GLOSSARY OF STOCK MARKET

8/9/2019 GLOSSARY OF STOCK MARKET

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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 aperiod 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 holdrecommendations 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 anindividual 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 FundA 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 stockwith 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 basispoint 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 StockShares 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) thatborrows 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 deliveriesare 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 LineRefers 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 thetransactions 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 stockprices 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 FundingFunds 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. Capitalgains 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 oneyear 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 businessactivities 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 orotherwise 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 MarketA 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 FundAn 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 stipulationrequired 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.

DiversificationThe 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 stockmarket 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 thebeneficiary. 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 iscurrently 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 ContractAn 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 theirfinancial 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 FundA 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 avision 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 liketo 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 asleverage, 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 figureit 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 beinside 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 isillegal 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 BankAn 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 ofborrowing 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 themarket. 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 GainA 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 makesodd 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 investorto 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 onewants 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 othersecurities. 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 aresaid 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 oflarge 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 stockslisted 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 StockExchange.

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 asdepreciation 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 MarginOperating 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 themarket 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 indexfor 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 topredetermined 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 OfferingThe 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 ReportA 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 ofaverage 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 IndiaThe 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 BombayStock 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.

SpinoffThe 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 yousell. 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.


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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

Documents

GLOSSARY OF STOCK MARKET