What is a Share? Meaning, Types & Benefits (2025 Guide)

This article explains the fundamental concept of “What is a Share?” for Indian investors in FY 2025-26. We analyze the structure of equity ownership, distinguishing between equity and preference shares with real-world examples like HDFC Bank’s 2025 bonus issue and Adani Enterprises’ November 2025 rights issue. The guide covers shareholder rights, regulatory frameworks under SEBI, and the latest tax implications (LTCG at 12.5%). We also clarify common confusions between “shares” and “stocks” and provide a verified breakdown of market capitalization categories.

A share in the stock market is a unit of ownership that represents a fractional claim on a company’s assets and earnings. When you buy a share, you become a partial owner (shareholder) of that company, entitled to voting rights and a portion of profits distributed as dividends. For Indian investors, shares are the primary vehicle for long-term wealth creation, offering potential capital appreciation that historically beats inflation. With retail participation in NSE and BSE reaching new highs in November 2025, understanding this asset class is the first step toward building a robust financial portfolio.

Types of Shares

In the Indian market, companies issue different classes of shares to meet various capital-raising needs. Understanding these distinctions is crucial for evaluating risk and return potential.

Equity Shares

Equity shares, also known as common stock, are the most popular investment vehicle on the NSE and BSE. They represent true ownership in a company.

• Voting Rights: Equity shareholders have the right to vote on corporate decisions (one share = one vote).
• Variable Returns: Dividends are not fixed; they depend on the company’s profits and board discretion.
• Risk & Reward: They carry higher risk as equity holders are paid last during liquidation, but they offer the highest potential for capital appreciation.
• Example: If you own equity shares of TCS (trading approx. ₹3,130 in Nov 2025), you benefit directly from the company’s growth.

Preference Shares

Preference shares are a hybrid instrument with features of both equity and debt.

• Fixed Dividends: Shareholders receive a fixed dividend rate before any payout to equity shareholders.
• Priority Claim: In case of company liquidation, preference shareholders are paid before equity shareholders.
• No Voting Rights: Typically, they do not carry voting rights in company management.
• Indian Context: These are less common for retail trading and are often used by companies for specific capital raising from institutional investors.

Bonus Shares

Bonus shares are free additional shares issued to existing shareholders from the company’s accumulated reserves. They increase the number of shares you hold but reduce the price per share, keeping the total investment value initially the same.

• Real-World Example (2025): HDFC Bank issued bonus shares in a 1:1 ratio (Record Date: August 27, 2025). If you held 100 shares before this date, you received another 100 shares for free. The share price adjusted from ~₹2,000 to ~₹1,000, making it more affordable for retail investors.

Rights Shares

A rights issue gives existing shareholders the “right” to buy new shares at a discounted price before they are offered to the public.

• Real-World Example (2025): Adani Enterprises announced a rights issue in November 2025 (Record Date: Nov 17, 2025). Shareholders were offered shares at ₹1,800 (a discount to the market price) in a ratio of 3:25 (3 new shares for every 25 held).

Characteristics of Shares

When you ask “What is a share?”, you are essentially asking about a bundle of rights and features:

• Ownership Rights: You are a legal part-owner of the company. Even one share gives you a stake.
• Transferability: Shares of listed companies are highly liquid. You can buy or sell them instantly on the NSE or BSE during market hours (9:15 AM to 3:30 PM).
• Limited Liability: Your financial liability is limited to the amount you invested. If the company goes bankrupt, you don’t lose personal assets beyond your share investment.
• Voting Rights: Equity shareholders vote on key decisions like appointing directors or approving corporate actions.
• Dividend Rights: You are entitled to a share of the profits if the board declares a dividend.
• Capital Appreciation: The primary driver for wealth—share prices rise as the company grows. For example, long-term investors in Reliance Industries have seen significant wealth compounding.
• Dematerialized Form: In India, physical share certificates are obsolete. Shares are held electronically in a Demat account with depositories like CDSL or NSDL.
• Indivisibility: You cannot buy 0.5 shares in India (unlike some US brokers). You must trade in whole numbers (1, 2, 10, etc.).
• Perpetual Existence: Shares exist as long as the company remains a going concern, regardless of who owns them.

How Are Shares Regulated?

The Indian stock market operates under a strict regulatory framework to protect investor interests.

• SEBI (Securities and Exchange Board of India): The apex regulator. SEBI formulates policies, monitors trading, and enforces strict disclosure norms to prevent fraud and insider trading. As per SEBI guidelines, all listed companies must disclose quarterly results and price-sensitive information.
• Stock Exchanges (NSE & BSE): These are the platforms where shares are traded. They act as the first line of surveillance, implementing circuit breakers to control excessive volatility.
• Depositories (CDSL & NSDL): They hold your shares in electronic form (Demat), ensuring safe and paperless transfers.
• Companies Act, 2013: This legislation governs the issuance of shares, dividend rules, and shareholder rights.
• RBI Regulations: The Reserve Bank of India monitors foreign investment limits (FDI/FPI) in Indian shares to maintain economic stability.

The Role of Shares in Determining Market Capitalization

Market capitalization (Market Cap) is the total market value of a company’s outstanding shares. It classifies companies by size and risk profile.

Formula:
Market Cap = Current Share Price × Total Outstanding Shares

SEBI Categorization (Nov 2025):

• Large Cap: The Top 100 companies by market capitalization. These are typically stable giants like Reliance Industries, TCS, and HDFC Bank.
• Mid Cap: Companies ranked 101st to 250th. These offer higher growth potential but come with moderate risk.
• Small Cap: Companies ranked 251st and onwards. These are high-growth but high-risk investments.

Example Calculation:
If a company has 10 crore shares outstanding and the current price is ₹500, the Market Cap is ₹5,000 crore.

Authorized, Issued, and Outstanding Shares – Key Differences

Investors often confuse these accounting terms. Here is the breakdown:

Can You Buy One Share of Stock?

Yes. In the Indian cash market (equity delivery), there is no minimum lot size. You can buy a single share of MRF (trading >₹1 lakh) or a single share of a small-cap company.

Exceptions (Derivatives):
If you trade in Futures & Options (F&O), you must buy in “Lots”.

• Nifty 50 Lot Size: 75 units* (As of November 2025). You cannot buy 1 unit of Nifty Futures; you must buy 75.
• Stock F&O: Each stock has a specific lot size (e.g., Reliance lot size might be 250).

*Important Note: As per NSE circular dated November 2025, the Nifty 50 lot size is scheduled to reduce to 65 units for contracts expiring after December 30, 2025 (i.e., starting with the January 2026 series). Always verify the current lot size on the NSE website before placing F&O orders.

Difference Between a Share and a Stock

While used interchangeably, there is a technical difference.

Conclusion

Shares are the building blocks of wealth creation in the modern economy. They offer a unique combination of liquidity, ownership, and inflation-beating returns. While the terminology—authorized capital, equity vs. preference, market cap—can seem complex, the core concept is simple: you are backing a business you believe in. With the Indian market maturing and regulations strengthening in 2025, there has never been a better time to participate.

Ready to claim your share of India’s growth story? Open your PL Capital account today and start your investment journey with confidence.

FAQs on Share

1. What Do You Mean by Share?

A share is a unit of ownership in a company. It represents a fractional claim on the company’s assets and profits. When you buy shares, you become a shareholder, gaining rights like voting on corporate decisions and receiving dividends when declared.

2. How Many Stocks Is 1 Share?

Technically, 1 share equals 1 unit of stock in a specific company. The term “stock” usually refers to the asset class or a portfolio (e.g., “I own tech stocks”), while “share” refers to the specific count (e.g., “I own 10 shares of TCS”).

3. What Is a Share vs a Stock?

A “share” refers to ownership in a single, specific company (e.g., shares of Reliance). “Stock” is a broader term used to describe equity ownership in general or a collection of shares across multiple companies (e.g., “investing in stocks”).

4. What Are the Two Types of Shares?

The two main types are Equity Shares and Preference Shares. Equity shares carry voting rights and variable dividends (higher risk, higher growth). Preference shares have no voting rights but offer a fixed dividend rate and priority payment during liquidation (lower risk, limited growth).

5. Can I Buy 0.5 Shares in India?

No, fractional share investing is not currently permitted in the Indian stock market. You must buy shares in whole numbers (minimum 1 share). However, you can invest small amounts via Mutual Funds, which allocate units up to several decimal places.