Equity is an ordinary share issued by a company. The first public offer of securities by a company after its inception is known as an Initial Public Offering (IPO). 
A share is one unit of ownership. For example if a company has issued 10,00,000 shares and a person owns 1000 of them, that means he owns 0.1% of the company.

Reasons for Going Public

Rights of equity shareholder:

Secondary markets are also referred to as Stock Exchange. They are a part of capital markets. To state simply it is a place where the securities issued by the Government, public bodies and Joint Stock Companies are traded. In the case of India, the stock markets are regulated by the Securities & Exchange Board of India (SEBI).

Functions of the stock exchanges can be summarised as follows:

a) Liquidity and Marketability of securities: The basic function of the stock market is the creation of a continuous market for securities, enabling them to be liquidated, where investors can convert their securities into cash at any time at the prevailing market price. 

 b) Fair price determination: This market is a nearly perfect competitive market as there are large number of buyers and sellers. Due to nearly perfect information, active bidding take place from both the sides. This ensures the fair price to be determined by demand and supply forces.

 c)Source for long term funds: Corporates, Government and public bodies raise funds from the equity market. These securities are negotiable and transferable. They are traded and change hands from one investor to the other without affecting the long-term availability of funds to the issuing companies.

 d) Helps in capital formation: It helps in mobilising the surplus funds from individuals and institutions and channelises them to Corporates and Government bodies for more profitable ventures.  

e) Reflects the general state of economy: The performance of the stock markets reflects the boom and depression in the economy. It indicates the general state of the economy to all those concerned, who can take suitable steps in time. The Government takes suitable monetary and fiscal steps depending upon the state of the economy.

It is an answer to the question “how is the market doing?” It is representative of the entire stock market. Movements of the index represent the average returns obtained by investors in the stock market.

Stock indices reflect expectation about future performance of the companies listed in the stock market or performance of the industrial sector. They reflect the publicly available information on the economy, industrial sectors and companies as a whole. This is available as Fundamental and technical data. Investor sentiment also plays an important role in the stock market movement. When the index goes up, the market thinks that the future returns will be higher than they are at present and vice versa.

Stock prices are sensitive to the following news:

i) Company specific news

ii) Country specific news (which includes budget, elections, government policies, wars and so on)

The four main legislation governing the securities market are:

 1. The SEBI Act, 1992, which establishes SEBI to protect investors and develop and regulate securities market.

2. The companies Act, 1956, which sets out code of conduct for the corporate sector in relation to issue, allotment and transfer of securities, and disclosures to be made in public issues.

3. The securities contracts (regulation) Act, 1956, which provides for regulation of transaction in securities through control over stock exchanges.

4. The depositories Act, 1996 which provides for electronic maintenance and transfer of ownership of demat securities.