Markets, Investing and Corporate India

Stock-market questions in the General Awareness section are almost never about a price. They are about what a corporate action does — to the number of shares you hold, to your percentage of the company, to the company's own cash — and about who runs what: the exchanges, the depositories, the index committees, the rating agencies. Read this chapter for the mechanics. A bonus issue and a stock split both double your shares and change nothing about your ownership; an IPO puts money into the company and an offer for sale puts none; a bond whose price falls from ₹1,000 to ₹800 now yields 10% on its 8% coupon. Those are the questions, and each has a number in it you can check. The founders table at the end is recall — but it is the oldest dates that get asked, and those do not move.

Where Shares Are Born, and Where They Are Traded

The primary market is where a company sells shares and receives the money; the secondary market is where those shares change hands between investors, and the company receives nothing. Every corporate action can be sorted by two questions — does the company get cash? and does your percentage change? — and the table does that sorting.

Corporate actions, sorted by the two questions that matter
ActionWhat happensCompany gets cash?Your % changes?
IPO — initial public offerFirst sale of shares to the public; the company lists on an exchange. Priced by book-building within a band; investors bid in lots.Yes (for fresh shares)Existing holders are diluted
FPO — follow-on offerAn already-listed company issues more new shares to the public.YesDiluted unless you subscribe
OFS — offer for saleExisting shareholders — usually the promoter or government — sell their shares through the exchange. No new shares.No — the seller gets itUnchanged
Rights issueNew shares offered to existing holders in proportion to what they own, usually at a discount.YesUnchanged if you take them up
Bonus issueFree shares given out of reserves — 1:1 means one new share per share held. The price adjusts down in proportion.NoUnchanged — everyone gets the same ratio
Stock splitThe face value is divided — a ₹10 share split 5:1 becomes five ₹2 shares. The count multiplies, the total value does not.NoUnchanged
BuybackThe company buys its own shares back and cancels them, using its cash.No — it pays cashRises for those who did not sell

Shares are held electronically in a demat account with one of two depositories — NSDL (1996) and CDSL (1999) — through a depository participant, which is usually your broker. Since January 2023 Indian equity trades settle on T+1: shares and money change hands one working day after the trade.

Reading the Sensex and the Nifty

India has two national exchanges. The Bombay Stock Exchange (1875) is the oldest in Asia; the National Stock Exchange (1992, trading from 1994) brought screen-based trading and now carries most of the volume. Each has a headline index, and the two are compared constantly.

The two headline indices
FeatureS&P BSE SensexNifty 50
ExchangeBSENSE
Constituents30 large, liquid companies50 large, liquid companies
Base1978–79 = 1003 November 1995 = 1,000
WeightingFree-float market capitalisationFree-float market capitalisation

Free-float weighting means a company counts only for the shares actually available to trade — the promoter’s locked-in holding is excluded — so a few very large, widely held companies dominate both indices. That is why "the Sensex rose" and "most shares rose" are different claims. Two more structural facts: SEBI classifies listed companies by market-capitalisation rank — the top 100 are large-cap, 101–250 mid-cap, 251 and below small-cap — and exchanges halt trading market-wide if an index moves 10%, 15% or 20% in a day (the circuit breaker).

🧠 Bull, bear, and the words around them
A bull market rises, a bear market falls (the usual marker is a 20% drop from a peak). A correction is a smaller fall, around 10%. Blue-chip means large, established and reliably profitable. Market capitalisation is share price × shares outstanding — the value of the whole company, not of one share.

Bonds, Funds and Ratings — the Arithmetic the Section Asks

A bond is a loan cut into pieces. It has a face value (what is repaid at maturity), a coupon (the fixed annual interest as a percentage of face), and a price at which it trades — and the price is what moves. The relationship the paper tests is that price and yield move in opposite directions. A ₹1,000 bond with an 8% coupon pays ₹80 a year. Bought at ₹1,000 it yields 8%; if its price falls to ₹800, the same ₹80 is now 10% of what you paid. When market interest rates rise, older bonds with lower coupons fall in price until their yield catches up.

The Government of India borrows through G-secs (dated securities of a year or more, paying a coupon) and Treasury bills of 91, 182 and 364 days, which pay no coupon and are sold at a discount to face value. Both are issued by the RBI on the government’s behalf and count towards a bank’s SLR.

Mutual-fund vocabulary, each with the number that defines it
TermMeaning
AMC — asset management companyThe firm that runs the fund. SEBI regulates it; AMFI is the industry body.
NAV — net asset valueValue of one unit = (assets − liabilities) ÷ units outstanding. A fund holding ₹520 crore with ₹20 crore of liabilities and 25 crore units has an NAV of ₹20.
SIP — systematic investment planA fixed sum invested at fixed intervals, buying more units when the NAV is low and fewer when it is high (rupee-cost averaging).
ELSS — equity-linked savings schemeThe tax-saving equity fund under Section 80C, with a three-year lock-in — the shortest of any 80C instrument.
Expense ratioThe annual fee as a percentage of assets, deducted from the NAV. Index funds and ETFs, which only track an index, charge far less than actively managed funds.

Credit ratings grade a borrower’s ability to repay, from AAA down to D (default); BBB− and above is "investment grade", below it "junk" or high-yield. India’s first rating agency was CRISIL, set up in 1987, followed by ICRA and CARE; the three global agencies whose sovereign ratings make headlines are Moody’s, S&P and Fitch. A downgrade raises the borrower’s cost of funds; it does not by itself change what it owes.

Corporate India — the Founders and Dates That Get Asked

Questions on companies favour the oldest houses and the first of a kind, because those facts do not change with the news cycle. The table is deliberately limited to founding years and founders that are settled history.

Founders and founding years — settled facts only
CompanyFoundedBy, and the detail that gets asked
Tata Group1868Jamsetji Tata, as a trading firm in Bombay. Tata Steel (1907) was India’s first integrated steel plant, at Jamshedpur.
Godrej1897Ardeshir Godrej, making locks in Bombay.
Bajaj Group1926Jamnalal Bajaj, a close associate of Gandhi.
Hindustan Unilever1933As Lever Brothers India; the Hindustan Lever name came in 1956.
Wipro1945M. H. Hasham Premji, as Western India Vegetable Products — a cooking-oil company. Azim Premji turned it to IT decades later.
Mahindra & Mahindra1945As Mahindra & Mohammed, a steel-trading firm; renamed after Partition.
Amul1946The Kaira District Co-operative at Anand, led by Tribhuvandas Patel; Verghese Kurien joined in 1949 and built it into the model for Operation Flood.
State Bank of India1 July 1955By an Act converting the Imperial Bank of India (1921), itself a merger of the three Presidency banks.
Reliance Industries1973Dhirubhai Ambani, incorporated as Reliance Textiles; its 1977 IPO is credited with bringing retail investors into Indian equities.
Infosys1981In Pune, by N. R. Narayana Murthy and six co-founders; headquartered in Bengaluru.
Maruti Udyog1981A Government of India company; the joint venture with Suzuki followed in 1982 and the first car, the Maruti 800, in 1983.
HDFC Bank and ICICI Bank1994Both among the first "new generation" private banks licensed after the 1991 reforms. ICICI itself dates from 1955 as a development finance institution.
Flipkart2007Sachin Bansal and Binny Bansal, in Bengaluru, selling books online.

Two governance terms complete the picture. The promoter is the founding or controlling shareholder — a legal category in India, with disclosure duties. The board of directors is elected by shareholders, and the Companies Act, 2013 requires listed companies to have independent directors (at least one-third of the board) and an audit committee chaired by one, precisely so that the promoter does not mark their own homework. Among state-owned firms, the Maharatna, Navratna and Miniratna tiers grant graded financial autonomy to the largest and best-performing central public sector enterprises.

Key takeaways

  • Sort every corporate action by two questions: does the company get cash, and does your percentage change? IPO, FPO and rights bring cash in; OFS, bonus and split bring none; bonus and split leave every holder’s percentage exactly where it was.
  • Sensex: BSE, 30 stocks, base 1978–79 = 100. Nifty 50: NSE, 50 stocks, base November 1995 = 1,000. Both are free-float weighted, which is why a handful of giants move them.
  • Large-cap is rank 1–100 by market capitalisation, mid-cap 101–250, small-cap 251 onward. It is a rank, not a rupee threshold.
  • Bond price and yield move in opposite directions: a fixed ₹80 coupon on a bond bought at ₹800 is a 10% yield. When rates rise, old bonds fall.
  • NAV = (assets − liabilities) ÷ units. ELSS has a three-year lock-in, the shortest under Section 80C. Investment grade begins at BBB−.
  • CRISIL (1987) was India’s first rating agency; Moody’s, S&P and Fitch rate sovereigns. NSDL (1996) and CDSL (1999) are the two depositories. Trades settle T+1 since January 2023.
  • Of the founders, the oldest dates are asked most: Tata 1868, Godrej 1897, Bajaj 1926, Wipro and Mahindra 1945, Amul 1946, SBI 1955, Reliance 1973, Infosys and Maruti 1981.

Practice questions (8)

Attempt each one before opening the answer. Every explanation names the tempting wrong option as well as the right one, because that is where marks are lost.

  1. An investor holds 100 shares, which is 2% of a company. The company announces a 1:1 bonus issue. After the bonus, the investor holds:

    1. 200 shares, still 2% of the company
    2. 200 shares, now 4% of the company
    3. 100 shares, now 1% of the company
    4. 200 shares, and the company receives fresh capital
    Show answer

    Answer: A — 200 shares, still 2% of the company

    A 1:1 bonus gives every shareholder one new share per share held, so the total number of shares doubles and each holder’s percentage is unchanged: 200 out of twice as many shares is still 2%. The share price halves to match. No money changes hands — the shares are issued out of reserves — so option D is wrong; a bonus is not an IPO or a rights issue. Option B is the intuitive error of doubling the shares but not the denominator.

  2. In an Offer for Sale (OFS) on a stock exchange, the proceeds of the sale go to:

    1. The company, as fresh capital
    2. The existing shareholders who are selling
    3. The stock exchange
    4. SEBI’s investor protection fund
    Show answer

    Answer: B — The existing shareholders who are selling

    An OFS is a sale of existing shares by their current holders — typically a promoter, or the government disinvesting from a public sector company — through the exchange’s platform. No new shares are created and the company receives nothing. That is the entire difference from an IPO or FPO, where the company issues fresh shares and keeps the money. Government disinvestment through OFS is a common headline, which is why the section asks it.

  3. A bond with a face value of ₹1,000 pays an 8% annual coupon. If it is trading at ₹800, its current yield is:

    1. 6.4%
    2. 8%
    3. 10%
    4. 12.5%
    Show answer

    Answer: C — 10%

    The coupon is fixed on the face value: 8% of ₹1,000 = ₹80 a year, whatever the price. Current yield = coupon ÷ price = 80 ÷ 800 = 10%. Option B is the trap — the coupon rate, which does not change. Option A (6.4%) is 8% of 800, applying the rate to the wrong base. The lesson the question carries is the inverse relationship: the price fell and the yield rose.

  4. The S&P BSE Sensex is made up of how many companies, and what is its base?

    1. 50 companies; base 1995 = 1,000
    2. 30 companies; base 1978–79 = 100
    3. 30 companies; base 1992 = 1,000
    4. 100 companies; base 1978–79 = 100
    Show answer

    Answer: B — 30 companies; base 1978–79 = 100

    The Sensex tracks 30 large, liquid BSE companies and has a base of 1978–79 = 100. Option A describes the Nifty 50 (NSE, 50 stocks, 3 November 1995 = 1,000) — the two are set beside each other in almost every version of this question. 1992 is the year the NSE was incorporated, not an index base. Both indices are weighted by free-float market capitalisation.

  5. Under SEBI’s classification, a listed company ranked 150th by market capitalisation is a:

    1. Large-cap
    2. Mid-cap
    3. Small-cap
    4. Micro-cap
    Show answer

    Answer: B — Mid-cap

    SEBI defines the buckets by rank, not by a rupee value: the top 100 companies are large-cap, 101 to 250 are mid-cap, and 251 onward are small-cap. Rank 150 is squarely mid-cap. "Micro-cap" is a market phrase, not a SEBI category. The rank-based definition is why a company can move between buckets without its own value changing — because others moved around it.

  6. A mutual fund holds assets worth ₹520 crore, has liabilities of ₹20 crore, and has 25 crore units outstanding. Its NAV per unit is:

    1. ₹20.80
    2. ₹20
    3. ₹21.60
    4. ₹25
    Show answer

    Answer: B — ₹20

    NAV = (assets − liabilities) ÷ units = (520 − 20) ÷ 25 = 500 ÷ 25 = ₹20. Option A (₹20.80) forgets to subtract the liabilities (520 ÷ 25). Option C adds them instead of subtracting (540 ÷ 25). The definition is the whole question: NAV is what each unit would be worth if the fund paid its debts and distributed the rest.

  7. Which of these Indian business houses was founded first?

    1. Godrej
    2. Bajaj
    3. Tata
    4. Wipro
    Show answer

    Answer: C — Tata

    Tata was founded by Jamsetji Tata in 1868, Godrej by Ardeshir Godrej in 1897, Bajaj by Jamnalal Bajaj in 1926, and Wipro — as a vegetable-oil company — in 1945. The order is Tata, Godrej, Bajaj, Wipro. Questions on corporate India favour these oldest dates because they are settled and will not be overtaken by next year’s news.

  8. The lock-in period for an Equity-Linked Savings Scheme (ELSS) mutual fund is:

    1. One year
    2. Three years
    3. Five years
    4. Fifteen years
    Show answer

    Answer: B — Three years

    ELSS carries a three-year lock-in — the shortest of any instrument that qualifies for the Section 80C deduction. Five years is the tax-saving fixed deposit and the National Savings Certificate; fifteen years is the Public Provident Fund. The comparison is the reason the fact is asked: ELSS is the most liquid of the 80C options, and it is the only one with equity exposure.