SHARES

A joint stock company divides its capital into units of equal denomination. Each unit is called a share.

These units are offered for sale to raise capital. This is termed as issuing shares. A person who buys share/shares of the company is called a shareholder, and by acquiring share or shares in the company becomes one of the owners of the company. Thus, a share is an indivisible unit of capital. It expresses the proprietary relationship between the company and the shareholder.

Meaning of share: According to the section 2(46) of the Companys Act 1956, share means a part in the share capital of the company and it also includes stock except where a distinction between stock and share capital is made expressed

Types of shares: Mainly there are two types of Shares: 1. Equity Shares 2. Preference Shares (a) Cumulative and Non-Cumulative Preference Shares (b) Participating and Non-Participating Preference Shares (c) Redeemable and Irredeemable Preference Shares (d) Convertible and Non-Convertible Preference Shares


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Features of equity shares

Equity Shares are also termed as ordinary shares. Shareholders holding equity shares have the residual right of the company. They may get higher dividends than the preference shareholders or may get nothing depending on the profit remained after paying all the expenses and dividend to shareholders. The share holders holding equity shares are also termed as residual claimants. It is the risk bearing capital of the company. They don't have preferential right with respect to payment of dividend or in the repayment of capital at the time of winding of the company. Equity shares are risk bearing shares because they are the actual owners of the company when ever company run into losses they have to bear the losses. Equity share holders enjoys voting right whenever there is a meeting they will enjoy voting power in electing board of directors. Equity capital is the permanent capital for the company . The company need not to return capital . Company has to repay the capital only at the time of winding up. Equity shares are easily transfer from one person to another at the stock exchange according to the procedure laid down in the article of association of the company.

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Types of equity shares

Blue chip shares: Shares of well known companies are called blue chip
shares. They must show consistent growth over the years. these shares have bright future. Defensive shares : These shares tend to fall less in bear market compared to other shares and they provide safe return for investors money. Growth shares: It represent the shares of fast growing companies. They show increasing trend of earnings per share. They are good for long term investment. Sweat shares: They are those shares which are issued to employees by the company because of their active involvement in the company's growth, these shares acts as reward for dedicated workers present in a company. Cyclical shares:Those shares which involves rise and fall in prices With the state of national economy.ex:construction,automobiles,engineering,banking,etc

Preference share: They are those shares which are given preference as
regards to payment of dividend and repayment of capital. As in the case of winding up of the company, their capital is paid back first and then the equity shareholders are paid. Preference shareholders cannot exercise their voting rights on all the matters.

Features of preference shares: Return on investment: Preference shares are given preference to get a

return on investment i.e. dividend. they are paid dividend first out of the profits made by a company. Return of capital: These shareholders are paid their capital first in case of winding up of the company. Fixed dividend: Preference shares have a fixed rate of dividend and that is the reason they are called fixed income securities. Whether the company has low or high profits, they are entitled only to a fixed rate of dividend. Non-participation in management: Preference shareholders do not participate in the management of the company's affairs. For example: A company may have earned a profit of Rs 1 crore . It keeps half that amount within itself. This will be utilised to buy new machinery or more raw material or to reduce its loan with the bank. It distributes the other half as dividend.

Types of preference share: 1. Cumulative and Non-Cumulative Preference Shares:- The

holders of the cumulative preference shareholders have the right to claim the unpaid dividend either of the current year or previous years, whether the company has earned profits or not.

Non cumulative preference share:- Non-cumulative

preference shareholders are paid dividend only in case the company has earned the sufficient profits. In case of loss, they cannot claim for the dividend either of the current or previous year.

2. Participating and Non-Participating Preference Shares:The holders of the participating preference shares have the right to claim for the dividend in addition to their fixed dividend on the surplus profits, which remains after meeting the claims of equity shareholders. The surplus profit is shared between preference and equity shareholders.

Non participating shares:They are entitled to only fixed rate of

dividend. They cannot claim for a part in surplus profits of the company.

3. Redeemable And Irredeemable Preference Shares:Redeemable preference shares : They are those shares which can be redeemed from the shareholders after a fixed period of time by making payment to them. But the company must be authorised by its Articles of Association. Irredeemable Preference Shares : they are those shares which cannot be redeemed from the shareholders during the life span as the Articles of Association does not authorise them.

4. Convertible and Non-Convertible Preference Shares:Convertible Preference Shares are those shares which can be easily converted into equity shares any time.

Non-Convertible Preference shares: They are those shares

which do not have the option of their conversion into the equity shares.

Process of share market First let us understand the Working of a share market
When a person want to buy/sell shares in the share market then he has to first place the order with a broker or can do themselves using online trading systems. When you place the buy order, the message is transferred to the exchange [either NSE {National Stock Exchange} or BSE {Bombay Stock Exchange}] and the order stays in the queue of exchange's other orders and gets executed if the price of that share comes to that value. Once you get the confirmation of this transaction, the shares purchased, will be sent to your DEMAT account. The shares will be stored in demat account in electronic format.

What is Demat account and why it is required?

Securities and Exchange Board of India (SEBI) is a board of India appointed by the Government of India in 1992 with its head office at Mumbai. In another word it is the regulator for stock exchanges. It monitors and regulates both stock exchanges in India Demat (short form of Dematerialization) is the process by which an investor can get shares (also called as physical certificates)converted into electronic form maintained in an account with the Depository Participant (DP).

DP could be organizations involved in the business of providing financial services like banks, brokers, financial institutions etc. DPs are like agents of Depository.
Depository is an organization responsible to maintain investor's securities (securities can be shares or any other form of investments) in the electronic form.

Investors wishing to open Demat account has to go to DP and open the account.

Opening the Demat account is as simple as opening the saving bank account with any bank. As you need bank account to save money, deposit cheques etc, likewise you need to have a demat account to buy and sell stocks in share market and to hold the shares. All shares what you own will show in your demat account, so you don't have to possess any physical certificates. All your shares are all held electronically in your demat account. As you buy and sell the shares, accordingly, your shares will get adjusted in your demat account.

How to open a Demat account? You will need the following details while opening the demat account: Name of account holder Mailing address Bank account details Guardian details for minors Nomination declarations

Speculators of stock market

Speculation has a special meaning when talking about money. The

person who speculates is called a speculator. A speculator does not buy goods to own them, but to sell them later. The reason is that he wants to profit from the changes of market prices. One tries to buy the goods when they are cheap and to sell them when they are expensive. It is called speculation Speculation includes the buying, holding, selling, and short selling of stocks, bonds, commodities, currencies, any valuable financial instrument.

SPECULATORS

1.BULL: A bull is a person on stock exchange who expects a rise in

price of certain shares. 2.BEAR: A bear is a person who expects that there is a fall in price, in case of fall in price he purchases the share and sells it at the time of price rise. 3.STAG: A stag is a cautious speculator who does not buy or sell shares but applies for shares in new issue market. As soon as he receives the shares he sells them, he may also suffer losses

THANK YOU EVERY ONE

Vinay.N