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Understand equity markets and how they facilitate buying and selling of company shares.
The equity market, also known as the stock market, plays a central role in modern finance. It facilitates ownership exchange, capital formation, and wealth creation for individuals and institutions globally.
An equity market—commonly known as the stock market—is a financial marketplace where shares of publicly held companies are issued, bought, and sold. It enables investors to purchase ownership in companies and benefit from capital appreciation and dividends. The term “equity market” is often used interchangeably with “stock market,” although it technically refers to the trading of ownership (equity) instruments.
Equity markets can operate through:
Stock exchanges – Regulated platforms like the NYSE, NASDAQ, NSE, and BSE
Over-the-counter (OTC) markets – Decentralised platforms for unlisted securities
These markets serve a dual purpose: allowing companies to raise capital and offering investors the opportunity to participate in the growth of businesses. Equity markets also play a crucial role in economic development by supporting entrepreneurship, job creation, and investment flow.
In the context of the share market:
Equity refers to ownership interest in a company.
The equity market provides a structured environment to issue and exchange these ownership stakes.
Understanding this term is essential to differentiate between equity financing and other instruments like debt or hybrid securities.
Equity markets can be categorised based on how and where shares are issued or traded. These distinctions help investors understand the structure of the market and the risks or opportunities involved.
At a broad level, equity markets include:
Primary Market: Where new shares are created and sold directly by companies to investors, typically through Initial Public Offerings (IPOs) or Follow-on Public Offers (FPOs).
Secondary Market: Where existing shares are traded among investors through stock exchanges. The issuing company is not directly involved in these transactions.
Listed Market: Shares are traded on recognised, regulated stock exchanges (e.g., NSE, BSE).
Unlisted Market: Shares are not listed on exchanges and are traded privately or over the counter (OTC).
Equity Capital Market (ECM): A broader concept that includes both public and private equity issuance, often involving institutional placements and underwriting by investment banks.
| Category | Description |
|---|---|
Primary Market |
New shares issued to raise capital (IPOs, FPOs) |
Secondary Market |
Existing shares traded among investors |
Listed Market |
Traded on formal exchanges like NSE/BSE |
Unlisted Market |
Privately held shares traded off-exchange |
Equity Capital Market |
Includes IPOs, block deals, placements, and underwriting activities |
Equity markets serve several critical functions:
Capital raising for businesses through share issuance
Liquidity for investors to buy and sell shares
Price discovery based on supply-demand dynamics
Ownership transfer and shareholder democracy (voting rights)
Indicator of economic health, reflecting investor sentiment
Equity markets are vital for the economy because they:
Channel savings into productive investments
Provide companies with growth capital
Enhance wealth distribution via retail participation
Act as a leading economic indicator
Equity markets connect businesses seeking funds with investors looking for returns. They help companies expand, create jobs, and contribute to GDP growth while offering individuals a stake in that progress.
Potential for high returns
Liquidity—easy to enter or exit
Ownership and voting rights
Portfolio diversification
Transparent regulation and disclosures
Volatility: Prices may fluctuate due to economic or market events
No guaranteed returns: Capital is at risk
Research-intensive: Requires market knowledge
Behavioural bias: Emotional trading can lead to losses
The major Indian equity exchanges (NSE & BSE) follow these hours:
Pre-opening session: 9:00 AM – 9:15 AM
Regular trading hours: 9:15 AM – 3:30 PM
Post-close session: 3:40 PM – 4:00 PM
All times are IST and may differ for special sessions or holidays.
Here are some of the most recognised equity markets globally:
NYSE (New York Stock Exchange) – Largest by market capitalisation
NASDAQ – Technology-heavy exchange
London Stock Exchange (LSE)
Tokyo Stock Exchange (TSE)
Shanghai Stock Exchange (SSE)
These platforms reflect global economic strength and investor sentiment.
Equity vs. Stock: Essentially the same in practice
Trading vs. Investing: Not all participants are short-term traders
Ownership: Buying shares grants part-ownership and voting rights
Returns: Not all shares offer dividends
The equity market is a dynamic ecosystem that enables:
Capital raising
Ownership transfer
Wealth generation
Understanding its types, functions, advantages, and risks is key for anyone looking to participate or analyse financial systems globally.
This content is for informational purposes only and the same should not be construed as investment advice. Bajaj Finserv Direct Limited shall not be liable or responsible for any investment decision that you may take based on this content.
An equity market is where shares of companies are bought and sold. It allows investors to become partial owners in a company and earn returns.
They are often used interchangeably. Technically, "equity market" refers to ownership instruments, while "stock market" typically includes the trading environment.
The primary market is where new shares are issued (e.g., IPO), and the secondary market is where existing shares are traded between investors.
They provide capital for businesses, offer investment avenues for individuals, and reflect the overall health of an economy.
Regular equity market trading in India runs from 9:15 AM to 3:30 PM IST, Monday to Friday.
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