What It Means
Equity means ownership shares in a company, representing a claim on its assets and future earnings. When people say "the equity market" or "equity trading," they mean the broad asset class of stocks traded on exchanges like the NSE and BSE, as opposed to debt instruments (bonds) or derivatives (futures and options).
How It Works
Owning equity makes you a part-owner of the company, however small — you're entitled to a share of profits (via dividends, if the company pays them) and, in theory, a vote at shareholder meetings for most equity classes. This is fundamentally different from debt: a bondholder is owed a fixed return regardless of how the company performs, while an equity holder's return depends entirely on the company's fortunes, with no guaranteed floor. That's also why equity is riskier than debt but has historically offered higher long-term returns.