Classification of Equity Shares

Classification of Equity Shares

Just as there are different ways of reaching God, there are numerous ways of making money on the stock market. You can select from a variety of equity stocks to suit your investment objectives, your ability and willingness to take risks, the size of your wallet, etc.

Following are some of the types of equity shares:

• Large Cap Stocks

• Blue-Chips

• Mid Cap Stocks

• Growth Stocks

• Defensive Stocks

• Cyclical Stocks

• Turnaround Stocks

• PSU Stocks

• MNC Stocks

• Large Cap Stocks

These are stocks of the large companies (many being blue chip firms) in terms of market cap (Rs. 10,000 crore and above). Being established enterprises, they have at their disposal large reserves of cash to exploit new business opportunities.

The sheer volume of large-cap stocks does not let them grow as rapidly as smaller capitalized companies and the smaller stocks tend to outperform them over time. However, what they lack in speed, they make in consistency. These companies have steady revenue and profits and pay regular dividend. Investors, hence, gain the advantages of reaping relatively higher dividends compared to small- and mid-cap stocks while also ensuring the long-term preservation of their capital.

Examples include TCS, Reliance Industries, ONGC, HDFC Bank, L&T, etc.

However, since these companies growth taper off after a time, these are usually not growth stocks.

• Blue Chips

These are shares of established companies whose assets, sales turnover, and profits continue to grow steadily. Growth can be achieved by following an aggressive policy of expanding of profitable manufacturing facilities and widening the marketing network, or else through diversifying into profitable new lines of activity. Such companies are usually led by a very high growth-oriented entrepreneurial type of management. They enjoy full advantage of the tax incentives available for growth through expansion, modernization, diversification, M&As, etc....