A share (or stock) is a unit of ownership in a company. If Reliance Industries has issued 678 crore shares and you own 1 share, you own 1/678,00,00,000th of Reliance — its profits, its assets, and its future growth.
Buying shares is not gambling on a ticker symbol. It's buying a tiny fractional ownership in a real business — just like buying a small fraction of a shop in your neighbourhood, but with the ability to sell it any day the market is open.
Every business needs capital to grow. Companies have two broad options:
When a company reaches a certain size and wants large-scale capital, it issues shares through an IPO (Initial Public Offering) on a stock exchange. This lets thousands of investors participate in the company's growth — and gives the founders and early investors a way to monetise their ownership.
Tata Motors, Infosys, HDFC Bank — all of them raised money from the public by selling shares. In return, public shareholders participate in their success (through rising share prices and dividends) and bear the losses if the business struggles.
Two very different numbers are associated with a share that confuse beginners:
The original denomination of a share as stated in the company's incorporation documents — typically ₹10, ₹5, ₹2, or ₹1 in India. Face value has almost nothing to do with the current market price. It matters for:
What buyers and sellers agree to pay right now on the stock exchange. This changes every second during trading hours and is determined purely by supply and demand. A company with ₹10 face value can have a market price of ₹4,000 (like Reliance) — the gap reflects all the value created since the original capital was raised.
A share with a face value of ₹1 trading at ₹200 is not "cheap" or "expensive" compared to another share with face value ₹10 trading at ₹150. Only the market price and the underlying business metrics (earnings, growth, valuation ratios) determine value. Face value is largely irrelevant for investment decisions.
When people say "shares" they almost always mean equity shares. But companies can also issue preference shares — here's how they differ:
| Parameter | Equity Shares | Preference Shares |
|---|---|---|
| Dividend | Variable — depends on profits and board decision | Fixed — predetermined rate |
| Dividend priority | Paid after preference shareholders | Paid before equity shareholders |
| Voting rights | Yes — one share, one vote | Generally No |
| Capital repayment (wind-up) | Last priority | Before equity holders |
| Upside participation | Unlimited — shares price growth | Limited — only fixed dividend |
| Traded on exchanges | Yes (liquid) | Rarely (illiquid) |
| Typical investor | Retail & institutional investors | Institutional / private investors |
For most retail investors, equity shares are the relevant type. Preference shares are primarily used in private equity, venture capital deals, or specific institutional arrangements.
Owning equity shares in a listed Indian company gives you these rights:
At Annual General Meetings (AGMs) and Extraordinary General Meetings (EGMs), each share gives you one vote on resolutions — board appointments, mergers, dividend approval, major capital expenditure. Retail investors rarely attend AGMs but can vote electronically through their broker or directly via the NSDL/CDSL e-voting platform.
When the company declares a dividend, all shareholders of record on the record date receive a proportional share. If you own 100 shares and dividend is ₹5 per share, you receive ₹500 (before TDS if applicable).
If the company grows and becomes more profitable, its share price typically rises — allowing you to sell at a profit. This is usually the primary source of returns for equity investors.
If the company is wound up (liquidated), assets are sold and obligations paid in order: employees' dues → secured creditors → unsecured creditors → preference shareholders → equity shareholders. Equity shareholders are last — which is why equity carries higher risk (and higher expected return).
MRF's share price is ~₹1.5 lakh per share and Page Industries trades at ~₹40,000 — yet both are considered reasonably valued by some analysts. A share price of ₹15 can be expensive if earnings don't support it, while ₹1,500 can be cheap if earnings are growing rapidly. Always look at PE ratio, earnings growth, and business quality — never just the price tag.
Before 1996, shares were held as physical paper certificates. In 1996, India introduced the Demat (Dematerialised) system, where shares are held electronically — just like money in a bank account.
Two depositories manage India's Demat system: NSDL (National Securities Depository Ltd) and CDSL (Central Depository Services Ltd). Your broker (Zerodha, Groww, etc.) is a Depository Participant (DP) that gives you access to one of these depositories. When you buy shares, they appear in your Demat account within T+1 (next business day). When you sell, they are debited from your account.
Shares in your Demat account are held in your name at NSDL or CDSL — not at your broker's balance sheet. If your broker shuts down, your shares remain safe. You can transfer them to another broker's Demat account. This is fundamentally different from a bank deposit — your money at a bank is the bank's liability, but your Demat shares are your property.
This article is part of our Stock Market Basics series. Read the full beginner's guide covering everything from how markets work to how to start investing.
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