What is an Equity Market

What is an Equity Market

Also known as the stock market, equity market is the market in which shares are issued and traded either through stock market exchanges or over-the-counter markets. It is one of the most vital areas of a market in an economy because it gives companies access to capital along with a slice of the companies’ ownership to investors with the potential to make gains on its future performance. Equity market is the meeting point for buyers and sellers of stocks. There are two kinds of securities that can be traded in the equity market- public stocks, which are listed on the stock exchange, and privately traded stocks. Private stocks are usually traded through dealers, also known as over-the-counter market.

‘Equity’- the word is so friendly and co-operative but when it comes together with ‘market’ it becomes the worst nightmare for most of us due to lack of knowledge. So to put it in simple words, equities are the stocks or shares of a company and any investor investing in the company’s equity shares becomes a shareholder of the company and gains ownership rights of that company. These shares are traded via a common universal platform which is known as the equity market or the stock market. The shares of all the companies, that are a part of the stock market, are listed in the stock exchange and it acts as a meeting ground for buyers and sellers. There are various kinds of instruments that can be traded.

In case of shares: (explain all)

  • Equity shares
  • Preference shares

In case of debentures: (explain all)

  • Partly convertible debentures
  • Fully convertible D
  • Non convertible
  • Warrants/ coupons/ secured premium notes/ other hybrids
  • Bonds

There are as many as 23 stock exchanges in India, with NSE (National Stock Exchange) and BSE (Bombay Stock Exchange) being the dominant ones. Every country in the world has numerous stock exchanges, out of which NYSE and LSE group are the most dominant ones.