Equity

Investment is an activity where you set aside some money now, in anticipation of receiving a higher amount in the future.

Equity investments mean purchase of stake in a company and therefore, partial ownership of that company. Equity represents their respective ownership interests in that business. Business owners can raise capital by selling their equity or ownership interests in the business to other investors. Investors buying the ownership interest (or equity) of a business, enjoy the gains and losses of business activities and are known as shareholders.  

Market participants are essential for the smooth functioning of the market and provide a link between buyers and sellers of securities in the securities markets. These entities are also known as Market Intermediaries. It is mandatory for these intermediaries to get themselves registered with the regulator, i.e. SEBI. These market participants may get registered with SEBI in different roles like Stock Exchanges, Depositories, Depository Participants (DP), Stock Brokers, Registrars and Transfer Agents (RTA), Merchant Bankers, Clearing Corporation, etc.  Some of the major participants and their roles and functions are mentioned below:

Primarily, the stock exchange provides a trading platform for investors to purchase securities. There are two major stock exchanges in India: NSE (National Stock Exchange) and BSE (Bombay Stock Exchange). A stock index measures the price changes of a specified group of stocks or stocks of a specified sector. 

In the primary market, the company issues securities directly to investors. This typically happens during an IPO or whenever a company wants to issue securities in the form of a bonus or rights issue.

Any action taken by the company that creates an impact on issued securities is known as corporate action. Dividend, stock split, bonus and rights issue are examples of corporate action.

Fundamental Analysis and Technical Analysis are two common ways to analyze stocks.

Fundamental analysis is used to calculate the intrinsic value of a stock based on the financials of the company, macro-economic factors and sector outlook.  Investors use this for long-term investment.

Blue chip companies have a well-established performance track record. These companies are typically pioneers in their industry and have large market capitalizations. They are preferred choices of investors who do not want to take a lot of risk with their equity investments. These stocks usually have stable earnings and normal growth rate. Investors can expect decent returns i.e. equivalent to market returns by investing in these stocks. These companies have a stable financial position and often pay dividends to shareholders. Stock like TCS, SBI, HDFC, ICICI bank, etc. can be considered as blue chip stocks.

Whenever you are investing or trading in the stock market, you need to pay taxes on your gain.

Microeconomics focuses on the study of individual decisions taken by businesses, households, workers, etc. Macroeconomics focuses on the study of decisions taken by countries and governments and assesses the economy as a whole. Macroeconomics deals with issues like inflation, growth, inter-country trades, unemployment etc. Microeconomics and macroeconomics are complementary to each other. Microeconomics is similar to a bottom-up approach where businesses need to be analyzed first followed by industry and country. Macroeconomics is more like a top-down approach, where the country is analyzed first and subsequently industry and businesses.

 What is the reason that investors are unable to get equivalent returns even though a certain asset class may have performed well?  There is a difference between asset class returns and investor returns in that asset class. The reason for this difference is individual behavior towards investment decision making.