Types of Equity Shares: Understanding Different Categories

Every one of the types of equity shares below falls under this umbrella.

Monika Shrivastav Monika Shrivastav
Oct 27, 2026 - 12:11 Updated: Oct 27, 2026 - 12:18
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Types of Equity Shares: Understanding Different Categories

The types of equity shares an investor encounters depend on how you classify them: by rights, by how they are issued, or by company size. This guide explains the main types of equity shares in India, with the legal basis, and shows why a demat account is needed to hold them.

The Legal Starting Point

Section 43 of the Companies Act, 2013 says share capital is of two kinds, equity and preference, and that equity share capital may carry voting rights or differential rights as to dividend, voting or otherwise. Every one of the types of equity shares below falls under this umbrella.

Types of Equity Shares by Rights

Equity shares can provide different levels of voting power and other shareholder rights, depending on their terms of issue. The following categories illustrate how these differences affect ownership and participation in company decisions.

  • Ordinary equity shares: Standard ownership with voting rights and variable dividends.

  • DVR (differential voting rights) shares: Carry different voting or dividend rights. Applicable rules govern their terms and permitted limits. Tata Motors, which introduced DVR shares in 2008, cancelled them in 2024.

Types of Equity Shares by Issue

Companies may issue additional shares through corporate actions or employee-related schemes for different purposes. These categories explain how investors or employees can receive equity beyond a standard market purchase.

  • Bonus shares: Extra shares issued to existing holders from reserves.

  • Rights shares: Offered first to existing shareholders.

  • Sweat equity shares: Issued to directors or employees for know-how or value addition.

  • ESOP shares: Employee stock options that can be exercised to acquire equity shares.

Types of Equity Shares by Market Capitalisation

SEBI’s rank-based categorisation, maintained through AMFI’s list updated every six months, defines large caps as the top 100 companies by full market capitalisation, mid caps as ranks 101–250 and small caps as 251 onwards. Large-cap funds must hold at least 80% in large caps, and mid- and small-cap funds at least 65% in their segments. Small caps can swing more because some have low free float and shallower markets.

Which Types of Equity Shares Suit Whom?

Different market segments and share categories may appeal to investors with different objectives and risk tolerances. The following are broad considerations rather than personalised investment recommendations.

  • Stability seekers: Often look at large caps.

  • Growth seekers: May consider mid caps with higher volatility.

  • Risk-tolerant investors: May research small caps carefully.

  • Existing shareholders: May evaluate rights and bonus issues when offered.

No category removes risk. The Nifty rose 24.60% in Samvat 2080 and 9.55% in Samvat 2079.

The Purpose of a Demat Account

Whatever type of equity shares you buy, they are held electronically. The purpose of a demat account is to store securities in dematerialised form with a depository, replacing paper certificates. A listed company’s own shareholder notice lists advantages such as faster transfer, no stamp duty on transfer, quick credit of dividends linked to your bank account and removal of risks like forged transfers. Since 1 April 2019, listed shares can be transferred only in demat form. India had about 23.44 crore demat accounts by July 2026. Learn more about the purpose of a demat account and how it works with your trading account.

Practical Tips

Choosing and managing equity shares involves more than identifying a category. Reviewing share rights, company size, and liquidity can help investors make informed decisions and maintain an organised portfolio.

  1. Identify which type of share you are buying.

  2. Check rights attached to the shares.

  3. Review company size and liquidity.

  4. Diversify across categories.

  5. Keep all holdings in one reliable demat structure.

A Neutral Reference Point

SMC Global Securities, established in 1990, is among providers that offer equity trading and demat services. Compare features and fees before opening accounts.

In Conclusion, the types of equity shares differ by rights, issue method and company size, but all represent ownership. Know which types of equity shares you hold, understand their risks, and keep them in a demat account.