable dematerialization of physical shares into electronic form.
• Maintain and update investor holdings via Demat accounts.
• Interfaced through Depository Participants (DPs) like banks and brokers.

• Issuer: The company that issues shares.
• Merchant Banker: Manages IPOs and listings.
• Registrar & Transfer Agent (RTA): Maintains investor records, corporate actions.
• Stockbroker: Executes trades on behalf of investors.
• Clearing Corporation: Ensures trade settlement (e.g., NSE Clearing Ltd).
• SEBI-registered Research Analysts & Investment Advisers: Provide advice.

• Cyclical Stocks: Performance tied to economic cycles (Auto, Real Estate, Metals)
• Defensive Stocks: Stable in downturns (FMCG, Pharma, Utilities)

• Blue Chip: High market cap, consistent earnings
• Penny Stocks: Low price, low market cap, high risk — often speculative
• ESOP Stocks: Equity given to employees under stock option plans

• Holding Period: ≤ 12 months
• Tax Rate: 20% (plus applicable surcharge and cess)
• Condition: Applicable only if STT is paid at the time of sale

• Holding Period: > 12 months
• Tax Rate: 12.5% (plus surcharge and cess) without indexation
• Exemption Threshold: Gains up to ₹1.25 lakh per financial year exempt

• Bonus Shares / Stock Splits: No immediate tax on issuance. Cost basis calculations adjust accordingly; gains taxed upon sale.
• Buybacks: Entire buy-back proceeds treated as deemed dividend, taxed at slab rates.

• Schedule CG in ITR should capture capital gains.
• Use AIS for validating reported STT, sale proceeds, and dividend income.

• Asset: Any resource owned by a company—such as cash, inventory, or real estate—used to generate revenue.
• Ask Price: The lowest price a seller is willing to accept for a share. 
• Beta (β): A measure of a stock's volatility in comparison to the broader market. Beta > 1 = more volatile; < 1 = less volatile. 
• Book Value: Value of an asset or company as per the balance sheet (Assets – Liabilities). 
• Bull Market: A market trend where prices are rising or expected to rise. 
• Bear Market: A market trend where prices are falling or expected to fall. 
• Bonus Shares: Free additional shares given to existing shareholders from the company’s reserves. 
• Blue-Chip Stock: Shares of financially sound, well-established companies with a history of reliable performance. 
• Broker: A SEBI-registered intermediary that facilitates buy/sell of shares. 
• Buyback: When a company repurchases its own shares from the market. 
• Call Option: A derivative contract that gives the buyer the right (but not obligation) to buy a stock at a fixed price. 
• Circuit Limit: A pre-defined price band set by exchanges to prevent excessive volatility. 
• Corporate Action: Events initiated by companies—like dividends, splits, or rights issues—that affect shareholders. 
• Cumulative Return: Total return earned on an investment over a given period. 
• Cut-off Price (IPO): The final price at which shares are allotted to investors in a book-built IPO. 
• Demat Account: An electronic account to hold shares in dematerialized (digital) form, maintained by NSDL or CDSL. 
• Dividend: A portion of company profits distributed to shareholders, generally in cash or stock.
• Earnings Per Share (EPS): Net profit divided by total outstanding equity shares; measures profitability per share. 
• Face Value: The nominal value of a share, typically ₹1, ₹2, or ₹10 in India. 
• Free Float Market Cap: Market value of shares available for trading, excluding promoter holdings. 
• FPO (Follow-on Public Offer): When a listed company issues additional equity shares to the public. 
• IPO (Initial Public Offering): The first sale of a company’s shares to the public and listing on the stock exchange. 
• ISIN (International Securities Identification Number): Unique 12-digit code that identifies each security.
• Limit Order: An order to buy/sell a stock at a specific price or better.
  
• Market Capitalization: Total value of a company's outstanding shares = share price × total shares. 
• Market Order: A buy/sell order executed immediately at current market prices. 
• Nifty 50 / Sensex: Benchmark equity indices of NSE and BSE, respectively, comprising top Indian stocks.
• Offer for Sale (OFS): Method used by promoters/government to dilute stake through exchange-based bidding. 
• P/E Ratio (Price-to-Earnings): Market price ÷ EPS; a valuation metric. 
• Rights Issue: Issuance of additional shares to existing shareholders at a discounted price. 
• SEBI: Securities and Exchange Board of India — the regulatory authority for securities markets. 
• Shareholding Pattern: Breakdown of a company’s equity ownership—promoters, public, FPI, etc. 
• Split (Stock Split): When a company increases the number of its shares by reducing the face value. 
• STCG / LTCG: Short-Term (≤1 year) / Long-Term (>1 year) Capital Gains — different tax rates apply. 
• Tick Size: Minimum price movement in a stock — typically ₹0.05 on NSE/BSE. 
• Volume: Number of shares traded during a specific time. 
• Volatility: Degree of variation in price movements; higher volatility = higher risk.