m.Stock by Mirae AssetOpen Demat Account
m.Stock by Mirae Asset
 Understanding Stock Categories: A Guide for Investors and Traders

Table of content

Understanding Stock Categories: A Guide for Investors and Traders

By Vipul Jain, Head of Risk, Mirae Asset Capital Markets

In stock markets, every stock comes with a label—and that label matters. Exchanges like NSE and BSE group stocks based on trading activity, compliance record, liquidity, and investor protection needs. These stock categories are more than just tags—they help investors and traders understand the level of risk, trading rules, and regulatory oversight linked to a particular stock.

Whether you're a long-term investor or a day trader, knowing how stocks are classified can help you make better decisions and avoid unnecessary risk. 

Why Do Stock Classifications Matter?

Stock categories help regulate trading behaviour and protect investors. Here’s why this classification is important:

  • Better transparency: You know what kind of stock you’re dealing with.
  • Risk management: Some categories warn of compliance issues or low liquidity.
  • Trading rules: Certain categories restrict intraday trading or require delivery-only settlement.

Just like food labels tell you what’s inside, stock classifications give you insights about the risk and trading norms of a security.

How Do NSE and BSE Classify Stocks?

A. BSE Stock Categories

Group

Meaning

Key Points

A

Highly liquid, actively traded

Mostly large-cap companies with good compliance history and high trading volumes

B

Broad category

Covers most mid-cap and small-cap stocks not in Group A, T, or Z

T

Trade-to-Trade

No intraday trading allowed; each trade must be settled individually

Z

Non-compliant stocks

Companies with serious listing violations or investor grievance issues

Other BSE Groups at a Glance

Group

Stock Type

F

Fixed-income instruments (debt)

G

Government securities

X

Exclusively listed on BSE

XT

BSE-only, trade-to-trade

M

SME segment

R

Rights entitlements

B. NSE Stock Categories

Category

Meaning

Key Points

EQ

Equity

Default category; allows both intraday and delivery trading

BE

Book Entry (Trade-to-Trade)

Delivery-only; no intraday allowed

BZ

Red flag stocks

Non-compliant or under regulatory action; trade-to-trade only

Other NSE Categories at a Glance

Category

Stock Type

GB

Sovereign Gold Bonds

GS

Government Securities

RR

REIT units

BL

Block deals

SM

SME segment

Can Stocks Move Between Categories?

Yes, stock categories are reviewed and updated by exchanges based on:

  • Trading volume and investor interest
  • Market cap changes
  • Compliance track record
  • Regulatory actions (ASM, GSM) – see glossary
  • Settlement behaviour

For example, a stock under surveillance may move to the BE or BZ category. A stock that improves its trading pattern and compliance may be upgraded to Group A or EQ series.

What This Means for You

Understanding these classifications helps you:

  • Avoid non-compliant or risky stocks
  • Trade according to the right rules
  • Build a safer, more informed portfolio

Before you buy or trade any stock, check its group or series on the exchange. Combine that with other factors like financials, corporate governance, and promoter history.

 Conclusion

Stock classification is a powerful tool for risk management and smarter investing. It helps you stay compliant, avoid pitfalls, and pick the right stocks for your trading or investment strategy. As India’s markets evolve, these categories will continue to guide participants toward more disciplined and transparent trading.

Read the labels. Understand the rules. Invest smarter.

Glossary: Key Terms Explained

1. Liquidity 
How easily a stock can be bought or sold without affecting its price. Higher liquidity means easier trading.

2. Market Capitalization
The total value of a company’s shares on the market.
 Formula: Stock Price × Total Number of Shares.
Companies are broadly categorized as small-cap, mid-cap, or large-cap based on this.

3. Trade-to-Trade (T2T)
A segment where intraday trading isn’t allowed. Every transaction must result in delivery—no buying and selling on the same day.

4. Delivery Trading
Buying a stock and holding it beyond the trading day. You actually take ownership of the shares. 

5. Compliance
Following rules set by regulators like SEBI and stock exchanges. Non-compliance can lead to stocks being downgraded to risky categories like Group Z or BZ.

6. Corporate Governance
Practices and policies that guide a company’s management and ethical conduct—includes transparency, board structure, and accountability to shareholders.

7. Surveillance (ASM/GSM)
Exchanges monitor certain stocks closely for unusual price movements or risk.

  • ASM (Additional Surveillance Measure): For stocks showing high volatility.
  • GSM (Graded Surveillance Measure): For fundamentally weak stocks with abnormal activity.

8. Rights Entitlements (RE)
Temporary securities given to shareholders when a company offers new shares via a rights issue. They give the option to buy more shares at a discount.

9. Rolling Settlement
Standard system where trades are settled within a fixed time—usually on a T+1 basis (trade day plus one working day).

10. Dematerialization (Demat)
Converting physical share certificates into electronic form. A must for modern trading.

More Related Articles

Top 10 stocks in India as per market capitalisation

Top 10 stocks in India as per market capitalisation

date-icon24 July 2024 | 11 mins read

Investing in the stock market can be quite rewarding, especially when you take a long-term approach. While short-term investments can be unpredictable and volatile, focusing on long-term stocks allows you to capitalise on the growth potential of well-established companies. While fundamental analysis is ideal, many investors prefer investing in top stocks as per market capitalisation since they are market leaders and hence relatively insensitive to short-term market ups and downs.

Read More
Difference Between FDI And FII

Difference Between FDI And FII

date-icon26 July 2024 | 7 mins read

The term "foreign direct investment" (FDI) refers to investment made by a company with its headquarters in another country. It is frequently confused with Foreign Institutional Investment (FII), which is investments made by a company with its headquarters in a nation different from the one where the investment is being made.

Read More
GTT orders on m.Stock

GTT orders on m.Stock

date-icon26 July 2024 | 6 mins read

To buy and sell stocks at the desired price, an investor has to continuously track the stock's price movements, which is a huge task. To overcome this challenge, investors can use the GTT (Good-Till-Triggered) order feature. It allows investors to set a trigger price and target price, so that the order is placed and executed only at the specified price.

Read More
View All