Equities (NSE, BSE, IPO Process)

When you buy a share of a company, you become a part-owner of that business, entitled to a proportional claim on its profits and assets. Equity is the residual claim: debt holders get paid first; whatever remains belongs to shareholders. This residual nature means equity is riskier than debt but also offers higher long-term return potential.

In India, equities are traded on two national exchanges: the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). The NSE's Nifty 50 and BSE's Sensex are the primary benchmark indices. NSE handles the majority of cash equity trading volume by value.

Equity markets serve two functions: primary markets (where companies raise fresh capital through IPOs and follow-on offerings) and secondary markets (where existing shares are bought and sold between investors). Understanding how both work is essential for analysing listed Indian companies.

Market structure:

• NSE and BSE: Both use electronic order-matching systems. T+1 settlement (trades settle one business day after execution, effective February 2023)
• Market segments: Main Board (large established companies), SME platform (smaller companies, lower listing requirements)
• Indices: Nifty 50 (free-float market-cap weighted, 50 stocks), Sensex (30 stocks), Nifty 500, sectoral indices

IPO process in India (SEBI ICDR Regulations):

1. DRHP (Draft Red Herring Prospectus) filed with SEBI
2. SEBI review and comments (typically 30 days)
3. Book-building: price band set, anchor investors allocated, QIB/NII/retail bidding window opens (3 days)
4. Basis of allotment, refunds, listing (typically Day 6 from close of issue)

• Reservation: 50% QIB, 15% Non-Institutional Investors (NII), 35% Retail (< ₹2 lakh application)

Key corporate actions:

• Dividend: Cash distribution to shareholders (ordinary or special)
• Bonus issue: Free shares to existing holders (no cash, capitalises reserves)
• Rights issue: New shares offered to existing holders at a discount
• Stock split / reverse split: Changes face value and share count, not economic value
• Buyback: Company repurchases its own shares (via tender offer or open market)