Before understanding about the Shares, first we need to understand about what is a Company, As per provisions mentioned in the Companies Act 2013, a Company means a business incorporated under this Act or any previous company law; In other words, A company is a legal entity which is formed by different individuals to generate profits through their commercial activities . Broadly there are two types of companies,
As per Indian Company Act 2013 - a public limited company is that has limited liability and offers shares (minimum 7 and maximum unlimited) to the general public. These shares can be traded in the stock exchanges (We will discuss about Stock Exchanges in later part) which is regulated through the Companies Act 1956 (amends time to time) and other related laws & regulations under the guidance of Ministry of Corporate Affairs.
a private limited company is business entity having limited to a maximum of 50 shareholders.
For any business model, Capital is the primary component to run the entity. This capital will be accumulated by dividing into smaller amounts termed as Shares. Those who buy the shares will be called as shareholder. When a company initially offers its shares to the public, it's called Initial Public Offer(IPO).
Let's understand with an example:
ABC public limited company starts its business with a capital of 1 lakh by accumulating through shares having Face Value of 10 each. Here Total number of Shares will be 100000/10 = 10000 shares.
The following are the two major stock exchanges of India. Stock Exchange is the secondary market for the shares already issued by the companies by way of IPO (Initial Public Offer) / FPO (Follow on Public Offer), where an investor / trader can buy or sell shares. Whereas Primary refers to that, when a company comes to public offer for the first time and this is called Initial Public Officer (IPO).
Sensex
| i. | Sensex is the index for Bombay Stock Exchange, Mumbai. The index represents the average of the top 30 shares (in terms of Market Capitalization) of the BSE listed Companies. |
| ii. | Bombay stock exchange is the oldest stock exchange and having highest number of Listed companies. |
Nifty
| i. | Nifty is the index for National Stock Exchange, New Delhi. The index represents the average of the 50 shares of the NSE listed companies. |
| ii. | Companies have to fulfil certain norms to be a part of the 50 shares. If any existing company in the 50 shares fails to meet the parameters at any point of time, that particular share will be removed from the index. |
| iii. | This stock exchange is considered as the youngest and represents the Indian Economy Growth. |
