Glossary of Stock Market

GLOSSARY OF STOCK MARKET
52-Week High/Low
The highest and lowest price at which a stock traded in the past 12 months, or 52 weeks.
Absolute Return
The return that an asset achieves over a period of time. This measure simply looks at the appreciation or
depreciation (expressed as a percentage) that an asset - usually a stock or a mutual fund - faces over a
period of time. Absolute return differs from relative return because it is concerned with the return of the
asset being looked at and does not compare it to any other measure.
Actual Return
The actual gain or loss of an investor.
Auction
A mechanism used by the Stock Exchange to fulfill its obligation to the buyer of a security. It is done
when the seller is unable to deliver the script sold by him. The security in question is offered by a member
who has ready possession of the script.
Acquisition
When one company purchases a majority interest in the acquired.
Allotment
The number of shares allotted to a partcipant in IPO against the actual number of securities he had applied
for.
American Depository Receipt (ADR)

A negotiable certificate issued by a U.S. bank representing a specified number of shares (or one share) in
a foreign stock that is traded on a U.S. exchange. ADRs are denominated in U.S. dollars, with the
underlying security held by a U.S. financial institution overseas.
American Depository Share (ADS)

A share issued under deposit agreement that represents an underlying security in the issuer's home
country. The terms American depositary receipt (ADR) and American depositary share (ADS) are often
thought to mean the same thing. However, an ADS is the actual share trading, while an ADR represents a
bundle of ADSs.
Analyst
A financial professional who has expertise in evaluating investments and puts together buy, sell and hold
recommendations on securities. Also known as a "financial analyst" or a "security analyst".
Annual General Meeting (AGM)

A mandatory yearly meeting of shareholders that allows stakeholders to stay informed and involved with
company decisions and workings.
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Annual Report
A company's annual statement of financial operations. Annual reports include a balance sheet, income
statement, auditor's report, and a description of the company's operations.
Annuity
A financial product sold by financial institutions that is designed to accept and grow funds from an
individual and then, upon annuitization, pay out a stream of payments to the individual at a later point in
time. Annuities are primarily used as a means of securing a steady cash flow for an individual during their
retirement years.
Appreciate
An increase in any investments value. For example, if shares of stock you own in a company have risen
from five to ten, it has "appreciated". Not quite the word to use to describe your blood pressure after you
finds you have just invested in a dud stock
Approved List
The list that tells you which shares are approved for the purpose of pledging them with the bank against
loan. Only these shares will be eligible for "loans against shares" facility. This list of approved securities
is periodically revised.
Arbitrage
The difference between price of a security in two different exchanges. The difference can be used to make
profits by persons holding a security to sell the same at an exchange where its price is high and buy it at
an exchange where it is available at a lower price.
Ask
The price a seller is willing to accept for a share, also known as the offer price.
Ask Size
The number of shares a seller is selling at a quoted ask price.
Asset Allocation
The process of dividing a portfolio among major asset categories such as bonds, stocks or cash. The
purpose of asset allocation is to reduce risk by diversifying the portfolio.
Asset Allocation Fund

A mutual fund that splits its investment assets among stocks, bonds and other investment vehicles in an
attempt to provide a consistent return for the investor.
Average Daily Share Volume
The number of shares traded per day, averaged over a period of time, usually one year. Helps in
determining the level of activity of the share on the market and in choosing only currently active stocks.
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Average Annual Growth Rate

The average increase in the value of a portfolio over the period of a year.
Average Annual Return

The historical return of a mutual fund.
Average Maturity
The average time to maturity of securities held by a mutual fund. Changes in interest rates have greater
impact on funds with longer average life.
Average P/E Ratio
Average price/earnings ratio of stocks owned by a mutual fund.
Average Return
The simple average of a series of returns generated over a period of time.
Back door listing

A strategy of going public used by a company that fails to meet the criteria for listing on a stock
exchange. To get onto the exchange, the company desiring to go public acquires an already listed
company.
Backend load
Sales charge paid when selling a mutual fund - also known as deferred load. (For instance, alimony can
be said to be a back-end load)
Bad Debt
A debt that is not collectible and therefore worthless to the creditor. This debt, once considered to be bad,
will be written off by the company as an expense.
Balance Sheet
A financial statement that summarizes a company's assets, liabilities and shareholders' equity at a specific
point in time. These three balance sheet segments give investors an idea as to what the company owns and
owes, as well as the amount invested by the shareholders.
Balanced Fund
A mutual fund that invests its assets into the money market, bonds, preferred stock, and common stock
with the intention to provide both growth and income.
Bankruptcy
The state of a person or firm unable to repay debts.
Bar Chart
A style of chart used by some technical analysts, the top of the vertical line indicates the highest price a
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security traded at during the day, and the bottom represents the lowest price. The closing price is
displayed on the right side of the bar, and the opening price is shown on the left side of the bar. A single
bar like the one below represents one day of trading.
Basis Point
A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis
point is commonly used for calculating changes in interest rates, equity indexes and the yield of a fixed-
income security.
Bear Market
A weak and falling market where buyers are absent (Usually because they burnt their fingers when they
held on too long to their shares when the market was rising.) Generally correlates with recession. An
opportunity to buy at low prices, in hope (usually) fulfilled if you wait long enough) of an upturn. Low
capital investors may have a problem in holding on to stocks for a long period. This is the reverse of the
bull market. Hence, the strategy would also be reversed but be cautious. It is more difficult to tell when a
falling stock is going to reverse direction than to predict when a rising is likely to fall.
Bear Market
A market condition in which the prices of shares are falling or are expected to fall.
Best Ask
The lowest quoted ask price for a particular share among those offered from competing market makers.
Best Bid
The highest quoted bid for a particular share among all those offered by competing market makers.
Blue Chip Stock

Shares of well-established and financially strong corporations, with little investment risk and a history of
earnings and dividend payments. These stocks usually form the base of a portfolio and allow for higher
gain (and higher risk) speculation in other stocks. Investment in such stocks is more for capital
appreciation than for return on investment since most blue chips trade at high market prices. Best to
allocate a portion of your annual income for the purchase of investment stocks over the long term.
Blue Chip
A nationally recognized, well-established and financially sound company.
Bond
A debt investment with which the investor loans money to an entity (company or government) that
borrows the funds for a defined period of time at a specified interest rate
Bond
A bond is a debt instrument issued by an entity for the purpose of raising capital. A long term promissory
note issued by a corporation. A bond can be issued by a corporation or other entity such as state or
municipal governments or the Central Bank of the country. Bonds normally have a set maturity (term)
and interest (coupon) rate associated with them. In simpler word, you are in effect lending money to the
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entity which issues the bonds for a specified period in return for a fixed rate of return till the bonds
mature, at which point you get back your principal investment.
Book Building
The process by which an underwriter attempts to determine at what price to offer an IPO based on
demand from institutional investors.
Bond Rating
A grade evaluating the quality of a bond
Book Closure
A company's announcement of a dividend or bonus to investors.
Book Closure
A company closes its register of members for updating the records to facilitate payment of dividends or
issue of tights of bonus shares. Book closure is the period during which this process is done and deliveries
are not affected in the clearing house.
Book value
Total shareholder equity from the balance sheet divided by the number of shares outstanding.
Book Value
The net asset value of a company, calculated by total assets minus intangible assets (patents, goodwill)
and liabilities.
Boom
A period of time during which sales or business activity increases rapidly.
Bottom
The lowest point or price reached by a financial security, commodity, index or economic cycle in a given
time period, which is followed by a steady increase.
Bottom Fisher
An investor who looks for bargains among stocks whose prices have recently dropped dramatically. The
investor believes that the recent price drop is temporary and a recovery is soon to follow.
Bottom Line
Refers to a company's net earnings.
Bonus Shares
Shares allotted to the existing shareholders by capitalizing the reserves into additional capital. When the
market expects a company to come out with a Bonus Issue, the price of the shares normally goes up.
Following a bonus issue, though the number of total shares increase, the proportional ownership of
shareholders does not change.
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Breakout
A price movement through an identified level of support or resistance, which is usually followed by
heavy volume and increased volatility. Traders will buy the underlying asset when the price breaks above
a level of resistance and sell when it breaks below support.
Bourse
A stock exchange
Breakout
A technical analysis term meaning a stock price has moved above or below a previous trading range.
Broker
An individual or firm that charges a fee or commission for executing buy and sell orders submitted by an
investor.
Bridge/Mezzanine Funding
Financing for a company expecting to go public within 6-12 months; usually so structured as to be repaid
from proceeds of a public offering, or to establish a floor price for public offer.
Broad Based Fund (sub-account)

A fund which has a minimum of 20 shareholders without any single investor holding more than 10
percent of the shares and units of the fund is known as broad Based Fund.
Brokerage Account
An arrangement between an investor and a licensed brokerage firm that allows the investor to deposit
funds with the firm and place investment orders through the brokerage, which then carries out the
transactions on the investor's behalf.
Broker
An agent who handles the public's orders to buy and sell stocks, commodities or other property. Full
service brokers are those that provide a wide range of investment services, research and advice. A full
service account representative usually works on a commission basis, thereby generating income on the
number of his clients' trades. Discount brokers are not in the business of giving investment advice they
usually work on salary, limit their services to trade executions and collect substantially lower fees.
BSE Sensex
A stock index (one of many) commonly used as an indicator of changes in the general level of the stock
prices in India . In this index, there are 30 diversified stocks traded on the Mumbai Stock Exchange which
are thought to be representative of the market in general.
Bubble
A surge in equity prices, often more than warranted by the fundamentals and usually in a particular sector,
followed by a drastic drop in prices as a massive selloff occurs.
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Bull
An operator who expects the share price to rise and takes a position in the market to sell at a later date.
Bull Market
A financial market of a certain group of shares in which prices are rising or are expected to rise.
Bull Market
A rising market where buyers far outnumber the sellers. Rising stock prices (generally occur during boom
years). Amateur investors could lose a lot of money in this phase of the market. They hold back money in
this phase of the market. They hold back selling in expectation of still higher gains and sometimes are left
high and dry when the market crashes. Anything that goes up has to come down is a law of physics that
holds well in the stock market, too. Long term investors are usually less harmed since their perspective is
3 to 5 years or even more and the market tends to level out over a period of time. A critical decision is
when to sell on a bull market. the best procedure is to decide within yourself that you will satisfied by a
specified margin eg profit on your investment (say, 10, 15, 20 percent or wherever) and then sell at that
point, regardless of every one predicting that share prices are sure to go up still further and you would be
a fool to sell at this point. Ignore them. Book your specified profit, that is, sell your shares and put the
money in your bank. If the Bull Run still continues, invest a lesser sum, decide your margin of profit, and
repeat the procedure. There will come a time when the Bull Run stops, that is the share prices reverse
direction. Sell immediately and rest content that you have been wise enough to book profits at different
points of the Bull Run . Your losses are thus restricted to the period after your last profit taking. You then
offer your sympathy to investors who did not disinvest and had to bear heavy loses. Duck if they take a
swing at you.
Bullion
Gold and silver that is officially recognized as high quality (at least 99.5% pure), and is in the form of
bars rather than coins.
Buy Transaction
When you place an order for stock, it can be executed depending on which type of exchange the stock is
listed. There are two methods of execution (i) the online exchange which is connected via satellite, or (ii)
the outcry method, which is executed on the floor of the exchange. The first method is instantaneous,
whereas the second can be a little time consuming. It takes time for a stock order to be sent by the broker
to the stock exchange floor. A person on the stock market floor bids to find a buyer for the stock. The
stock is then purchased or sold and the broker finally notified of the price and how much money to deduct
from the customer's account plus his broker fee. The total time is an estimated 20 minutes.
Buy
A recommendation to purchase a specific security.
Buy and Hold

A passive investment strategy in which an investor buys stocks and holds them for a long period of time,
regardless of fluctuations in the market.
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Buy Back
The buying back of outstanding shares (repurchase) by a company in order to reduce the number of shares
on the market. Companies will buyback shares either to increase the value of shares still available
(reducing supply), or to eliminate any threats by shareholders who may be looking for a controlling stake.
Buyout Funding
Funds provided to enable a corporation to acquire another enterprise or product line or business. In the
corporate world all major deals are leveraged, that is, funded by someone else. Try doing this in your
personal life and you will probably go to jail.
CAGR
The year-over-year growth rate of an investment over a specified period of time. It's an imaginary number
that describes the rate at which an investment would have grown if it grew at a steady rate
Call Option
An option where the buyer gets the right to buy the underlying security at a specified
future date.
Capital Employed
Total liabilities and equity less non-interest bearing liabilities.
Capital Gain
An increase in the value of a capital asset (investment or real estate) that gives it a higher worth than the
purchase price. The gain is not realized until the asset is sold.
Capital Gains Distribution

Payments to mutual fund shareholders of profits from the sale of securities in a fund's portfolio. Capital
gains distributions (if any) are usually made annually.
Capital Turnover
Annual total Revenue as a percentage of total assets.
Capitalization
The value of a company as measured by the market price of its common shares, multiplied by the total
number of shares that have been issued
Capitalize
When costs of items such as buildings, equipment and other items with a useful lifetime exceeding one
year are categorized as assets to be depreciated over a number of years, rather than being expensed in the
year of purchase.
Capital Gains Tax

A type of tax levied on capital gains incurred by individuals and corporations. Capital gains are the profits
that an investor realizes when he or she sells the capital asset for a price that is higher than the purchase
price.
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Carry Forward
Settlement where positions are carried forward from one settlement to another settlement.
Cash Flow Statement

This document provides aggregate data regarding all cash inflows a company receives from both its
ongoing operations and external investment sources, as well as all cash outflows that pay for business
activities and investments during a given quarter.
Cash Flow per Share

Cash flow from operating activities divided by average number of shares.
Cash Settlement
Payment for transactions done in one settlement on the due date.
Change in Stock Price

The change in stock price is recorded in points. The fraction amount depends on the security being traded.
The change in stock price is the difference between the opening stock price and the current price the stock
is selling at. For example, if stock XYZ opened at 10, and is now selling for 11.50 it would be up +1.50.
The +1.50 is the change in stock price.
Circuit Breaker
A mechanism used to restrain the market when it gets overheated. The Exchange may relax the limit after
a cooling off period of about half an hour.
Clear Title
A title to an asset proves your legal ownerships of that asset. That asset be mortgaged, sold, rented or
otherwise transferred, temporarily or permanently, to another person. This represents an encumbrance on
the title. Banks are reluctant to authorize loans against assets which have encumbrances and prefer a clear
title.
Clearing House
It is a legal counter party to both legs of every trade. The netted purchase and sale positions of the trading.
Members are settled through the clearing house
Choppy Market
A stock market condition whereby prices swing up and down considerably but with no resulting overall
price movement in either direction.
Closely Held Shares

The shares held by individuals closely related to a company.
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Closing Price
The final price at which a security is traded on a given trading day.
Close
The closing price is the last traded price for the stock on a particular day. The previous close is the price a
stock closed on the previous day.
Closed-End Fund
Investors of such a fund buy shares from other share holders and sell shares to other investors. Share price
is determined by supply and demand for fund
Collateral
It is used to provide a guarantee for a loan. Can be encased by the bank if you default in any way on
repayment of interest or principle of your loan or other obligations. It includes negotiable instruments,
shares or goods and titles to immovable assets. If you feel that your bank works at a snail's pace, try
defaulting on a loan - the bank will encase your collateral so fast you'll never know what hit you till it is
too late.
Commodity
A basic good used in commerce that is interchangeable with other commodities of the same type.
Commodities are most often used as inputs in the production of other goods or services.
Common Stock
Equity or ownership in a corporation. Stockholders participate in a company's profits or losses through
dividends and changes in the stock's market value.
Commission
A fee charged by brokers for their service in facilitating investment has to be handled through brokers
registered on that exchange.
Commodity Index
An index that tracks a basket of commodities to measure their performance.
Common Shareholder
An individual, business or institution that holds common shares in a company, giving the holder an
ownership stake in the company. This will also give the holder the right to vote on corporate issues such
as board elections and corporate policy, along with the right to any common dividend payments.
Consensus Estimate
A figure based on the combined estimates of the analysts covering a public company. Generally, analysts
give a consensus for a company's earnings per share and revenue; these figures are most often made for
the quarter, fiscal year and next fiscal year.
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Correction
Corrections are generally temporary price declines, interrupting an uptrend in the market or asset.
Crash
A major decline in a financial market.
Cum Rights
A share is described as cum rights when the purchaser is entitled for current rights
Demat - Dematerialization
The move from physical certificates to electronic book keeping.
Day Order
The quantity that remains untraded is not cancelled until the end of the day.
Dalal Street
A term that refers to the Bombay Stock Exchange, the major stock exchange in India. The street is home
not only the Bombay Stock Exchange but also a large number of other financial institutions.
Day Trader
A stock trader who holds positions for a very short time (from minutes to hours) and makes numerous
trades each day. Most trades are entered and closed out within the same day.
De-merger
A corporate strategy to sell off subsidiaries or divisions of a company.
Debenture
A type of debt instrument that is not secured by physical asset or collateral. Debentures are backed only
by the general creditworthiness and reputation of the issuer. Both corporations and governments
frequently issue this type of bond in order to secure capital.
Debt
An amount of money borrowed and owed by one party to another.
Debt to Equity (long term)

Total long term debt divided by total shareholder equity.
Debt to Equity (Total)

Total (short and long term) debt divided by total shareholder equity.
Default
Failure to pay back a debt.
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Debt to Equity Ratio

Long-term debt divided by shareholders' equity, showing the relationship between long-term funds
provided by creditors and funds provided by shareholder; a high ratio may indicate high risk, low ratio
may indicate low risk.
Debt Fund
An investment pool, such as a mutual fund or ETF, in which core holdings are fixed income
investments.The fee ratios on debt funds are lower, on average, than equity funds because the overall
management costs are lower.
Deflation
A general decline in prices, often caused by a reduction in the supply of money or credit. It is the opposite
of inflation.
Deferred Expense
Balance sheet liability reflecting expenses shown on the income statement that haven't actually been paid.
Deferred revenue
When a share is bought or sold for the purpose of receiving or effecting deliveries.
Delisting
The removal of a listed security from the exchange on which it trades.
Derivative
A security whose price is dependent upon or derived from one or more underlying assets. The derivative
is a contract between two or more parties. Its value is determined by fluctuations in the underlying asset
like commodities, bonds, stocks, etc
Dematerialisation
It is a process by which an investor gets physical certificates converted into electronic balances
maintained in his account with the Depository Participant (DP). In other words, the shares are
'dematerialized'.
Depositories
An organization which holds securities of investors, on request in electronic from through a registered
Depository Participant (DP). It can be compared with a bank. It holds securities in an account, transfers
securities between accounts on the instruction of the account holder, facilitates transfers of ownership
without having to handle securities and facilitates safe-keeping of shares. Minimum net worth stipulation
required by SEBI for registering a DP is Rs. 100 crore.
Depository Participant (DP)

A DP is a representative of the depository in the system. The DP maintains the client's securities account
balances and keeps him informed about the status of holdings. According to SEBI regulations, financial
institutions (FI's), banks, custodians, stockbrokers, etc. can become DPs. It is comparable with a branch of
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a bank if a Depository is likened to a bank. A DP is offered depository services only after it gets proper
registration from SEBI.
Depreciation
A non-cash accounting charge representing the loss in value of hard assents such as buildings and
machinery over the accounting period.
Derivatives
A financial contract between two or more parties based on the future value of an underlying asset.
Options and similar other instruments are examples. For instance, the value of a call option on reliance
(derivative) fluctuates with the price of reliance stock. The value is totally 'derived' from the value of the
underlying asset such as securities, commodities, bullion, currency, live stock, etc. it is any hybrid
contract of a pre-determined fixed duration such as forward, future, option, etc. linked for the purpose of
contract fulfillment to the value of a specified real or financial asset or to an index of securities
Disinvestment
The action of an organization or government selling or liquidating an asset or subsidiary.
Diversification
A risk-management technique that mixes a wide variety of investments within a portfolio. The rationale
behind this technique contends that a portfolio of different kinds of investments will, on average, yield
higher returns and pose a lower risk than any individual investment found within the portfolio.
Dividend
Distribution of a portion of a company's earnings, decided by the board of directors, to a class of its
shareholders.
Dip
A drop in the price of a stock that is temporary making it the ideal time to buy the stock. A precept
common to all businesses: buy low sell high. Never forget, 'highs' and 'lows' are relative not absolute.
Any increase over your purchase price is a gain, and vice versa. One usually gets into trouble when giving
in to the thoroughly human instinct for the gap to increase (in case of gains) or decrease (in case of
losses). Book your profits (or cut your losses) as you go; don't allow them to accumulate too long.
Discount
The difference between a bond's face value and when to trade a security.
Diversification
The acquisition of a group of assets in which returns on the assets are not directly related over time.
Proper investment diversification is intended to reduce the risk inherent in particular securities. An
investor seeking diversification for a securities portfolio would purchase securities of firms that re not
similarly affected by the same variables.
For example, an investor would not want to combine large investment positions in airlines, trucking and
automobile manufacturing because each industry is significantly affected by oil prices and interest rates.
Of course, diversification is essentially for investors not traders. A lot of thought goes into deciding on
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investment avenues because you are not looking so much at the present status of the industry but at its
short- or mid-term future.
This, in turn, requires that you take into an account innumerable factors that could affect the health of the
industry. Of course, you can always take an analyst's help, but you should also learn to recognize factors
that may impact a particular industry. This calls for clear thinking and common sense. You can do it!
Dividend
Cash payment made to the shareholders out of the profits of the company. Cash dividends are paid out of
corporate earnings and the percentage of earnings paid out varies from corporation to corporation.
Generally, the percentage of corporate earnings paid out runs from 40 to 80 per cent, but many times it is
less, even zero, where the corporation keeps its entire earnings.
A stock dividend gives the shareholders additional shares of stock or a fraction thereof, rather than cash.
It is not mandatory for accompany to distribute dividends. At the same time, if a company is stingy on its
dividend policy, it is not going to find many investors.
Dividend Per Share

The amount of dividend paid out per share. (Dividend rate x nominal value of share)/100. The price used
is usually the market price at the end of the period under review, for instance, the end of a financial year.
Dividend Yield
Total of 12-months' dividend paid (historical or forecast) divided by the latest share price.
Documentation
The papers that are needed to process your loan application.
Dow Jones Industrial Average (DJIA)

A stock index (one of many) commonly used as an indicator of changes in the general level of the stock
market prices in United States . In this index, there are 30 industrial stocks thought to be representative of
industrial stocks in general. Dow Jones & Company, a financial and investment publisher based in New
York , also calculates averages for utility stocks, transportation stocks and bonds.
Just a few of the 30 companies in the DJIA are: American Express, AT&T, Bethlehem Steel, Boeing,
Chevron, Disney, Coca-Cola, General Motors and IBM. You will not be directly concerned at what
happens on the Dow.
But remember, the Dow average is global leader and is usually reflected by exchange around the world.
The wonders of globalization! You don't have enough problems trying to understand the trend of Mumbai
stock prices; you also have to keep in touch with global trends. Is that fat fee you are paying your stock
analyst looking more reasonable now?
Drawing Power Valuation

Valuation in stock markets affects your drawing power and hence your loan taking ability as it is
reviewed from time to time as per the applicable market value adopted by the bank. It is like an overdraft
limit. But in this case it is based on the market values of shares put up as collateral against a loan. The
limit fluctuates in line with the market price of the shares.
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Due Diligence
The process whereby an in-depth examination of a company's business prospects is conducted. Usually
when a merger, sale or acquisition of a company is intended
Downgrade
A negative change in the rating of a security.
Due Diligence - DD
An investigation or audit of a potential investment.
EBITDA - Earnings Before Interest, Taxes, Depreciation and Amortization

EBITDA is a good metric to evaluate profitability
EBIT
Effective before interest and taxes. Also known as operating income.
Effective Interest Rates

The compounded interest rate calculated on the actual inflows and outflows of cash.
EPS - Earnings Per Share

EPS is the earning on each share of a company
ESOP - Employee Stock Ownership Plan

A qualified, defined contribution, employee benefit plan designed to invest primarily in the stock of the
sponsoring employer.
Emerging Markets
Developing countries.
EMI
Equated monthly installments to be paid by the borrower in repayment of the loan taken (includes
principal and interest). If you think you can save some interest by pre-paying your loan be sure your EMI
agreement does not contain a pre-payment penalty. In the bizarre world of loan finance, lenders prefer
that you do not repay your loan before the agreed term. They lose interest, you see.
Equities
Another name for shares.
Equity per Share

Shows how much of a company's equity one share represents. If the market price is greater than the equity
per share, the market believes that the company will generate extra value. Equity divided by number of
shares at the close of the period.
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Ex Bonus
A Share is described as ex dividend when the buyer is not entitled for the dividend. The seller remains the
beneficiary. The day after dividends is paid!
Ex Rights
A share is described as ex rights when the buyer is not entitled for the Rights. The seller remains the
beneficiary. Ex rights shares are cheaper than Cum Rights and offer a good 'buy' opportunity for
investment oriented players.
Expiry Date
The date and time after which a writer of an option cannot exercise his rights.
Exposure
When the value of your asset/product pledged with a bank against loan is reduced by market price
fluctuation or for other reasons, it increases your 'exposure', that is, the bank feels insecure about the
return of the loan. And when a bank feels insecure, what happens in the famous Hollywood movie
'Indecent Exposure' is nowhere the bank could do to you if you do not reduce your exposure.
Exposure Limit
The limit allowed to the broker by his exchange or to the customer by broker. It is the total value up to
which one is allowed to hold open positions at any point of time.
Extended Hours Trading
Trades executed before or beyond normal market hours.
Earnings Estimate
An analyst's estimate for a company's future quarterly or annual earnings.
Earnings Surprise
When the earnings reported in a company's quarterly or annual report are above or below analysts'
earnings estimates.
Equity Fund
A mutual fund that invests in a broad, well-diversified group of stocks.
Ex-Dividend
The trading of shares when a declared dividend belongs to the seller rather than the buyer.
Exponential Moving Average - EMA

A type of moving average that is similar to a simple moving average, except that more weight is given to
the latest data.
FCCB - Foreign Currency Convertible Bond

A type of convertible bond issued in a currency different than the issuer's domestic currency.
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FDI - Foreign Direct Investment

An investment abroad, usually where the company being invested in is controlled by the foreign
corporation.
FII - Foreign Institutional Investor

An investor or investment fund that is from or registered in a country outside of the one in which it is
currently investing.
Face Value
The nominal value of a security stated by the issuer. For shares, it is the original cost of the share shown
on the certificate.
Financial Porn
A slang term used to describe sensationalist reports of financial news and products causing irrational
buying that can be detrimental to investors' financial health.
Fiscal Year
Any 12-month period that a company uses for accounting purposes.
Flat Rate of Interest

Percentage representation of the amount of annual interest on the total loan amount.
Float
The number of shares outstanding minus what is owned by insiders and what the company is holding
back (treasury stock.)
Fully Paid Shares

Shares issued in which no more money is required to be paid to the company by shareholders on the value
of the shares.
Fund Of Funds
A mutual fund that invests in other mutual funds.
Fundamental Analysis
Fundamental analysis is to produce a value that an investor can compare with the security's current price
in hopes of figuring out what sort of position to take on that stock.
Futures Contract
An agreement between parties for specified asses for performance on a fixed day in future. A futures
contract is a legally binding agreement to buy or sell commodities to buy or sell commodities or financial
securities at fixed time in the future at a price agreed upon today. The delivery period, quantity and
quality of a futures contract is standardized and specified while the price is set at the time a contract is
opened and is negotiated between buyers and sellers. Futures are traded either electronically or via open
outcry on a traded either electronically or via open outcry on a trading floor on the Exchange offering the
particular contract.
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Futures
A financial contract obligating the buyer to purchase an asset (or a seller to sell an asset) at a
predetermined date and price.
GAAP - Generally Accepted Accounting Principles

The common set of accounting principles, standards and procedures that companies use to compile their
financial statements.
GDP
The forfeited output of a country's economy.
GDR - Global Depositary Receipt

A bank certificate issued in more than one country for shares in a foreign company. The shares are held
by a foreign branch of an international bank.
Gilt Fund
A mutual fund that invests in several different types of medium and long-term government securities in
addition to top quality corporate debt.
Goodwill
The amount by which a company's shareholder equity exceeds the value of its hard assets.
Going Public
The process of selling shares that were formerly privately held to new investors for the first time. Also
known as Initial public offering (IPO).
Green Field Investment

A form of foreign direct investment where a parent company starts a new venture in a foreign country by
constructing new operational facilities from the ground up.
Greenshoe Option
A provision contained in an underwriting agreement that gives the underwriter the right to sell investors
more shares than originally planned by the issuer.
Gross Margin
Gross profit divided by sales.
Growth Fund
A diversified portfolio of stocks that has capital appreciation as its primary goal, and thereby invests in
companies that reinvest their earnings into expansion, acquisitions, and/or research and development.
Guidance
Information that a company provides as an indication or estimate of their future earnings.
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Gross Profit
Profit a company makes on goods and services before considering overhead expenses. Gross profit is
sales minus cost of sales.
Growth Stocks
Stocks that pay low dividends, but are expected to grow. Strictly for long term investors who have a
vision for the future and are not interested in maximizing short term profits.
Guarantor
A person who promises to pay your debts if you are unable to pay them yourself. If you find a good
guarantor, hand on to him. Never let him down. He's like money in a bank.
Haircut
The difference between prices at which a market maker can buy and sell a security.
High
The highest price that was paid for a security during a certain time period. This can be expressed daily,
weekly, and monthly or for a 52-week period. For example, the high for the day can be 20, but the high
for the year can be 50. It helps to know the price history of a security over a period of time as an
additional support for current buy or sell decision.
Hot Stock
A stock whose price rises quickly the day it goes public. Let's say you buy a new offering at Rs.10. What
would you do if, on the first day of listing on the exchange it is quoted at Rs.25? Sell, or wait for a further
increase. The same old choice: should I sell now and make a profit or wait for a while in hope that the
price will go up further?
Hypothecation
Pledging assets against a loan using properties such as securities as collateral for loan, but not transferring
legal ownership to the lender - which does not mean that you will not lose your collateral if you default
on repayment. With a little paper work, the lender can sell your collateral to realize his payments.
Hammering
The rapid and concentrated sale of a stock thought to be overvalued by the market.
Hedging
A practice of taking one market position to offset potential losses in another. For example using a futures
a contract to reduce the impact of price fluctuations in a cash or physical market. Like when you may like
to cover possible loss by also backing the horse for a place. In securities trading, since there is no win or
place, you have to look for another investment avenue where the return is less but the risk is also
correspondingly less. A hedger takes an equal and opposite position in the futures market to the one he
holds in the equity market.
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Hedge
Making an investment to reduce the risk of adverse price movements in an asset. Normally, a hedge
consists of taking an offsetting position in a related security, such as a futures contract.
Hedge Fund
An aggressively managed portfolio of investments that uses advanced investment strategies such as
leverage, long, short and derivative positions in both domestic and international markets with the goal of
generating high returns.
Holding Period
In a long position, holding period refers to the time between an asset's purchase and its sale. In a short
sale, the length of time for which the short position is held.
Initial Public Offering - IPO

The first sale of stock by a private company to the public.
Iceberg Order
A large single order that has been divided into smaller lots, usually by the use of an automated program,
for the purpose of hiding the actual order quantity.
In And Out
The purchase and sale of a security within a short period of time, usually on the same day.
Income Fund
A mutual fund that seeks to provide stable current income by investing in securities that pay interest or
dividends.
Income Statement
A record of a company's sales and expenses over a particular year or quarter
Index / Indices
An index is managed and publishes either by a stock exchange or a professional financial and investment
body. It is representative of the market sentiment. Normally the index components are the highly traded
stocks of that exchange. Usually they represent about 80 to 85 percent of the market capitalization and
trading. Sectored indices like Industrial, banking, Utilities, etc is made up of the highly traded stocks in
that particular sector. The BSE Sensex is based on 30 stocks as is New York 's Dow average. These 30
stocks, in number, are a miniscule percent of the total listed shares, but in terms of value of trade and
market capitalization, they represent anything up to 85 per cent.
Industry Group
Companies in related businesses.
Index
A statistical measure of change in an economy or a securities market. In the case of financial markets, an
index is essentially an imaginary portfolio of securities representing a particular market or a portion of it.
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Inflation
Increase in the prices for goods and services. For the common man, this means he pays more for what he
uses. For the stock market player, it could be both good and bad news. If cement prices are going up, is it
because there is a shortage in output, a surge in construction activities or higher government taxes? There
could be a number of reasons, each of them having a different impact on the fundamentals of the cement
industry. If you are holding cement shares, should you hold on to them, buy more or sell? Try and figure
it out. If you can't leave it your analyst.
Inflation Rate
An important economic indicator. The rate at which prices are rising. So, when the inflation rate is 2
percent, it means it is rising at the rate of 2 percent per year based on current prices. It does not mean that
anything you buy will now cost you 2 percent more than it did last time.
Income Stocks
Stocks that have consistently paid high dividends. Contrary to what you might think after some time on
the stock exchange, there really are such stocks. When you find one grab it and cherish it till death or
inflation do you part if you have good base of income stocks, you can afford to speculate in higher risk
stocks. But remember you have to keep an eye on the fundamentals of the company. Consistent does not
mean ?for ever?.
Index Fund
A portfolio of investments that is weighted the same as a stock-exchange index in order to mirror its
performance.
Inflation
The rate at which the general level of prices for goods and services is rising, and, subsequently,
purchasing power is falling.
Inorganic Growth
A growth in the operations of a business that arises from mergers or takeovers, rather than an increase in
the companies own business activity.
Insider Information
Any knowledge about a company, its products, or securities not generally available to the public gained
from a source inside the company. For instance if your daughter-in-law's sister's husband is working for a
large public limited organization and lets fall during a family get-together that his company is planning to
buy company XYZ and you immediately place a buy order for XYZ shares, that would be insider trading.
It is legally in most countries for anyone to make a securities trade based on what they believe to be
inside trading result in large fines or imprisonment or both. In India , SEBI is trying to improve its
monitoring system, but the system is so widespread and disparate and the judicial system, which it's
numerous levels of appeals, so time consuming and cumbersome that most insider trades are seldom
reported or detected. But the system is being tightened up so think twice before you place that buy order
for XYZ shares.
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Insider Information
Material information about a company's activities that has not been disclosed to the public.
Insider Trading
The buying or selling of a security by someone who has access to material, nonpublic information about
the security. Insider trading can be illegal or legal depending on when the insider makes the trade. It is
illegal when the material information is still nonpublic.
Institutional Ownership
Shares of a company owned by pension funds, mutual fund, banks, financial institutions, etc
Institutional Investor
A non-bank person or organization that trades securities in large enough share quantities or dollar
amounts that they qualify for preferential treatment and lower commissions.
Intangibles
Soft assets such as patents, trademarks, etc.
Interest
Money charged by a lender to a borrower for the use of his or her money. Payment made at periodic
investments on an investment.
Intraday
Stock trading tracked in periods shorter than one day. For instance the trades during the first two hours or
last two hours of the trading day.
Intrinsic Value
A term favored by value oriented fundamental analysts to express the actual value of a corporation, as
opposed to the current value based on the stock price. Usually calculated by adding the current value of
estimated future earning to the book value.
Investment
Anything of value purchased to provide capital appreciation and /or income.Examples include stocks,
bonds, mutual funds, unit investment trusts, certificates of deposit, money market funds and collectibles
(not lottery tickets; that would be speculation not investment). Investments may also include artwork,
antiques and real estate. Also, your wife's jeweler is an investment, so spend lavishly on her.
Investment Bank
An organization, usually a stock brokerage firm, involved in taking a new company public IPO,
consulting on mergers and acquisitions, handling corporate borrowing, etc. An intermediary between an
issuer of securities and the investing public. They handle the distribution of blocks of previously issued
securities, either through secondary offering or through negotiations, maintain markets for securities
already distributed, and act as finders in private placement of securities.
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IPO (Initial Public Offering)

Equity or other issue which is presented to the market for the first time.
IRR (Internal Rate of Returns)

Internal Rate of Return is the rate at which the lender accounts for interest.
Issue
Any securities of a company, or the act of distributing such securities.
Inventory
Raw materials, work in process, and finished goods that have not been shipped to customers.
Interim Dividend
A dividend payment made before a company's AGM and final financial statements.
IPO Lock-Up
A contractual caveat referring to a period of time after a company has initially gone public, usually
between 90 to 180 days. During these initial days of trading, company insiders or those holding majority
stakes in the company are forbidden to sell any of their shares.
Joint Venture
Two companies joining together to start a new entity, keeping the current entities untouched to start a
business.
Key Performance Indicators - KPI

A set of quantifiable measures that a company or industry uses to gauge or compare performance in terms
of meeting their strategic and operational goals.
Lead Underwriter
Brokerage house in charge of IPO.
Leverage
Any means of increasing value and return by borrowing funds or committing less of one's own money.
For corporations, it refers to the ratio of debt (in the form of bonds and preferred stock outstanding) to
equity (in the form of common stock outstanding) In the company's capital structure.
The more long-term debt there is, the greater the financial leverage. Shareholders benefit from this
financial leverage to the extent that the return on the borrowed money exceeds the interest costs of
borrowing it. The market value of the company rises and so do its shares. Because of this effect, financial
leverage is popularly called ?trading on the equity'. For individuals, leverage can involve debt, as when an
investor borrows money from his broker ?on margin' and so is able to buy more stock than he otherwise
could. If the stock goes up, he repays the broker the loan amount and keeps the profit himself. By
borrowing money he has achieved a higher return on his investment than if he had paid for all the stock
himself. Rights, warrants, futures and option contracts also provide leverage, not through debt but by
offering the prospect of a high return for little or no investment.
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The downside: most individuals pledge existing stocks with their bankers or brokers for the loan, which is
a percentage of the market value of the stocks pledged. Say you have pledged stocks worth Rs.100 on the
market against which you are given a loan of Rs.50 (50 per cent). Now suppose the market value of the
pledged stocks goes down to Rs.75. The lender is immediately going to ask you to pledge more stocks (or
pay cash) to bring the level up to 200 per cent of the loan.
Multiply this instance by thousands and you can imagine the margin pressure that is exerted on the
market. This is when the market falls and we have what is known as a ?bear' market.
Leveraged Buy Out

Take over of a public corporation using borrowed funds.
Liability
A financial obligation or debt.
Limit Order
A market order that specifies the highest or lowest price at which the customer is willing to trade
securities. An order to a broker to buy a certain stock (future, etc.) only if the price rises to a specified
level. This decision-making is necessary to cut losses due to lower prices or sudden reverses in rising
share prices.
Liquidity
A measure of the number of shares, or money value of shares traded daily. Mutual funds and other
institutional buyers prefer high liquidity stocks so they can easily move in and out of positions. Depth of
market to absorb buy and sell activity of even large orders at prices appropriate to supply and demand.
The market must also adapt quickly to new information and incorporate that information into the stock's
price. Liquidity is one of the most important characteristics.
Load
A sales commission paid when you buy (front-end) or sell (back-end) a mutual fund.
Load Funds
Mutual funds that carry a sales commission.
Long Position
A bull position in a security. To buy or hold a long position is the state of actually owning a stock,
security, contact, or commodity. It is the opposite of a short position.
Long-term Gain
A gain on the sale of a capital asset where the holding period was twelve months or more and profit was
subject to the long-term capital gains tax. The legal definition of short term and long term capital gains
varies from country. So is taxation based on those classifications? This is one of the reasons investors buy
and sell stocks around the world. A U.S. investor (FII), today, can make more money on an investment on
the BSE than the U.S. bourse. The day-even minute - the FII sees a better opportunity elsewhere in the
world. That's where the money will go.
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Long-term Investments
Balance sheet item reflecting investments in other companies, etc.
Lot
A fixed minimum number in which shares are bought and sold. Trading lots can comprise 5, 10, 50 or
100 shares depending on the face value of shares. Such number makes round lots, anything less makes
odd lots.
Low (price)
The lowest price a security or commodity has reached in a certain period of time such as a daily low or
annual low. This can be expressed daily, weekly, monthly, or for a 52 week period. For example, the low
for the day can be 10, but the low for the year can be 5, Helps you understand whether today's price is an
aberration or a logical extensive of a trend.
Limit Order
An order placed with a brokerage to buy or sell a set number of shares at a specified price or better.
Liquidity
The degree to which an asset or security can be bought or sold in the market without affecting the asset's
price.
Long Term
Holding an asset for an extended period of time. Depending on the type of security, a long-term asset can
be held for as little as one year or for as long as 15 years or more.
Losing Your Shirt

In the investment world, this expression is used to describe a very bad investment that causes an investor
to lose everything he or she has invested.
M&A - Mergers And Acquisitions

A merger is a combination of two companies to form a new company, while an acquisition is the purchase
of one company by another with no new company being formed.
Margin
Borrowed money that is used to purchase securities. An upfront payment made by the customer to take a
position in the market. His exposure limit is fixed based on the margin money brought in by him. The
difference in the value of shares pledged and the loan amount sanctioned. The margin for physical shares
is 50 percent (that is you can borrow only up to 50 percent of the values of your pledged shares. If one
wants to borrow Rs.100, then it will have to pledge shares worth Rs.200. The margin for demat shares
is35 percent. Margins are at the sole discretion of the bank and may even vary from scrip to scrip.
Margin Call
A broker's demand on an investor using margin to deposit additional money or securities so that the
margin account is brought up to the minimum maintenance margin.
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Market Capitalization
Total market value of the company on the stock exchange. Total number of shares multiplied by the
official price quoted on the stock exchange.
Mark to Market
A notional profit or loss of a long or short position as compared to the current market price.
Market Liquidity
Use to track money flow into and out of the markets. Positive cash flow can serve as an indicator that
fund managers have cash to put into the markets at the next buying opportunity. Conversely, negative
case flow may indicate that fund managers may need to liquidate some holdings to meet redemption
requirements. Additionally, IPO's reduce market liquidity; however mergers increase market liquidity.
Market lots
The minimum trading lot on a stock exchange. On compulsorily dematerialized shares for all classes of
investors, the market lot is just one share.
Market Order
An order where no price specification is mentioned at the time of placement and market prices apply.
Authorization for a broker to buy or sell securities at the best price that can be negotiated at the moment.
Market Perform
Market perform is a neutral assessment of a stock and is neither strongly positive or negative.
Market Timing
The act of attempting to predict the future direction of the market, typically through the use of technical
indicators or economic data.
Market Value
The current quoted price at which investors buy or sell a share of common stock or a bond at a given
time. Also known as "market price".
Market Price
It is the price a particular stock is currently selling for during the operating hours of the stock market.
Market Open/Close Price.

It is the last sale price of a particular stock on the previous day.
Maturity Date
The date on which the principal amount of a note, draft, acceptance bond or other debt instrument
becomes due and is repaid to the investor and interest payments stop.
Medium Term
An intermediate period of time to hold an asset.
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Mid Cap
Companies having a market capitalization between Rs 500 crore and Rs 1,000 crore
Monetary Policy
The actions of a reserve bank of india, that determine the size and rate of growth of the money supply,
which in turn affects interest rates.
Money Market
The securities market dealing in short-term debt and monetary instruments.
Minimum Number of Companies Accepted

The minimum number of companies, whose shares have to be offered as security for obtaining loans. For
example, in case of IDBI Bank the shares to be offered as security should be of at least of two companies.
It is in your interest to pledge the shares of an number of companies when you take a loan; if the value of
some shares drop in the market they may be offset by the other shares which have risen in price. Banks
also profitability of a number of companies.
Momentum Analysis
Usually involves looking for stocks in a strong uptrend (high relative strength), strong earnings growth,
and increasing earnings forecasts. In today's market, may include relative strength only.
Money Supply
The amount of money in circulation. The Reserve Bank of India attempts to control the growth of the
economy by regulating the increase or decrease in money supply.
Mutual Fund
A security that gives small investors access to a well-diversified portfolio of equities, bonds and other
securities. Each shareholder participates in the gain or loss of the fund. Units are issued and can be
redeemed as needed.
Moving Average
A rolling set of averages calculated over a time series of values. A moving average represents data in a
manner that smoothens fluctuations and highlights possible trends. Not for amateur investors. Moving
averages are one way to view historical price levels. Moving averages take into account some number of
price periods (a new period is added and the oldest is dropped from the calculation) to show average price
over time. It is possible to weight more recent prices by linearly or exponentially smoothing the average
lines. The linger the averaging period, the more lag you will see between the average and the most recent
prices. The 10-day Moving Average (MA) is the average closing price for the past 10 days. Stocks are
said to be in an uptrend when above their MA and in a downtrend when below. The most widely followed
MAs are 50 days and 200 days. Long -term investors tend to look at the 200-day MA while active traders
are more likely to pay attention to the 50-day MA. Many investors look at both. As a general rule, it's best
to avoid stocks trading below both their 50 -and 200-day MAs.
Municipal Bonds
Debt instrument issued by a state or local agency.
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Mutual Fund
A portfolio of stocks, bonds or other securities administered by a team of one or more managers from an
investment company who make buy and sell decisions on component securities. Capital is contributed by
smaller investors who buy shares in the mutual fund rather than the individual stocks and bonds in its
portfolio. The return on the funds holdings is distributed back to its contributors, or shareholders, minus
various fees and commissions. This system allows small investors to participate in the reduced risk of
large and diverse portfolio that they could not otherwise afford to build themselves. They also have the
benefit of professional managers overseeing their money who have the time and expertise to analyze and
pick securities. There are two types of mutual funds, open and closed ended. Units in closed -end funds,
some of which are listed on stock Exchanges, are readily transferable in the open market and are bought
and sold, like other stock. These funds do not accept new contributions from investors, but only reinvest
the return on the existing portfolio. Open -end funds sells their own shares to investors, stand ready to buy
back their old shares and are not normally listed in exchanges. Open-end funds are so called because their
capitalization is not fixed; they issue more units as people want them. Many open-ended funds allow
contributors extra perks, such as the ability to write cheques against their units. also there are several open
ended mutual funds which are insurance linked. The mutual funds which are insurance linked. Its
basically marketing with for an investor with limited funds and/or limited knowledge of the market.
NAV - Net Asset Value

The total value of the fund's portfolio less liabilities. Net Asset Value (NAV) is the market value of the
securities held by the scheme of a Mutual Fund.NAV varies on a day-to-day basis since the market value
of securities changes regularly. The total market value divided by the total number of units of the scheme
on a specific date is the NAV.To simplify, if you hold a unit in a mutual fund, the NAV is the value today
of your unit.
NASDAQ Composite Index

The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks
listed on the NASDAQ stock Market.The Index is market value weighted. This means that each
company's security affects the Index in proportion to its market by total shares outstanding, is calculated
throughout the trading day, and is related to the total value of the Index.
Net Asset Value per Share

Equity excluding minority interests, divided by number of shares.
Net Profit Ratio

Profit from operations as a percentage of revenue.
No-load Fund0073
Mutual funds that do not carry a sales commission.
Non-operating Expense
Expenses not due to the basic business of company.
Non-operating Income
Income not derived from basic business of company
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Normalized Earnings
Profits a company can be expected to achieve taking out cyclical effects and unusual events such as one-
time write-offs caused by late product releases, customer bankruptcies and the like.
NSCCL
National Securities Clearing Corporation Limited. The Clearing Corporation of the National Stock
Exchange.
NSE
National Stock Exchange
Odd Lots
Stocks sold in quantities of less than a specified minimum number. Generally, it costs less to trade in
round lots.
Offer
The price at which a share is available in the market.
Offering Price
The price at which publicly issued securities are made available for purchase.
One Night Stand Investment

Buying a security with the intention of holding it for the long term, but subsequently panicking and
selling it the following day.
Online Trading
The act of placing buy/sell orders for financial securities and/or currencies with the use of a brokerage's
internet-based proprietary trading platforms.
Open End Fund

A type of mutual fund where there are no restrictions on the amount of shares the fund will issue. If
demand is high enough, the fund will continue to issue shares no matter how many investors there are.
Open-end funds also buy back shares when investors wish to sell.
Open Offer
A secondary market offering that is similar to a rights issue in which a shareholder is given the
opportunity to purchase stock at a price that is lower than the current market price.
Open Order
A limit order that does not expire at the end of the trading day.
Opening Price
Opening price is normally determined by the price at which a stock finished selling on the previous day.
Most exchange has limits of how high or low the stock can trade on the following day. It is like a limit or
circuit, and is based on a percentage of the last traded of the previous day. For example, is the stock
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exchange has a upper or lower limit of 10, and if XYZ stock finished selling ay 20.00 the previous day
then the maximum or minimum opening price the following day will be 22.00 and 18.00. This reduces the
scope of overnight off-market deals which are illegal.
Operating Cash Flow

Surplus cash generated from a company's basic operations without regard to income tax entries such as
depreciation and amortization. Changes in levels of inventories, accounts receivable and accounts payable
also affect cash flow. Also see Free Cash Flow.
Operating Earnings
Earnings without considering certain expenses such as inventory write downs, severance pay,
depreciation and amortization charges, or just about anything else the company feels like excluding to
make its earnings look better. Also known as core earnings, ongoing earnings, earnings excluding special
items or operating earnings.
Organic Growth
The growth rate that a company can achieve by increasing output and enhancing sales. This excludes any
profits or growth acquired from takeovers, acquisitions or mergers.
Oversubscribed
A situation in which the demand for an initial public offering of securities exceeds the number of shares
issued.
Operating Income
Sales minus all expenses except income taxes and other items not relaxed to basic business.
Operating Margin
Operating income divided by sales.
Order Cancellation
A facility available in the trading system where one is allowed to cancel the order placed earlier.
Order Modification
A facility available in the trading system where one is allowed to modify an earlier order.
Overbought
Refers to a stock that has risen sharply in price or to the market as a whole after a period of vigorous
buying which, it is sometimes said, has left prices "too high".
Oversold
The reverse of over-bought. A single security or a market which, it is believed has declined to an
unreasonable level. Usually, this is where everybody starts screaming "scam" and, if they shriek loud
enough, SEBI starts a probe. Also applies sometimes to overbought situations.
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P/E Ratio - Price-Earnings Ratio

PE ratio or PE multiples is the ratio arrived by dividing Current market Price by Earnings per share of that
stock.
Par Value
The face value or the price of a share, debenture, or bond that is written on the certificate. It is not the
market price.
Pay In
The designated day on which the members pay securities and fund to the clearing house.
Par Value
The face value of a bond.
Pay Out
The designated day on which the Clearing House effects payment and deliveries to the membersPension
Fund
A fund established by an employer to facilitate and organize the investment of employees' retirement
funds contributed by the employer and employees.
Payout Ratio
Percentage of earnings paid out in dividends.
Penny Stocks
This term is typical to the USA stock markets. Low-priced issues, often highly speculative, selling at less
than $1 a share. Frequently used as a term of disparagement although some penny stocks have developed
into investment-caliber issues. In India they are called low-Capped stocks and BSE has a separate index
for them. It is not unusual, When a bull market is raging, to find the index for these stocks outpacing the
Sensex. These stocks offer larger returns but at higher risk.
Poison Pill
Steps taken by a corporation to thwart a hostile takeover attempt. For instance, a company could issue
rights to purchase shares at a substantial discount after a merger, or it might issue preferred shares giving
holders the right to redeem their shares at a discount after a merger.
Pledge
To deposit securities with a lender as security for money borrowed.
Poop And Scoop

A highly illegal practice occurring mainly on the Internet. A small group of informed people attempt to
push down a stock by spreading false information and rumors. If they are successful, they can purchase
the stock at bargain prices.
Portfolio
The group of assets - such as stocks, bonds and mutuals - held by an investor.
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Preferred Stock
A class of ownership in a corporation that has a higher claim on the assets and earnings than common
stock.
Debt instruments. Preferred shareholders are paid a head of common stock holders in the event the
corporation is liquidated. Convertible preferred shares can be converted into common stock according to
predetermined conditions. Mostly these types of stocks pay a fixed dividend regardless of corporate
earnings and have priority over common stock in the payment of dividends. However, it carries no voting
rights, and should earnings rise significantly the preferred holder is stuck with the same fixed dividend
while common holders collect more. The fixed income stream of preferred stock makes it similar in may
ways to bonds. It is like a fixed deposit in a bank. You are stuck with a fixed return regardless of how
high interest rates climb. On the other hand, If interest rates fall, you can congratulate yourself on a wise
decision.
Premium
The difference between the higher price paid for a fixed-income security and the security's face amount at
issue.
For bonds and preferred stock, the premium is the amount by which the price exceeds the face, or par
value. For options markets, the premium is synonymous with the options price. In other words, you have
to pay a little extra upfront if you want to be shielded from the fluctuations of enquiry stock.
Price Target
A projected price level as stated by an investment analyst or advisor.
Private Company
A company whose ownership is private.
Pro-Rata
Used to describe a proportionate allocation.
Profit Taking
The action of selling stock to cash in on a sharp rise. This action pushes prices down temporarily.
Public Company
A company that has issued securities through an initial public offering and which are traded on at least
one stock exchange.
Public Offering
The sale of equity shares or other financial instruments by an organization to the public in order to raise
funds for business expansion and investment.
Pump And Dump

A scheme attempting to boost the price of a stock through recommendations based on false, misleading,
or greatly exaggerated statements.
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QOQ - Quarter on Quarter

A measuring technique that calculates the change between one financial quarter and the previous financial
quarter. This is similar to the year over year measure, which compares the quarter of one year (Q1 2007)
to the same quarter of the previous year (Q1 2006).
Quarterly Earnings Report

A quarterly filing made by public companies to report their performance. Included in earnings reports are
items such as net income, earnings per share, earnings from continuing operations and net sales.
Quick Ratio
Cash and cash equivalents plus accounts receivables divided by current liabilities.
Quote
Prices at which a share can be bought or sold. The highest bid to buy and the lowest offer to sell any stock
at a given time.
Rally
A period of sustained increases in the prices of stocks or indexes.
Record Date
The date established by an issuer of a security for the purpose of determining the holders who are entitled
to receive a dividend, rights or bonus.
Redemption
The return of an investor's principal in a security, such as a stock, bond, or mutual fund.
Registrar
An institution or organization that is responsible for keeping records of bondholders and shareholders.
Resistance
The price at which a stock or market can trade, but which it cannot exceed, for a certain period of time.
Rights Offering (Issue)

Issuing rights to a company's existing shareholders to buy a proportional number of additional securities
at a given price (usually at a discount) within a fixed period.
Redemption Fee
Fee charged when you sell a mutual fund, if you have not held the fund for the prescribed minimum time.
Rematerialisation
Process of converting the shares from electronic form to physical form.
Research and Development (R&D)

Costs of developing new products and services.
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Resistance
Historical price level at which rising prices have stopped rising and either moved sideways or reversed
direction; usually seen as a price chart pattern.
Return on Assets
After tax income divided by total assets. Profit from operations plus financial income as a percentage of
average capital employed.
Return on Equity
After tax income (latest 12 months) divided by shareholders equity (from balance sheet).Profit after tax
and minority interests as a percentage of average equity excluding minority interests.
Return on investments
After tax income (latest 12 months) divided by total of shareholders equity plus long term debt, plus other
long term liabilities.
Revenue
A company's sales.
Rights Issue
Issue of new shares to the existing shareholders at a price which is normally lower than the current market
price of the old shares. it is issued in a fixed ratio to those shares which are already held.
Risk
The potential to lose money (principal and any earnings) or not to make on an investment.
Road Show
Presentations made by underwriters and IPO company officials to institutional buyers to create interest in
the offering.
Rollover
A point where a stock price has fallen to support, or risen to resistance, and then reverses the up or down
trend convincingly.
Round Lots
Stocks sold in specified share quantities.
SEBI - Securities And Exchange Board Of India

The regulatory body for the investment market in India.
Saturday Night Special

A slang term used to refer to a surprise takeover attempt.
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Sector Fund
An investment fund that makes investments solely in businesses that operate in a particular industry or
sector of the economy.
Sensex
An abbreviation of the Bombay Exchange Sensitive Index (Sensex) - the benchmark index of the Bombay
Stock Exchange (BSE). It is composed of 30 of the largest and most actively-traded stocks on the BSE.
Settlement Date
The date by which an executed security trade must be settled. That is, the date by which a buyer must pay
for the securities delivered by the seller.
Share Capital
Funds raised by issuing shares in return for cash or other considerations.
Shareholder
Any person, company, or other institution that owns at least 1 share in a company.
Shares
A unit of ownership interest in a corporation or financial asset. The two main types of shares are common
shares and preferred shares.
Short Sale
A market transaction in which an investor sells borrowed securities in anticipation of a price decline and
is required to return an equal amount of shares at some point in the future.
Short Term
Holding an asset for short period of time.
Simple Moving Average - SMA

A simple, or arithmetic, moving average that is calculated by adding the closing price of the security for a
number of time periods and then dividing this total by the number of time periods.
Small Cap
Refers to stocks with a relatively small market capitalization. It is a company with a market capitalization
less than Rs 500 crore.
Spinoff
The creation of an independent company through the sale or distribution of new shares of an existing
business/division of a parent company.
Stop-Limit Order
An order placed with a broker that combines the features of stop order with those of a limit order. A stop-
limit order will be executed at a specified price (or better) after a given stop price has been reached.
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Stop-Loss Order
An order placed with a broker to sell a security when it reaches a certain price. It is designed to limit an
investor's loss on a security position.
Support
The price level which, historically, a stock has had difficulty falling below.
Seed Capital
A small amount of capital provided to an entrepreneur, usually for product development; beta stage
development, pilot projects, etc, not covering launch expenses, commercial production or marketing;
typically provided by angel (venture) investors.
Selling Short
The reverse of the usual stock market technique, short selling is based on the anticipation that a particular
security price will go down. The practice of short selling involves borrowing shares of a security from
your broker and immediately selling them at the current price. Then as the price of that security declines,
you buy back an equal number of shares on the open market and use them to cover the shares you
borrowed from your broker, and make a profit. For instance, if you sell short 100 shares of XYZ
Corporation at 50.00 a share and the price of the stock drops to 35.00, your profit is 15.00 a share, or
1500.00. Short sellers lose when the price of the stock ascends rather than descends. Theoretically, there
is more risk involved with short selling because a stock price could continue to rise forever and the short
seller's loss could be infinite. A stock purchased at 10.00 a share can, however, only fall to zero and that
is the maximum loss that would be incurred. Not for the common investor, unless you are very sure of
yourself. Carefully check all tips on short sales before deciding to act on them.
Settlement
The process of paying for stocks you purchase, or receiving credit from your broker for the stocks you
sell. Most stock transactions must be settled within three business days.
Shares
A unit representing a measure of ownership in a corporation.
Shareholder
A person who buys stock in a corporation, and therefore becomes a part owner of the corporation. This
does not mean you should walk into a Reliance office and ask for a glass of water. You will get the water
as a matter of courtesy, but it will be accompanied by some odd looks.
Shareholders Equity
The difference between the totals of assets and liabilities shown on a company's balance sheet.Book value
is the shareholders equity divided by the number of outstanding shares.
Short Covering
Buying stock to return stock previously borrowed to make delivery on a short sale.
7
Short Position
Stock options, or future contracts sold and not covered as of particular date. Short position also means the
total amount of stock an individual has sold short and has not covered, as of a particular date. Most stock
exchange have a rigid rules regarding short selling. The player should ascertain these rules from a
registered broker of the exchange.
Short Sale
To sell a stock you do not currently own. To go short you "borrow" stock from the broker/dealer, then sell
the stock, with the intent to buy the stock back at a lower price than you had initially sold it for. A short
sale can only take place on an "up tick"" or 'zero-plus tick'.
Short-term Gain
The profit realized from the sale of securities or other capital assets held twelve months or less.
Short-term Debt
Borrowing that must be repaid within one year.
Short-term Investments
Stocks and other liquid securities.
Solvency Ratio
Equity excluding minority interests as at year-end as a percentage of liabilities and equity at year-end.
Speculators
Investors who seek large capital gains through relatively risky investments.
Split
An increase in the number of shares outstanding. This increase in the number of shares result in the
proportionate decrease of share price. For example, a company declares a "3 for 1 " stock split, the price
of the stock is currently 60 a share, a shareholder with 100 shares before the split would have 300 shares
after the split with a value of 20 a share. The shareholders equity does not change. A reverse split is
where the total number of shares is decreased and the stock price increases proportionally. As in a split
the total stock holders equity remains the same.
Spot Trading
Trading in commodities that will be delivered immediately. (Also called cash trading)
Spread
The spread is the difference between the bid price and the offer price.
Standard Deviation
A measure of a mutual fund or stock's historical volatility.
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Stock Certificate
The actual document that is evidence of stock ownership, usually watermarked and patterned to make it
hard to forge.
Stock Option
Contract allowing holder to buy or sell given number of shares of a particular stock at a given price by a
certain date.
Stock Split
An increase in the number of outstanding shares in a corporation. This is usually n\brought about by the
division of existing shares. For examples, a two-for-one split means that shareholders will receive two
new shares for each old share, making a total of three. Alternately, a reverse stock split brings about the
decrease in the number of shares in a corporation.
Stop Loss Order

An order placed with a "trigger price". It is placed to minimize the losses and the order cab be either for a
purchase or a sale.
Stop Order
An order to buy or sell a security conditioned on a specific price. This order is very often referred to as a
"stop loss" order, because it prevents the security from falling below a certain price.
Stops
Can be either a buy or a sell stop. A buy is placed above current prices and a sell is placed above current
prices and a sell is placed below current prices.These order types instruct the broker to execute at market
once a specific price level is reached and traded at.
Sub-accounts
A sub-account includes institutions (established or incorporated outside India ) and those funds, or
portfolios (established outside India ) whether incorporated or not and corporate and individuals on whose
behalf investments are proposed to be made in India by a Foreign Institutional Investor. NRIs and
overseas Corporate Bodies (OCB) are not eligible for registration as sub-accounts. There are two
categories of sub-accounts :
(1) broad-based/proprietary sub-accounts which are allowed to individually invest up to 10% of the total
issued capital, and
(2) Foreign corporate and foreign individuals who are not allowed to exceed 5 percent of the issued
capital.
Support
Historical price level at which falling prices have stopped falling and either moved sideways or reversed
direction; usually seen as a price chart pattern
Takeover
A corporate action where an acquiring company makes a bid for an acquiree. If the target company is
publicly traded, the acquiring company will make an offer for the outstanding shares.
7
Technical Analysis
A method of evaluating securities by analyzing statistics generated by market activity, such as past prices
and volume. Technical analysts do not attempt to measure a security's intrinsic value, but instead use
charts and other tools to identify patterns that can suggest future activity.
Technical Rally
An upward movement in a security's price following a declining trend. The movement is caused by
technical as opposed to fundamental factors affecting sentiment.
Tick
The minimum upward or downward movement in the price of a security.
Top Line
A reference to the gross sales or revenues of a company.
Trailing EPS
The sum of a company's earnings per share for the previous four quarters.
Tangible Book Value

Book value minus goodwill and intangible assets.
Technical Analysis
An analysis of a stock or future based strictly on numbers. The method includes analysis of price patterns.
Don't try to understand it unless you are a maths gold medalist.
Third Stage Capital

Capital provided to an enterprise that has an established commercial production and basic marketing set-
up, typically for market expansion, acquisitions, product development etc.
Tick
The tick is the direction in which the price of stock moved on its last sale. An up-tick means the last trade
was at a higher price than the one before than the price was at a higher price than one before it and a
down -tick means the last sale price was lower than the one before it. A zero-plus tick means the
transaction was at the same price as the one before, but still higher than the nearest preceding price. The
tick becomes especially important when large market movements trigger the implementation of certain
circuit breakers meant to stabilize the market.
Ticker
A ticker is a trading screen information display showing the current price, volume, etc of a particular
stock, option, future, etc.
Ticker Symbol
A ticker symbol represents a particular security (company, option etc.) on the exchange it is trading on
and is used to retrieve information about that security from that exchange. For example, the symbol ?f? on
the New York Stock Exchange (U.S.A) will bring you information about Ford Motor Company. ?ONGC?
7
will show you the information of the Oil and Natural Gas Commission on the National Stock Exchange of
India. Ticker symbols can be used to retrieve information from a financial publication such as your daily
paper's business section. Today, ticker symbols can be submitted to an electronic ticker quote retrieval
system to find information about a particular security instantly.
Top
A technical analysis term meaning the stock price is going down from here.
Total liabilities
All monies owed regardless of how classified on the balance sheet. The best measure of a firm's total
debt.
Trader
An employee of a broker/dealer or other financial institution who specializes in handling purchases and
sales of securities for the firm or its clients.
Trailing Twelve Months (TTM)

The last four reported quarters.
Transaction Costs
The costs of trading securities, including the broker's commission and taxes. Commission varies with the
size of the trade.
Treasury Bills
Shorts-term debt issued by the central government, sold at a discount and redeemed at full face value.
Treasury Notes
Debt securities issued by the central government that mature over a specified number of years.
Turnover Rate
Turnover is the relationship between the float and the average monthly volume of a stock. The higher the
turnover rate, the more volatile the stock and the greater potential for wider swings in price (both ways).
Turnover Ratio
How often a mutual fund changes its portfolio holdings. 100 per cent turnover means a fund, on average,
changes all the stocks in its portfolio once a year.
Underperform
An analyst recommendation that means a stock is expected to do slightly worse than the market return.
Undersubscribed
A situation in which the demand for an initial public offering of securities is less than the number of
shares issued.
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Upgrade
A positive change in the rating of a security.
Undervalued
A stock trading below its fair value.
Underwriter
An investment banking firm committed to successful distribution of a public issue, failing which the firm
would take the securities being offered (that is, buy) into its own books. Some countries also provide for
underwriting on best effort basis
Valuation
The process of determining the current worth of an asset or company.
Vested Interest
A financial or personal stake one entity has in an asset, security, or transaction.
Volatility
Volatility refers to the amount of uncertainty or risk about the size of changes in a security's value.
Value Traded
This is the total monetary value of all trading in a security for the market day. It is calculated by
multiplying the volume traded by the average sale price.
Venture Capital
Professional moneys co-invested with the entrepreneur usually to fund an early stage, more risky venture.
Offsetting the high risk the investor takes is the promise of high return on the investment. A venture
capitalist not only brings in moneys as ?equity capital' (that is, without security/charge on assets) but also
brings onto the table extremely Valuable domain knowledge, business contacts, brand-equity, strategic
advice, etc. He is a fixed interval investor, whom the entrepreneurs approach without the risk of ?
takeover'. If you have a good idea that can be commercialised and you can convince the venture capitalist
of the workability of your idea and of your own ability in seeing it through, the venture capitalist will
nurse you through. His return is high but, then, he's taking all the risks on an untried idea.
Volume
The total number of shares, bonds, or other units of a security traded in a certain time period.
Venture Capitalist
An investor involved in financing a company's operations before going public, in exchange for an
ownership percentage.
Warrant
A derivative security that gives the holder the right to purchase securities (usually equity) from the issuer
at a specific price within a certain time frame.
7
Write-Off
A reduction in the value of an asset or earnings by the amount of an expense or loss.
Wall Street
A street in the city of Manhattan , New York where several major brokerage firms and stock exchanges
are located. Dalal Street is the Indian counterpart in Mumbai.
Warrant
A warrant is a financial instrument issued by a bank or other financial institutions, which is traded on a
Stock Exchange's equity market. Warrants may be issued over securities such as shares in a company, a
currency, an index or a commodity.
Working Capital
Current assets minus current liabilities.
XD - Ex- Dividend
Buying the shares trading in XD will not entitle you for the dividend which is already declared but not yet
been issued.
YOY - Year Over Year

A method of evaluating two or more measured events that compares the results of measurement at one
time period with those from another time period, on an annualized basis.
Yield
Yield is the annual rate of return for any investment and is expressed as a percentage.
Zero Dividend Preferences

Zero dividend preference shares are Preference shares which receive no dividends throughout their lives.

Glossary of Stock Market

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GLOSSARY OF STOCK MARKET

American Depository Receipt (ADR)

American Depository Share (ADS)

Annual General Meeting (AGM)

Asset Allocation Fund

Average Daily Share Volume

Average Annual Growth Rate

Average Annual Return

Average P/E Ratio

Average price/earnings ratio of stocks owned by a mutual fund.

Back door listing

Blue Chip Stock

A grade evaluating the quality of a bond

Broad Based Fund (sub-account)

Buy and Hold

Capital Gains Distribution

Capital Gains Tax

Cash Flow Statement

Cash Flow per Share

Change in Stock Price

Closely Held Shares

Debt to Equity (long term)

Debt to Equity (Total)

Debt to Equity Ratio

Depository Participant (DP)

Dividend Per Share

Dow Jones Industrial Average (DJIA)

Drawing Power Valuation

EBITDA - Earnings Before Interest, Taxes, Depreciation and Amortization

Effective Interest Rates

EPS - Earnings Per Share

ESOP - Employee Stock Ownership Plan

Equity per Share

Extended Hours Trading

Trades executed before or beyond normal market hours.

Exponential Moving Average - EMA

FCCB - Foreign Currency Convertible Bond

FDI - Foreign Direct Investment

FII - Foreign Institutional Investor

Flat Rate of Interest

Fully Paid Shares

GAAP - Generally Accepted Accounting Principles

GDR - Global Depositary Receipt

Green Field Investment

Initial Public Offering - IPO

IPO (Initial Public Offering)

IRR (Internal Rate of Returns)

Any securities of a company, or the act of distributing such securities.

Key Performance Indicators - KPI

Leveraged Buy Out

Losing Your Shirt

M&A - Mergers And Acquisitions

Market Open/Close Price.

Minimum Number of Companies Accepted

NAV - Net Asset Value

NASDAQ Composite Index

Net Asset Value per Share

Net Profit Ratio

One Night Stand Investment

Open End Fund

Operating Cash Flow

P/E Ratio - Price-Earnings Ratio