This has helped them save a significant amount in the form of regular interest outgo. Download link sent. Start investing now or.
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Golden temple in Amritsar. Recommended Stories. Motley Fool. Yahoo Finance Video. There are different types of stocks based on ownership, market capitalization, dividend payments, risk, and price trends. Stocks based on ownership- Common stocks, preference stocks, Hybrid stocks, Stocks with embedded-derivative options.
Common stocks and preference shares differ from each other on the parameter of priority. Preference stocks get a priority on the distribution of surplus on the occasion of distribution of profits and dividends. Hybrid Stocks are also known as convertible preferred shares. These are the preference shares that carry an option to be converted into common stocks at a specified time. The stocks embedded with a derivative option carry both callable and putable options.
Under this option, the company can call or buy and the investor can put or sell the shares. These are not very commonly available. Stocks based on market capitalization- The classification of these depend on the market value of the total shareholding of a company.
Market capitalization is the share price multiplied by the number of shares. These stocks are large cap stocks, mid cap stocks, and small cap stocks. These are often blue-chip stocks. Mid cap stocks are companies with a market capitalization in the range of Rs. Small cap stocks are companies with a market capitalization of less than Rs crores. Stocks based on dividend payments- These are income stocks and growth stocks. The income stocks pay a dividend higher than their share price.
These are also known as dividend-yield or dog stocks. These stocks are preferred by investors who are seeking a regular income. On the other hand, growth stocks usually provide lower dividends.
These stocks prefer reinvesting their income into their operation to grow the company. With the growth of the company, its share price also grows. Stocks based on risk- These stocks are relatively riskier than others due to frequent fluctuations in the share price. Blue-chip stocks are well-established companies that have lower liabilities and higher growth potential.
Foreign investments are classified into two categories: foreign direct investment FDI and foreign portfolio investment FPI. All investments in which an investor takes part in the day-to-day management and operations of the company are treated as FDI, whereas investments in shares without any control over management and operations are treated as FPI. For making portfolio investments in India, one should be registered either as a foreign institutional investor FII or as one of the sub-accounts of one of the registered FIIs.
Both registrations are granted by the market regulator, SEBI. Foreign institutional investors mainly consist of mutual funds, pension funds, endowments, sovereign wealth funds , insurance companies, banks, and asset management companies.
At present, India does not allow foreign individuals to invest directly in its stock market. Foreign institutional investors and their sub-accounts can invest directly into any of the stocks listed on any of the stock exchanges.
Most portfolio investments consist of investment in securities in the primary and secondary markets, including shares, debentures , and warrants of companies listed or to be listed on a recognized stock exchange in India. FIIs can also invest in unlisted securities outside stock exchanges, subject to the approval of the price by the Reserve Bank of India. Finally, they can invest in units of mutual funds and derivatives traded on any stock exchange.
FIIs must use special non-resident rupee bank accounts in order to move money in and out of India. The balances held in such an account can be fully repatriated. The government of India prescribes the FDI limit, and different ceilings have been prescribed for different sectors.
Over a period of time, the government has been progressively increasing the ceilings. By default, the maximum limit for portfolio investment in a particular listed firm is decided by the FDI limit prescribed for the sector to which the firm belongs.
However, there are two additional restrictions on portfolio investment. Regulations also impose limits for investment in equity-based derivatives trading on stock exchanges.
Foreign entities and individuals can gain exposure to Indian stocks through institutional investors. Many India-focused mutual funds are becoming popular among retail investors. As per Indian regulations, participatory notes representing underlying Indian stocks can be issued offshore by FIIs, only to regulated entities.
However, even small investors can invest in American depositary receipts representing the underlying stocks of some of the well-known Indian firms, listed on the New York Stock Exchange and Nasdaq. ADRs are denominated in dollars and subject to the regulations of the U.
Likewise, global depositary receipts are listed on European stock exchanges. India focused ETFs mostly make investments in indexes made up of Indian stocks. Emerging markets like India are fast becoming engines for future growth. Maybe it's the right time for outside investors to seriously think about joining the India bandwagon.
NSE India.
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