Stock Market Glossary

Assets Under Management (AUM) is the total market value of investments managed by a mutual fund or portfolio manager.

Asset allocation is the strategy of dividing investments among different asset classes like stocks, bonds, and cash based on goals and risk tolerance.

Alpha measures investment performance relative to a benchmark. Positive alpha indicates outperformance, negative indicates underperformance.

A bull market is a financial market condition where prices are rising or expected to rise. It is characterized by optimism, investor confidence, and expectations that strong results should continue.

A bear market is a condition in which securities prices fall 20% or more from recent highs amid widespread pessimism and negative investor sentiment.

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

Book value is the net asset value of a company, calculated as total assets minus intangible assets and liabilities. Per share book value helps assess if a stock is undervalued.

Bonus shares are additional shares given to existing shareholders free of cost, proportional to their holdings. It increases share count without changing total value.

Beta measures a stock's volatility relative to the overall market. Beta above 1 means more volatile than market, below 1 means less volatile.

Compound Annual Growth Rate (CAGR) represents the mean annual growth rate of an investment over a specified period longer than one year.

Circuit breakers are mechanisms that temporarily halt trading when prices move beyond set limits (upper or lower circuit). They prevent extreme volatility.

A call option gives the buyer the right (not obligation) to buy the underlying asset at a predetermined price before expiry. Buyers profit when prices rise.

Candlestick patterns are formations in candlestick charts that signal potential price movements. Common patterns include Doji, Hammer, and Engulfing.

Compounding is earning returns on both your original investment and previously earned returns. It accelerates wealth growth over time.

A dividend is a distribution of a portion of a company's earnings to shareholders. Dividends are typically paid quarterly and can be in cash or additional stock.

A dematerialized (demat) account holds securities like shares, bonds, and mutual funds in electronic form. It eliminates the need for physical certificates.

Domestic Institutional Investors (DII) include mutual funds, insurance companies, and other local institutions. They provide stability during FII selling.

Delivery trading means holding shares in your demat account beyond the trading day. Shares are delivered to your account after T+1 settlement.

Draft Red Herring Prospectus (DRHP) is the preliminary document filed with SEBI before an IPO. It contains company details, financials, and risk factors.

Earnings Per Share (EPS) is a company's net profit divided by the number of outstanding shares. It indicates how much money a company makes for each share.

Expense ratio is the annual fee charged by mutual funds as a percentage of assets to cover operating expenses. Lower expense ratio means higher returns for investors.

Equity Linked Savings Scheme (ELSS) is a tax-saving mutual fund with a 3-year lock-in period. Investments up to Rs 1.5 lakh qualify for tax deduction under Section 80C.

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

Futures and Options (F&O) are derivative instruments that derive value from underlying assets like stocks or indices. Used for hedging and speculation.

Foreign Institutional Investors (FII) are investment funds registered abroad that invest in Indian markets. Their buying/selling significantly impacts market movements.

A futures contract is an agreement to buy or sell an asset at a predetermined price on a specific future date. Both buyer and seller are obligated to honor the contract.

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

Grey Market Premium (GMP) is the unofficial price at which IPO shares trade before listing. It indicates expected listing gains but is not guaranteed.

Hedging is a strategy to reduce investment risk by taking an offsetting position. It protects against adverse price movements.

Intraday trading involves buying and selling stocks within the same trading day. All positions must be squared off before market close.

Initial Public Offering (IPO) is when a private company offers shares to the public for the first time. It helps companies raise capital from public investors.

A limit order specifies the maximum price to buy or minimum price to sell. It only executes at the specified price or better.

Lot size is the minimum quantity of shares/units that must be traded in F&O contracts. It varies for different stocks and indices.

Liquidity refers to how easily an asset can be bought or sold without significantly affecting its price. Highly liquid assets have high trading volumes.

Market capitalization (market cap) is the total market value of a company's outstanding shares. Calculated as share price multiplied by total shares outstanding.

A mutual fund pools money from multiple investors to invest in stocks, bonds, or other securities. It is managed by professional fund managers.

A market order is executed immediately at the current market price. It guarantees execution but not price.

Margin trading allows buying securities by paying only a fraction of the total value. The broker lends the remaining amount, charging interest.

Moving average is a technical indicator that smooths price data by averaging prices over a specific period. Common types are SMA and EMA.

Net Asset Value (NAV) is the per-unit market value of a mutual fund. It is calculated by dividing total assets minus liabilities by number of units.

NIFTY 50 is the benchmark Indian stock market index representing the weighted average of 50 of the largest Indian companies listed on NSE.

Option premium is the price paid to buy an option contract. It represents the cost of acquiring the right to buy or sell the underlying asset.

Price-to-Earnings (P/E) ratio measures a company's current share price relative to its per-share earnings. It indicates how much investors are willing to pay per rupee of earnings.

Promoter holding is the percentage of shares owned by company founders and their families. Higher promoter holding often indicates confidence in the business.

A put option gives the buyer the right to sell the underlying asset at a predetermined price before expiry. Buyers profit when prices fall.

A portfolio is a collection of investments held by an individual or institution. Diversification across assets reduces overall risk.

Return on Equity (ROE) measures a company's profitability relative to shareholders' equity. Higher ROE indicates efficient use of equity capital.

Relative Strength Index (RSI) is a momentum indicator measuring speed and magnitude of price changes. Values above 70 indicate overbought, below 30 indicate oversold.

Resistance is a price level where selling pressure is strong enough to prevent further rise. It acts as a ceiling for prices.

Rupee cost averaging means investing fixed amounts regularly regardless of market conditions. It averages out the purchase cost over time.

Systematic Investment Plan (SIP) is a method of investing a fixed amount regularly in mutual funds. It helps in rupee cost averaging and disciplined investing.

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

Short selling involves borrowing shares and selling them, hoping to buy back at a lower price. Profit is made when prices fall.

SENSEX is the benchmark index of BSE comprising 30 well-established, financially sound companies. It reflects overall market sentiment.

A stock split divides existing shares into multiple shares, reducing the price proportionally. Total investment value remains unchanged.

Strike price is the predetermined price at which an option can be exercised. It determines whether an option is in-the-money or out-of-the-money.

Support is a price level where buying interest is strong enough to prevent further decline. It acts as a floor for prices.

T+1 settlement means trades are settled one business day after the transaction date. India moved to T+1 from T+2 in January 2023.

Technical analysis studies past price movements and trading volumes to predict future price movements. It uses charts, patterns, and indicators.

Volatility measures the degree of price variation over time. High volatility means larger price swings and higher risk.