Types of Stocks in Indian Share Market
The stocks are bit complicated for newcomers. There are several types of stock, each of which is distinguished by some extremely fine print. While all stocks indicate ownership of a company’s shares, they are not all the same. A stock is a virtual representation of your share market investment on a computer. You may either acquire stocks outright or sell them short. In India, short selling is permitted for intraday trading, however SEBI prohibits naked short selling and day trading by institutional investors.
Category of Stocks
Here’s a rundown of the many stock categories traded in Indian stock market:
Learn More: Explain Common Stocks – Features & Benefits
Blue Chip: A blue chip stock is a stake in one of the country’s most well-established and financially strong corporations.
Secondary Stock: A share in a corporation that has a lot of money but isn’t quite a blue chip is known as secondary stock.
Income Stock or Dividend Stock: A income stock is a stock that is defined by its issuing company’s commitment to paying out increased dividends.
Growth Stock: A growth stock is a stock in a firm that is still tiny but has a lot of potential for growth, according to its owners.
Learn More: What are the different types of orders in Stock Market
Penny Stock: A penny stock is a highly speculative stock in a firm with little or no real value other than the possibility for rapid development.
Other Stock Investments
In addition to the popular categories of stocks mentioned above, the market offers two forms of stock: ordinary or common stock and preferred stock, which cater to different sorts of investors. The advantages of common stock are more targeted toward ordinary investors, whereas the advantages of preferred stock are more geared toward institutional investors such as banks, mutual funds, bonds and pension funds.
Common Stock in Indian Stock Market
Common stock is the type of stock that most individuals prefer when they want to invest in stock. It’s also the most often bought and sold stock, or traded in investor jargon. As stated at the outset, it symbolises fundamental ownership of a portion of a corporation. On corporate concerns, one share of common stock entitles the owner to one vote, or proxy. As popularly indicated, two votes equal two shares, and so on.
Let us take example of apple commodities. Because of the strong winter that damaged the apple harvest, the value of your firm and hence its stock would have plummeted if you had purchased shares in one of those companies that manufactures processed juice from apples. You would have lost money, which is known as a capital loss.
Shareholders profit when the company’s value rises, if in this case, the apple shows bumper harvest without damage to the crop, the company’s worth increase and the stock rise with it. This is referred to as capital gain.Financial “instruments” and equities” are frequently used terms while discussing different forms of investments in Indian share market.
One of the two ways stocks make and lose money is through capital gains and losses (the other being dividends). Other issues, such as capital gains taxes, should always be taken into account. Current capital gains taxes are bit high that they typically cancel out a large portion of a stock’s prospective earnings, making many equities unappealing to stock investors. You always incur the danger of losing the money you put in with any stock investment (capital loss). While it would be of little consolation in such a circumstance, you would at least obtain a tax credit for the money you ended up losing.
Preferred Stock in Indian Stock Market
Preferred Stock is a type of stock that has a higher dividend. Preferred stock differs from common stock in that preferred stock shareholders get dividend payments before common stock shareholders. Furthermore, if the company goes out of business, preferred stockholders receive their portion of whatever is left before common stockholders.
So, why aren’t more people investing in preferred stock? For starters, firms do not issue preferred stock until after they have issued common stock, so there is less of it. Second, most preferred stockholders do not have voting rights. Third, and most importantly, depending on how much money the firm produces, preferred stock owners are generally given a fixed dividend.