Stock Market Glossary

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  • Abridged Prospectus -

    An Abridged Prospectus is a shortened version of a prospectus for public offerings. It contains essential information, such as the company’s financials, risks, and objectives of the offering. It ensures investors get the essential details needed to make informed investment decisions efficiently. 

  • Acquisition -

    An Acquisition is the process where one company buys a majority or all of another company’s shares to gain control. This strategy helps the acquiring company expand its market presence, access new technologies, or reduce competition, thereby enhancing its overall market value.

  • Algorithmic trading -

    Algorithmic Trading is the use of automated systems to execute trades based on pre-set criteria like time, price, and volume. This method enhances trading speed and accuracy, minimizes human error, and is widely used by institutions for managing large, complex transactions. 

  • Annual Earnings Change  -

    Annual Earnings Change refers to the difference in a company’s earnings between the current fiscal year and the previous fiscal year. It is calculated by subtracting the previous fiscal year’s earnings from the current fiscal year’s earnings, reflecting year-over-year performance.

  • Arbitrage -

    Arbitrage involves buying and selling the same asset in different markets simultaneously to capitalize on price discrepancies. By exploiting these differences, traders can profit from variations in asset prices across markets, taking advantage of opportunities for potential financial gain.

  • Arbitrage Selling -

    Arbitrage Selling is when a person buys a security at a lower price in one market and sells it at a higher price in another. The profit results from temporary price differences between markets and is often considered riskless for the trader.

  • Artificial Intelligence  -
  • Artificial Intelligence (AI) -

    Artificial Intelligence (AI) in the stock market involves using advanced algorithms and machine learning to analyze market data, predict trends, and execute trades. AI systems enhance trading strategies by processing large volumes of data, improving decision-making and efficiency in trading activities.

  • Asset Allocation -

    Asset Allocation is the strategy of distributing investments across various asset categories, such as real estate, stocks, and bonds, based on risk assessment and financial goals. This process helps manage risk and optimize returns by determining the proportion of funds in each asset class.

  • Asset Allocation Fund -
  • Asset Management Company (AMC) -

    An Asset Management Company (AMC), registered with SEBI, manages mutual fund assets, accepts customer investments, and makes decisions on fund operations and restructuring. AMCs use their larger resources to offer extensive diversification and effectively administer mutual funds to meet investor objectives.

  • Assets  -

    Assets are all resources owned by a company, including money, securities, and real estate, that contribute to its financial value. They can be tangible or intangible and are listed on the balance sheet. Assets enhance company value, provide future benefits & can improve sales & cash flow.

  • Automatic Investment Plan -

    An Automatic Investment Plan (AIP), also known as a Systematic Investment Plan (SIP), involves regularly deducting a set amount from an investor’s bank account to invest in mutual fund units at the current market rate. SIPs can be set to daily, monthly, or quarterly intervals.

  • Average Daily Volume -

    Average Daily Volume is the average number of securities traded daily over a specific period. It can fluctuate due to changing public perceptions of security and significantly influences stock prices, market liquidity, and overall trading activity in the financial markets.

  • Average P/E Ratio -

    The P/E Ratio or Price/Earnings ratio is calculated by dividing the current market price of a share by its earnings per share. A higher P/E ratio reflects greater investor willingness to pay, while losses result in a P/E ratio of zero or nonexistent. 

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  • Back End Load -

    A Back End Load or Exit Load is a commission or fee charged when an investor sells or exits a mutual fund. This fee is not applied by all fund houses and represents an additional cost that investors need to bear.

  • Balanced Mutual Fund  -

    A Balanced Mutual Fund invests in a mix of equity and debt assets, aiming to generate returns from both. It is designed for risk-averse investors seeking higher returns, providing a diversified investment option that balances potential growth with relative safety.

  • Basis -

    Basis is the difference between the futures price & the current cash price of the same commodity. It is calculated as the cash price minus the futures price. Changes in basis impact the effectiveness of futures as a hedging tool, typically using the nearest contract month.

  • Basis of Allotment -

    Basis Allotment is the process of allocating shares to shareholders, typically seen in an IPO. Shares are distributed based on prior agreements and specific conditions that must be met before issuance, ensuring an orderly allocation among investors participating in the offering.

  • Basket Trades -

    Basket Trades involve buying or selling a group of securities simultaneously. Typically used by institutional investors, this strategy allows traders to execute multiple trades at once, often for managing portfolios or replicating an index, helping to save time and reduce transaction costs.

  • Bid and Ask -

    The Bid is the highest price a buyer is willing to pay for a security, while the Ask is the lowest price a seller is willing to accept. The difference between the Bid and Ask prices is called the spread, influencing trading and liquidity.

  • Bluechip Fund -

    A Bluechip Fund is a mutual fund that invests in bluechip stocks, which are large, established companies with a proven track record of stable returns. These stocks tend to perform well even in adverse market conditions. Investors can track performance using the Bluechip Index. 

  • Bonds -

    Bonds are fixed-income securities issued by governments or corporations in exchange for a loan. They provide a fixed interest rate over a specified time period. The quality of a bond is determined by its credit rating, reflecting the issuer's creditworthiness.

  • Book Building -

    Book Building is a price discovery method used during an IPO, where the company issuing shares does not fix a specific price. Instead, an underwriter invites institutional investors to submit bids within a price range, which helps determine the final issue price based on demand. 

  • Bounce -

    A Bounce occurs when a stock hits a support level, where its price resists further decline, and then sharply rebounds upward. This support can be represented by a trend line, moving average, or a combination of technical indicators, signaling a potential price reversal.

  • Bracket order -

    A Bracket Order is an intraday trading strategy that helps traders limit losses and lock in profits by placing three orders simultaneously: a buy or sell order, a target order to book profits, and a stop-loss order to limit potential losses. 

  • Broker -

    A Broker is an intermediary between investors and securities exchanges, facilitating the buying and selling of stocks, ETFs, futures, and options. Only registered brokers, whether individuals or firms, can place trades on exchanges, making them essential for investors to access financial markets.

  • Brokerage -

    Brokerage refers to the fee an investor or trader pays to a brokerage firm for its services, varying by platform. Generally, brokerage fees for intraday, futures, and options trading are higher than for equity delivery transactions, which involve long-term investing.

  • BSE -

    The Bombay Stock Exchange (BSE) was established in 1875 and is the oldest stock exchange in India and Asia. It facilitates the issuance of new securities through IPOs and FPOs and enables trading of shares and ETFs, supporting nearly 6,000 companies in India’s capital markets.

  • Budget -

    A budget refers to a financial plan that outlines how an individual or organization allocates funds for spending and managing expenses. In macroeconomics, it represents the trade-offs made in the exchange of goods, helping to track income and expenditures effectively.

  • Bull Market -

    A bull market is a positive trend in the stock market characterized by a price increase of 20% or more following a decline of 20%. Investors often express bullish sentiments when they anticipate sustained growth in the market over time.

  • Bullion -

    Bullion refers to gold, silver, and other high-purity non-ferrous metals, typically shaped into bars or coins. It is recognized as a legal tender, held by central banks, and is utilized by investors to hedge against inflation and manage portfolios effectively.

  • Bureau of Indian Standards (BIS) -

    The Bureau of Indian Standards (BIS) is responsible for standardizing and certifying goods and services to ensure safety and reliability for consumers. Established in 1986, BIS also certifies gold based on Indian standards for fineness and purity through testing at its centers.

  • Buy-back (compensation)  -

    Buy-back (compensation) is a form of countertrade where an exporter of heavy equipment or technology agrees to purchase a certain percentage of the output from a new facility once it begins production. This arrangement benefits both parties involved in the trade.

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  • Call Option -

    A call option is a derivative contract that grants the buyer the right but not the obligation to purchase an underlying asset such as shares, commodities, or currencies at a predetermined price within a specified timeframe, primarily used for speculation and profit generation.

  • Capital -

    Capital refers to the total amount of money a trader uses to buy and sell securities, often starting with "starting capital." For investors, it encompasses cash and financial assets. In economics, capital includes machinery, inventory, and factories necessary for production.

  • Capital Gain -

    A capital gain is a profit an investor or trader earns by selling shares, commodities, futures, options, currencies, and other assets. More literally, a profit represents a gain on the capital invested, highlighting the importance of effective investment strategies in wealth accumulation.

  • Capital Gain or Loss -

    Capital gain is the profit earned from selling an asset, while capital loss is the loss incurred from selling an asset. Gains can be realized (after sale) or unrealized (before sale). Capital gains are taxable, and losses may offset gains for tax purposes.

  • Capital Gains Distribution -

    Capital Gains Distribution refers to payments made by mutual funds or exchange-traded funds (ETFs) to investors, representing a portion of the proceeds from the fund's sales of stocks and assets within its portfolio. It reflects the investor's share of the fund's capital gains.

  • Capital Losses -

    Capital Loss is the loss that occurs when an investor sells a capital asset for less than its purchase price. This includes stocks, real estate, and other investments. Capital losses can offset capital gains, thereby reducing overall taxable income for the investor.

  • Cash Commodity -

    A cash commodity refers to physical goods such as metals, grains, or other tangible products, traded and delivered, often after exercising futures or options contracts. These goods are also called "actuals” and are commonly delivered for payment in futures trading.

  • Cash Contract  -

    A cash contract is an agreement between two parties for the delivery of goods at a predetermined price and date. Unlike futures contracts, it involves physical delivery. It's commonly used by large companies for securing commodities without engaging in speculation.

  • Cash Flow  -

    Cash flow refers to the net amount of money moving in and out of a business or individual's finances. Positive cash flow indicates more income than expenses, while negative cash flow signals higher expenses. It's crucial for assessing liquidity and overall financial health.

  • Cash Market -

    A cash market, also known as a spot market, is where assets, goods, or securities are bought and sold with immediate settlement at the spot price. Stock exchanges like NSE and BSE are examples of cash markets, unlike futures markets where settlement occurs later.

  • Circuit Breaker -

    A circuit breaker is a regulatory measure that halts trading across an index or market to prevent panic selling during drastic price declines. It helps control volatility, giving investors time to assess market conditions and avoid impulsive decisions during market turmoil.

  • Commodity -

    A commodity refers to raw materials or physical goods like metals, grains, oil, and cotton, essential in manufacturing consumer products. It also includes financial products such as currencies or stock indexes, widely traded in markets for industrial and consumer use. 

  • Commodity Exchange -

    A commodity exchange is a regulated marketplace where standardized commodity contracts and related investment products are traded. It enforces rules for trading. Initially focused on agricultural products in the 19th century, modern exchanges now involve a broader range of commodities and derivatives.

  • Commodity spread/straddles -

    A commodity straddle is an options trading strategy where a trader buys both call and put options with the same strike price and expiration date. It profits from significant price movement in either direction, provided the gains exceed the premium paid for the options.

  • Common Stock  -
  • Contract note -
  • Contract of sale -
  • Conversion Arbitrage -
  • Cover order  -
  • Currency future  -
  • Currency option -
  • Currency trading -
  • Current Ratio -

    Current Ratio is a liquidity metric that measures a company’s ability to pay off short-term liabilities using its current assets. It is calculated by dividing current assets by current liabilities, indicating the company’s financial stability and ability to cover immediate obligations.

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  • 52 Week High -

    52 Week High refers to the highest price at which a stock has traded in the past year. This metric helps investors evaluate stock performance, compare historical prices, analyze market trends, and better understand potential future stock movements and market behavior.

  • 52 Week Low -

    52 Week Low refers to the lowest price at which a stock has traded over the past year. This metric helps investors assess potential risks, evaluate the stock’s current valuation, understand market sentiment, and identify possible recovery or further declines.