Last Updated: Jun 13, 2022 Value Broking 8 Mins 1.4K

Stocks are a fascinating and lucrative means of investment that can fulfill the hope of making big chunks of money. Before investing, though, one needs to research extensively. Taking a close look at the stocks will make us realize that there are many types of stocks. 

So let us have a clear picture of the different types of stocks. There is the categorisation of types of stocks in India, categorized based on the various parameters. These parameters include the company’s size, dividend payment, industry, and fundamentals. 

What are the Different Types of Stocks Based on Ownership?

Common Stocks

These stocks provide the investors voting rights on the business policies of a company. The investors get a share of the profits generated. However, in the case of liquidation, the investors have a very low priority. They may only receive funds after paying the debt holders and preferred stockholders. 

Preferred stocks

These stocks come with a guarantee to get a fixed amount as a dividend every year. They do not give investors voting rights, but liquidation is highly prioritized and is likely to get their share of the money. 

Hybrid stocks

These are preferred stocks that are convertible into a fixed number of common stocks.  Some of them may carry voting rights, and some may not.

What are the Different Types of Stocks Based on Market Capitalization?

Large-cap Stocks

These stocks are of huge companies with very high market valuations. The share price of search stocks is very stable with low volatility. Hence they are very low-risk Investment options.

Mid-cap Stocks

These stocks are generally in the direction of getting prominent with steady growth. Their market capitalization is not as high as large-cap stocks, but they are not very low either. Their share prices are reasonably stable with a moderate risk factor. 

Small-cap Stocks

These stocks belong to companies with relatively low market valuations. They are very volatile but have the potential for having high returns. They are a good option for aggressive investors willing to take high risks. 

Different Types of Stocks in India Based on Dividend Payouts

Income Stocks

This category includes stocks that regularly pay investors dividends and are popularly known as dividend yield stocks. These are risk-free stocks. 

Growth Stocks

They include stocks that have expectations of growing at a considerable rate outperforming the market. These companies generally don’t pay dividends and prefer to reinvest the earnings. 

IPO Stocks

IPO Stocks are one of the most popular investments in the Indian Stock Market. IPO or Initial public listing companies means a private company which is recently going public to raise more funds. The IPO does offer a lot of buzz as the past data shows the IPO gives a good amount of return to the investors. But investing in the  IPO can be risky. Sometimes the IPO share price goes down from its listing price. If the company business model doesn’t work or if there are some factors that are directly or indirectly affecting the share price of that company. There are chances of stocks to rise with a good percentage of falls after the listing is complete.

Classification Based on Risks

Beta Stocks

Beta is the measure of risk. It can be positive or negative. A higher value of beta represents a high-risk quotient of the stock. If the value is more than 1, the stock is highly volatile compared to the market.

Blue-chip Stocks

These stocks have very high and stable earnings. The companies are enormous and well recognized. Their financial position is also very healthy, and thus, investors consider them as safe avenues of investment. 

Defensive Stocks

These stocks are of companies that remain unaffected by the prevailing economic conditions. Companies involved in food, insurance, beverages, etc.  These businesses are good examples of defensive stocks.

Cyclical Stocks

The growth of these stocks is moderate, dependent on the excellent performance of a market and economy. So they are affected by economic trends resulting in price fluctuations. If the financial condition improves, the stock also does well. But if the economic situation degrades, the stock’s performance also goes down, resulting in a sharp decrease in its share prices. Stocks of automobile companies are among them. There are also non-cyclical stocks that operate in recession proof, which tends to perform reasonably irrespective of any effect in the economy. These stocks are generally LPG stocks, power and food industry stocks.

Classification Based on Stock Classes

It is a primary way of classifying stocks into different categories. The classification of stocks depends on voting rights that the shareholders get when they invest in the shares of the stocks. The companies generally prefer to separate the stocks into various groups to provide different advantages to different investors. Some stocks may give shareholders the power to have a say in business management, annual meetings, acquisitions, mergers, etc. 

The shareholders get voting rights which they can exercise if they wish. Even some stocks offer shareholders the privilege to cast more than one vote in matters concerning various aspects of the company. Contrary to this, some other stocks do not provide any of these voting rights. You also do not get a say in the company affairs. Investors are only entitled to the shares, and the growth in shares can only reap benefits—any additional privileges not provided to the investors.

Classification Based on Market Capitalization

Market capitalization refers to the total value of a company’s shares that are traded on the stock market. The current price of each share multiplied by the total number of shares that the company holds will give that company’s market capitalization at a specific point in time. This value can change based on the stock’s share price changes. Based on market capitalization, stocks are of three different types. 

  • The first type of stock includes substantial companies with a long history of delivering the best products and services. They are highly-reputed companies with a vast market capitalization that created brand values. Generally, the first hundred companies listed according to their market capitalization form the kind of large-cap stocks. 
  • The second is the midcap stocks which are not as big as the large-cap ones. They have very positive trends of growth and continue to perform well.
  • The final category includes the small-cap stocks, which are relatively small companies with low market capitalizations. The price of shares of these stocks is very volatile and highly unpredictable. They are considered high-risk investment options. However, the small-cap stocks can provide ample opportunities for high returns to their investors as their prices are low, which can increase significantly if a company performs better.

Stock on the Basis of Different Sectors

You often find stock companies with different sectors which are listed in the Stock Market. These companies are divided on the basis of their sector and for a basic idea you can check the list of sectors along with their services in the market.

  1. Communication sector:  These companies deal with the telephone, internet and other communication services for their customers.
  2. Energy sector:  Companies that  extract natural resources and produce energy fall in  these sectors. The companies that provide oil, gas, and other resources.
  3. Consumer product: The FMCG companies that offer food related products for the customers. These sectors include products such as tobacco, food and other household products. 
  4. Financial sector: Companies which offer financial services for their customers. Services such as mortgage, deposit, insurance and brokerage firm. It includes banks and other financial companies.
  5. Consumer Discretionary:  Company that deals with retailers, automakers and hotel and restaurant companies.
  6. Healthcare sector: These types of companies include health insurers, drug and biotech companies and medical device & drug making firms.
  7. Real estate sector: Listed companies that deal with the real estate and construction business. The role of these companies is to manage real estate and build better infrastructure.
  8. Technology:  This fastest growing sector includes IT Solutions, software, semiconductors and more. This sector has seen a huge growth in the last ten years. Companies such as Wipro, infosys are examples of IT giants in the Indian Stock Market.
  9. Industrial Sector: These sectors deal with the airline, defense and aerospace sectors. It also includes the logistics and machinery equipment for production of goods and services.
  10. Utilities Sector: A company that deals with the electric, natural gas, water and multiple products. These companies fall  into  the daily utility products or services.


Depending on the aspect on which we want to assess a stock, we can thus group them into different types of stocks. A good understanding of the various stocks is always essential to make informed decisions about Investments. It will help manage risks effectively by locating assets properly while making the portfolio. One can study the various stocks and the parameters to find the best stocks for investments.

As you are well informed about the type of stocks, you can diversify your financial portfolio and make less risky investments.