ASBA

ASBA is a facility where the money for an investment like in an IPO is blocked in your bank account until the investment is allotted. The blocked amount continues to earn interest and is debited only after shares are allocated to you.

Abridged Prospectus

An abridged prospectus is a shortened version of a full prospectus, providing essential details about a public issue. It includes key information about the company, its financials, and the securities being offered, allowing investors to make informed decisions without reading the full prospectus.

Accrued Expenses

These are costs a company has incurred but hasn't paid yet. Think of them as bills that have arrived but aren’t due yet, though they still need to be accounted for in the company’s financial records.

Accrued Interest

This is the interest that has built up on a loan or investment over time but hasn't been paid out yet. It’s like owing someone interest but not paying it until a later date.

Add-on Method

A way to calculate interest by adding it to the principal at the start of a loan, making the total repayment amount clear upfront. It’s like paying all the interest at once, even if you pay the loan over time.

Advance/Decline

A technical indicator showing the number of stocks that have advanced in price versus those that have declined, used to gauge market sentiment.

After Market Order

An After Market Order (AMO) is an order placed by investors to buy or sell securities after regular trading hours. These orders are executed when the market opens on the next trading day. AMOs are useful for investors who cannot actively trade during normal market hours and want to secure a trade at the opening price.

Algorithmic Trading

This involves using computer programs to automatically make trades based on preset conditions. Imagine giving a robot instructions on when to buy or sell stocks without needing human intervention.

Amortisation

Amortisation refers to the gradual repayment of a debt through regular instalments. Imagine it as making small, consistent payments over time until the entire loan is paid off.

Amortisation method

The Amortization Method spreads out the cost of an asset over its useful life. For instance, if you buy a computer for ₹10,000 and use it for 5 years, you might record ₹2,000 as an expense each year. This way, the cost is evenly spread out over the time you use the asset.

Annual Report

An annual report is like a yearly report card for a company. It's a document that public companies have to share with their shareholders every year. This report gives a detailed picture of how the company did in the past year.

Annualised Premium

Annualised premium is the total amount you’d pay for an insurance policy over a year. In the stock market, this term is often used when comparing the costs of different insurance or financial products. It helps you understand how much you'd be paying annually, even if you're making monthly or quarterly payments.

Anti-money Laundering

Anti-Money Laundering (AML) refers to laws and regulations that prevent criminals from using the stock market to hide or "clean" illegal money. These rules ensure that all financial transactions are transparent and monitored to maintain trust in the financial system.

Arbitrage Funds

Arbitrage funds are mutual funds that aim to make a profit by taking advantage of price differences in different markets, like the spot and futures. They buy an asset at a lower price in one market and sell it at a higher price in another, often in the same or a very short time period.

Articles of Association

The Articles of Association are like the rulebook for a company. They outline how the company is run, including the roles of directors, how decisions are made, and the rights of shareholders. When you invest in a company, these rules help you understand how the company operates and protects your interests as a shareholder.

Ask

Ask is the lowest price a seller is willing to accept for an asset, like a stock. It’s the price at which you can buy the asset from the seller in the market. The ask price is often compared with the bid price, which is the highest price a buyer is willing to pay.

Asset Allocation

Asset allocation is an investment strategy that divides a portfolio’s assets among different categories, such as stocks, bonds, and cash, based on the investor's risk tolerance, time horizon, and financial goals. The goal is to balance risk and reward by spreading investments across various asset classes, thereby reducing the impact of poor performance in any one category.

Asset Management Company (AMC)

An Asset Management Company (AMC) is a firm that manages investment portfolios on behalf of investors. AMCs pool funds from multiple investors and invest them in a diversified portfolio of securities, including stocks, bonds, and other assets. They charge a fee for their services, which typically includes research, portfolio management, and administrative services.

Assets Under Management (AUM)

Assets Under Management (AUM) refers to the total market value of the assets that an investment company or financial institution manages on behalf of its clients. AUM is a key metric in the financial industry, as it indicates the size and success of an investment firm. Higher AUM typically suggests greater influence in the market and the ability to attract more investors.

At-the-Money Option

An option is considered at-the-money if its strike price is equal to the current market price of the underlying asset. For example, if a stock is trading at ₹100 and the strike price of your call or put option is also ₹100, the option is at-the-money. It has no intrinsic value but could become profitable if market conditions change.

Audit

An audit in the stock market is like a detailed checkup of a company's financial records. Independent auditors (CPA or CA) review the company's books to ensure everything is accurate and follows the rules. This helps investors trust that the company's financial statements are honest and reliable.

Auditor

A professional who performs audits, ensuring that a company’s financial statements are correct and trustworthy. Think of them as the inspector making sure everything is in order.

Authority Bond

An Authority Bond is a type of bond issued by a government agency or public authority to raise money for specific projects, like building roads or schools. When you buy this bond, you're essentially lending money to the government, and in return, they promise to pay you back with interest over time. It's considered a safer investment since it's backed by the government.

BSE (Bombay Stock Exchange)

The BSE is Asia's oldest stock exchange, based in Mumbai, India. BSE is also known as 'The Gateway of Indian Capital Market.' It facilitates trading various financial instruments, including stocks, bonds, and other securities, providing a regulated marketplace for investors and companies.

Bad Debt

This is money that a company is owed but can't collect, usually because the borrower can't or won't pay. Companies write off bad debt as a loss in their financial records.

Balance of trade

This is a record of all the money a country receives and spends with other countries. It includes imports, exports, and financial transfers, showing whether a country is earning more than it spends internationally.

Balanced Funds

Balanced funds are mutual funds that invest in both stocks and bonds, aiming to balance risk and reward. They provide steady income from bonds and growth potential from stocks, making them a safer option than investing only in stocks or bonds.

Base Rate

The minimum interest rate set by a central bank, influencing all other interest rates in the economy. Think of it as the foundation rate that all other rates are built on.

Basis

Basis is the difference between the spot price (current market price) of an asset and the futures price (agreed price for future delivery). It helps traders understand if an asset is trading above or below its future price.

Basis Points

Basis Points are a way to measure small changes in interest rates or percentages. One basis point is equal to 0.01%, so if an interest rate goes from 4.00% to 4.25%, it has increased by 25 basis points. It helps to talk about tiny changes in rates without using decimals.

Beta

Beta measures how much a stock's price moves in relation to the overall market. A beta of 1 means the stock moves with the market. A beta higher than 1 means it’s more volatile than the market, and lower than 1 means it’s less volatile.

Bid

The bid is the highest price a buyer is willing to pay for an asset, like a stock or commodity. It’s the opposite of the ask price, which is the lowest price a seller is willing to accept.

Bid-Ask Spread

The bid-ask spread is the difference between the highest price that buyers are willing to pay for a stock (called the bid price) and the lowest price that sellers will accept (called the ask price). If the spread is small, it means it's easy to buy and sell the stock without affecting its price much. If it's large, it can be harder to trade quickly at a fair price.

Block Deal

A block deal is a large transaction of stocks, typically involving a minimum number of shares or a large monetary value, between two parties on the stock exchange. These deals are usually pre-arranged between big investors like institutions or mutual funds.

Blue Chip Companies

These are well-established, financially stable companies with a reputation for reliability. They're typically leaders within their industry so they're often sought after and considered to be low-risk investments

Bonds

Bonds are debt instruments issued by corporations, governments, or other entities to raise capital. Investors who purchase bonds are essentially lending money to the issuer in exchange for regular interest payments and the return of the bond's face value at maturity.

Book Building Process

The book-building process is a method used during an IPO or FPO to determine the price at which shares will be offered. Investors submit bids within a price range, and the final price is set based on demand. This process helps to find the optimal market price for the shares.

Borrowed Capital

Money a company borrows to invest or grow its business. Borrowed capital can be used to pay for salaries, equipment, and other expenses.

Breakout

Occurs when the price of an asset moves outside a defined support or resistance level with increased volume, often signalling the start of a new trend.

Budget Deficit

This occurs when a government spends more money than it earns from taxes and other sources. To cover the deficit, the government may borrow money, which can impact the economy and, in turn, the stock market.

Bull Spread

A bull spread is a trading strategy used when an investor expects a moderate rise in the price of an asset. It involves buying one option and selling another at a higher strike price to limit risk but also cap potential gains.

CAD (Current Account Deficit)

CAD means a country is spending more money on buying goods and services from other countries than it is earning from selling its own products to them. It's like spending more than you make.

CDSL (Central Depository Services Limited)

CDSL is one of the two primary depositories in India, established to provide convenient, dependable, and secure electronic storage of securities. By converting physical certificates into electronic format, CDSL enables seamless transactions in the stock market, reducing risks associated with handling physical documents. It plays a crucial role in settling trades by ensuring that securities are transferred electronically between parties.

Calendar Spread

A trading strategy where you buy and sell options with the same strike price but different expiration dates, like planning ahead for different seasons in the market.

Call Option

A call option is a contract that gives the buyer the right, but not the obligation, to buy an asset (like a stock) at a specific price (strike price) within a certain time period. It’s a way to bet on the price of the asset going up.

Capital Appreciation

The increase in the value of an asset over time. It’s like your investment growing in value, giving you potential profit when you sell it.

Capital Asset

Anything valuable that you own, like property, stocks, or equipment, that can be sold for cash in the future.

Capital Expenditure

Money spent by a company to buy or upgrade physical assets. It’s like investing in big purchases or improvements that will help the business in the long run.

Capital Gains

Capital Gains are the profits you make when you sell an asset like stocks, property, or bonds for more than you paid for it. For example, if you buy a stock for ₹100 and sell it for ₹150, your capital gain is ₹50. It’s the extra money you earn from selling investments at a higher price.

Capital Market

The capital market is where long-term financial securities like stocks and bonds are bought and sold. It helps companies raise money for growth, and investors buy and sell shares or bonds to earn returns.

Capital Tax

A tax on the profit you make from selling an asset, like stocks or property, usually paid when you cash out your investments.

Cash/Equity Market

The cash or equity market is where shares of companies are bought and sold immediately for cash. Unlike the futures market, trades here are settled quickly, and the buyer becomes the owner of the stock right away.

Central Bank

The main bank in a country that controls monetary policy, like interest rates, and helps stabilise the economy, such as the Federal Reserve in the U.S.

Charts

Visual representations of price movements over time. Help traders analyze historical data, identify patterns, and make informed trading decisions. Common types include line, bar, and candlestick charts.

Circuit Breaker

A circuit breaker is a safety mechanism in the stock market that temporarily halts trading if prices drop too quickly. It helps prevent panic selling and gives the market a chance to stabilise.

Closed-End Funds

Closed-End Funds are investment funds with a fixed number of shares that trade on stock exchanges like regular stocks. Once the shares are sold during the initial offering, no more shares are created. Their price can go up or down based on demand, which might be different from the actual value of the fund's investments.

Collar

A collar is a strategy used to limit potential losses and gains on an investment. It involves buying and selling options to create a range within which the investment’s value can move.

Commodities Market

The commodities market is where raw materials like gold, oil, and agricultural products are traded. Investors buy and sell contracts for these physical goods, often using futures contracts to lock in prices for future delivery.

Contra Funds

Contra funds are mutual funds that invest in stocks that are currently out of favor or undervalued in the market but have potential for long-term growth. The fund manager takes a contrarian view, betting that these stocks will rise in the future.

Corporate Bonds

Corporate bonds are debt securities issued by companies to raise capital for business activities. These bonds typically offer higher interest rates compared to government bonds, reflecting the higher risk associated with lending to a corporation.

Credit Rating

A credit rating is an assessment of a borrower's creditworthiness or the risk of default, typically provided by rating agencies. For bonds and other debt instruments, a higher credit rating indicates lower risk, making them more attractive to investors, while a lower rating suggests higher risk.

Custodian

A custodian is a financial institution that holds and safeguards a company's or investor's financial assets, like stocks, bonds, and cash to ensure they are secure.

Cut-off Price

The cut-off price is the final price at which shares are allocated to investors in a book-building issue. Retail investors may choose to bid at the cut-off price, indicating they are willing to pay the final price determined by the book-building process.

Cut-off Time

The deadline for placing orders on a particular day. Orders placed after the cut-off time will be executed on the next trading day.

Daily Margin Statement

This report shows traders their margin balance, which is the amount of money they need to keep in their account to cover potential losses in their trades.

Debentures

Debentures are a type of loan a company takes by issuing a certificate to the lender. The company promises to pay back the loan with interest, but unlike bonds, debentures are not secured by assets. They’re riskier but can offer higher returns to investors.

Debt Funds

Mutual funds that invest primarily in debt securities, such as bonds and debentures are called as Debt Funds. These funds aim to provide a steady income stream and are generally considered to be less risky than equity funds.

Debt Instruments

Debt instruments are financial tools, like loans or bonds, that allow companies or governments to borrow money. In return, they agree to pay back the loan with interest. It’s a way for businesses or governments to raise funds without giving up ownership.

Debt/equity ratio

The Debt/Equity Ratio measures how much debt a company has compared to its equity. It’s calculated by dividing total debt by total equity. For example, if a company has ₹1 lakh in debt and ₹2 lakh in equity, the ratio is 0.5. A higher ratio means more reliance on debt.

Delta

Measures the sensitivity of an option's price to changes in the price of the underlying asset. A delta of 0.5 means a Rs. 1 change in stock price leads to a Rs. 0.50 change in the option's price.

Demerger

A demerger is when a company splits into two or more separate companies. Each new company focuses on a specific part of the business. This is usually done to unlock value or improve management focus on different business areas.

Depository Participants

Depository Participants (DPs) act as intermediaries between the investors and the depositories (like CDSL or NSDL). They are authorised entities, often banks or brokerage firms, that help investors open and manage demat accounts. Depository Participants ensure that securities bought or sold by investors are safely stored in electronic form within the depository, facilitating easy and secure transfer of ownership.

Depreciation

Depreciation is the gradual reduction in the value of a company's assets over time, like real estate, machinery, due to wear and tear or becoming outdated.

Derivatives Market

The derivatives market is where financial contracts like futures and options are traded. These contracts derive their value from underlying assets like stocks, bonds, or commodities. Investors use them to manage risk or speculate on price changes.

Devaluation

Devaluation is when a country deliberately lowers the value of its currency compared to others, usually to boost exports by making them cheaper in foreign markets.

Direct Tax

A direct tax is a tax paid directly to the government by an individual or organisation, such as income tax or property tax. It’s based on the taxpayer's income or assets.

Discount Broker

A broker offering basic brokerage services at lower fees than full-service brokers, usually without personalized investment advice or research.

Dividend Distribution Tax (DDT)

DDT is a tax that companies pay on the dividends they distribute to shareholders. It's deducted before you receive your dividend payments, so you get the net amount after tax.

Dividend Payout

Dividend Payout is the portion of a company's profits that is distributed to shareholders as dividends. A high dividend payout ratio indicates that a company is returning a significant portion of its profits to shareholders. This can be given as cash or additional shares, providing investors with a regular income from their investments in a company.

Dividend Payout Ratio

This ratio shows the percentage of a company's earnings that are paid out to shareholders as dividends, indicating how much profit is being shared. A higher ratio means more of the profit is being returned to investors.

Dividend Yield

Dividend yield shows how much money a company pays in dividends each year compared to its stock price. It’s a simple way to see the return shareholders get just from dividends.

Dividends

Payments made by a company to shareholders, typically from profits, providing a return on investment either in cash or additional shares.

Domestic Institutional Investors

Domestic institutional investors (DIIs) are large investors within a country, like mutual funds, pension funds, and insurance companies, that invest in the country's financial markets. They have significant influence on market movements due to their large investments.

Domestic Trade Deficit

A domestic trade deficit occurs when a country imports more goods and services than it exports. This can lead to borrowing from other countries to finance the difference.

Due Diligence

Due diligence is the careful evaluation and analysis of a company or investment before making a decision. It’s like doing your homework to ensure you’re making a wise choice.

EBITDA (Earnings Before Interest, Tax, Depreciation, and Amortisation)

It's a measure of a company's overall profitability, showing how much money it makes before paying interest, taxes, and other non-operational costs.

ELSS-Equity Linked Savings Scheme

ELSS are mutual funds that invest primarily in equities (stocks) and offer tax benefits under Section 80C of the Income Tax Act. They have a lock-in period of three years, and the returns are market-linked, making them a popular choice for tax-saving and wealth creation.

Earnings Per Share (EPS)

This tells you how much money a company makes for each share of its stock. It's calculated by dividing the company’s profit by the number of outstanding shares.

Economy

The economy refers to the overall system of production, consumption, and trade in a country or region. It impacts stock markets because a strong economy generally boosts business profits, leading to higher stock prices.

Electronic Clearing Service (ECS)

ECS is an electronic payment system that enables bulk transfer of funds, such as salaries, dividends, and pension payments, from one bank account to another. It’s commonly used for recurring transactions.

Endowment Fund

An endowment fund is a collection of money that is invested to generate revenue for charitable causes. The goal of an endowment fund is to provide a sustainable source of income for nonprofit organisations, churches, hospitals, and community foundations.

Entry Load

Entry load is a fee or charge paid by an investor when purchasing units of a mutual fund. It is a percentage of the investment amount and is intended to cover the costs incurred by the fund house in managing the investment. Entry loads have been abolished in India since 2009.

Equilibrium Price

This is the price at which the demand for a stock matches the supply. It's where buyers and sellers agree on the value of the stock, and trades happen at this price.

Equity

Equity represents ownership in a company. When you buy a company's equity, usually in the form of stocks, you own a part of that company and can benefit from its profits through dividends or by selling your shares at a higher price.

Equity Funds

Equity funds are mutual funds that primarily invest in stocks or shares of companies. They aim to generate high returns by taking advantage of the growth potential in the equity markets. These funds come with higher risk compared to debt funds but also offer the potential for greater returns over the long term.

Equity Options

Equity options are options contracts that use individual stocks as the underlying asset. They give the right to buy (call) or sell (put) a stock at a specified price within a set time frame, allowing traders to profit from price changes in the stock market.

Escrow Account

An escrow account holds money or assets on behalf of two parties until certain conditions are met, ensuring that both parties fulfil their obligations before the funds are released.

Ex-dividend Date

The ex-dividend date is the day when a stock starts trading without the value of its next dividend payment. If you buy the stock on or after this date, you won’t receive the upcoming dividend.

Exchange-Traded Funds (ETF)

ETFs are investment funds that are traded on stock exchanges, similar to stocks. They track an index, commodity, or a basket of assets and offer diversification, liquidity, and lower costs compared to traditional mutual funds. Investors can buy and sell ETF units throughout the trading day at market prices.

Exit Load

Exit load is a fee or charge paid by an investor when redeeming units of a mutual fund. It is usually imposed if the investor exits the fund before a specified period, serving as a deterrent against premature withdrawal and compensating the fund for potential losses.

Expense Ratio

The expense ratio is the annual fee that a mutual fund charges its investors to cover management, administrative, and other operating expenses. It is expressed as a percentage of the fund’s average assets under management (AUM) and directly impacts the fund’s returns.

Expiration Date

The expiration date is the last day an options or futures contract is valid. After this date, the contract becomes worthless, and the buyer must decide whether to exercise the option or let it expire.

Exponential Moving Average (EMA)

A type of moving average that gives more weight to recent price data, making it more responsive to price changes, used in technical analysis to identify trends and reversals.

Exposure

Exposure refers to the amount of risk an investor or company is exposed to in a particular investment. It can relate to specific assets, markets, or currencies.

Exposure Margin

Exposure margin is the additional amount of money a trader must keep in their account to cover potential losses in futures or options trading. It’s a safety net for brokers to reduce the risk of traders defaulting on their contracts.

Extended Internal Rate of Return (XIRR)

XIRR is a method used to calculate the annual return on investments with irregular cash flows. It helps determine how well an investment has performed over time, considering different investment dates.

Extrinsic Value

Extrinsic value, also called time value, is the part of an option’s price that isn’t based on the actual difference between the current price and the strike price. It represents the potential for the option’s price to change before it expires.

FDI (Foreign Direct Investment)

FDI is when a company or individual from one country invests directly into businesses or assets in another country, often boosting economic growth.

FIAT Currencies

FIAT currencies are the everyday money we use, like dollars or rupees. They don’t have value on their own, like gold. Instead, their value comes from the trust people have in the government that issues them. The government says this money is valid for buying things and paying debts, and everyone agrees to use it. Its value can change based on how the economy is doing.

FPO

A Follow-on Public Offering (FPO) is when an already listed company issues additional shares to the public to raise more capital. It can be used to finance business expansion, reduce debt, or meet other financial needs. The process is similar to an IPO but involves a company that is already publicly traded.

Face Value

Face value is the original price of a financial instrument, like a bond or stock, when it was first issued. For example, a bond with a ₹1,000 face value will pay that amount back to the holder when it matures, regardless of its market price, it is the amount that the issuer is obligated to repay at maturity.

Feeder Funds

Feeder funds work like this many people put their money into a small fund, and that small fund then invests all the money into a bigger fund. The bigger fund is managed by experts, and this allows regular people to benefit from their skills and investments without having to do it themselves. It’s a way to join a bigger, smarter investment with others.

Fibonacci Ratio

A series of numbers (0.618, 1.618, etc.) used in technical analysis to predict potential levels of support and resistance based on historical price movements.

Financial Analysis

This is the process of evaluating a company’s financial statements to understand its performance and make investment decisions.

Financial Planning

Financial planning is the process of setting and achieving financial goals, such as saving for retirement or buying a home. It involves budgeting, investing, and managing risk to ensure financial security.

Financial Reporting Framework (FRF)

FRF refers to the rules and standards that govern how companies prepare and present their financial statements. It ensures consistency, transparency, and comparability across financial reports.

Financial Risk

Financial risk refers to the possibility of losing money in an investment or business due to factors like market fluctuations, economic downturns, or mismanagement. Managing financial risk is key to protecting assets and investments.

Financials

Refers to a company's financial statements, including the balance sheet, income statement, and cash flow statement, providing insights into financial performance and stability.

Fiscal Deficit

Fiscal Deficit occurs when the government spends more money than it earns in taxes and other revenues. It has to borrow to cover this gap, which can affect the economy and future budgets.

Fiscal Policy

Fiscal Policy is how the government decides to spend and collect money through taxes to influence the economy. For example, it might spend more to boost growth or cut taxes to encourage spending.

Fiscal year

A Fiscal Year is a 12-month period used by companies and governments for financial reporting and budgeting. It doesn’t always match the calendar year and might run from April to March, for example. It helps organisations plan and review their finances annually.

Fixed Exchange Rate System

A Fixed Exchange Rate System means that a country's currency, like the Indian Rupee (INR), is tied to another major currency, such as the US Dollar. The value of the INR is set and maintained at a fixed rate compared to this other currency. This system helps keep exchange rates stable, making it easier to trade and invest internationally, but it can also limit how much the currency value can change based on market conditions.

Flexible Exchange Rate System

In a Flexible Exchange Rate System, the value of a currency, like the Indian Rupee (INR), changes based on supply and demand in the global market. Unlike a fixed system, where the currency value is set by the government, in a flexible system, the exchange rate can go up or down depending on factors like trade, investment, and economic conditions. For example, if more people want to buy Indian goods, the value of the INR might increase.

Floor Price

The floor price is the minimum price set for bidding in a book-building issue. It represents the lowest price at which investors can place bids for the shares being offered. The floor price helps ensure that the company receives a reasonable price for its shares during the public issue.

Foreign Currency Convertible Bonds (FCCB)

These are bonds issued by a company that can be converted into shares of the company’s stock at a later date. They’re a way for companies to raise money in foreign currency while giving investors the option to become shareholders.

Foreign Currency Non-Resident Account (FCNR)

This is a type of bank account for non-residents of a country that allows them to deposit foreign currency. It helps expatriates ( a person who resides outside their country of citizenship) earn interest on their money while keeping it in their home currency.

Foreign Exchange Rate

This is the rate at which one currency can be exchanged for another, like how many INR you get for a US dollar. It impacts the cost of imports, exports, and foreign investments.

Foreign Institutional Investors (FIIs)

These are large organisations from outside India that invest in Indian financial markets, such as stocks and bonds. Their investments can influence the Indian market significantly.

Foreign Inward Remittance Certificate

This is a document that proves money has been sent from another country to an Indian bank account. It's often used to show that someone received money from abroad, whether for personal support or to invest in India.

Foreign Portfolio Investors (FPIs)

These are foreign investors who buy and sell financial assets like Indian stocks and bonds in a country other than their own.. FPIs bring foreign money into the Indian markets, similar to FIIs but typically with a broader investment scope.

Full-Service Broker

A broker offering a wide range of services, including investment advice, portfolio management, research, and access to financial products, charging higher fees compared to discount brokers.

Fund House

A fund house, also known as an asset management company (AMC), is a firm that creates and manages mutual funds. It pools money from investors to invest in various securities, such as stocks, bonds, and other assets, aiming to generate returns based on the fund’s objectives.

Fund Manager

A fund manager is a professional responsible for making investment decisions for a mutual fund or portfolio. They select securities, manage risks, and adjust the portfolio to achieve the fund's objectives. The fund manager’s expertise plays a crucial role in the performance of the fund.

Fund of Funds

A Fund of Funds (FoF) is a mutual fund that invests in other mutual funds instead of directly investing in stocks, bonds, or other securities. This approach offers diversification across multiple funds and asset classes, but it may come with higher fees due to the layered management structure.

Fundamental Analysis

Evaluating a company's financial health by analyzing its earnings, assets, liabilities, and economic factors to determine its intrinsic value and potential growth.

Futures Contract

A futures contract is a legal agreement to buy or sell an asset at a specific price on a future date. Unlike options, futures contracts obligate both parties to complete the transaction. For example, if you agree to buy oil at a set price for delivery in three months, you must buy the oil at that price, regardless of the market price when the contract expires.

GDP

Gross Domestic Product is the total value of all goods and services produced in India over a specific period. It measures the economic performance of the country.

Gilt Funds

Gilt funds are mutual funds that invest exclusively in government securities, such as bonds issued by the central or state governments. These funds are considered low-risk, as they carry the backing of the government, and are ideal for conservative investors seeking stable returns.

Global Funds

Global funds are mutual funds that invest in securities from markets around the world, including the investor’s home country. They provide exposure to international markets, allowing investors to diversify their portfolios geographically and tap into growth opportunities across different economies.

Global Indices

These are indicators that track the performance of stock markets around the world. For example, the Nifty 50 in India, the S&P 500 in the US, or the FTSE 100 in the UK. They help investors see how a group of important stocks is performing overall.

Gold ETFs

Gold ETFs (Exchange-Traded Funds) are financial instruments that represent ownership in gold assets. They allow investors to invest in gold without physically holding it. The price of Gold ETFs usually mirrors the price of physical gold, providing an easy and secure way to invest in gold through the stock exchange.

Gold Funds

These are mutual funds that invest in gold or companies involved in gold production. Instead of buying physical gold, you can invest in these funds to benefit from changes in gold prices, making it a simpler way to invest in gold.

Goods Till Triggered (GTT) Order

A GTT (Good Till Triggered) order is a type of order that remains active until the set trigger price is reached. Once the trigger is hit, the order is executed automatically. It is useful for investors who want to execute trades at specific price points without constantly monitoring the market.

Government Bonds

Government bonds are loans investors give to the government in exchange for regular interest payments. After a set period, the government returns the full amount of the bond. They’re considered very safe investments since governments are unlikely to default on their debts.

Gross Margin

The difference between a company's revenue and its cost of goods sold (COGS), expressed as a percentage, measuring production efficiency.

Gross National Product (GNP)

Gross National Product (GNP) measures the total value of everything a country’s people and businesses produce, including what they earn from abroad. It gives an idea of how much wealth a country creates, not just within its borders but also from its activities in other countries.

Growth Fund

A type of mutual fund that focuses on investing in companies that are expected to grow quickly. These companies often reinvest their profits to expand rather than pay dividends, making them attractive for long-term gains.

Growth Option

In mutual funds, the growth option means that profits earned by the fund are not paid out as dividends but are reinvested back into the scheme. This increases the Net Asset Value (NAV) of the units over time, allowing investors to benefit from capital appreciation.

Growth Scheme

A growth scheme is a type of mutual fund focused on long-term capital appreciation by investing primarily in equities. These schemes are suitable for investors who are willing to take on higher risk for the potential of higher returns over the long run.

Guaranteed Surrender Value

Guaranteed Surrender Value is the amount of money you get back if you decide to end your life insurance policy early. It's a minimum amount guaranteed by the insurance company, so you don't lose all the money you’ve paid in premiums, but it might be less than what you’ve paid in.

Guaranteed Survival Benefit

Guaranteed Survival Benefit is a sum of money paid to you by your insurance company if you outlive the policy term. It's like a reward for staying healthy and living through the policy period, and it's paid at specific times during the policy term.

Haircut

A haircut refers to the difference between the market value of an asset and the value at which it is accepted as collateral for a loan. It represents the lender's assessment of risk, with a higher haircut indicating a higher perceived risk. For example, if a bond worth ₹100 is accepted as collateral at ₹90, the haircut is 10%.

Half Stock

Half stock is a type of stock with a value that is half of what a regular stock usually has. For example, if a regular stock is worth Rs. 100, a half stock would be worth Rs. 50. These were used to make investing more affordable for people with less money.

Halloween Strategy

A stock market strategy based on the idea that stocks tend to perform better between November and April. The strategy suggests selling stocks in May and buying back around Halloween to avoid the weaker market period.

Hard Money Loan

Hard money loans usually come from private individuals or companies, not banks. They are a quick way to get money but tend to be more expensive. Since these loans are based on the value of the property you offer as collateral, rather than your financial history, they can be approved faster.

Haurlan Index

This is a technical analysis tool used by traders to measure the strength of the stock market by analysing the breadth (how many stocks are moving up or down). It helps traders understand the overall health of the market.

Head and Shoulders

Head and Shoulders is a pattern seen on stock charts that signals a potential reversal in the market trend. It looks like three peaks+ the middle one (the "head") is higher than the two on either side (the "shoulders"). When this pattern appears, it often means that the price is likely to move in the opposite direction.

Head-Fake Trade

This is a trading strategy where a trader intentionally creates a false signal to lure other traders into buying or selling a particular asset. This can be done by placing large orders that are later canceled or by spreading false information.

Headline Risk

Headline risk is the possibility that a news story can negatively impact a company's stock price, or the value of other publicly traded instruments associated with the company. Headline risk can also damage a company's reputation and hurt its core business.

Heat Maps

These are visual representations of data that use color to show different levels of activity or intensity. In finance, heat maps can be used to visualize market trends, identify areas of high interest, or analyze the performance of different investments.

Hedge Funds

Hedge funds are private investment funds that aim to make high profits by using a variety of strategies, including buying and selling stocks, bonds, and other assets. They often take bigger risks compared to regular mutual funds. Because of the higher risk, hedge funds are usually only open to wealthy investors who can afford to lose money if things don't go as planned. These funds are not as tightly regulated as regular investments, giving them more flexibility in how they operate.

Hedgers

A hedger in the stock market is an investor who tries to protect themselves from potential losses. They do this by making investments that will balance out any losses in their main investments. For example, if they own stocks, they might also buy options that will make money if those stocks lose value. Hedging is like buying insurance for your investments to reduce risk.

High Net Worth Individuals (HNIs)

High Net Worth Individuals (HNIs) are investors with substantial personal wealth, typically possessing a net value of Rs. 5 crore or more in India. In the financial markets, HNIs are often sought after by financial advisors and institutions due to their capacity to make large investments. Their market activities can influence stock prices and trends, as they have the resources to take significant positions in various financial instruments.

Hive-Off

A hive-off is when a company separates part of its business into a new, independent company. This can happen when the parent company wants to focus on its core activities or when the new company is better off on its own. It's like spinning off a section of the company to operate independently.

Hybrid Funds

Hybrid funds are mutual funds that invest in a mix of asset classes, such as stocks, bonds, and other securities. These funds aim to balance risk and return by diversifying across different asset types, making them suitable for investors looking for both growth and income.

Immediate or Cancel (IOC) Order

An IOC (Immediate or Cancel) order is a type of stock market order that must be executed immediately. If the order cannot be fully executed at the current market price, the unfilled portion is automatically canceled. It is commonly used when investors want to quickly buy or sell securities without waiting for the entire order to be filled.

In-the-Money Option

An option is in-the-money if exercising it would lead to a profit. For a call option, this means the stock price is above the strike price, so you can buy the stock cheaper than its current market price. For a put option, the stock price is below the strike price, allowing you to sell it for more than its current market value.

Income Scheme

An income scheme is an investment plan designed to provide regular income, usually in the form of interest or dividends. Examples include bonds or fixed deposits. It's a way for investors to earn steady returns, especially helpful for retirees.

Index

An index is a tool used to track the performance of a group of stocks or other assets. For example, the Nifty 50 index tracks the 50 most actively traded stocks in India. Indices help investors see how the overall market or specific sectors are doing, and they can also be used as benchmarks for comparing individual investments.

Index Funds

Index funds are mutual funds or ETFs that aim to replicate the performance of a specific market index, like the Nifty 50 or S&P 500. They invest in the same securities and proportions as the index they track, offering investors a low-cost way to gain broad market exposure.

Index Option

A financial derivative giving the holder the right to buy or sell a specific index at a predetermined price before a certain date, used to hedge or speculate on index movements.

Index of Industrial Production (IIP)

The Index of Industrial Production (IIP) is a monthly index that measures the performance of various industrial sectors in India. It is calculated and published by the Central Statistical Organisation (CSO). The IIP helps track the growth of industries like manufacturing, mining, and electricity production, providing insights into the overall health of the Indian economy.

Indexation

Indexation is a method used to adjust the purchase price of an asset for inflation, thereby reducing the taxable capital gains when the asset is sold. In mutual funds, indexation benefits are often applied to long-term capital gains, helping investors reduce their tax liability.

Indirect Tax

This is a tax that you pay indirectly when buying goods or services. For example, GST (Goods and Services Tax) is an indirect tax included in the price of products, and the business passes it on to the government.

Individual Financial Advisors (IFA)

Individual Financial Advisors (IFAs) are professionals who help people manage their money and make investment decisions. They provide personalised advice based on a client’s financial goals, risk tolerance, and life situation. IFAs can help with retirement planning, investment strategies, and other financial matters.

Inflation

Inflation is the rate at which the prices of goods and services rise over time, reducing the purchasing power of money. When inflation is high, each unit of currency buys fewer goods and services than before. It’s an important economic factor that affects the cost of living, savings, and investments.

Initial Public Offering

An Initial Public Offering (IPO) is when a company first sells its shares to the public to raise money. Think of it as a company opening its doors to new investors, who can buy pieces of the company for the first time. It’s a way for the company to get funds to grow and for the public to invest in the company.

Input Tax

Input tax is the tax you pay on goods and services that your business buys. Imagine you're a restaurant owner. When you buy ingredients like vegetables and meat, you pay a tax on them. You can usually claim this tax back if your business is registered for GST. It's like a credit that reduces the amount of tax your business has to pay when selling goods or services.

Inside Information

Non-public, material information about a company that could influence its stock price. Trading on this information is illegal and considered insider trading.

Insider Trading

Insider trading happens when someone buys or sells shares of a company using confidential information that the general public doesn't know yet. This gives them an unfair advantage and is illegal because it violates the principles of fairness in the stock market.

Insolvency

This is when a company or person doesn't have enough money to pay their bills. It's like being broke and unable to pay your rent or bills. If a company becomes insolvent, it may have to declare bankruptcy, which means selling its assets to pay off its debts.

Interest Rate

This is the cost of borrowing money. It's like the rent you pay to borrow money. Higher interest rates mean you'll pay more to borrow money. For example, if you borrow 100 Rupees at a 5% interest rate, you'll have to pay back 105 Rupees.

Interim Dividend

An interim dividend is a payment made by a company to its shareholders before the final annual dividend is decided. It’s like an early bonus based on the company’s profits during the first part of the year. Companies may pay interim dividends to reward shareholders when they’re doing well.

Internal Rate of Return (IRR)

This is a way of measuring how much profit an investment makes. The higher the IRR, the more attractive the investment. It helps investors compare different investment opportunities.

International Funds

International funds are investment funds that invest in companies located outside your home country. They help diversify your portfolio by spreading your investments across different countries, which can reduce risk if your home country’s economy isn’t doing well.

Intraday Trading

Intraday trading refers to buying and selling financial instruments within the same trading day. Traders aim to capitalize on short-term price movements, with all positions being closed before the market closes. This strategy requires close monitoring of the market and is considered high-risk but can offer quick profits.

Intrinsic Value of an Option

Intrinsic value is the real, built-in value of an option. For a call option, it’s the difference between the current price of the asset and the strike price, if the asset price is higher. For a put option, it’s the difference if the asset price is lower than the strike price.

Inventory Turnover

Inventory turnover is a ratio that shows how often a company sells and replaces its inventory over a specific period. High turnover means goods are selling quickly, which is generally a good sign for the business.

Investment Objective

The investment objective is the goal a mutual fund or investment scheme aims to achieve, such as capital appreciation, income generation, or capital preservation. This objective guides the fund's investment strategy and asset allocation.

Investment Strategy

An investment strategy is a plan that guides how you allocate your money in different assets like stocks, bonds, or real estate. The strategy depends on your financial goals, risk tolerance, and time horizon.

Issue

The process by which a company offers new securities, such as stocks or bonds, to investors, also referring to the securities themselves.

Junk Bonds

Junk bonds are bonds issued by companies with lower credit ratings, meaning they are riskier investments. Because of the higher risk, they offer higher interest rates to attract investors. While they can provide high returns, there’s also a greater chance that the company might not be able to pay back the bond.

Key Performance Indicator (KPI)

This is a number that helps you measure how well a company or person is doing. It's like a scorecard. For example, a company might use KPIs to measure its profitability, customer satisfaction, or employee turnover. KPIs help businesses understand how they’re doing and where they need to improve to reach their targets.

Large Cap

Large cap refers to companies with a large market capitalization, meaning they are worth a lot of money on the stock market. These companies are usually well-established, stable, and less risky to invest in compared to smaller companies. Large-cap stocks are often considered safe investments with steady growth.

Launch Date

The launch date is the date when a mutual fund or investment scheme is first made available to investors. It marks the beginning of the fund’s operations and its performance track record.

Legal Reserve

A legal reserve is a portion of a company’s profits that is set aside by law and cannot be distributed to shareholders as dividends. It’s like a financial safety net to protect the company’s capital and ensure it can meet future obligations. This reserve helps keep the company financially stable.

Lending rate

The lending rate is the interest rate that banks and financial institutions charge when they lend money to borrowers. It’s the cost of borrowing money, and it can vary based on the type of loan, the borrower’s creditworthiness, and market conditions. A lower lending rate means borrowing is cheaper, while a higher rate makes it more expensive.

Liability

A liability is something you owe to someone else, like a debt or an obligation. It could be money you need to pay back, like a loan, or services you need to provide. For example, if you borrow money from a bank to buy a car, the loan is a liability. Liabilities are the opposite of assets, which are things you own.

Limit Order

A limit order is an instruction to buy or sell a security at a specific price or better. For a buy limit order, the trade will only be executed at the limit price or lower; for a sell limit order, it will be executed at the limit price or higher. This type of order gives investors control over the price they pay or receive for a security but may not be executed if the market price doesn’t reach the limit price.

Liquid Assets

Liquid assets are things you own that can be quickly turned into cash without losing much value. Examples include money in your bank account or stocks. These assets are easy to sell and use when you need cash fast.

Liquid Funds

Liquid funds are a type of debt mutual fund that invests in short-term money market instruments like treasury bills, commercial paper, and certificates of deposit. These funds are designed to offer high liquidity, making them suitable for investors looking to park their surplus funds for short durations with minimal risk.

Liquidation Value

Liquidation value is the amount of money you would get if you sold all of a company’s assets quickly, usually in a situation where the company is closing down. It’s often lower than the market value because the sale is done quickly.

Liquidity

Liquidity is how easily you can convert something you own into cash. If something is very liquid, like money in a bank, you can use it right away. If it’s not very liquid, like real estate, it might take time to sell and get cash.

Listed Stock

Refers to a company's shares that are traded on an official stock exchange, such as the NSE or BSE in India, giving the company access to public capital.

Listing date

The listing date is the day when a company’s shares are first traded on a stock exchange after an Initial Public Offering (IPO) or Follow-on Public Offering (FPO). It marks the debut of the company's stock in the public market.

Listing of Securities

Listing of securities means a company’s stocks or bonds are available for trading on a stock exchange. When a company lists its securities, it makes them available for people to buy and sell in the stock market, like on the NSE or BSE.

Loan-to-Value Ratio (LTV)

The Loan-to-Value Ratio (LTV) is a number that compares the amount of a loan to the value of the asset being purchased, like a house. For example, if you’re buying a house worth ₹50 lakh with a ₹40 lakh loan, your LTV would be 80%. A lower LTV is safer for lenders because you’re borrowing less compared to the asset’s value.

Lock-in Period

The lock-in period is the minimum duration during which an investor cannot sell or redeem the investment. Common in schemes like ELSS and fixed deposits, this is done to help maintain stability and liquidity in the market.

Long-Term Investments

Assets held for an extended period, typically over a year, with expectations of generating returns through appreciation, dividends, or interest.

Lot

A lot refers to the standardised number of shares or units that are traded. For example, in the stock market, one lot may represent 100 shares of a stock. Buying or selling in lots ensures trades are made in uniform amounts.

Lot size

Lot size refers to the minimum number of shares that can be purchased or sold in a single transaction on the stock exchange. It is set by the exchange and ensures standardized trading in stocks and other securities.

MSE (Metropolitan Stock Exchange)

The Metropolitan Stock Exchange (MSE) is a national stock exchange in India established in 2008 which operates under the regulations of SEBI. It offers trading in multiple segments, including equities, stock options, currency trading, interest rate products, and bonds. MSE launched SX40 as the flagship index of the MSE to represent the performance of 40 large-cap, liquid stocks from various sectors of the Indian economy.

Margin

Margin is the money you need to deposit with your broker when you borrow funds to trade in stocks or other assets. It acts as collateral for the loan and is usually a percentage of the total trade value.

Margin Call

Occurs when an investor's account balance falls below the required margin level, necessitating more funds or asset sales to meet the margin requirements, or the broker may liquidate holdings.

Margin Traiding

Margin trading allows investors to borrow money from a broker to buy more stocks than they could with just their own money. The stocks act as collateral for the loan, and the investor pays interest on the borrowed amount. This can lead to higher gains or bigger losses.

Marginal Cost

Marginal cost is the cost of producing one more unit of a product. If you’re making T-shirts, the marginal cost would be the cost of making one additional T-shirt. It helps businesses decide whether producing more of something is worth the extra cost. For example, if it costs a company ₹100 to produce 10 units of a product, and it costs ₹110 to produce 11 units, the marginal cost of the 11th unit is ₹10.

Marginal Rate of Tax

The marginal rate of tax is the percentage of tax you pay on your next rupee of income. As your income increases, the rate at which you’re taxed on additional income can go up. This helps governments collect more tax from people who earn more. For example, if you earn ₹100,000 and the marginal tax rate for your income bracket is 25%, you will pay 25% tax on the last ₹100 you earn.

Marked to Market

Marked to Market means adjusting the value of an asset to reflect its current market price. For example, if you bought a piece of land for ₹1 lakh, but now it’s worth ₹1.5 lakh, you’d adjust its value on your records to ₹1.5 lakh. This method gives a more accurate view of what things are worth right now, instead of what you originally paid for them.

Market Capitalisation

Market capitalization, or market cap, is the total value of all a company’s shares on the stock market. It’s calculated by multiplying the current share price by the number of outstanding shares. Market cap helps investors understand the size of a company, with large-cap companies being bigger and generally more stable, and small-cap companies being smaller and potentially more volatile.

Market Correction

A market correction is when stock prices drop by about 10% after rising for a period of time. It’s a normal part of the stock market cycle and can be a good opportunity to buy stocks at lower prices. Corrections usually happen when prices have become too high and need to come back down to a more reasonable level.

Market Order

A market order is a trading tool that allows investors and traders to buy or sell securities immediately at the best available current price. While, market orders prioritize speed and execution it also carries the risk of price fluctuations and potential execution at a less favorable price.

Market Sentiment

Market sentiment reflects the overall mood of investors about the market or a particular stock. If investors are feeling positive, they might be buying more, which pushes prices up. If they are worried or negative, they might sell off, causing prices to drop. It’s like how the mood in a room can affect everyone’s behavior.

Market Value

Market value is the price at which something, like a stock or property, can be sold in the current market. It’s what buyers are willing to pay for it right now. For example, if a company's shares are trading at ₹500 per share, its market value is ₹500. Market value helps determine how much something is worth at a given time.

Market close

Market close refers to the time when trading stops for the day on a stock exchange. After the market closes, no more trades can be made until it opens again the next trading day. Prices of stocks are fixed at the closing price until the market reopens.

Merger

A merger happens when two or more companies combine to form a single entity. This can be done through a purchase, acquisition, or pooling of interests. For example, when two banks merge, they become a single, larger bank.

Micro Cap

Micro cap refers to small companies with a low market capitalization, meaning they are worth less money on the stock market compared to larger companies. It typically ranges between typically between INR 50 crores and INR 500 crores. These stocks can be risky because the companies are smaller and less established.

Minimum Investment Amount

Minimum investment amount is the smallest amount of money you need to start investing in a financial product, like mutual funds or bonds. Each investment option may have its own minimum amount to participate.

Minimum subscription

Minimum subscription is the minimum amount of shares that must be purchased by investors in an IPO or FPO for the issue to proceed. If this threshold is not met, the issue may be canceled, and the money is returned to the investors.

Money Laundering

Money laundering is the illegal process of making dirty money, earned from criminal activities, look clean by moving it through banks or businesses. It’s done to hide where the money really came from and to make it appear legal.

Money Market Funds

Money market funds are investment funds that invest in short-term, low-risk financial instruments like Treasury bills or certificates of deposit (CDs). They offer a safe place to park cash while earning a small return.

Moving Average (MA)

Smooths out price data by creating a constantly updated average price over a specific period, used to identify trends and reversals.

Mutual Funds

Mutual funds are investment funds where many people pool their money to invest in a variety of stocks, bonds, or other securities. A professional manager handles the investments, spreading the risk and making it easier for individuals to invest in a diversified portfolio.

NAV (Net Asset Value)

Net Asset Value (NAV) is the per-unit value of a mutual fund or ETF (Exchange-Trade fund), calculated by dividing the total value of the fund’s assets by the number of units outstanding. NAV is the price at which investors buy or sell units of the fund.

NBFC (Non-Banking Financial Company)

NBFC (Non-Banking Financial Companies) are financial institutions regulated by RBI and are registered under the Companies Act, of 1956. NBFC offer loans, credit facilities, investments in shares and bonds, leasing, and insurance. Unlike banks, NBFCs do not hold a banking license. To be classified as an NBFC, a company must have over 50% of its assets and income from financial activities. They are essential in extending financial services, especially to sectors like SMEs (small and medium enterprises) in the Indian financial system.

NCD

NCD stands for Non-Convertible Debentures, which are long-term financial instruments issued by companies to raise money. They pay interest like bonds, but you can’t convert them into shares of the company. They are a way for companies to borrow money from investors.

NSDL (National Securities Depository Limited)

National Securities Depository Limited (NSDL), was established in August 1996. It is India's first and largest central securities depository that modernizes the securities market by converting physical share certificates into electronic form. It operates under SEBI and ensures regulatory compliance and investor protection. It offers services such as opening and maintaining demat accounts, facilitating securities transfers, managing corporate actions and providing consolidated account statements for investors.

NSE (National stock exchange)

The National Stock Exchange (NSE) was the first exchange in India to introduce electronic trading. It is based in Mumbai and established in 1992 to bring transparency and efficiency to the Indian equity markets. It is regulated by SEBI and offers trading in a wide range of financial instruments, including equities, derivatives, and debt. The benchmark index of NSE is the Nifty 50, comprising the 50 most actively traded stocks.

Net Margin

The profit a company earns after deducting all expenses from its revenue. It is expressed as a percentage of revenue. A high net margin indicates that a company is profitable, while a low net margin suggests that the company is struggling.

Net Profit Margin

Net Profit Margin shows how much profit a company makes from its sales after all expenses. It’s calculated by dividing net profit by total revenue. For instance, if a company makes ₹10,000 in sales and earns ₹2,000 profit, the net profit margin is 20%. It shows how efficiently the company turns sales into profit.

Net income

Net Income is the same as net profit. It’s the total earnings of a company after all expenses and taxes are deducted from total revenue. For example, if a company earns ₹100,000 and spends ₹70,000 on costs and taxes, its net income is ₹30,000.

Net profit

Net Profit is the amount a company earns after all expenses, taxes, and costs are subtracted from total revenue. If a company’s total revenue is ₹50,000 and its expenses are ₹40,000, the net profit is ₹10,000. It represents the company’s actual earnings.

New Fund Offer (NFO)

A New Fund Offer (NFO) is the first-time subscription offer for a new mutual fund or ETF launched by an asset management company. It is similar to an Initial Public Offering (IPO) for stocks and allows investors to buy units of the fund at the face value during the launch period.

No-load Fund

A no-load fund is a type of mutual fund that does not charge any entry or exit fees when you buy or sell its units. This means the entire amount you invest goes towards purchasing units, making it a cost-effective option for investors. The fund’s returns are solely based on the performance of its underlying assets.

Non-Performing Asset (NPA)

A Non-Performing Asset (NPA) is a loan or advance that hasn’t been paid back for a long time, usually 90 days or more. It’s considered a bad debt, as the bank or lender isn’t earning any income from it. NPAs are a sign of financial trouble for the borrower and the lender

OCO-One Cancels the Other Order

An OCO (One Cancels the Other) order is when two trade orders are placed at the same time, but only one will be executed. If one order is completed, the other is automatically cancelled. It’s used to manage risk and take advantage of market conditions. For example, you might place a buy order at a certain price and a sell order at a lower price. If the buy order is executed, the sell order will be cancelled.

Off-Balance Sheet

Off-balance sheet refers to assets or liabilities that a company doesn’t list on its main financial statements. These are often financial commitments or investments that don’t appear on the company’s balance sheet but can still impact its financial health.

Offer Document

An offer document is a legal document provided by a company when it’s issuing new securities, like stocks or bonds. It contains all the important information that investors need to know before they decide to invest, including risks, financial details, and terms of the offering.

Open Interest

Open interest refers to the total number of options or futures contracts that are currently active and not yet settled. It shows how many contracts are open and gives an idea of the market's activity. High open interest indicates a lot of trading activity and liquidity, while low open interest might suggest less trading and fewer opportunities.

Open Position

An open position refers to any trade that is still active and hasn't been settled. It can be a stock, option, or other investment that you've bought or sold but haven't yet closed or completed the transaction.

Open-ended Fund

An open-ended fund is a type of mutual fund that allows investors to buy and sell units at any time. The fund issues new units when investors buy in and redeems units when investors sell out. The price of units is determined by the Net Asset Value (NAV), which fluctuates based on the value of the fund's underlying assets.

Option

An option is a financial contract that gives you the right, but not the obligation, to buy or sell a specific asset, like a stock, at a certain price before a certain date. Options are used by investors to hedge risks or to speculate on the price movement of the asset.

Option Chain

A list of all available options contracts for a particular underlying asset, showing the strike prices, expiration dates, and bid and ask prices for each option. Option chains are used by traders to analyze the market sentiment for a particular asset.

Option Premium

Option premium is the cost you pay to have the choice to buy or sell a stock at a certain price in the future. Think of it like paying for a reservation. The price of this reservation (the premium) depends on the current stock price and how much time is left before the option expires.

Option Spread

An option spread is a strategy where you buy and sell different options on the same stock at the same time. This is done to limit risk or increase potential profits. For example, you might buy one call option and sell another call option with a different strike price. The difference in the prices of these options helps manage the overall cost and potential profit of the trade. It’s like balancing out your bets to make the trade safer or more profitable.

Option Writer

The option writer is the person who sells an options contract. When you write an option, you’re agreeing to fulfill the contract if the buyer decides to use it. For example, if you write a call option, you agree to sell the stock at the strike price if the buyer exercises the option. The writer earns a premium for taking on this risk.

Order Book

The order book is an electronic list of buy and sell orders for a particular stock or asset. It shows the prices and quantities that buyers are willing to pay and sellers are asking for, helping traders understand the market demand and supply.

Out-of-the-money

Out-of-the-money refers to an option that currently has no intrinsic value. For a call option, it means the current price of the asset is below the strike price, and for a put option, it means the current price is above the strike price.

Over the Counter (OTC)

OTC refers to stocks, bonds, or other financial products that are traded directly between two parties, rather than on a formal exchange like the NSE or BSE. OTC markets are less regulated and often involve smaller or riskier companies.

Overbought

Occurs when a security's price has risen too quickly and is considered overvalued, potentially indicating a price decline.

Oversold

Occurs when a security's price has fallen too quickly and is considered undervalued, often signalling a potential price rebound.

Oversubscription

Oversubscription occurs when the demand for a company's shares in an IPO or FPO exceeds the number of shares being offered. This typically indicates strong investor interest, leading to allocation on a pro-rata basis or through a lottery system.

P&L Account

The Profit and Loss (P&L) account shows a company’s revenues and expenses over a period, usually a quarter or year. It helps investors see how much profit or loss the company made during that time.

P/E Ratio

The P/E ratio (Price-to-Earnings ratio) shows how much investors are paying for each rupee of a company's earnings. It's calculated by dividing the stock price in INR by the earnings per share (EPS) in INR. For example, if a stock costs ₹200 and the company earns ₹20 per share, the P/E ratio is 10. A higher P/E might suggest that investors expect strong future growth, while a lower P/E could mean the stock is undervalued or the company is facing challenges.

Par Value

Par value is the face value of a bond or stock, set by the issuing company. It’s the minimum amount investors pay for the security when it’s first issued, though its market value can change over time.

Participatory Notes (P-Notes)

P-Notes are financial instruments used by foreign investors to invest in Indian stocks without registering with the Indian regulators. They are issued by foreign brokerages and can be traded in international markets.

Passive Funds

Passive funds, such as index funds and ETFs, are designed to replicate the performance of a specific market index. Instead of actively selecting stocks, the fund's portfolio mirrors the index composition. This approach generally results in lower fees and provides investors with broad market exposure without the need for active management.

Passive Investing

Passive investing is a strategy where investors aim to match the performance of a market index, like the Nifty 50, by investing in index funds or ETFs. It involves less buying and selling, focusing on long-term growth.

Payback Period

The payback period is the time it takes to recover the cost of an investment. It’s the period after which the investment starts generating profits, helping investors assess the risk of an investment.

Pegging

Pegging is when a country’s currency is fixed to the value of another currency, usually the US dollar, to stabilise exchange rates. This helps the country maintain stable trade and investment conditions.

Pending order

This is an order you place with your broker to buy or sell a stock at a specific price. It's like a request to your broker to buy or sell the stock for you when the price reaches your target.

Penny Stocks

Penny stocks are shares of small companies that trade at a very low price, usually under ₹10 in India. These stocks are highly risky due to their low trading volume and lack of information about the companies, but they can offer big returns if the company grows.

Permanent Portfolio

A permanent portfolio is an investment strategy designed to perform well in all economic conditions. It typically includes a mix of assets like stocks, bonds, gold, and cash to balance risk and return.

Portfolio

A collection of investments held by an individual or institution, diversified to manage risk and achieve financial goals.

Portfolio Manager

A portfolio manager is a professional responsible for making investment decisions on behalf of clients, managing a portfolio of assets such as stocks, bonds, and other securities. They aim to achieve the investment objectives of the portfolio by analyzing market conditions, selecting investments, and managing risks. Portfolio managers play a crucial role in mutual funds, hedge funds, and other investment vehicles.

Portfolio Turnover Ratio

The portfolio turnover ratio measures how frequently a mutual fund or portfolio buys and sells its assets within a year. A high ratio means more trading, which could lead to higher costs and tax implications for investors.

Position

A position is the amount of a stock, bond, or any other investment that you currently own (or owe if you’ve sold it short). If you own shares of a stock, you have a ""long position""; if you’ve sold borrowed shares, you have a ""short position.""

Post-Money Valuation

Post-money valuation is the value of a company after new investments or funding has been added. It’s calculated by adding the new investment to the pre-money valuation, showing the company’s worth after the investment.

Preemptive Rights

Preemptive rights give existing shareholders the first chance to buy new shares when a company issues more stock. This helps them maintain their ownership percentage and control in the company.

Preference Share

Preference shares are a type of stock that gives shareholders a fixed dividend before common shareholders receive any dividends. However, preference shareholders usually don’t have voting rights in the company.

Preferred Stock

Preferred stock is a type of stock that gives shareholders a higher claim on the company’s assets and earnings than common stockholders. Preferred shareholders typically receive fixed dividends and have priority over common stockholders in case the company goes bankrupt.

Preliminary Expenses

Preliminary expenses are the initial costs a company incurs before it officially starts its operations. These include things like legal fees, registration charges, and promotional costs. It's like the money you spend to set up everything before your business actually begins.

Premium (futures)

In the context of futures contracts, the premium is the extra amount a contract is trading for compared to its expected spot price. This extra amount reflects factors like interest rates, storage costs, or dividends. For example, if a futures contract for oil is priced higher than the current price of oil, the difference is called the premium.

Premium (options)

The premium is the price you pay to buy an options contract. It’s like a fee for having the right to buy or sell an asset at a specific price before a certain date. For example, if you buy a call option, you pay a premium to have the option to buy the stock at a set price. If the stock’s price goes up, you can make a profit.

Price Band

The price band is the range within which investors can bid for shares during a book-building IPO or FPO. The company sets a minimum (floor price) and maximum (cap price) limit, and investors place bids within this range. The final issue price is determined based on these bids.

Price to Book Ratio

The Price to Book (P/B) ratio compares a company’s market value to its book value (total assets minus liabilities). It helps investors see if a stock is undervalued or overvalued compared to the company’s actual worth.

Price to Sales Ratio (P/S)

Compares a company's stock price to its revenue per share, used to value companies by showing how much investors are willing to pay for each dollar of sales.

Primary Market

The primary market is where new stocks or bonds are issued and sold directly to investors. When a company goes public through an Initial Public Offering (IPO), the shares are sold in the primary market. After that, they are traded in the secondary market (stock exchange).

Private Equity

Private equity involves investing in private companies that aren’t listed on the stock exchange. Investors buy a stake in the company, often to help it grow, and later sell their stake for a profit when the company succeeds.

Profit Margin

Profit margin is the percentage of revenue that remains as profit after all expenses are paid. It’s a key measure of a company’s profitability, showing how much money the company keeps from its total sales.

Proprietary Trading

Proprietary trading, or prop trading, is when a financial firm trades stocks, bonds, or other securities using its own money, rather than clients’ money, to make profits. The firm keeps the profits and takes on the risks involved.

Public Debt

Public debt, also known as government or sovereign debt, is the total amount a government owes to its creditors. It includes bonds, securities, and other debt instruments issued to finance budget deficits and public expenditures. Public debt is often compared to a country's GDP (Gross Domestic Product) to evaluate how easily the country can repay what it owes. While it helps fund public goods and services, excessive debt can lead to economic instability. Proper management of public debt is essential to maintain investor confidence and ensure long-term economic stability.

Public Issue

A public issue is when a company sells its shares or securities to the public to raise money. This can include an Initial Public Offering (IPO), where a company first offers its shares, a Follow-on Public Offering (FPO), where an existing company sells more shares, or an Offer for Sale, where current shareholders sell their shares. The process is regulated by SEBI and involves filing a detailed prospectus. The company and market conditions set the share price, and intermediaries like investment banks help manage the issue.

Public Sector Units (PSUs)

Public Sector Units (PSUs) in India are government-owned corporations, where the government holds at least 51% of the paid-up share capital. These entities can be owned by the Central or State Governments, and are classified as Central Public Sector Undertakings (CPSUs) or State Public Sector Undertakings (SPSUs). They contribute significantly to economic development by driving infrastructure, providing essential services, and generating employment.

Put Option

A put option is a contract that gives the buyer the right, but not the obligation, to sell an asset (like a stock) at a specific price (strike price) before a certain date. It’s typically used when an investor expects the price of the asset to drop.

Put/Call Ratio

A sentiment indicator comparing the number of put options (bearish bets) to call options (bullish bets) traded. A high ratio suggests bearish sentiment, while a low ratio indicates bullish sentiment.

Qualified Institutional Buyers (QIBs)

Qualified Institutional Buyers (QIB), are institutional investors who are considered to have the knowledge and resources to invest in the financial markets. This group includes mutual funds, insurance companies, pension funds, and other major financial institutions. They are regulated under SEBI’s guidelines in India and are subject to specific regulations in different countries to ensure fair and orderly markets. QIB are vital in the financial economy as they stabilise the market, affect prices, access private deals, and show confidence in new investments.

Quantitative Trading

Quantitative trading is a strategy that uses mathematical models, statistical analysis, and computer algorithms to identify and execute trading opportunities in financial markets. Quantitative traders create models to forecast market trends, test these models using past data, and then use them to trade in real time. This method enables fast, automated trading and strong risk management but needs advanced skills and can be risky if market conditions shift or strategies become popular.

Quick Ratio

The quick ratio evaluates if a company can meet its short-term debts (financial obligations due within a year) using its most liquid assets( cash, marketable securities) which can be quickly converted to cash. It is calculated as (Current Assets - Inventory) / Current Liabilities A quick ratio of 1 or higher indicates good short-term financial health, meaning the company can meet its liabilities. A ratio below 1 suggests potential liquidity issues. The quick ratio is a key metric for assessing a company's financial stability but does not account for all factors influencing liquidity.

R&D (Research and Development)

R&D stands for Research and Development. It involves researching your market, and customer needs, and developing new, improved products, and services to fit these needs. Investment in R&D opens up the potential for innovation and increasing sales. Often, such financial expenses are overlooked but can have a significant impact. This can include setting up a separate R&D department, hiring talent, and product and service testing, among others.

R-squared

R-squared is a measure used to show how well a particular investment's performance matches or is related to the performance of a benchmark or index. A higher R-squared means the investment’s returns closely track the benchmark.

REIT (Real Estate Investment Trust)

A company that owns, operates, or finances income-generating real estate, allowing investors to earn dividends without owning property directly.

RSI (Relative Strength Index)

A momentum indicator used in technical analysis to measure the speed and change of price movements. Ranges from 0 to 100 and helps identify overbought or oversold conditions.

Rating Agencies

Rating agencies, or credit rating agencies assess the creditworthiness of entities by giving them credit ratings. Their main role is to evaluate the ability of borrowers to repay debt based on their analysis of the borrower's financial information. They use letter-based scores to indicate default risk and financial stability, with higher ratings representing lower risk. Agencies like Moody's, S&P, and Fitch play a key role in capital markets by affecting interest rates and helping with securities trading.

Realised Gain/Loss

Realized gain/loss is the profit or loss made when an asset is sold. It’s the difference between the selling price and the purchase price. A gain happens if the selling price is higher, while a loss occurs if it’s lower. This amount affects taxes and reflects the actual outcome of the sale.

Rebate

In the stock market, a rebate usually refers to a reduction in transaction fees or commissions provided to traders or investors. For instance, if you buy or sell shares through a broker, you might receive a rebate on the trading fees, meaning you pay less in commission. This helps reduce the overall cost of trading and can be especially beneficial for frequent traders.

Recurring Deposit

A recurring deposit (RD) is a savings scheme where individuals deposit a fixed amount each month for a set period, typically ranging from six months to ten years. It offers a fixed interest rate, compounded quarterly, and allows account holders to accumulate a lump sum at maturity. While interest earned is taxable and premature withdrawals may incur penalties, RDs provide a disciplined saving approach with returns and flexibility, including the option to borrow against the deposit.

Red Herring Prospectus

A Red Herring Prospectus is a preliminary document filed by a company planning to go public. It contains essential information about the company, its business operations, financials, and the proposed issue but does not include details of the price or the number of shares being offered.

Redemption

Redemption means selling mutual fund shares, or units, back to the fund at their net asset value (NAV), minus any fees. Investors redeem shares to meet financial goals, address underperformance, or adjust to market conditions. Redemption can be partial or full, typically processed in 3-4 days. Considerations include possible exit fees and taxes, and risks of realizing losses during market downturns.

Redemption Yield

Redemption Yield is the total return you expect from a bond if you hold it until it matures. It reflects the internal rate of return (IRR) based on the bond's current price, coupon payments, and time until maturity. This yield helps investors compare bond profitability, with higher yields suggesting better returns. The yield is inversely related to bond prices+ as prices fall, yields rise, and vice versa.

Reinvestment Risk

Reinvestment Risk is the risk that an investor may not be able to reinvest cash flows, such as interest payments or principal repayments, at the same rate as the original investment's yield. Reinvestment Risk is the chance of earning less on reinvested funds when interest rates drop. For example, if you receive interest payments from a bond but rates have fallen, you might have to reinvest that money at lower rates, reducing your overall returns. This risk is important for investments like bonds and can be managed by choosing strategies like bond ladders.

Repo Rate

Repo rate is the interest rate at which the Reserve Bank of India (RBI) lends money to commercial banks, with the banks providing securities as a guarantee. It is a key tool for controlling inflation and managing the economy’s liquidity. When the repo rate is high, borrowing becomes more expensive, helping to reduce inflation. When the rate is low, borrowing is cheaper, which can stimulate economic activity. Changes in the repo rate influence other interest rates in the economy, affecting the cost of loans for consumers and businesses.

Repurchase Agreement (Repo)

A repurchase agreement (repo) is a financial transaction where one party sells a security to another with an agreement to repurchase it later at a higher price. This acts as a short-term loan with the security serving as collateral or guarantee. The price difference reflects the interest on the loan. Repo's are used for short-term borrowing, often overnight, and are considered low-risk due to the collateral. They are important for managing liquidity, controlling interest rates, and maintaining market stability.

Resistance Line

A resistance line is a price point where a stock struggles to go above. Think of it like a ceiling in a room. If a stock's price keeps hitting this level but doesn’t go higher, it’s like the price is hitting its head against the ceiling. This line helps investors understand where the price might stop rising.

Retail Investors

Retail investors are individual investors who buy and sell securities, mutual funds, or ETFs for personal financial goals through brokerage accounts or online platforms. They invest smaller amounts compared to institutional investors and are guided by objectives such as retirement savings or education funds. Retail investors significantly impact market trading, with significant activity in consumer goods, communication, and technology sectors

Return on Assets

Return on Assets (ROA) measures how well a company uses its assets to make profits. Imagine you have a lemonade stand. If you use your stand, pitcher, and lemons to make money, ROA shows how efficiently you're using those items to earn that money. It’s found by dividing the company’s net profit by its total assets. Higher ROA means the company is good at making money from what it owns.

Return on Capital Employed (ROCE)

Measures a company's profitability and efficiency in using its capital, showing how much profit is generated for each unit of capital employed.

Return on Equity (ROE)

Return on Equity (ROE) measures how well a company generates profit from its shareholders' equity. Equity is the money invested by shareholders plus any profits the company has kept. It is calculated by dividing net income by the average shareholders' equity. A higher ROE indicates that the company is using its equity effectively to produce profit.

Return on Investment (ROI)

Return on Investment (ROI) evaluates the efficiency of an investment by dividing the net profit by the initial cost, which is expressed as a percentage. It helps investors compare the profitability that is the returns they are getting from different investments. For instance, a higher ROI indicates a more profitable investment.

Reverse Stock Split

Reduces the number of a company's outstanding shares while increasing the share price proportionately, without changing the overall market capitalization.

Reward-Risk Ratio

The reward-risk ratio is a way to measure how much potential profit you could make from a trade compared to the potential loss. For example, if you might gain ₹10 but could lose ₹5, your ratio is 2:1. A higher ratio means you could make more profit compared to what you could lose, helping you decide if the trade is worth it.

Rights Entitlement

Rights entitlement is a privilege given to existing shareholders, allowing them to buy additional shares at a price lower than the current market value, typically during a rights issue. This opportunity is based on the number of shares they already own as of a specific date. Shareholders can either exercise this right to purchase more shares or sell the entitlement in the secondary market.

Rights Issue

A rights issue allows companies to raise capital by offering existing shareholders the opportunity to buy additional shares at a discounted price. This enables shareholders to maintain their ownership percentage while the company secures funds for various needs, such as debt repayment or expansion. Rights can often be traded if shareholders choose not to participate.

Risk Premium

Risk premium is the additional return an investor expects to receive for taking on higher risk compared to a risk-free asset, such as government bonds. It compensates investors for the uncertainty of riskier investments, like stocks or corporate bonds. The size of the risk premium varies depending on factors like market conditions, the specific investment, and the investor's risk tolerance. Understanding risk premium helps investors evaluate whether the potential return of an investment justifies the risk involved.

Risk-Adjusted Return

Risk-adjusted return measures how much return an investment provides compared to the risk taken. It helps investors compare different investments by considering both their returns and risks. Metrics like the Sharpe ratio and Treynor ratio are used to calculate it, helping investors balance returns with risk.

Roll-over

Roll-over is when you extend the duration of a financial contract, like a loan or a futures contract. Instead of letting it expire, you close the current contract and start a new one with a later date. It’s similar to renewing a subscription; you keep the same type of agreement but push the end date further into the future.

Running Yield

Running yield measures the annual income (like interest or dividends) of an investment as a percentage of its current market price. Unlike yield to maturity, which considers the total return until a bond matures, running yield focuses only on the income part. It is often used for bonds to help investors compare how much income they can expect from different bonds relative to their prices.

Rupee Convertibility

Rupee convertibility is about how easily the Indian Rupee can be exchanged for foreign currencies. It includes current account convertibility for trade and business and capital account convertibility for investments. Full convertibility means the rupee can be exchanged freely without limits. Currently, the rupee is fully convertible for trade but only partially convertible for investments.

SEBI (Securities and Exchange Board of India)

SEBI (Securities and Exchange Board of India) is the regulatory authority for India's securities market, established in 1988 and given legal authority in 1992. It aims to protect investors, regulate market intermediaries, prevent fraud, and promotes market development. Governed by a chairman appointed by the government, members from the Ministry of Finance and the Reserve Bank of India, SEBI drafts regulations conducts investigations and enforces compliance. It is key to ensure integrity, transparency, and efficiency in the market.

SIP

A Systematic Investment Plan (SIP) is an investment strategy where investors contribute a fixed amount regularly (e.g., monthly or quarterly) into a mutual fund. SIPs enable investors to build wealth over time by investing consistently, regardless of market conditions, and benefit from rupee cost averaging, which reduces the impact of market fluctuations on investments.

SLR (Statutory Liquidity Ratio)

(SLR) Statutory Liquidity Ratio is a requirement under the Banking Regulation Act of 1949. It mandates commercial banks in India to keep a minimum percentage of their (NDTL) Net Demand and Time Liabilities in liquid assets, such as cash and gold. NTDL are the total deposits a bank has from the public, minus deposits it holds with other banks. The SLR can be calculated below using the formula SLR= (Liquid assets/NDTL) x 100 A higher SLR limits bank lending and controls inflation, while a lower SLR boosts liquidity and encourages lending. It is a key tool for the RBI to maintain financial stability and manage liquidity in the economy.

Scalp

Scalp trading means making many quick trades to earn small profits from tiny price changes. Traders who scalp buy and sell stocks within minutes or hours, trying to take advantage of small movements in the stock’s price. It’s like trying to catch small fish in a big pond, and requires lots of time and attention.

Secondary Market

The secondary market is where investors buy and sell existing securities issued by companies. Unlike the primary market, where new securities are issued and sold for the first time, the secondary market allows investors to trade securities that have already been issued, such as stocks and bonds, among themselves. This market ensures you can easily buy or sell securities and helps establish their market value.

Sector Funds

Sector funds are mutual funds that focus on investing in a specific sector of the economy, like technology, healthcare, or energy. They are riskier because their performance depends on the health of that specific sector.

Securities

Financial instruments representing ownership (stocks), a creditor relationship (bonds), or rights to ownership (derivatives), traded in various markets.

Securities Transaction Tax (STT)

Securities Transaction Tax (STT) is a tax on buying and selling securities like stocks or bonds. If you buy or sell shares, a small percentage of the transaction amount goes to the government. It’s a way to tax financial trading activities.

Security Holdings

Security holdings refer to the total number of securities, such as stocks, bonds, or mutual funds, owned by an individual or institution in their investment portfolio. These holdings represent the ownership stake and are tracked to assess the portfolio's value, performance, and asset allocation.

Share Certificate

A document that proves ownership of a certain number of shares in a company, including details like the number of shares, company name, and owner's name.

Shares Outstanding

Refers to the total number of shares a company has issued and are held by investors, including institutional investors and company insiders.

Short Position

A short position is the position created where an investor sells securities they do not own, typically borrowing them from a broker, with the intention of buying them back later at a lower price. The goal is to profit from a decline in the security's price. However, this strategy is risky because if the price rises instead, the investor must buy back the securities at a higher price, leading to a loss.

Short Selling

Short selling involves selling borrowed shares, expecting their price to drop. Investors first borrow shares from a broker under SEBI’s framework, If the stock price falls, the investor buys back the shares at the lower price. They return the borrowed shares to the broker and keep the profit. This strategy allows investors to profit from declining stock prices.

Short Squeeze

Occurs when a heavily shorted stock's price rises, forcing short sellers to buy back shares at higher prices to cover positions, driving the price further up.

Short-Term Capital Gains

Short-Term Capital Gains are profits from selling assets that you’ve held for one year or less. These gains are usually taxed at a higher rate compared to long-term gains. For instance, if you buy and sell stocks within a few months for a profit, that profit is considered short-term capital gain.

Simple Moving Average (SMA)

The average of a security's closing prices over a specific period, smoothed out to identify trends.

Slippage

Slippage specifically refers to the difference between the expected price of a trade and the actual price at which the trade is executed. This occurs due to factors like market volatility or delays in order execution. It can also occur that large orders exceed the available volume at the current bid/ask price. Slippage is a trading risk, but it can be reduced by trading in stable markets, using limit orders, and setting a maximum slippage tolerance.

Small Cap

Small cap refers to stocks of companies in India with a market capitalisation usually between ₹500 crores and ₹5,000 crores. Market capitalisation is the total value of the company’s outstanding shares of stock. These companies have significant growth potential but also come with higher volatility and risk compared to larger companies. These stocks tend to attract investors seeking high-growth opportunities, as they can outperform larger stocks during bullish markets.

Sovereign Gold Bonds

Sovereign Gold Bonds (SGBs) are issued by the government and are a way for people to invest in gold without actually buying physical gold. These bonds track the price of gold and also pay interest, making them a safe way to invest in gold.

Speculation

Speculation involves buying and selling financial assets, such as stocks, with the expectation of making a profit based on future price movements. Speculative trading is a high-risk strategy, particularly in volatile stocks or derivatives, where traders aim to capitalize on short-term price fluctuations. It plays a significant role in market dynamics but also carries the potential for substantial financial loss.

Split Shares

Occur when a company divides its existing shares into multiple shares to make the stock more affordable for investors. The total value of the shares remains the same.

Spot Price

Spot prices are the current prices at which assets like commodities or stocks can be bought or sold for immediate delivery. It’s the price you pay ""on the spot"" if you want to buy something right now, as opposed to a future date.

Spread

The spread is the difference between the bid price (what buyers will pay) and the ask price (what sellers will accept) for a financial instrument. A narrower spread indicates better liquidity and lower trading costs, while a wider spread suggests lower liquidity and higher costs. It reflects the ease of trading the asset and the associated transaction costs.

Stock Market

The stock market is a place where shares of companies are bought and sold. It’s a way for companies to raise money by selling ownership stakes to the public, and for investors to buy and sell these shares. The stock market helps companies grow and provides investors with opportunities to earn money through dividends and stock price increases.

Stock Market Index

A stock market index is a measure that tracks the performance of a specific group of stocks, reflecting the overall movement of the market or a particular segment. It helps investors assess market trends and performance. Indices are based on criteria such as market capitalization or sector and represent average price changes of the included stocks. Investors use index funds or ETFs to invest in these indices, providing a way to diversify their portfolios and follow market trends.

Stop-Loss Order

A stop-loss order is a risk management tool used by investors to limit potential losses on a security. It instructs a broker to automatically sell a stock when its price reaches a specified level, known as the stop price, thus preventing further losses. This helps manage risk by preventing further losses if the market moves against the investor. When the stop price is reached, the order becomes a market order and is executed at the next available price.

Stop-loss

An order placed with a broker to sell a security if its price falls below a specified level. It helps investors limit their losses by automatically selling the stock before it drops too much.

Straddle

A straddle is an options strategy where an investor buys both a call option and a put option for the same stock at the same strike price. It’s used when the investor expects a big price movement in the stock but is unsure if it will go up or down.

Structured Finance

Structured finance involves creating financial products by pooling different assets, such as loans or mortgages, to meet specific funding needs. This approach helps manage risk by offering securities with various risk levels and provides custom financing options for large institutions. Examples include Collateralized Debt Obligations (CDOs) and Mortgage-Backed Securities (MBS). It helps increase liquidity and fund major projects by spreading out risk and offering tailored solutions.

Subprime Lending

Subprime lending refers to the practice of providing loans to borrowers with poor credit histories or higher risk profiles, typically at higher interest rates to compensate for the increased risk of default. These loans often come with less favorable terms, such as adjustable interest rates, higher fees, and stricter penalties for late payments. While subprime lending can help individuals access credit, it also carries significant risks for both lenders and borrowers, as seen during the global financial crisis when widespread defaults on risky mortgages caused severe economic downturns.

Supply and Demand

Supply and demand are fundamental economic principles determining the price of stocks. When demand for a stock is higher than its supply, prices rise, and when supply exceeds demand, prices tend to fall. Various factors, including market sentiment, economic data, and geopolitical events, can influence these dynamics, making them critical for investors to understand and anticipate market movements.

Support Line

A support line is a price level where a stock tends to stop falling and might start rising again. Traders use it to predict when to buy a stock because they believe the price will not drop below this level.

Swap

A swap is a financial contract in which two parties agree to exchange cash flows or other financial instruments over a specified period. Common types include interest rate swaps, where fixed and floating interest rates are exchanged, and currency swaps, where different currencies are exchanged. Swaps are typically used to hedge risks, such as interest rate fluctuations or currency exposure, allowing institutions to manage their financial risks more effectively.

Switching

Switching means moving your investment from one fund to another within the same mutual fund family. Investors switch funds to adjust to changing market conditions or personal investment goals.

Systematic Risk

Systematic risk, also known as market risk, is the inherent risk affecting the entire market or a specific segment. This type of risk is caused by external factors such as economic changes, political instability, or natural disasters, and it cannot be diversified away. Investors need to be aware of systematic risk because it affects all investments within the market and It cannot be eliminated through diversification.

Systematic Transfer Plan (STP)

A Systematic Transfer Plan (STP) is a service where investors regularly transfer a set amount from one mutual fund to another within the same company. It helps spread out investments over time and reduce market risk.

Systematic Withdrawal Plan (SWP)

A Systematic Withdrawal Plan (SWP) allows investors to withdraw a fixed amount from their mutual fund investment at regular intervals, providing a steady income while leaving the rest of the money invested.

TDS(Tax Deducted at Source)

TDS is a tax collection mechanism in which a portion of a payment is deducted at the source before the remaining amount is paid to the recipient. It is commonly applied to salaries, dividends, interest payments, and other forms of income. TDS helps the government collect taxes in advance and ensures that tax liabilities are met in a timely manner. Taxpayers can claim credit for TDS amounts against their total tax liability when filing their returns. For example, if you earn ₹10,000 in interest from a bank, the bank might deduct ₹1,000 as TDS before giving you the remaining ₹9,000.

Tax Declaration

A tax declaration is a statement you provide to your employer or the government, declaring your income, investments, and expenses for the year. It helps determine how much tax should be deducted from your salary or if you're eligible for deductions.

Tax Return

A tax return is a form you file with the government to report your income, expenses, and any taxes you owe or have paid during the year. It helps calculate whether you need to pay more taxes or receive a refund.

Technical Analysis

Involves studying historical price charts and market data to predict future price movements, relying on patterns, trends, and indicators.

Term Deposit

A term deposit is a financial product offered by banks where a fixed amount of money is deposited for a specified period at a predetermined interest rate. Term deposits provide a secure investment option with guaranteed returns, making them attractive to risk-averse investors. Upon maturity, the principal and interest are paid out to the investor. Term deposits are known by different names, such as fixed deposits in India, and often offer higher interest rates than regular savings accounts.

Tick

The minimum price movement of a trading instrument, representing the smallest possible change in price.

Time Value of Money (TVM)

The Time Value of Money (TVM) is a financial concept stating that a sum of money today is worth more than the same amount in the future due to its potential earning capacity. This principle underpins many financial decisions, including investment analysis, loan amortization, and retirement planning. TVM is calculated using present value and future value formulas, helping investors assess the worth of cash flows over time and make informed financial choices.

Trading Session

The period during which the stock market is open for trading. In India, the regular trading session is from 9:15 AM to 3:30 PM on weekdays.

Treasury Bills (T-Bills)

Treasury Bills, or T-Bills, are short-term government securities issued with maturities ranging from a few days to one year. They are sold at a discount and redeemed at face value upon maturity, with the difference representing the interest earned. T-Bills are considered one of the safest investments since they are backed by the government's credit. They are popular among investors seeking a low-risk option for parking funds temporarily, especially in uncertain economic conditions.

Treasury Stock

Treasury stock refers to shares that a company has repurchased from its existing shareholders but has not cancelled. These shares do not carry voting rights or pay dividends, and they can be reissued or retired at the company's discretion. Companies may buy back shares to reduce the number of outstanding shares, which can increase earnings per share, or to use the shares for employee compensation plans. Treasury stock is recorded as a reduction in shareholders' equity on the balance sheet.

Trend

The general direction in which the price of an asset is moving. Trends can be upward (bullish), downward (bearish), or sideways (neutral) and are essential for making trading decisions.

Trust Fund

A trust fund is a legal entity created to hold assets for the benefit of certain individuals or organizations, managed by a trustee. Trust funds are often used in estate planning to ensure that assets are distributed according to the grantor's wishes, or for charitable purposes. The trustee is responsible for managing the assets according to the terms set out in the trust document, which may include investing the funds, making distributions to beneficiaries, and ensuring the trust's objectives are met.

Under Subscription

Under subscription happens when the number of shares applied for in an IPO or FPO is less than the number of shares offered by the company. This may indicate lower investor interest, and the issue may fail if it doesn’t meet the minimum subscription requirement.

Underlying security

The underlying security is the actual asset, like a stock or bond, on which a financial contract, such as an option or futures contract, is based. For example, if you have an option to buy shares of a company, those shares are the underlying security. The value of the financial contract depends on the value of the underlying security.

Underwriter

An underwriter is a financial institution or entity that guarantees the purchase of a company’s shares during an IPO or FPO. They take on the risk of buying any unsold shares, ensuring that the company raises the intended capital. In return, they earn a commission or fee.

Underwriting

Underwriting is the process by which an investment bank or other financial institution assesses and assumes the risk of issuing new securities, such as stocks or bonds, on behalf of a company. The underwriter guarantees the sale of the securities by purchasing them from the issuer and reselling them to the public or institutional investors. This process helps companies raise capital while transferring the risk of the issuance to the underwriter. Successful underwriting is crucial for the smooth functioning of capital markets.

Unlisted

Refers to securities not traded on a formal stock exchange, usually traded over-the-counter (OTC), and can be less liquid and more risky.

Unlisted Securities

Unlisted securities are financial instruments that are not traded on formal exchanges, such as the stock market. These can include shares of private companies, bonds, or derivatives, which are typically traded over-the-counter (OTC) directly between parties. Unlisted securities often carry higher risks due to their lack of liquidity and transparency, but they may offer unique investment opportunities for those willing to assume the additional risk. Investors should conduct thorough due diligence before investing in unlisted securities.

Unrealised Gain/Loss

An unrealized gain or loss represents the increase or decrease in the value of an investment that has not yet been sold. It is the difference between the current market value of the asset and its purchase price. While unrealized gains or losses affect the overall value of a portfolio, they do not result in actual profits or losses until the investment is sold. Tracking unrealized gains and losses is essential for investors to understand the performance of their investments and potential tax implications.

Valuation

Valuation is the process of determining the current worth of an asset, company, or investment using various methods such as discounted cash flow analysis, comparable company analysis, or price-to-earnings ratios. Accurate valuation is critical for investors to make informed decisions, whether they are considering buying, selling, or holding an asset. Valuation plays a key role in mergers and acquisitions, stock analysis, and portfolio management, helping investors assess whether an asset is overvalued, undervalued, or fairly priced.

Value Investing

Value investing is an investment strategy that involves buying stocks that are undervalued based on their intrinsic value, which is determined through fundamental analysis. Value investors seek to purchase stocks that are trading at a discount to their true worth, with the expectation that the market will eventually recognize the stock's value, leading to price appreciation. This approach requires patience and a long-term perspective, as it may take time for the market to correct the mispricing.

Value Trap

A value trap occurs when a stock appears to be undervalued based on financial metrics such as price-to-earnings ratios, but continues to underperform due to underlying business issues or external factors. Investors may be lured by the low price, only to find that the stock's problems are more significant than initially perceived, leading to prolonged poor performance. Identifying value traps requires careful analysis of a company's fundamentals and the broader market environment to avoid potential losses.

Venture Capital

Venture capital is a form of private equity financing provided to start-ups and early-stage companies that have high growth potential but also carry significant risk. Venture capitalists invest in these companies in exchange for equity stakes, providing the capital needed for product development, scaling operations, and entering new markets. While the risk of failure is high, successful investments can yield substantial returns. Venture capital plays a crucial role in fostering innovation and supporting entrepreneurial ventures in various industries.

Volatility

Volatility in the Indian stock market refers to the degree of price fluctuations in stocks or other financial instruments over a specific period. High volatility indicates larger price swings, influenced by economic, political, or market-specific factors. While it can offer profit opportunities, it also introduces higher risk, making it a key consideration for investors.

Volume

The number of shares or contracts traded in a security or market during a specific period. High volume often indicates strong investor interest and potential price movement.

Volume Indicators

Measure the number of shares or contracts traded in a security or market over a specific period. They help traders understand the strength of a price movement by showing whether the trend is backed by high or low trading activity.

Voting Rights

Voting rights in the Indian stock market give shareholders the power to vote on critical company matters, such as electing the board of directors or approving mergers. These rights are proportional to the number of shares owned, ensuring shareholders have a say in the company’s governance and strategic direction.

Warrants

Warrants are instruments issued by Indian companies that allow investors to buy shares at a specific price before a set expiry date. Traded separately from the underlying stock, warrants provide an opportunity to purchase shares at potentially favorable terms but come with higher risk due to their limited time frame.

Wealth Management

Wealth management involves managing a financial asset of individuals or families through investment, tax planning, and estate planning. Financial assets do not have a physical form but hold value based on a contractual agreement. It includes cash, stocks, bonds, mutual funds, and bank deposits. Wealth management is often tailored to HNIs (high-net individuals), its core principles apply to anyone seeking a structured approach to achieving their financial goals.

Weighted Average Cost of Capital (WACC)

Weighted Average Cost of Capital (WACC) is a measure used by companies to calculate the average cost of their capital, combining both equity (their own money) and debt (borrowed money). It helps determine the minimum return a company needs to make on its investments to satisfy both investors and creditors, ensuring that projects generate value.

Wholesale Price Index (WPI)

Wholesale Price Index (WPI) measures the average price change of goods sold in large quantities between businesses. It's used to track inflation at the wholesale level, before goods reach consumers in the retail market.

Windfall Gain

A windfall gain refers to an unexpected or unanticipated profit, often due to external factors like regulatory changes, market shifts, or sudden demand spikes. These gains are typically large and not part of regular income.

Withholding Tax

Withholding tax is the amount of tax that is automatically deducted from an employee's salary or an investor’s income by the payer, like an employer or a bank, and sent directly to the government on behalf of the taxpayer.

Working Capital

Working capital is the difference between a company’s current assets and current liabilities. It indicates the liquidity available for day-to-day operations, showing whether a company can cover its short-term obligations. Positive working capital means the company can meet its short-term debts, while negative working capital indicates potential financial difficulties.

Writer

The writer of an options contract is the person who sells the option. By selling the option, the writer agrees to fulfill the contract if the buyer decides to exercise it. For example, if you write a call option, you might have to sell the stock at the agreed price if the buyer chooses to buy it. The writer earns a premium for taking on this obligation.

Yield

Yield is the income generated from an investment, usually expressed as an annual percentage of the investment's cost, current market value, or face value. It includes interest or dividends received from holding a security and helps investors assess the return on their investments.

Yield Curve

The yield curve is a graph that plots the interest rates of bonds with equal credit quality but different maturity dates. It typically slopes upward, indicating that longer-term bonds have higher yields. The shape of the yield curve can signal changes in economic conditions, such as expectations of inflation or interest rates.

Zero-Coupon Bond

A zero-coupon bond is a type of bond that does not pay periodic interest. Instead, it is issued at a discount to its face value and redeemed at full face value at maturity. The difference between the purchase price and the face value is the investor's profit, or ""implied interest.""