Terms related to Indian share market
Meaning of words associated with Indian share market
Following are Indian stock market terminologies (words and terms) which are very commonly used while trading and investing in Indian Stock Market
Share Trading –
Buying and selling of shares is called as share trading.
Open price –
The first price at which the stock opens in the morning.
High price –
The stock price reached at the highest level throughout the trading day
Low price –
The stock price reached the lowest level throughout the trading day.
Close Price –
The final price of the stock when the market closes for a day or the stock price at which it remains at the time of closing the market at 3:30 PM
Volume – Volume is nothing but the quantity of shares.
Bid price –
The Buying price is called as the Bid price.
Offer price –
The selling price is called as offer price.
Bid Quantity –
The total number of shares available for buying is called as Bid Quantity.
Offer Quantity –
The total number of shares available for selling is called as Offer Quantity.
Short selling –
First selling and then buying (this only happens in day trading and in derivative futures and options) is called as short sell or shorting of sell.
Transaction – One complete cycle of buying and selling of shares is considered as one Transaction.
Squaring off –
This term is used to complete one transaction. Means if you buy then have to sell (means square off) and if you short sell then you have to buy (means square off).
Limit Order –
In limit order, the buying or selling price has to be mentioned and when the share price comes to that price then the order will get executed with the price mentioned by the trader.
Market Order –
When you put buy or sell price at market rate then the price get executes at the current rate of the market. The market order gets immediately executed at the current available price.
Stop Loss Orders –
As the name indicates the stop-loss orders are used to stop or limit the losses in the share market. Stop loss orders are the limit price set by traders at which the order will automatically enter or exit the trade.
The stop-loss order is placed below the current market price of the stock to stop the loss in buy position and above the current market price to stop the loss in short sell position.
Margin Trading –
Margin amount is the amount given by a broker for day trading. The trading done using margin amount is called as margin trading.If you use margin amount then the trades has to be closed on the same day.
Alpha stock –
A weighted measure of how much a stock has risen or fallen over a certain period, usually a year. Generally, more emphasis is placed on recent activity by assigning higher weights to it than those assigned to earlier movements. This helps to give a return figure that has a greater focus on the most current period and is a more relevant measure for short-term analysis.
If the stock was up over the period, it will have a positively weighted alpha. An unchanged stock price has a small weighted alpha.
A stock whose price has fallen over the period will have a negatively weighted alpha. Technical analysts use this measure to identify companies that have shown a strong trend over the past year and, more specifically, to focus their attention on companies whose momentum is building.
Beta Stock –
Beta is a measure of a stock’s volatility in relation to the market. By definition, the market has a beta of 1.0, and individual stocks are ranked according to how much they deviate from the market. A stock that swings more than the market over time has a beta above 1.0. If a stock moves less than the market, the stock’s beta is less than 1.0. High-beta stocks are supposed to be riskier but provide a potential for higher returns; low-beta stocks pose less risk but also lower returns.
Bull Phase –
when the market keeps going up it is called as Bull phase or cycle.
Bear Phase –
when the market keeps going down it is called as Bear phase or cycle.
Forex Trading –
Trading done in currency is called as Forex trading
Online Share Trading –
Buying and selling of shares through internet during market hours is called as online share trading
Offline Share Trading –
Buying and selling of shares through a broker and placing orders through telephone is called an offline share trading. The offline share trading can be done during live market hours and also when the market is closed by placing an order through the telephone to a broker.
Mutual Fund –
It is a financial instrument collects money from all investor and then invests in financial instruments like stocks, bonds, etc. It is managed by a fund manager.
The person investing the money in stocks for long-term based on the fundamentals of the company is called an investor. Long term like 2 to 5 years or even for 10 years.
The person who trades to make quick money in share market is called a trader. The trader is not concerned about the company’s fundamentals. The trader waits for any type of news which gives an opportunity to make money in a day or in a week or in a month.
Penny stock –
The stock price less then Rs 1 is called a penny stock.
Large Cap Stocks –
Shares of those companies with a market capitalization over Rs. 1000 crores is called as large-cap stocks
Mid Cap Stocks –
Shares of those companies with a market capitalization between Rs. 100 crores and Rs.1000 crores is called as Mid-cap stocks
Small cap stocks –
Shares of those companies with a market capitalization less than Rs. 100 crores are called as Small cap stocks
Future Derivatives –
It is the financial instrument whose price depends on the underlying instrument. An underlying instrument can be stock, currency, commodity etc. It has the expiry of one month. Every last Thursday it expires.
For more information please visit at www.daytradingshares.com/futures_options_derivatives_trading.html
Option – Please visit this link to get clear understanding of option
Short Selling –
Selling of shares at the higher price and then buying them at the lower price to generate profits is called as short selling.
Short selling of shares is done only during day trading while short selling in Futures and options can be done and hold for months based on their expiry dates.
Buy Back of shares –
The buying of shares by a company from the open market in order to reduce the number of shares in the market. Companies will buy back shares to increase the value of shares whenever company feels the share price is undervalued in the open market.
The long form of IPO is Initial public offering. when a company issues common shares to the public for the first time. They are often issued by smaller, younger companies seeking capital to expand, but can also be done by large privately-owned companies looking to become publicly traded.
The basic difference between Initial Public Offer (IPO) and Follow-on Public Offer (FPO) is as the names suggest IPO is for the
companies which have not listed on an exchange and FPO is for the companies which have already listed on the exchange but want to raise funds by issuing some more equity shares.
Right Issue –
Issuing rights to a company’s existing shareholders to buy a proportional number of additional shares at a given price (usually at a discount) within a fixed period.
Day trading –
Buy and selling of shares in a day is called as day trading. Day trading can also be done in futures and in options.
Volatility in Share market –
When the share price moves up and down without proper direction is called as volatility.
Volume is nothing but the quantity in share market.
Stock Broker –
The person or company authorized by the stock exchange like NSE and or BSE to carry out buying and selling of shares on behalf of others.
Stock Sub Broker –
The broker assigns sub-broker. The sub-broker also performs same tasks like broker but he communicates with the broker and not with stock exchanges and broker communicates with stock exchanges.
Systematic Investment Plan (SIP) –
A systematic investment plan is a way to invest a fixed amount in stocks or in mutual funds regularly.
Net Asset Value (NAV) –
Net Asset Value is the market value of the assets of the scheme minus its liabilities. The per unit NAV is the net asset value of the scheme divided by the number of units outstanding on the Valuation Date. Thus, NAV of a mutual fund unit is nothing but the ‘book value.’
Annual General Meeting (AGM) –
Gathering of the directors and stockholders (shareholders) for every year. According to law the AGM to be held each calendar year. Generally, not more than 15 months are allowed to elapse between two AGMs, and a 21-day’s written notice of its date is required to be given to the stockholders. The main purpose of an AGM is to comply with legal requirements, such as the presentation and approval of the audited accounts, election of directors, and appointment of auditors for the new accounting term. Other items that may also be discussed include compensation of officers, confirmation of proposed dividend, and issues raised by the stockholders.
Technical Analysis –
The stock price prediction based on charts and indicators is called as technical analysis. Technical Analysis is irrespective of company’s fundamentals. Technical analysis is used for short-term, and also for long term.
Fundamental Analysis –
The stock price prediction based on company’s growth/fundamentals. The long-term investment is done based on fundamental analysis.
Primary Market –
The new shares (IPO) are issued in the Primary market. Once issued they are listed in the secondary market. It is not possible to trade in the primary market. After listing in secondary market the trading takes place on those shares.
Secondary market –
The secondary market is nothing but share market. Buying and selling of shares in the secondary market mean buying and selling of shares in the stock market.
The company shares some of its profits to its shareholder is called a dividend.
Interim Dividend –
Distribution of profits to shareholders before a company’s annual earnings have been computed, or at any time between two successive annual general meetings (AGM). Firms paying an interim dividend to try to be reasonably certain they can afford it, and make the necessary adjustments (if any) in the subsequent or year-end dividend payments.
Final Dividend –
The final dividend declared at a company’s Annual General Meeting (AGM) for any given year is called as final dividend.
Bonus shares –
Free shares of stock given to current shareholders, based upon the number of shares that a shareholder owns.
National Stock Exchange (NSE) –
The National Stock Exchange (NSE) is a stock exchange located at Mumbai, India. It is the 10th largest stock exchange in the world by market capitalization and largest in India by daily turnover and number of trades, for both equities and derivative trading. NSE and the Bombay Stock Exchange are the two most significant stock exchanges in India, and between them are responsible for the vast majority of share transactions. The NSE’s key index is the S&P CNX Nifty also called as NIFTY.
The nifty index consists of 50 major stocks weighted by market capitalization.
Nifty is the barometer on the NSE exchange.
Bombay Stock Exchange (BSE) –
The BSE is a stock exchange located on Dalal Street, Mumbai and is the oldest stock exchange in Asia. The BSE has the largest number of listed companies in the world.It has also been cited as one of the world’s best-performing stock market.
As of December 2010, there are over 5,034 listed Indian companies and over 7700 scrips on the stock exchange. The Bombay Stock Exchange has a significant trading volume. The SENSEX is the index on BSE also called the “BSE 30”, is a widely used market index in India. Sensex consist of 30 major stocks weighted by market capitalization.
Sensex is the barometer on the BSE exchange.
Bank Nifty –
Bank Nifty is the barometer used to measure the banking index. Bank nifty consist of 12 top banks.
CNX IT –
CNX IT is the barometer used to measure the IT index. CNX IT consist of Top 20 companies.
An option is a financial product whose price is based on its underlying instrument (or product) underlying instrument can be Index (Nifty, Jr.Nifty, Bank Nifty etc) stock, currency etc.
In other words – Options are derivative instruments, meaning that their prices are derived from the price of another security. More specifically, options prices are derived from the price of an underlying stock, index, currency etc
Call Option –
A call option is bought when the underlying (Nifty, Jr.Nifty, Bank Nifty etc or stock ) is expected to go up. The financial Definition – A call option gives the buyer the right to buy a specified quantity of the underlying asset at the strike price on or before the expiration date. It is also possible to sell the call option.
Put Option –
A put option is bought when the underlying (Nifty, Jr.Nifty, Bank Nifty etc or stock) is expected to go down. The financial Definition – A Put option gives the buyer the right to sell the specified quantity of the underlying asset at the strike price on or
before an expiry date.
It is also possible to sell the put option.
52 Week High price (52 WH) –
The highest price of the stock touched in a year is called as 52-week high price.
52 Week Low (52 WL) –
The lowest price of the stock touched in a year is called as 52-week low price
Depository participant (DP) –
A depository is an institution or a kind of organization which holds securities with it, in which trading is done among shares, debentures, mutual funds, derivatives, F&O, and commodities.
Market Trend –
It is also called as market direction. The bearish trend means market direction is going down. The bullish trend means market direction is going up.
Upper Circuit –
when the index or stock goes up by more than a fixed limit the exchange places the upper circuit for that stock or index. Trading is then suspended for some time to let the market cool down. Upper circuit is a system lock used to stop excessive speculation in the stock market, applied by the stock exchanges.
When the index or stock goes down by more than a fixed limit the exchange places the lower circuit for that stock or index. Trading is then suspended for some time to let the market cool down. Lower circuit is a system lock used to stop excessive speculation in the stock market, applied by the stock exchanges.
Demat Account – The account used to save the shares is called as the demat account. The shares are saved in electronic format in demat account.
Securities Transaction Tax (STT) –
It is a tax being levied on all transactions done on the stock exchanges. Securities Transaction Tax is applicable on purchase or sale of equity shares, derivatives, equity oriented funds and equity oriented Mutual Funds.
If you are selling the shares after 12 months, then it comes under long-term capital gains. Check out the current rate of long-term capital gain.
As of 2016, it is 0.1% for delivery based equity trading. The tax is not applicable on off-market transactions or on commodity or currency transactions. The original tax rate was set at 0.125% for a delivery-based equity transaction and 0.025% on an intra-day transaction. The rate was set at 0.017% on all Futures and Options transactions.