Presentation about basics of shares and their types.

1. SHARES

2. What are shares?
A unit of ownership in a company that represents a
claim on a portion of the company's assets and
earnings.
Shares are a way for people to own a piece of a
company. When a company wants to raise money, it
can offer shares to investors. Each share represents
a small piece of ownership in the company.
3

3. The concept of shares dates back to the 1600s when the Dutch
East India Company issued the first shares to raise funds for
its voyages.
Most of the companies used this concept for their expansion
and growth.
The share market is a platform where stocks or shares of
publicly traded companies are bought and sold. These
transactions take place through a stock exchange, such as the
New York Stock Exchange (NYSE).
The price of shares is determined by supply and demand. If
there are more buyers than sellers, the price of shares will
increase, and vice versa.
4

4. 5
Online platforms such as the Groww app can also be used to
facilitate the buying and selling of shares. These platforms
typically allow users to browse available shares, place bids or
offers, and complete transactions online.

5. Types of shares
⊸ Preference shares
⊸ Equity shares.
6

6. Preference shares
Preference shares are like a
special kind of share that gives
investors some extra benefits,
like getting paid a fixed
amount of money before other
shareholders if the company
makes a profit.
However, they usually don't
give the investor a say in how
the company is run.
What are preference and equity
shares?
Equity shares
Equity shares are the regular
shares that most people think
of when they hear the word
"stock".
They represent ownership in
the company and typically
come with voting rights, which
means the investor can have a
say in company decisions.
7

7. Types of preference shares
⊸ Convertible preference shares
⊸ Non-convertible preference shares
⊸ Redeemable preference shares
⊸ Irredeemable preference shares
⊸ Participating preference shares
⊸ Non-participating preference shares
⊸ Cumulative preference shares
⊸ Non-cumulative preference shares
⊸ Shares with callable option
8

8. 9
Convertible
Convertible preference shares are
those shares that can be
converted into common shares at
a later date.
Non-Convertible
Non-convertible preference
shares are more fixed and cannot
be converted or changed.
Redeemable
Redeemable preference shares can
be redeemed or bought back by
the company at a later date
Irredeemable
Irredeemable preference shares
cannot be redeemed or bought
back by the company at a later
date.
Participating
Participating preference shares
give shareholders the right to
receive additional dividends
beyond their fixed rate if the
company has a profitable year
Non-participating
Non-participating preference
shares only receive their fixed rate
of dividends.

9. 10
Cumulative
Cumulative preference shares
accumulate any unpaid dividends
and must be paid out in the
future, similar to a savings
account where any missed
payments accumulate and must
be paid out later
Non-cumulative
Non-cumulative preference
shares do not accumulate unpaid
dividends, i.e, any missed
payments are not owed to the
shareholder.
Shares with a callable option
Shares with callable option, give the company the right to call and buy
back the shares from shareholders which were previously sold at a
predetermined price and date in the future.
This gives the company flexibility to adjust its capital structure as
needed.

10. Preference shares: Pros and cons
PROS:
Fixed Dividend: Preference
shareholders are entitled to a fixed
dividend that is paid before any
dividends are paid to equity
shareholders.
Priority of Claims: In the event of
liquidation, preference shareholders
have a higher priority of claims over
equity shareholders.
Limited Voting Rights: Preference
shareholders usually have limited
voting rights, which means they
have less influence over the
company's decision-making process.
This can be an advantage for those
who prefer a more hands-off
approach to investing.
11
CONS:
Lower Returns: Since preference
shares have a fixed dividend,
investors may not benefit from any
increases in the company's profits or
share price.
No Ownership Rights: Preference
shareholders do not have ownership
rights in the company, which means
they cannot participate in the
company's growth or future earnings
potential.
Limited Liquidity: Preference
shares are not as liquid as equity
shares, which means they may be
more difficult to buy or sell on the
market.

11. Equity Shares
Equity shares, also known as ordinary shares or common shares,
represent ownership in a company. When someone buys equity
shares, they become a part-owner of the company and have the right
to vote on company decisions, such as electing the board of
directors.
Shareholders of equity shares also have the potential to earn
dividends, which are payments made by the company to
shareholders as a reward for their ownership. However, dividends are
not guaranteed and can vary depending on the company's profits
and financial position.
In simpler terms, equity shares are like buying a piece of a company
and having a say in its decisions. Shareholders can also earn money
through dividends, but this is not guaranteed.
12

12. Equity shares: Pros and cons
PROS:
Ownership Rights: Equity
shareholders have ownership rights
in the company, which means they
can participate in the company's
growth and future earnings
potential.
Potential for Higher Returns:
Equity shareholders may benefit
from any increases in the company's
profits or share price, which can
result in higher returns.
Voting Rights: Equity shareholders
have voting rights, which means
they can have a say in the company's
decision-making process.
13
CONS:
Volatility: Equity shares are subject
to more market volatility than
preference shares, which means they
can experience larger fluctuations in
price.
Lower Priority of Claims: In the
event of liquidation, equity
shareholders have a lower priority of
claims compared to preference
shareholders.
Dilution: If a company issues more
equity shares, it can dilute the
ownership and earnings potential of
existing shareholders.

13. Difference Between
Preference Shares:
⊸ Nominal value is lower.
⊸ Dividend varies according to
profit.
⊸ No right for arrears of
dividend.
⊸ No priority in dividend and
repayment of capital.
⊸ Cannot be redeemed.
⊸ There is more risk.
⊸ Wider voting right.
⊸ Control over management.
⊸ Highly speculative.
⊸ Ready to take risk and to get
greater dividend prefer this.
Equity Shares:
⊸ Nominal value is higher.
⊸ Rate dividend is fixed.
⊸ Cumulative preference shares get
arrears.
⊸ Priority in dividend and
repayment of capital.
⊸ Can be redeemed.
⊸ The risk is lower.
⊸ Limited voting right.
⊸ No control over management.
⊸ Less speculative.
⊸ Not ready to take risk and expect
steady income prefer this
14

14. NIFTY 50
15

15. NIFTY 50
16
NIFTY is the stock market index of the National Stock Exchange (NSE) in
India. It represents the weighted average of the top 50 companies listed on
the NSE, across 14 sectors of the Indian economy, and provides an overall
picture of the performance of the Indian stock market.
The Nifty is a commonly used benchmark for Indian equity investments and
is widely followed by investors and traders. The index is calculated using a
market capitalization weighted methodology, which means that companies
with a higher market value have a greater impact on the index movements.
⊸ The full form of NIFTY is the National stock exchange FIFTY.
⊸ Index Value = Current Market Value / (1000 * Base Market Capital).
⊸ Nifty assigns a base value of 1000 and uses 1995 as the base year.

16. SENSEX
18
The full form of SENSEX is Stock Exchange Sensitive Index. SENSEX is the oldest
stock exchange in India and is also termed as BSE (Bombay Stock Exchange). It is a
free float, economy-weighted index of 30 financially sound and very
well-established organizations listed on BSE.
The primary difference between market cap and free-float market cap is that the
total market cap considers the total number of outstanding shares. In comparison,
the free-float market cap considers only those shares that are actually available to
the general public for trading.
The free-float methodology is a method of calculating the market capitalization of
a stock market index's underlying companies. With the free-float methodology,
market capitalization is calculated by taking the equity's price and multiplying it by
the number of shares readily available in the market.
SENSEX Value = (Total free float market capitalization/ Base market
capitalization) * Base period index value
The base period (year) used here is 1978-79 and the base value is 100 index points.

17. 20
⊸ Initial Public Offering (IPO): The first sale of a company's
shares to the public, allowing the company to raise capital by
issuing new shares.
⊸ Dividend: A payment made by a company to its shareholders
as a distribution of its earnings.
⊸ Capital Gains: The term capital gain refers to the increase in
the value of a capital asset when it is sold. Put simply, a
capital gain occurs when you sell an asset for more than what
you originally paid for it.
⊸ Blue-chip index: An index that tracks the shares of
well-known and financially stable publicly traded companies
known as blue chips. Blue-chip stocks provide investors with
consistent returns, making them desirable investments, and
are considered a gauge of the relative strength of an industry
or economy.
Other important terms

18. ⊸ Bull market: A time when stock prices are rising and market
sentiment is optimistic. Generally, a bull market occurs when there is a
rise of 20% or more in a broad market index over at least a two-month
period.
⊸ Bear market: A bear market is defined by a prolonged drop in
investment prices — generally, a bear market happens when a broad
market index falls by 20% or more from its most recent high.
21

19. INVESTING IN SHARES
Investing in shares means buying ownership in a company, with
the expectation of making a profit from its growth or by
receiving dividends.
⊸ Benefits: Potential for high returns,Opportunity to invest
in companies you believe in, Dividends.
⊸ Risks: Market risk,Company-specific risk,Currency risk.
Diversification is a key strategy for managing risk when
investing in shares. By diversifying your portfolio, you spread
your investments across different asset classes, industries, and
geographies, reducing the impact of any one company's
performance on your overall portfolio.
22

20. Short Term:
⊸ Typically held for less than
one year.
⊸ Aim to take advantage of
short-term market
fluctuations and price
⊸ Can be riskier, as
short-term price
movements can be
unpredictable and volatile
⊸ Can require more frequent
monitoring and active
management
Long Term:
⊸ Typically held for more than one
year, often several years or even
decades.
⊸ Aim to benefit from a company's
long-term growth and potential
for increasing share value.
⊸ Generally considered less risky,
as long-term trends tend to
smooth out short-term volatility
⊸ Can require less frequent
monitoring and passive
management
23
Short term vs Long term
Investment

21. Short Term:
⊸ Day trading: Within a single
trading day.
⊸ Swing trading: For a few days or
weeks.
⊸ Event-driven trading: During a
significant event, such as a merger
or earnings announcement.
⊸ Short selling: The practice of
borrowing shares of a stock and
selling them with the expectation
that the price will fall, allowing
the investor to buy the shares
back at a lower price and make a
profit.
Long Term:
⊸ Value investing: Buying shares of
companies that are undervalued
in the market, with the
expectation that their value will
increase over the long term.
⊸ Growth investing: Buying shares
of companies that are expected to
experience above-average growth
rates in the future.
⊸ Income investing: Buying shares
of companies that pay dividends,
with the expectation of holding
the shares for the long term to
generate a steady stream of
income.
24
Examples: