What is the Share Market? A Complete Overview

1. Defining the Share Market: Owning a Piece of a Business

A share represents a single unit of ownership in a company. When you purchase 100 shares of an Indian corporation like Tata Motors or Reliance Industries on the exchange, you become a legitimate equity shareholder and fractional owner of that corporation.

As a shareholder, you are entitled to two primary financial benefits: capital appreciation (increase in share price over time) and corporate dividend payouts (the distribution of net company profits to shareholders).

2. Types of Shares: Equity vs. Preference Shares

In India, corporations issue two main types of share capital under the Companies Act:

1. Equity Shares (Ordinary Shares): Carry full voting rights at Annual General Meetings (AGMs) and offer variable dividend returns tied to company profitability. Most retail investors trade equity shares.

2. Preference Shares: Receive a fixed dividend rate prior to equity shareholders and have preferential payout rights during company liquidation, but do not carry general AGM voting rights.

3. Share Market vs. Stock Market: What is the Real Difference?

While used interchangeably in everyday language, "Share Market" specifically refers to the trading of corporate equity shares. In contrast, "Stock Market" is an umbrella financial term covering shares, corporate bonds, mutual funds, sovereign gold bonds (SGB), and exchange-traded derivatives.