Stock Market Glossary

A stock represents a share in the ownership of a company and constitutes a claim on part of the company's assets and earnings.

A share is a unit of ownership in a company. The terms 'stock' and 'share' are often used interchangeably.

Equity represents ownership interest in a company. It's the value of shares issued by a company.

A dividend is a portion of a company's profits distributed to shareholders, typically paid quarterly.

A bull market is a period when stock market prices are generally rising, typically by 20% or more from recent lows.

A bear market is a period when stock market prices are generally falling, typically by 20% or more from recent highs.

Market cap is the total value of a company's outstanding shares, calculated by share price × number of shares.

Price-to-Earnings ratio measures a company's current share price relative to its per-share earnings.

A demat (dematerialized) account holds shares in electronic form, similar to a bank account holding money.

A trading account is used to place buy/sell orders in the stock market. It's linked to your bank and demat accounts.

Initial Public Offering is when a private company first sells its shares to the public to raise capital.

Sensex (Sensitive Index) is India's oldest stock market index, comprising 30 of the largest and most actively traded stocks.

Nifty 50 is India's benchmark stock market index, representing the top 50 companies by market capitalization.

A portfolio is a collection of investments owned by an individual or institution, including stocks, bonds, and other assets.

Diversification is the practice of spreading investments across various assets to reduce risk.

A stop loss is an order to sell a security when it reaches a certain price, limiting potential losses.

A mutual fund pools money from many investors to invest in diversified portfolio of stocks, bonds, or other securities.

Systematic Investment Plan is a method of investing fixed amounts regularly in mutual funds.

A broker is a person or firm that charges a fee or commission for executing buy and sell orders for investors.

Volatility measures the degree of variation in trading prices over time, indicating risk and uncertainty.

Blue chip stocks are shares of large, well-established, and financially sound companies with a history of reliable performance.

Penny stocks are low-priced shares of small companies, typically trading below ₹50 in India with high risk and potential returns.

A market order is an order to buy or sell a stock immediately at the best available current price.

A limit order is an order to buy or sell a stock at a specific price or better, giving control over execution price.

Day trading involves buying and selling financial instruments within the same trading day, with no positions held overnight.

Delivery trading involves buying stocks and holding them for more than one day, with actual ownership transfer.

Beta measures a stock's volatility in relation to the overall market. Beta of 1 means the stock moves with the market.

Earnings Per Share (EPS) is a company's profit divided by the number of outstanding shares, indicating profitability.

Book value is the net asset value of a company, calculated as total assets minus intangible assets and liabilities.

Price-to-Book ratio compares a company's market price to its book value, indicating if stock is over or undervalued.

Dividend yield is the annual dividend per share divided by the stock's current price, expressed as a percentage.

Capital gain is the profit from selling an asset at a price higher than its purchase price.

Capital loss occurs when you sell an asset for less than its purchase price.

Asset allocation is the strategy of dividing investments among different asset classes like stocks, bonds, and cash.

Risk appetite is the amount of risk an investor is willing to take to achieve their investment goals.

Net Asset Value (NAV) is the per-unit value of a mutual fund, calculated daily after market hours.

Assets Under Management (AUM) is the total market value of assets that a mutual fund or investment company manages.

A fund manager is a professional responsible for managing a mutual fund's portfolio and making investment decisions.

Lock-in period is a timeframe during which investors cannot sell their investment, common in tax-saving schemes.

Equity Linked Savings Scheme (ELSS) is a tax-saving mutual fund with a 3-year lock-in period under Section 80C.

An index fund is a mutual fund that tracks a market index like Nifty 50, offering passive investing with low costs.

Exchange Traded Fund (ETF) is a fund that tracks an index, commodity, or basket of assets but trades like a stock.

Liquidity refers to how easily an asset can be converted to cash without affecting its market price.

Volume is the number of shares traded during a specific period, indicating market activity and interest.

Bid price is the highest price a buyer is willing to pay for a stock at a given time.

Ask price is the lowest price a seller is willing to accept for a stock at a given time.

The difference between the highest bid price and lowest ask price for a stock, representing trading costs.

A circuit breaker is a market regulation that temporarily halts trading if prices move too much in a short time.

Insider trading is the illegal practice of trading based on material non-public information about a company.

Securities and Exchange Board of India (SEBI) is the regulatory body for Indian securities markets.

Companies are classified by market capitalization: Large-cap (>₹20,000 crore), Mid-cap (₹5,000-20,000 crore), Small-cap (<₹5,000 crore).

Large-cap companies have market capitalization above ₹20,000 crore, representing stable, established businesses.

Mid-cap companies have market capitalization between ₹5,000-20,000 crore, offering growth potential with moderate risk.

Small-cap companies have market capitalization below ₹5,000 crore, offering high growth potential but with higher risk.

Face value is the nominal value of a share set by the company, typically ₹10, ₹5, or ₹2 in India.

Bonus shares are additional shares given to existing shareholders free of cost, capitalizing reserves.

A stock split divides existing shares into multiple shares, reducing face value and increasing share count.

A rights issue offers existing shareholders the right to buy additional shares at a discounted price.

The percentage of earnings paid to shareholders as dividends, indicating company's dividend policy.

Price action is the movement of a security's price over time, analyzed to make trading decisions.

A support level is a price level where a stock historically finds buying interest, preventing further decline.

A resistance level is a price level where selling pressure emerges, preventing further price increase.

A moving average smooths price data to identify trends, calculated as average of closing prices over a period.

Relative Strength Index (RSI) is a momentum oscillator indicating overbought (>70) or oversold (<30) conditions.

Fundamental analysis evaluates a company's intrinsic value by examining financial statements and economic factors.

Technical analysis forecasts future price movements by studying historical market data, primarily price and volume.

Debt-to-equity ratio measures a company's financial leverage by comparing total debt to shareholders' equity.

Current ratio measures a company's ability to pay short-term obligations with current assets.

Return on Equity (ROE) measures profitability relative to shareholders' equity, indicating efficiency of capital use.

Return on Capital Employed (ROCE) measures profitability relative to total capital employed in the business.

Promoter holding is the percentage of shares owned by company founders/promoters, indicating control level.

Foreign Institutional Investors (FII) are overseas investment funds investing in Indian securities markets.

Domestic Institutional Investors (DII) are Indian institutional investors like mutual funds and insurance companies.

Retail investors are individual investors who invest personal money in securities markets.

Derivatives are financial contracts whose value derives from underlying assets like stocks, indices, or commodities.

Futures are standardized contracts to buy or sell an asset at a predetermined price on a future date.

Options are contracts giving the right, but not obligation, to buy (call) or sell (put) an asset at a strike price.

Margin trading allows investors to buy stocks by borrowing money from brokers, amplifying potential returns and risks.

Commodities are raw materials or primary agricultural products that can be bought and sold, like gold, silver, oil.

Asset classes are groups of securities with similar characteristics and behavior, like equities, bonds, commodities.