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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.
GLOSSARY OF STOCK MARKET
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.
GLOSSARY OF STOCK MARKET
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
GLOSSARY OF STOCK MARKET
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 fixedincome 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
Bottom Fisher An investor who looks for bargains among stocks whose prices have recently dropped dramatically. Bottom The lowest point or price reached by a financial security. though the number of total shares increase. Following a bonus issue. Book Value The net asset value of a company. commodity. at which point you get back your principal investment. Bonus Shares Shares allotted to the existing shareholders by capitalizing the reserves into additional capital. The investor believes that the recent price drop is temporary and a recovery is soon to follow. 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. 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 is the period during which this process is done and deliveries are not affected in the clearing house. calculated by total assets minus intangible assets (patents. Book Building The process by which an underwriter attempts to determine at what price to offer an IPO based on demand from institutional investors. goodwill) and liabilities. Book value Total shareholder equity from the balance sheet divided by the number of shares outstanding. 7 . index or economic cycle in a given time period. the proportional ownership of shareholders does not change.GLOSSARY OF STOCK MARKET entity which issues the bonds for a specified period in return for a fixed rate of return till the bonds mature. the price of the shares normally goes up. When the market expects a company to come out with a Bonus Issue. Bottom Line Refers to a company's net earnings. which is followed by a steady increase. Boom A period of time during which sales or business activity increases rapidly.
A full service account representative usually works on a commission basis. Full service brokers are those that provide a wide range of investment services. 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. 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. Broker An agent who handles the public's orders to buy and sell stocks.GLOSSARY OF STOCK MARKET Breakout A price movement through an identified level of support or resistance. usually so structured as to be repaid from proceeds of a public offering. followed by a drastic drop in prices as a massive selloff occurs. 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. thereby generating income on the number of his clients' trades. or to establish a floor price for public offer. there are 30 diversified stocks traded on the Mumbai Stock Exchange which are thought to be representative of the market in general. Broker An individual or firm that charges a fee or commission for executing buy and sell orders submitted by an investor. which then carries out the transactions on the investor's behalf. Traders will buy the underlying asset when the price breaks above a level of resistance and sell when it breaks below support. 7 . often more than warranted by the fundamentals and usually in a particular sector. Bourse A stock exchange Breakout A technical analysis term meaning a stock price has moved above or below a previous trading range. Bubble A surge in equity prices. which is usually followed by heavy volume and increased volatility. In this index. research and advice. 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 . Bridge/Mezzanine Funding Financing for a company expecting to go public within 6-12 months. commodities or other property.
too. 15. 20 percent or wherever) and then sell at that point. A critical decision is when to sell on a bull market. Bullion Gold and silver that is officially recognized as high quality (at least 99. Ignore them. the best procedure is to decide within yourself that you will satisfied by a specified margin eg profit on your investment (say. They hold back money in this phase of the market. and is in the form of bars rather than coins. sell your shares and put the money in your bank. Your losses are thus restricted to the period after your last profit taking. They hold back selling in expectation of still higher gains and sometimes are left high and dry when the market crashes. The first method is instantaneous. 7 . Book your specified profit. regardless of fluctuations in the market. that is. It takes time for a stock order to be sent by the broker to the stock exchange floor. Buy Transaction When you place an order for stock. Buy and Hold A passive investment strategy in which an investor buys stocks and holds them for a long period of time. Bull Market A financial market of a certain group of shares in which prices are rising or are expected to rise. There are two methods of execution (i) the online exchange which is connected via satellite. There will come a time when the Bull Run stops. 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. and repeat the procedure. it can be executed depending on which type of exchange the stock is listed. Bull Market A rising market where buyers far outnumber the sellers. Rising stock prices (generally occur during boom years). If the Bull Run still continues. whereas the second can be a little time consuming. Amateur investors could lose a lot of money in this phase of the market. The total time is an estimated 20 minutes. A person on the stock market floor bids to find a buyer for the stock.GLOSSARY OF STOCK MARKET Bull An operator who expects the share price to rise and takes a position in the market to sell at a later date. Buy A recommendation to purchase a specific security. invest a lesser sum.5% pure). that is the share prices reverse direction. or (ii) the outcry method. 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. Duck if they take a swing at you. Sell immediately and rest content that you have been wise enough to book profits at different points of the Bull Run . 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. You then offer your sympathy to investors who did not disinvest and had to bear heavy loses. 10. decide your margin of profit. Anything that goes up has to come down is a law of physics that holds well in the stock market. which is executed on the floor of the exchange.
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. Companies will buyback shares either to increase the value of shares still available (reducing supply). In the corporate world all major deals are leveraged. multiplied by the total number of shares that have been issued Capitalize When costs of items such as buildings. Capital Turnover Annual total Revenue as a percentage of total assets. rather than being expensed in the year of purchase. Buyout Funding Funds provided to enable a corporation to acquire another enterprise or product line or business. CAGR The year-over-year growth rate of an investment over a specified period of time. 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. equipment and other items with a useful lifetime exceeding one year are categorized as assets to be depreciated over a number of years. The gain is not realized until the asset is sold. 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. that is. funded by someone else. Try doing this in your personal life and you will probably go to jail.GLOSSARY OF STOCK MARKET Buy Back The buying back of outstanding shares (repurchase) by a company in order to reduce the number of shares on the market. 7 . or to eliminate any threats by shareholders who may be looking for a controlling stake. Capitalization The value of a company as measured by the market price of its common shares. Capital Gains Tax A type of tax levied on capital gains incurred by individuals and corporations. 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 Employed Total liabilities and equity less non-interest bearing liabilities.
The netted purchase and sale positions of the trading. The +1. rented or otherwise transferred. Banks are reluctant to authorize loans against assets which have encumbrances and prefer a clear title. The fraction amount depends on the security being traded. Change in Stock Price The change in stock price is recorded in points. as well as all cash outflows that pay for business activities and investments during a given quarter. and is now selling for 11. 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. This represents an encumbrance on the title. Cash Flow per Share Cash flow from operating activities divided by average number of shares.50 is the change in stock price. Closely Held Shares The shares held by individuals closely related to a company. Cash Settlement Payment for transactions done in one settlement on the due date. The Exchange may relax the limit after a cooling off period of about half an hour. sold. temporarily or permanently. That asset be mortgaged. to another person.50 it would be up +1. The change in stock price is the difference between the opening stock price and the current price the stock is selling at. Cash Flow Statement This document provides aggregate data regarding all cash inflows a company receives from both its ongoing operations and external investment sources. Clear Title A title to an asset proves your legal ownerships of that asset. For example.50.GLOSSARY OF STOCK MARKET Carry Forward Settlement where positions are carried forward from one settlement to another settlement. if stock XYZ opened at 10. Clearing House It is a legal counter party to both legs of every trade. 7 . Circuit Breaker A mechanism used to restrain the market when it gets overheated.
business or institution that holds common shares in a company.GLOSSARY OF STOCK MARKET Closing Price The final price at which a security is traded on a given trading day. try defaulting on a loan . Share price is determined by supply and demand for fund Collateral It is used to provide a guarantee for a loan. The previous close is the price a stock closed on the previous day. these figures are most often made for the quarter. Consensus Estimate A figure based on the combined estimates of the analysts covering a public company. Commodities are most often used as inputs in the production of other goods or services.the bank will encase your collateral so fast you'll never know what hit you till it is too late. If you feel that your bank works at a snail's pace. shares or goods and titles to immovable assets. Commission A fee charged by brokers for their service in facilitating investment has to be handled through brokers registered on that exchange. Can be encased by the bank if you default in any way on repayment of interest or principle of your loan or other obligations. Close The closing price is the last traded price for the stock on a particular day. Closed-End Fund Investors of such a fund buy shares from other share holders and sell shares to other investors. This will also give the holder the right to vote on corporate issues such as board elections and corporate policy. fiscal year and next fiscal year. Generally. giving the holder an ownership stake in the company. Commodity A basic good used in commerce that is interchangeable with other commodities of the same type. along with the right to any common dividend payments. Common Shareholder An individual. It includes negotiable instruments. 7 . Commodity Index An index that tracks a basket of commodities to measure their performance. 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. analysts give a consensus for a company's earnings per share and revenue.
the major stock exchange in India. Debenture A type of debt instrument that is not secured by physical asset or collateral. Cum Rights A share is described as cum rights when the purchaser is entitled for current rights Demat .GLOSSARY OF STOCK MARKET Correction Corrections are generally temporary price declines. Dalal Street A term that refers to the Bombay Stock Exchange. Most trades are entered and closed out within the same day. The street is home not only the Bombay Stock Exchange but also a large number of other financial institutions. Debentures are backed only by the general creditworthiness and reputation of the issuer. Debt An amount of money borrowed and owed by one party to another. De-merger A corporate strategy to sell off subsidiaries or divisions of a company.Dematerialization The move from physical certificates to electronic book keeping. Debt to Equity (long term) Total long term debt divided by total shareholder equity. Default Failure to pay back a debt. Debt to Equity (Total) Total (short and long term) debt divided by total shareholder equity. interrupting an uptrend in the market or asset. Both corporations and governments frequently issue this type of bond in order to secure capital. Day Order The quantity that remains untraded is not cancelled until the end of the day. 7 . Day Trader A stock trader who holds positions for a very short time (from minutes to hours) and makes numerous trades each day. Crash A major decline in a financial market.
can become DPs. in which core holdings are fixed income investments. Deferred Expense Balance sheet liability reflecting expenses shown on the income statement that haven't actually been paid. a high ratio may indicate high risk. bonds. According to SEBI regulations. The DP maintains the client's securities account balances and keeps him informed about the status of holdings. stockbrokers. transfers securities between accounts on the instruction of the account holder. custodians. low ratio may indicate low risk. the shares are 'dematerialized'. Derivative A security whose price is dependent upon or derived from one or more underlying assets. than equity funds because the overall management costs are lower. on average. Deferred revenue When a share is bought or sold for the purpose of receiving or effecting deliveries.GLOSSARY OF STOCK MARKET Debt to Equity Ratio Long-term debt divided by shareholders' equity. Depository Participant (DP) A DP is a representative of the depository in the system. financial institutions (FI's). on request in electronic from through a registered Depository Participant (DP). showing the relationship between long-term funds provided by creditors and funds provided by shareholder. In other words. Debt Fund An investment pool. It is the opposite of inflation. It can be compared with a bank. Depositories An organization which holds securities of investors. 100 crore. banks. 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).The fee ratios on debt funds are lower. Minimum net worth stipulation required by SEBI for registering a DP is Rs. Its value is determined by fluctuations in the underlying asset like commodities. Deflation A general decline in prices. The derivative is a contract between two or more parties. Delisting The removal of a listed security from the exchange on which it trades. such as a mutual fund or ETF. It holds securities in an account. etc. It is comparable with a branch of 7 . stocks. often caused by a reduction in the supply of money or credit. facilitates transfers of ownership without having to handle securities and facilitates safe-keeping of shares.
An investor seeking diversification for a securities portfolio would purchase securities of firms that re not similarly affected by the same variables. 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. For example. it is any hybrid contract of a pre-determined fixed duration such as forward. yield higher returns and pose a lower risk than any individual investment found within the portfolio. Dip A drop in the price of a stock that is temporary making it the ideal time to buy the stock. Never forget. Diversification A risk-management technique that mixes a wide variety of investments within a portfolio. the value of a call option on reliance (derivative) fluctuates with the price of reliance stock. etc.GLOSSARY OF STOCK MARKET a bank if a Depository is likened to a bank. Depreciation A non-cash accounting charge representing the loss in value of hard assents such as buildings and machinery over the accounting period. Any increase over your purchase price is a gain. on average. diversification is essentially for investors not traders. bullion. decided by the board of directors. A DP is offered depository services only after it gets proper registration from SEBI. 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). Options and similar other instruments are examples. The value is totally 'derived' from the value of the underlying asset such as securities. currency. future. Book your profits (or cut your losses) as you go. to a class of its shareholders. Dividend Distribution of a portion of a company's earnings. 'highs' and 'lows' are relative not absolute. and vice versa. live stock. trucking and automobile manufacturing because each industry is significantly affected by oil prices and interest rates. don't allow them to accumulate too long. an investor would not want to combine large investment positions in airlines. The rationale behind this technique contends that a portfolio of different kinds of investments will. Diversification The acquisition of a group of assets in which returns on the assets are not directly related over time. For instance. option. A precept common to all businesses: buy low sell high. Of course. commodities. A lot of thought goes into deciding on 7 . Discount The difference between a bond's face value and when to trade a security. Derivatives A financial contract between two or more parties based on the future value of an underlying asset. etc. Proper investment diversification is intended to reduce the risk inherent in particular securities.
In this index. Bethlehem Steel. you can always take an analyst's help. Of course. At the same time. This. Documentation The papers that are needed to process your loan application. It is not mandatory for accompany to distribute dividends. The limit fluctuates in line with the market price of the shares. where the corporation keeps its entire earnings. But in this case it is based on the market values of shares put up as collateral against a loan. requires that you take into an account innumerable factors that could affect the health of the industry. rather than cash. if a company is stingy on its dividend policy. Dow Jones & Company.or mid-term future. 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 . 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. for instance. it is not going to find many investors. 7 . You can do it! Dividend Cash payment made to the shareholders out of the profits of the company. (Dividend rate x nominal value of share)/100. But remember. a financial and investment publisher based in New York . This calls for clear thinking and common sense. Generally. The wonders of globalization! You don't have enough problems trying to understand the trend of Mumbai stock prices. Boeing. but many times it is less. even zero. Cash dividends are paid out of corporate earnings and the percentage of earnings paid out varies from corporation to corporation. the end of a financial year. Coca-Cola. Just a few of the 30 companies in the DJIA are: American Express. It is like an overdraft limit. also calculates averages for utility stocks. Dividend Per Share The amount of dividend paid out per share. AT&T. Chevron. You will not be directly concerned at what happens on the Dow. Dividend Yield Total of 12-months' dividend paid (historical or forecast) divided by the latest share price. there are 30 industrial stocks thought to be representative of industrial stocks in general. in turn. you also have to keep in touch with global trends. Disney. the Dow average is global leader and is usually reflected by exchange around the world.GLOSSARY OF STOCK MARKET investment avenues because you are not looking so much at the present status of the industry but at its short. General Motors and IBM. transportation stocks and bonds. but you should also learn to recognize factors that may impact a particular industry. the percentage of corporate earnings paid out runs from 40 to 80 per cent. A stock dividend gives the shareholders additional shares of stock or a fraction thereof. The price used is usually the market price at the end of the period under review.
Emerging Markets Developing countries. Depreciation and Amortization EBITDA is a good metric to evaluate profitability EBIT Effective before interest and taxes. In the bizarre world of loan finance. 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.GLOSSARY OF STOCK MARKET Due Diligence The process whereby an in-depth examination of a company's business prospects is conducted. Taxes. defined contribution.Earnings Per Share EPS is the earning on each share of a company ESOP . Equity per Share Shows how much of a company's equity one share represents.Earnings Before Interest. Effective Interest Rates The compounded interest rate calculated on the actual inflows and outflows of cash. Equity divided by number of shares at the close of the period. EBITDA . Equities Another name for shares. you see. the market believes that the company will generate extra value. lenders prefer that you do not repay your loan before the agreed term. Due Diligence . They lose interest. sale or acquisition of a company is intended Downgrade A negative change in the rating of a security. 7 . EPS .Employee Stock Ownership Plan A qualified. employee benefit plan designed to invest primarily in the stock of the sponsoring employer. Usually when a merger. EMI Equated monthly installments to be paid by the borrower in repayment of the loan taken (includes principal and interest). If the market price is greater than the equity per share. Also known as operating income.DD An investigation or audit of a potential investment.
Expiry Date The date and time after which a writer of an option cannot exercise his rights. Earnings Estimate An analyst's estimate for a company's future quarterly or annual earnings. It is the total value up to which one is allowed to hold open positions at any point of time.Foreign Currency Convertible Bond A type of convertible bond issued in a currency different than the issuer's domestic currency. Exposure Limit The limit allowed to the broker by his exchange or to the customer by broker. Earnings Surprise When the earnings reported in a company's quarterly or annual report are above or below analysts' earnings estimates. well-diversified group of stocks. The seller remains the beneficiary. FCCB . the bank feels insecure about the return of the loan. And when a bank feels insecure. except that more weight is given to the latest data. Ex rights shares are cheaper than Cum Rights and offer a good 'buy' opportunity for investment oriented players.EMA A type of moving average that is similar to a simple moving average. Exposure When the value of your asset/product pledged with a bank against loan is reduced by market price fluctuation or for other reasons. that is.GLOSSARY OF STOCK MARKET Ex Bonus A Share is described as ex dividend when the buyer is not entitled for the dividend. it increases your 'exposure'. The day after dividends is paid! Ex Rights A share is described as ex rights when the buyer is not entitled for the Rights. Ex-Dividend The trading of shares when a declared dividend belongs to the seller rather than the buyer. Equity Fund A mutual fund that invests in a broad. 7 . Extended Hours Trading Trades executed before or beyond normal market hours. Exponential Moving Average . what happens in the famous Hollywood movie 'Indecent Exposure' is nowhere the bank could do to you if you do not reduce your exposure. The seller remains the beneficiary.
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. Fiscal Year Any 12-month period that a company uses for accounting purposes.Foreign Direct Investment An investment abroad. Futures Contract An agreement between parties for specified asses for performance on a fixed day in future. Float The number of shares outstanding minus what is owned by insiders and what the company is holding back (treasury stock. Face Value The nominal value of a security stated by the issuer.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. FII . For shares. Flat Rate of Interest Percentage representation of the amount of annual interest on the total loan amount.) 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.GLOSSARY OF STOCK MARKET FDI . Fund Of Funds A mutual fund that invests in other mutual funds. The delivery period. 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. 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. usually where the company being invested in is controlled by the foreign corporation. 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. it is the original cost of the share shown on the certificate. 7 . 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.
and/or research and development. GAAP . Gross Margin Gross profit divided by sales. 7 . Growth Fund A diversified portfolio of stocks that has capital appreciation as its primary goal. 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. acquisitions. The shares are held by a foreign branch of an international bank. 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. GDR .Global Depositary Receipt A bank certificate issued in more than one country for shares in a foreign company. 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. GDP The forfeited output of a country's economy. standards and procedures that companies use to compile their financial statements.Generally Accepted Accounting Principles The common set of accounting principles. Guidance Information that a company provides as an indication or estimate of their future earnings. Going Public The process of selling shares that were formerly privately held to new investors for the first time.GLOSSARY OF STOCK MARKET Futures A financial contract obligating the buyer to purchase an asset (or a seller to sell an asset) at a predetermined date and price. Goodwill The amount by which a company's shareholder equity exceeds the value of its hard assets. and thereby invests in companies that reinvest their earnings into expansion. Also known as Initial public offering (IPO).
Growth Stocks Stocks that pay low dividends. or wait for a further increase. you have to look for another investment avenue where the return is less but the risk is also correspondingly less. but are expected to grow. For example. hand on to him. 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. Guarantor A person who promises to pay your debts if you are unable to pay them yourself. 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. For example using a futures a contract to reduce the impact of price fluctuations in a cash or physical market. What would you do if. Let's say you buy a new offering at Rs. Hammering The rapid and concentrated sale of a stock thought to be overvalued by the market. This can be expressed daily. Strictly for long term investors who have a vision for the future and are not interested in maximizing short term profits. weekly. since there is no win or place. the high for the day can be 20.which does not mean that you will not lose your collateral if you default on repayment. If you find a good guarantor. He's like money in a bank. and monthly or for a 52-week period. High The highest price that was paid for a security during a certain time period. 7 . Never let him down. Hot Stock A stock whose price rises quickly the day it goes public. but not transferring legal ownership to the lender . Hedging A practice of taking one market position to offset potential losses in another. but the high for the year can be 50. Like when you may like to cover possible loss by also backing the horse for a place.25? Sell. With a little paper work. on the first day of listing on the exchange it is quoted at Rs. Haircut The difference between prices at which a market maker can buy and sell a security. the lender can sell your collateral to realize his payments.10. In securities trading. Gross profit is sales minus cost of sales. A hedger takes an equal and opposite position in the futures market to the one he holds in the equity market.GLOSSARY OF STOCK MARKET Gross Profit Profit a company makes on goods and services before considering overhead expenses.
Initial Public Offering . In the case of financial markets. for the purpose of hiding the actual order quantity. the length of time for which the short position is held.IPO The first sale of stock by a private company to the public. Sectored indices like Industrial. Normally the index components are the highly traded stocks of that exchange. In a short sale. Income Fund A mutual fund that seeks to provide stable current income by investing in securities that pay interest or dividends. 7 . long. a hedge consists of taking an offsetting position in a related security. 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. Hedge Fund An aggressively managed portfolio of investments that uses advanced investment strategies such as leverage. short and derivative positions in both domestic and international markets with the goal of generating high returns. The BSE Sensex is based on 30 stocks as is New York 's Dow average. banking. such as a futures contract. Industry Group Companies in related businesses. they represent anything up to 85 per cent. In And Out The purchase and sale of a security within a short period of time. an index is essentially an imaginary portfolio of securities representing a particular market or a portion of it. usually by the use of an automated program. Holding Period In a long position. Utilities. Iceberg Order A large single order that has been divided into smaller lots.GLOSSARY OF STOCK MARKET Hedge Making an investment to reduce the risk of adverse price movements in an asset. These 30 stocks. It is representative of the market sentiment. holding period refers to the time between an asset's purchase and its sale. etc is made up of the highly traded stocks in that particular sector. Normally. Usually they represent about 80 to 85 percent of the market capitalization and trading. but in terms of value of trade and market capitalization. usually on the same day. are a miniscule percent of the total listed shares. Index A statistical measure of change in an economy or a securities market. in number.
GLOSSARY OF STOCK MARKET Inflation Increase in the prices for goods and services. but the system is so widespread and disparate and the judicial system. this means he pays more for what he uses. If you can't leave it your analyst. subsequently. It does not mean that anything you buy will now cost you 2 percent more than it did last time. Consistent does not mean ?for ever?. that would be insider trading. SEBI is trying to improve its monitoring system. it could be both good and bad news. 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. The rate at which prices are rising. Inorganic Growth A growth in the operations of a business that arises from mergers or takeovers. 7 . buy more or sell? Try and figure it out. So. Inflation The rate at which the general level of prices for goods and services is rising. a surge in construction activities or higher government taxes? There could be a number of reasons. But remember you have to keep an eye on the fundamentals of the company. When you find one grab it and cherish it till death or inflation do you part if you have good base of income stocks. when the inflation rate is 2 percent. If cement prices are going up. 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. you can afford to speculate in higher risk stocks. Contrary to what you might think after some time on the stock exchange. For the common man. or securities not generally available to the public gained from a source inside the company. 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 . its products. purchasing power is falling. Insider Information Any knowledge about a company. there really are such stocks. Inflation Rate An important economic indicator. it means it is rising at the rate of 2 percent per year based on current prices. is it because there is a shortage in output. each of them having a different impact on the fundamentals of the cement industry. Income Stocks Stocks that have consistently paid high dividends. which it's numerous levels of appeals. and. rather than an increase in the companies own business activity. If you are holding cement shares. Index Fund A portfolio of investments that is weighted the same as a stock-exchange index in order to mirror its performance. For the stock market player. should you hold on to them.
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. Intangibles Soft assets such as patents. 7 . Investments may also include artwork. maintain markets for securities already distributed.Examples include stocks. Institutional Ownership Shares of a company owned by pension funds. Insider trading can be illegal or legal depending on when the insider makes the trade. Intraday Stock trading tracked in periods shorter than one day. mutual fund. It is illegal when the material information is still nonpublic. financial institutions. Investment Bank An organization. Interest Money charged by a lender to a borrower for the use of his or her money. Usually calculated by adding the current value of estimated future earning to the book value.GLOSSARY OF STOCK MARKET Insider Information Material information about a company's activities that has not been disclosed to the public. An intermediary between an issuer of securities and the investing public. so spend lavishly on her. mutual funds. antiques and real estate. either through secondary offering or through negotiations. and act as finders in private placement of securities. 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. etc. They handle the distribution of blocks of previously issued securities. Investment Anything of value purchased to provide capital appreciation and /or income. Insider Trading The buying or selling of a security by someone who has access to material. For instance the trades during the first two hours or last two hours of the trading day. trademarks. that would be speculation not investment). involved in taking a new company public IPO. Also. your wife's jeweler is an investment. unit investment trusts. handling corporate borrowing. money market funds and collectibles (not lottery tickets. Payment made at periodic investments on an investment. bonds. etc. usually a stock brokerage firm. nonpublic information about the security. consulting on mergers and acquisitions. certificates of deposit. banks.
The market value of the company rises and so do its shares. 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. Interim Dividend A dividend payment made before a company's AGM and final financial statements. Shareholders benefit from this financial leverage to the extent that the return on the borrowed money exceeds the interest costs of borrowing it. Leverage Any means of increasing value and return by borrowing funds or committing less of one's own money. Because of this effect.GLOSSARY OF STOCK MARKET IPO (Initial Public Offering) Equity or other issue which is presented to the market for the first time. During these initial days of trading. work in process. and finished goods that have not been shipped to customers. IRR (Internal Rate of Returns) Internal Rate of Return is the rate at which the lender accounts for interest. warrants. By borrowing money he has achieved a higher return on his investment than if he had paid for all the stock himself. he repays the broker the loan amount and keeps the profit himself. leverage can involve debt. company insiders or those holding majority stakes in the company are forbidden to sell any of their shares. The more long-term debt there is. Key Performance Indicators . as when an investor borrows money from his broker ?on margin' and so is able to buy more stock than he otherwise could. Rights. Issue Any securities of a company. Joint Venture Two companies joining together to start a new entity. If the stock goes up. 7 . not through debt but by offering the prospect of a high return for little or no investment.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. Inventory Raw materials. Lead Underwriter Brokerage house in charge of IPO. For corporations. IPO Lock-Up A contractual caveat referring to a period of time after a company has initially gone public. the greater the financial leverage. or the act of distributing such securities. For individuals. financial leverage is popularly called ?trading on the equity'. futures and option contracts also provide leverage. usually between 90 to 180 days. keeping the current entities untouched to start a business.
or money value of shares traded daily. That's where the money will go. This decision-making is necessary to cut losses due to lower prices or sudden reverses in rising share prices.50 (50 per cent).100 on the market against which you are given a loan of Rs. investor (FII). It is the opposite of a short position. Leveraged Buy Out Take over of a public corporation using borrowed funds.) only if the price rises to a specified level. contact. 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. Now suppose the market value of the pledged stocks goes down to Rs.GLOSSARY OF STOCK MARKET The downside: most individuals pledge existing stocks with their bankers or brokers for the loan. So is taxation based on those classifications? This is one of the reasons investors buy and sell stocks around the world. Liquidity is one of the most important characteristics. Load Funds Mutual funds that carry a sales commission.75.the FII sees a better opportunity elsewhere in the world. Mutual funds and other institutional buyers prefer high liquidity stocks so they can easily move in and out of positions. This is when the market falls and we have what is known as a ?bear' market. The market must also adapt quickly to new information and incorporate that information into the stock's price. To buy or hold a long position is the state of actually owning a stock. Liability A financial obligation or debt. Load A sales commission paid when you buy (front-end) or sell (back-end) a mutual fund. can make more money on an investment on the BSE than the U.S. The legal definition of short term and long term capital gains varies from country. Liquidity A measure of the number of shares. Depth of market to absorb buy and sell activity of even large orders at prices appropriate to supply and demand. Multiply this instance by thousands and you can imagine the margin pressure that is exerted on the market. The day-even minute . Say you have pledged stocks worth Rs. etc. 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. An order to a broker to buy a certain stock (future. or commodity.S. A U. Limit Order A market order that specifies the highest or lowest price at which the customer is willing to trade securities. which is a percentage of the market value of the stocks pledged. 7 . today. bourse. Long Position A bull position in a security. security.
Trading lots can comprise 5. 7 . Lot A fixed minimum number in which shares are bought and sold. This can be expressed daily. For example. while an acquisition is the purchase of one company by another with no new company being formed. Depending on the type of security.100. monthly. weekly. Margin Borrowed money that is used to purchase securities. Losing Your Shirt In the investment world. or for a 52 week period. 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. this expression is used to describe a very bad investment that causes an investor to lose everything he or she has invested. An upfront payment made by the customer to take a position in the market. 50 or 100 shares depending on the face value of shares. M&A . Liquidity The degree to which an asset or security can be bought or sold in the market without affecting the asset's price. 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. a long-term asset can be held for as little as one year or for as long as 15 years or more. 10. If one wants to borrow Rs. 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. Such number makes round lots. Limit Order An order placed with a brokerage to buy or sell a set number of shares at a specified price or better. The difference in the value of shares pledged and the loan amount sanctioned. etc. but the low for the year can be 5. anything less makes odd lots. Margins are at the sole discretion of the bank and may even vary from scrip to scrip. the low for the day can be 10. then it will have to pledge shares worth Rs.200. Long Term Holding an asset for an extended period of time. Helps you understand whether today's price is an aberration or a logical extensive of a trend. His exposure limit is fixed based on the margin money brought in by him. The margin for demat shares is35 percent.Mergers And Acquisitions A merger is a combination of two companies to form a new company.GLOSSARY OF STOCK MARKET Long-term Investments Balance sheet item reflecting investments in other companies.
however mergers increase market liquidity. Maturity Date The date on which the principal amount of a note. Also known as "market price". Medium Term An intermediate period of time to hold an asset. draft. acceptance bond or other debt instrument becomes due and is repaid to the investor and interest payments stop. Conversely. Market Open/Close Price. Authorization for a broker to buy or sell securities at the best price that can be negotiated at the moment. Market Timing The act of attempting to predict the future direction of the market. negative case flow may indicate that fund managers may need to liquidate some holdings to meet redemption requirements. typically through the use of technical indicators or economic data. On compulsorily dematerialized shares for all classes of investors. 7 . Additionally.GLOSSARY OF STOCK MARKET Market Capitalization Total market value of the company on the stock exchange. Market lots The minimum trading lot on a 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. Market Value The current quoted price at which investors buy or sell a share of common stock or a bond at a given time. 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. Market Price It is the price a particular stock is currently selling for during the operating hours of the stock market. Total number of shares multiplied by the official price quoted on the stock exchange. IPO's reduce market liquidity. Market Perform Market perform is a neutral assessment of a stock and is neither strongly positive or negative. Positive cash flow can serve as an indicator that fund managers have cash to put into the markets at the next buying opportunity. It is the last sale price of a particular stock on the previous day.
Mutual Fund A security that gives small investors access to a well-diversified portfolio of equities. Units are issued and can be redeemed as needed. Minimum Number of Companies Accepted The minimum number of companies. 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. Money Supply The amount of money in circulation. Not for amateur investors. A moving average represents data in a manner that smoothens fluctuations and highlights possible trends. Municipal Bonds Debt instrument issued by a state or local agency. bonds and other securities. Banks also profitability of a number of companies.000 crore Monetary Policy The actions of a reserve bank of india. and increasing earnings forecasts. 7 . It is in your interest to pledge the shares of an number of companies when you take a loan. Each shareholder participates in the gain or loss of the fund. As a general rule. Stocks are said to be in an uptrend when above their MA and in a downtrend when below. The 10-day Moving Average (MA) is the average closing price for the past 10 days. In today's market. Moving Average A rolling set of averages calculated over a time series of values. strong earnings growth. in case of IDBI Bank the shares to be offered as security should be of at least of two companies. it's best to avoid stocks trading below both their 50 -and 200-day MAs. It is possible to weight more recent prices by linearly or exponentially smoothing the average lines. that determine the size and rate of growth of the money supply. may include relative strength only. Moving averages are one way to view historical price levels. The linger the averaging period.GLOSSARY OF STOCK MARKET Mid Cap Companies having a market capitalization between Rs 500 crore and Rs 1. which in turn affects interest rates. For example. Money Market The securities market dealing in short-term debt and monetary instruments. The most widely followed MAs are 50 days and 200 days. The Reserve Bank of India attempts to control the growth of the economy by regulating the increase or decrease in money supply. the more lag you will see between the average and the most recent prices. 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. whose shares have to be offered as security for obtaining loans. Momentum Analysis Usually involves looking for stocks in a strong uptrend (high relative strength). Many investors look at both. if the value of some shares drop in the market they may be offset by the other shares which have risen in price.
To simplify. No-load Fund0073 Mutual funds that do not carry a sales commission. Units in closed -end funds.The Index is market value weighted. divided by number of shares. NASDAQ Composite Index The NASDAQ Composite Index measures all NASDAQ domestic and non-U. is calculated throughout the trading day. Open -end funds sells their own shares to investors. or shareholders. they issue more units as people want them. are readily transferable in the open market and are bought and sold. The mutual funds which are insurance linked. They also have the benefit of professional managers overseeing their money who have the time and expertise to analyze and pick securities. The return on the funds holdings is distributed back to its contributors. if you hold a unit in a mutual fund. The total market value divided by the total number of units of the scheme on a specific date is the NAV. but only reinvest the return on the existing portfolio. There are two types of mutual funds.GLOSSARY OF STOCK MARKET Mutual Fund A portfolio of stocks. and is related to the total value of the Index. Net Profit Ratio Profit from operations as a percentage of revenue. some of which are listed on stock Exchanges.Net Asset Value The total value of the fund's portfolio less liabilities. also there are several open ended mutual funds which are insurance linked. 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. like other stock. open and closed ended. This means that each company's security affects the Index in proportion to its market by total shares outstanding. 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. Its basically marketing with for an investor with limited funds and/or limited knowledge of the market. Open-end funds are so called because their capitalization is not fixed. These funds do not accept new contributions from investors. NAV . such as the ability to write cheques against their units. the NAV is the value today of your unit. Net Asset Value (NAV) is the market value of the securities held by the scheme of a Mutual Fund. Net Asset Value per Share Equity excluding minority interests. Non-operating Expense Expenses not due to the basic business of company. Capital is contributed by smaller investors who buy shares in the mutual fund rather than the individual stocks and bonds in its portfolio.NAV varies on a day-to-day basis since the market value of securities changes regularly. based common stocks listed on the NASDAQ stock Market. minus various fees and commissions. Non-operating Income Income not derived from basic business of company 7 . Many open-ended funds allow contributors extra perks. stand ready to buy back their old shares and are not normally listed in exchanges.S.
Open Order A limit order that does not expire at the end of the trading day. and is based on a percentage of the last traded of the previous day. For example. One Night Stand Investment Buying a security with the intention of holding it for the long term. Offer The price at which a share is available in the market. it costs less to trade in round lots. 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. Opening Price Opening price is normally determined by the price at which a stock finished selling on the previous day. but subsequently panicking and selling it the following day. Generally. is the stock 7 . If demand is high enough. It is like a limit or circuit. NSCCL National Securities Clearing Corporation Limited. Open-end funds also buy back shares when investors wish to sell. the fund will continue to issue shares no matter how many investors there are. Open End Fund A type of mutual fund where there are no restrictions on the amount of shares the fund will issue. 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.GLOSSARY OF STOCK MARKET Normalized Earnings Profits a company can be expected to achieve taking out cyclical effects and unusual events such as onetime write-offs caused by late product releases. Most exchange has limits of how high or low the stock can trade on the following day. The Clearing Corporation of the National Stock Exchange. customer bankruptcies and the like. Offering Price The price at which publicly issued securities are made available for purchase. NSE National Stock Exchange Odd Lots Stocks sold in quantities of less than a specified minimum number.
7 . it is believed has declined to an unreasonable level. Operating Income Sales minus all expenses except income taxes and other items not relaxed to basic business. if they shriek loud enough. A single security or a market which. Changes in levels of inventories. This excludes any profits or growth acquired from takeovers. Operating Cash Flow Surplus cash generated from a company's basic operations without regard to income tax entries such as depreciation and amortization. it is sometimes said. Oversubscribed A situation in which the demand for an initial public offering of securities exceeds the number of shares issued.00. this is where everybody starts screaming "scam" and. This reduces the scope of overnight off-market deals which are illegal. ongoing earnings. and if XYZ stock finished selling ay 20. 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. Operating Earnings Earnings without considering certain expenses such as inventory write downs. Also see Free Cash Flow. or just about anything else the company feels like excluding to make its earnings look better. Organic Growth The growth rate that a company can achieve by increasing output and enhancing sales. SEBI starts a probe. Operating Margin Operating income divided by sales. Usually. has left prices "too high". severance pay. Order Modification A facility available in the trading system where one is allowed to modify an earlier order. depreciation and amortization charges. Also applies sometimes to overbought situations. acquisitions or mergers.00 the previous day then the maximum or minimum opening price the following day will be 22.GLOSSARY OF STOCK MARKET exchange has a upper or lower limit of 10. Order Cancellation A facility available in the trading system where one is allowed to cancel the order placed earlier. Also known as core earnings. Oversold The reverse of over-bought. accounts receivable and accounts payable also affect cash flow. earnings excluding special items or operating earnings.00 and 18.
These stocks offer larger returns but at higher risk. a company could issue rights to purchase shares at a substantial discount after a merger. Pay In The designated day on which the members pay securities and fund to the clearing house. to find the index for these stocks outpacing the Sensex. bonds and mutuals . Poop And Scoop A highly illegal practice occurring mainly on the Internet. For instance. In India they are called low-Capped stocks and BSE has a separate index for them. or bond that is written on the certificate. often highly speculative. Frequently used as a term of disparagement although some penny stocks have developed into investment-caliber issues.held by an investor. Penny Stocks This term is typical to the USA stock markets. Par Value The face value or the price of a share.such as stocks. they can purchase the stock at bargain prices. Par Value The face value of a bond. Pledge To deposit securities with a lender as security for money borrowed.Price-Earnings Ratio PE ratio or PE multiples is the ratio arrived by dividing Current market Price by Earnings per share of that stock. When a bull market is raging. It is not the market price. Low-priced issues. or it might issue preferred shares giving holders the right to redeem their shares at a discount after a merger. debenture. Payout Ratio Percentage of earnings paid out in dividends.GLOSSARY OF STOCK MARKET P/E Ratio . selling at less than $1 a share. If they are successful. 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. It is not unusual. A small group of informed people attempt to push down a stock by spreading false information and rumors. Portfolio The group of assets . 7 . Poison Pill Steps taken by a corporation to thwart a hostile takeover attempt.
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. Private Company A company whose ownership is private. On the other hand. In other words. The fixed income stream of preferred stock makes it similar in may ways to bonds. Debt instruments. the premium is synonymous with the options price. It is like a fixed deposit in a bank. Pro-Rata Used to describe a proportionate allocation. However. Public Company A company that has issued securities through an initial public offering and which are traded on at least one stock exchange. the premium is the amount by which the price exceeds the face. or par value. Mostly these types of stocks pay a fixed dividend regardless of corporate earnings and have priority over common stock in the payment of dividends. If interest rates fall. Preferred shareholders are paid a head of common stock holders in the event the corporation is liquidated. Pump And Dump A scheme attempting to boost the price of a stock through recommendations based on false. For options markets. You are stuck with a fixed return regardless of how high interest rates climb. For bonds and preferred stock. and should earnings rise significantly the preferred holder is stuck with the same fixed dividend while common holders collect more. 7 . or greatly exaggerated statements. This action pushes prices down temporarily. it carries no voting rights. Price Target A projected price level as stated by an investment analyst or advisor. Convertible preferred shares can be converted into common stock according to predetermined conditions. misleading.GLOSSARY OF STOCK MARKET Preferred Stock A class of ownership in a corporation that has a higher claim on the assets and earnings than common stock. 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. you have to pay a little extra upfront if you want to be shielded from the fluctuations of enquiry stock. Profit Taking The action of selling stock to cash in on a sharp rise.
earnings from continuing operations and net sales. if you have not held the fund for the prescribed minimum time. for a certain period of time. Research and Development (R&D) Costs of developing new products and services. 7 . Resistance The price at which a stock or market can trade. Registrar An institution or organization that is responsible for keeping records of bondholders and shareholders. Redemption The return of an investor's principal in a security. Quarterly Earnings Report A quarterly filing made by public companies to report their performance.GLOSSARY OF STOCK MARKET QOQ . Quote Prices at which a share can be bought or sold. which compares the quarter of one year (Q1 2007) to the same quarter of the previous year (Q1 2006). Rematerialisation Process of converting the shares from electronic form to physical form. Rally A period of sustained increases in the prices of stocks or indexes. bond. Included in earnings reports are items such as net income. or mutual fund. 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. 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. Redemption Fee Fee charged when you sell a mutual fund. rights or bonus. This is similar to the year over year measure. such as a stock. The highest bid to buy and the lowest offer to sell any stock at a given time. earnings per share. but which it cannot exceed.Quarter on Quarter A measuring technique that calculates the change between one financial quarter and the previous financial quarter. Quick Ratio Cash and cash equivalents plus accounts receivables divided by current liabilities.
plus other long term liabilities. Rollover A point where a stock price has fallen to support. Round Lots Stocks sold in specified share quantities. 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. Profit from operations plus financial income as a percentage of average capital employed. Return on Assets After tax income divided by total assets. Risk The potential to lose money (principal and any earnings) or not to make on an investment. Saturday Night Special A slang term used to refer to a surprise takeover attempt. it is issued in a fixed ratio to those shares which are already held.Securities And Exchange Board Of India The regulatory body for the investment market in India. Road Show Presentations made by underwriters and IPO company officials to institutional buyers to create interest in the offering.Profit after tax and minority interests as a percentage of average equity excluding minority interests. and then reverses the up or down trend convincingly. SEBI . Revenue A company's sales. usually seen as a price chart pattern. 7 . Return on investments After tax income (latest 12 months) divided by total of shareholders equity plus long term debt. Return on Equity After tax income (latest 12 months) divided by shareholders equity (from balance sheet).GLOSSARY OF STOCK MARKET Resistance Historical price level at which rising prices have stopped rising and either moved sideways or reversed direction. or risen to resistance.
Settlement Date The date by which an executed security trade must be settled. Small Cap Refers to stocks with a relatively small market capitalization. 7 . Shares A unit of ownership interest in a corporation or financial asset. the date by which a buyer must pay for the securities delivered by the seller.GLOSSARY OF STOCK MARKET Sector Fund An investment fund that makes investments solely in businesses that operate in a particular industry or sector of the economy. Simple Moving Average .the benchmark index of the Bombay Stock Exchange (BSE). 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. Shareholder Any person. Spinoff The creation of an independent company through the sale or distribution of new shares of an existing business/division of a parent company. It is composed of 30 of the largest and most actively-traded stocks on the BSE.SMA A simple. 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. or other institution that owns at least 1 share in a company. company. Stop-Limit Order An order placed with a broker that combines the features of stop order with those of a limit order. The two main types of shares are common shares and preferred shares. Share Capital Funds raised by issuing shares in return for cash or other considerations. Sensex An abbreviation of the Bombay Exchange Sensitive Index (Sensex) . Short Term Holding an asset for short period of time. That is. or arithmetic. A stoplimit order will be executed at a specified price (or better) after a given stop price has been reached. It is a company with a market capitalization less than Rs 500 crore.
only fall to zero and that is the maximum loss that would be incurred.00 a share can. Not for the common investor. The practice of short selling involves borrowing shares of a security from your broker and immediately selling them at the current price. and make a profit. Short sellers lose when the price of the stock ascends rather than descends. however. Shareholders Equity The difference between the totals of assets and liabilities shown on a company's balance sheet. This does not mean you should walk into a Reliance office and ask for a glass of water.GLOSSARY OF STOCK MARKET Stop-Loss Order An order placed with a broker to sell a security when it reaches a certain price. typically provided by angel (venture) investors.00 a share and the price of the stock drops to 35. your profit is 15. Support The price level which. or 1500.00. Most stock transactions must be settled within three business days. if you sell short 100 shares of XYZ Corporation at 50. commercial production or marketing. A stock purchased at 10. Theoretically. Shareholder A person who buys stock in a corporation. Shares A unit representing a measure of ownership in a corporation. 7 . not covering launch expenses. Settlement The process of paying for stocks you purchase.Book value is the shareholders equity divided by the number of outstanding shares. Then as the price of that security declines. 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 has had difficulty falling below. or receiving credit from your broker for the stocks you sell. but it will be accompanied by some odd looks. beta stage development.00 a share. unless you are very sure of yourself.00. For instance. Seed Capital A small amount of capital provided to an entrepreneur. It is designed to limit an investor's loss on a security position. Carefully check all tips on short sales before deciding to act on them. you buy back an equal number of shares on the open market and use them to cover the shares you borrowed from your broker. short selling is based on the anticipation that a particular security price will go down. and therefore becomes a part owner of the corporation. Short Covering Buying stock to return stock previously borrowed to make delivery on a short sale. usually for product development. etc. historically. Selling Short The reverse of the usual stock market technique. pilot projects. You will get the water as a matter of courtesy.
To go short you "borrow" stock from the broker/dealer. Solvency Ratio Equity excluding minority interests as at year-end as a percentage of liabilities and equity at year-end. Spot Trading Trading in commodities that will be delivered immediately. then sell the stock. or future contracts sold and not covered as of particular date. 7 . with the intent to buy the stock back at a lower price than you had initially sold it for. Short position also means the total amount of stock an individual has sold short and has not covered. A short sale can only take place on an "up tick"" or 'zero-plus tick'. Split An increase in the number of shares outstanding. as of a particular date. A reverse split is where the total number of shares is decreased and the stock price increases proportionally. For example. Standard Deviation A measure of a mutual fund or stock's historical volatility. The shareholders equity does not change. Speculators Investors who seek large capital gains through relatively risky investments. (Also called cash trading) Spread The spread is the difference between the bid price and the offer price. As in a split the total stock holders equity remains the same. Short-term Debt Borrowing that must be repaid within one year. a shareholder with 100 shares before the split would have 300 shares after the split with a value of 20 a share. The player should ascertain these rules from a registered broker of the exchange. Most stock exchange have a rigid rules regarding short selling. a company declares a "3 for 1 " stock split. Short-term Investments Stocks and other liquid securities. Short Sale To sell a stock you do not currently own.GLOSSARY OF STOCK MARKET Short Position Stock options. the price of the stock is currently 60 a share. This increase in the number of shares result in the proportionate decrease of share price. Short-term Gain The profit realized from the sale of securities or other capital assets held twelve months or less.
a two-for-one split means that shareholders will receive two new shares for each old share.GLOSSARY OF STOCK MARKET Stock Certificate The actual document that is evidence of stock ownership. For examples. NRIs and overseas Corporate Bodies (OCB) are not eligible for registration as sub-accounts. This is usually n\brought about by the division of existing shares. If the target company is publicly traded. 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. the acquiring company will make an offer for the outstanding shares. Stop Loss Order An order placed with a "trigger price". 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.These order types instruct the broker to execute at market once a specific price level is reached and traded at. Stops Can be either a buy or a sell stop. usually seen as a price chart pattern Takeover A corporate action where an acquiring company makes a bid for an acquiree. a reverse stock split brings about the decrease in the number of shares in a corporation. Alternately. A buy is placed above current prices and a sell is placed above current prices and a sell is placed below current prices. This order is very often referred to as a "stop loss" order. Support Historical price level at which falling prices have stopped falling and either moved sideways or reversed direction. Stock Split An increase in the number of outstanding shares in a corporation. 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. and (2) Foreign corporate and foreign individuals who are not allowed to exceed 5 percent of the issued capital. usually watermarked and patterned to make it hard to forge. 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. Sub-accounts A sub-account includes institutions (established or incorporated outside India ) and those funds. 7 . because it prevents the security from falling below a certain price. making a total of three.
S. The tick becomes especially important when large market movements trigger the implementation of certain circuit breakers meant to stabilize the market. Trailing EPS The sum of a company's earnings per share for the previous four quarters.A) will bring you information about Ford Motor Company. Technical Rally An upward movement in a security's price following a declining trend. Ticker A ticker is a trading screen information display showing the current price. The movement is caused by technical as opposed to fundamental factors affecting sentiment. the symbol ?f? on the New York Stock Exchange (U. such as past prices and volume. option etc. but still higher than the nearest preceding price. etc of a particular stock. Ticker Symbol A ticker symbol represents a particular security (company. Tangible Book Value Book value minus goodwill and intangible assets. etc. 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. option. Third Stage Capital Capital provided to an enterprise that has an established commercial production and basic marketing setup. A zero-plus tick means the transaction was at the same price as the one before. acquisitions.GLOSSARY OF STOCK MARKET Technical Analysis A method of evaluating securities by analyzing statistics generated by market activity. Technical Analysis An analysis of a stock or future based strictly on numbers. but instead use charts and other tools to identify patterns that can suggest future activity. ?ONGC? 7 . Tick The minimum upward or downward movement in the price of a security. future. Don't try to understand it unless you are a maths gold medalist. Tick The tick is the direction in which the price of stock moved on its last sale. For example. Technical analysts do not attempt to measure a security's intrinsic value.) on the exchange it is trading on and is used to retrieve information about that security from that exchange. typically for market expansion. product development etc. The method includes analysis of price patterns. Top Line A reference to the gross sales or revenues of a company. volume.
Trailing Twelve Months (TTM) The last four reported quarters. 7 .GLOSSARY OF STOCK MARKET 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. The higher the turnover rate. changes all the stocks in its portfolio once a year. sold at a discount and redeemed at full face value. Commission varies with the size of the trade. Undersubscribed A situation in which the demand for an initial public offering of securities is less than the number of shares issued. on average. the more volatile the stock and the greater potential for wider swings in price (both ways). 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. Transaction Costs The costs of trading securities. ticker symbols can be submitted to an electronic ticker quote retrieval system to find information about a particular security instantly. Today. Underperform An analyst recommendation that means a stock is expected to do slightly worse than the market return. Turnover Ratio How often a mutual fund changes its portfolio holdings. including the broker's commission and taxes. Treasury Notes Debt securities issued by the central government that mature over a specified number of years. The best measure of a firm's total debt. 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. Turnover Rate Turnover is the relationship between the float and the average monthly volume of a stock. Treasury Bills Shorts-term debt issued by the central government. 100 per cent turnover means a fund.
or transaction. It is calculated by multiplying the volume traded by the average sale price. His return is high but. A venture capitalist not only brings in moneys as ?equity capital' (that is. buy) into its own books. security. He is a fixed interval investor. in exchange for an ownership percentage. without security/charge on assets) but also brings onto the table extremely Valuable domain knowledge. or other units of a security traded in a certain time period. whom the entrepreneurs approach without the risk of ? takeover'. 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. more risky venture.GLOSSARY OF STOCK MARKET Upgrade A positive change in the rating of a security. Volatility Volatility refers to the amount of uncertainty or risk about the size of changes in a security's value. Offsetting the high risk the investor takes is the promise of high return on the investment. then. strategic advice. he's taking all the risks on an untried idea. failing which the firm would take the securities being offered (that is. Underwriter An investment banking firm committed to successful distribution of a public issue. Vested Interest A financial or personal stake one entity has in an asset. Undervalued A stock trading below its fair value. 7 . business contacts. etc. Some countries also provide for underwriting on best effort basis Valuation The process of determining the current worth of an asset or company. brand-equity. 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. Venture Capital Professional moneys co-invested with the entrepreneur usually to fund an early stage. Value Traded This is the total monetary value of all trading in a security for the market day. Volume The total number of shares. Venture Capitalist An investor involved in financing a company's operations before going public. bonds.
on an annualized basis. Dalal Street is the Indian counterpart in Mumbai. XD .Dividend Buying the shares trading in XD will not entitle you for the dividend which is already declared but not yet been issued. Working Capital Current assets minus current liabilities. a currency.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. Wall Street A street in the city of Manhattan . an index or a commodity. YOY .Ex. Zero Dividend Preferences Zero dividend preference shares are Preference shares which receive no dividends throughout their lives. Warrants may be issued over securities such as shares in a company. New York where several major brokerage firms and stock exchanges are located.GLOSSARY OF STOCK MARKET Write-Off A reduction in the value of an asset or earnings by the amount of an expense or loss. Yield Yield is the annual rate of return for any investment and is expressed as a percentage. 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. 7 .
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