FAQs on Stock Market

A V Jose, Associate Professor ,

SCMS , Kalamasserry
Equity Share
 Represents ownership in a company

 Holder of the such share is a member of the

company eligible to share many benefits
from the company
Returns from investment in shares
 Capital appreciation
 Dividend
 Bonus shares
 Rights issue
What is Capital appreciation
( capital gains)
 Difference between buying price and
selling price of a share. People are not
looking at the dividend when they
purchase share but the capital
appreciation over a period of time.
Dividend
 Part of profit distributed by the company
among the investors
 It is percentage of the paid up value or face

value of the share

Bonus share
 Shares issued by companies to their
shareholders free of cost by capitalisation of
accumulated reserves from the profits
earned in the earlier years
What is a Rights Issue
 In a Rights issue , a company issues new
shares by giving existing shareholders the
right to purchase new shares in proportion
to their existing holding ( can be offered at a
discount also)
What are the risks in investing in
Shares
 Equity shares are “ High Risk High return
Investments”
 Compared with Small savings, bank deposits,

PPF Debentures, Bonds etc. it is risky

 A good scrip picked up at the right time

could fetch fairly good returns ( infosys)

 Sometimes the invested fund itself may be

eroded( HFCL)
Preferential allotment of shares

Fresh allotment of shares to
promoters, their friends and
relatives on a preferential basis
Face Value of share
 Par Value - nominal value of the share
Issue at par
 Issued at the same price as the face value
of the share
Issue at Premium
 When issued at a price above the face value
of the share
What is a Bond
 It is a promissory note issued by a company
or government to its lenders
 Lenders earns interest
Where can one buy shares?
 IPO
 Stock market
IPO
 Initial Public Offer- when company offers its
shares to the general public for the first
time ever, it is known as IPO.After IPO these
shares are listed in stock exchanges
Stock exchange
 It is a place where the buyer and seller meet
to trade in shares in an organised manner .
 There are 23 stock exchages in India
 Controlled by SEBI
What is the function of the stock
market?
 Stock market enhances capital formation in
the economy and it comprises of
 Primary market
 Secondary market