A 52-week high is the highest closing price of a stock or ETF in the last 365 days. Say for example you’re checking the history of a stock on 01-01-2022. Then its 52 week high will be the highest price it closed at between 01-01-2021 and 01-01-2022. 52 week highs are used as technical indicators by traders.

A 52 week low is the lowest closing price of a stock or ETF in the last 365 days. Let’s say you check a stock’s history on 01-01-2022. Then the 52 week low will be the stock’s lowest closing price between 01-01-2021 and 01-01-2022. 52 week lows are used as technical indicators by traders.

Bullish Abandoned Baby Pattern

• Candle #1: Red in color & forms during a downward trend
• Candle #2: Forms a Doji Star below Candle #1’s closing price
• Candle #3: Leads to a bullish trend & forms above the Doji Star (similar size to Candle #1)

Bearish Abandoned Baby Pattern

• Candle #1: Green in color & forms during an upward trend
• Candle #2: Forms a Doji Star above Candle #1’s closing price
• Candle #3: Leads to a bearish trend & forms below the Doji Star (similar size to Candle #1)

Abc Wave Theory or Elliot Wave Theory is used to determine the direction of the stock market by identifying recurring waves or patterns over the long term. The theory is named after Ralph Nelson Elliott.

5 Motive or Impulse Waves are formed if the movement is in the direction of the trend. 3 Corrective Waves are formed if the movement is against the direction of the trend.

An abridged prospectus is a short version of a company prospectus. As per SEBI norms, a company looking to offer equity or debt to investors must file a prospectus.

This document contains crucial details that can help investors make investment decisions. But a regular prospectus is lengthy.

That’s why Section 2(1) of the Companies Act of 2013 came into effect. It directed companies to publish an abridged or shorter version of their prospectus.

• Confirmed: Bank guarantees payment in case the buyer defaults
• Unconfirmed: Bank does not guarantee payment in case the buyer defaults

An accrued expense is the cost that is incurred in the current accounting period but is due to be paid in the future.

More simply, an accrued expense is an unpaid bill due in the future for goods or services that have already been received by a company.

Accrued expenses show up as liabilities on a company’s books.

An accrued interest is the interest incurred in the current accounting period but the actual interest is due to be paid or received in the next accounting period.

• Accumulation: Denotes demand or the buying levels of a particular stock
• Distribution: Denotes the supply or the selling levels of a particular stock

An Acid Test Ratio shows whether a company has enough liquid short-term assets to deal with current liabilities.

The higher the Acid Test Ratio the better a company’s ability to deal with debt.

Acid Test Ratio = (Cash + Marketable Securities + Accounts Receivable)/Current liabilities

The adjusted closing price of stock accounts for any changes that happen due to corporate actions like dividends, stock splits, and others after trading hours.

An adjusted futures price shows the cost of purchasing, financing, and delivering the underlying assets of a futures contract.

The adjusted futures price is calculated by multiplying the price of the underlying asset by the number of units to be delivered (known as the conversion factor).

• Calculate the number of stocks that finished in the red.
• Calculate the number of stocks that finished in the green.
• Subtract #1 from #2 to find out the net movement aka Net Advance.
• Repeat #1, #2, and #3 the next day and add the values for Net Advance.
• Add both the previous day’s and the present day’s Net Advance. Repeat for future calculations.

• Primary: Indemnity (fulling payments)
• Secondary: Guarantee (assuring that the outcome will be met)

After hours trading means buying and selling securities after the end of regular market hours. In India, the stock market is open for regular trade from 9.15 AM to 3.30 PM.

After hours trading is allowed from 3.40 PM to 4 PM. Around the world, stocks are known to suffer from a lack of liquidity during after hours trading.

Algorithmic trading or algo trading means buying and selling securities using computer algorithms that follow a set of predefined rules to execute trades.
In algo trading, predefined rules can be set to act on triggers like stock price, volume, time, and others.

An all or none order is an instruction to execute the entire order or none of it. For example, you place an order for 1000 shares with a contingency that it should be an all or none order.

If so, then the order will be not executed if 999 shares are available. The order will only go through if 1000 shares are available. Otherwise, the order will be canceled.

An Alpha indicates the measure by which a stock or portfolio has managed to outperform a benchmark like an index of shares.

A positive Alpha means that the security or portfolio is beating the market while a negative Alpha means that it is lagging.

Alpha can also be used to measure the competence of a fund manager and their strategies.

An American Option allows the contract holder to exercise the right any time before or on the expiry date. American style options contracts are not available in India.

An Anaume Pattern can be seen when a gap is filled after a change in the direction of a security or market’s price.

Anaume Patterns are gap-filling patterns that can signal the reversal of a bearish trend, which is nothing but a potential onset of a bullish trend, when used in conjunction with other patterns.

Anaume Patterns are also known as exception exhaustion patterns.

Anchoring is a bias that drives people to make decisions that are based on (anchored to) pre-existing notions, ideas, and suggestions that may or may not be true.

Adjustments around anchoring are common as it becomes a starting point for many when it comes to decision-making.

For example, someone is anchored to a financial model or strategy. They may choose to use the anchor in situations where it may not fit and as a result, may end up getting an unfavorable outcome.

An Annual Earnings Change is the difference between a company’s earnings from the present and previous fiscal year. The formula for annual earnings change is:

Current Fiscal Year Earnings - Previous Fiscal Year Earnings

Say for example a liquid nitrogen manufacturing company earned Rs. 50 crores in the current fiscal year and Rs. 29 crores in the previous fiscal year. Their annual earnings change will be:
Rs. 50 crores - Rs. 29 crores = Rs. 21 crores.

An Annual General Meeting or AGM is an event where a company’s board of directors presents the annual report, future outlook, and strategy to shareholders. AGMs serve as one of the few occasions when shareholders get to interact with a company’s board of directors.

A Net Profit Margin is the ratio of a company’s net profits to revenues. The formula to calculate Net Profit Margin is:

Net Profit Margin = Net Profit* / Revenue * 100

*Net profit = Revenue - Cost of goods - Operating Cost - Other Expenses - Interest - Taxes

Net Profit Margin is expressed as a percentage, which means that you can compare the financial health of multiple companies.

A company can use its Net Profit Margin to understand whether its strategies and business models are effective.

An annual report is an exhaustive written account of a company’s finances, activities, and other relevant information for the fiscal year.

Publicly traded companies are required to publish annual reports so that existing and potential shareholders have full transparency into the company’s finances and overall health.

Arbitrage is a strategy where a security is bought in one market and sold in another market to generate profits due to the difference in price. This difference is known to be minor.

Say for example a share trades at Rs. 1000 on NSE and Rs. 1002 on BSE. The share can be arbitraged by buying it on BSE and selling it on BSE for a profit of Rs. 2.

The ask or offer price is the price at which an investor is willing to sell a security like stocks, bonds, currencies, ETFs, and others.

The ask size is the number of units of a security that an investor is willing to sell at the ask or offer price.

Asset allocation is a strategy or method in which an investor decides how much money they should allocate to an investment based on their risk profile, financial goals, and other factors to maximize returns and minimize risk.

An asset is anything that has economic value and is owned by an individual, company, or group. Assets are bought to generate returns in the future.

An asset is something that has monetary value and can generate profits in the future while a liability is a debt that’s repayable immediately or in the future. Assets are owned whereas liabilities as owed.

At the close or closing price is the last traded price of securities like stocks, ETFs, and others at the end of regular market hours.

For example, if a stock hit Rs. 4,500 at 3.30 PM (market close), then that is its price at the close also known as the closing price.

Unlike Adjusted Closing Price, at the close or closing price does not take into account price changes due to corporate actions.

At The Money is a scenario in which the strike price of an options contract is the same as the market price of its underlying security.

Exercising an option At The Money can lead to a loss as the premium paid for the contract won’t be recovered.

That said, At The Money is known to be a positive indicator as it indicates the option may soon have intrinsic value.

At the opening is an instruction to execute an order at the open price, which is the price of a security at the start of regular stock market hours.

Authorized capital or authorized share capital is the maximum amount of capital for which shares can be issued by a company to its shareholders.

Or in other words, authorized capital denotes all the shares across all the categories that a company could issue if it wanted to raise money.

An autoregressive model uses one or more past values to forecast the current value of an asset.

The model assumes that past values can have an impact on the current value but the number of past values it takes into account can vary.
For example, an AR(1) model will use one preceding value, an AR(2) model will use two preceding values, and so on.

The Average Daily Trading Volume (ADTV) is a technical indicator that indicates the number of shares that were bought and sold on average across one or more trading days.

A high ADTV means that more investors are interested in a stock while a low ADTV implies that a stock isn’t on the radar of many investors. The formula for Average Daily Trading Volume (ADTV) is:

ADTV x days = Total trading volume of stock across x days / x days

• High - low (Day 1)
• Absolute value of (Day 1’s high - Day 0’s close)
• Absolute value of (Day 1’s low - Day 0’s close)

• Shares bought of XYZ: 10
• Price of each share: Rs. 1000
• Total cost of investing: Rs. 10,000
• Average investment cost: Rs. 1000

• Shares bought of XYZ: 10
• Price of each share: Rs. 900
• Total cost of investing: Rs. 9,000
• Average investment cost: Rs. 900

• Initial average cost of investing (Day 1): Rs. 1000
• New average cost of investing (Day 1 & Day 2): Rs. 950

“Back months” is used to refer to futures contracts that have a delivery date that’s due far into the future. Back months is generally known to be a popular term in commodity trading.

Backtesting means simulating trading strategies and models using historical data to understand whether they are effective.

In many ways, backtesting is considered to be an important part of crafting trading strategies that work.

If backtesting leads to positive results, then the trading strategy or model may be viable.

• Current assets : Cash & cash equivalents, marketable securities, accounts receivable, inventories, prepaid expenses, and other liquid assets


• Fixed assets : Property, equipment, furniture, machinery, software, and other intangible assets


• Current liabilities : Short-term debt, unearned revenue, accounts payable, other accrued expenses & liabilities


• Long Term liabilities : Long-term loans, bonds, and others


• Shareholders’ equity : Paid-in capital and retained earnings

Basing happens when a security trades sideways after prolonged periods of falling prices.

As a result, the security forms a “base” or flat pattern which means there is little to no upward or downward movement and a decline in volatility.

This may go on for a relatively long time but is crucial as basing is an indicator of any meaningful reversal that may happen.

• Short the basis : Done if the price difference or basis is expected to reduce


• Long the basis :Done if the price difference or basis is expected to increase

• Share allocation ratio
• Bids
• Demand
• Final price

• Retail Individual Investors (RII)
• Qualified Institutional Buyer (QIB)
• Non-Institutional Buyers (NIBs)
• High Net-worth Individuals (HNIs)
• Anchor Investors

A bear market is a period of continuous decline in the stock or commodity market.

Typically, investors believe that a bear market has arrived when a stock, commodity, or entire index fall by 20% or more from its most recent highs.

The onset of a bear market is generally in tandem with poor economic conditions.

• Greater than benchmark: the asset is doing considerably well (great)
• Same as benchmark: the asset is moving with the market (okay)
• Less than benchmark: the asset is performing poorly (bad)

A best efforts underwriting or offering means the underwriter will do their best to market the securities for the issuer (company, supplier, etc) to investors. The underwriter will not buy all the securities from the issuer, only those the underwriter’s clients want to purchase.

• Ri = a stock's return
• Rm = overall market's return
• Covariance = ups & downs of stock returns versus ups & downs of market returns
• Variance = the difference between market returns and its average

• Beta < 1.0: stock less volatile than the market
• Beta = 1.0: stock just as volatile as the market
• Beta > 1.0: stock more volatile than the market
• Negative Beta: stock shares inverse relation with the market

• High Beta Stocks : typically having a Beta value of more than 1, these stocks are known to be high-risk, high-reward investments
• Low Beta Stocks : typically having a Beta value of less than 1, these stocks are known to be low-risk, low-reward investments
• Negative Beta Stocks : typically having a Beta value of less than zero, these stocks are known to have an inverse correlation with the market
• Same as the market : typically having a Beta that’s equal to 1, these stocks are known to share characteristics with the market

A block trade is a substantially large buy or sell order for a stock, commodity, or other security. Block trades are typically done by institutional investors like hedge funds, mutual funds, and others to mask the true size of the transaction.

Shares change hands between companies after the price of the security is privately negotiated. Most block trades are routed through investment banks and executed outside the conventional market.

Blue chip stocks are shares of iconic companies in India that have been leaders of their respective industries for years, if not decades, and have a stellar yet consistent business track record. Example of blue chip stocks in India are: HDFC Bank, TCS, Reliance Industries, Hindustan Unilever, Infosys etc.

Established in 1875, Bombay Stock Exchange or simply BSE is a place where stockbrokers and traders can buy and sell securities like stocks, bonds, ETFs, and more. 5000+ securities are listed on BSE, which is the oldest stock exchange in India and Asia.

A bond market is a place where bonds are issued, bought, and sold. Bonds are issued in exchange for a loan generally by governments and corporations.

• SOV: Only for government bonds
• AAA: Highest
• AA+: High-medium
• A+: Upper-medium
• BBB+: Lower-medium
• BB+: Speculative
• B+: Highlight speculative
• CCC+: Risky
• CC: Extremely risky

Book building is the process of determining the potential issue price of a financial instrument based on investor demand, generally during an IPO.

Book building is typically done by an underwriter (like an investment bank) who will invite institutional investors like hedge funds, mutual funds, and others to submit bids for the financial instrument.

These bids act as a range that the underwriter can use to fix a price that satisfies the company issuing the security and market participants.

Book entry securities are financial instruments like stocks, bonds, ETFs, and others whose ownership is recorded and tracked electronically. Book building is the process of determining the potential issue price of a financial instrument based on investor demand, generally during an IPO.

For context, there was a time when physical ownership certificates were issued. If someone wanted to sell their shares, they’d have to present the ownership certificate and get it transferred to the buyer.

Book entries have made ownership certificates obsolete as they track who owns what electronically.

The trades are settled by the depository like NSDL or CSDL which sends the buyer a statement confirming ownership.

• Perform due diligence
• Determine the final offering price
• Record & track interested buyers
• Confirm orders
• Guarantee purchase

Book to Bill ratio is the value you get by dividing the total worth of new orders received by the total worth of orders sold. The formula to calculate Book to Bill ratio is:

Book to Bill ratio: Total worth of new orders received / Total worth of orders billed

Book to Bill ratio helps companies understand the demand and supply for their goods or services. A Book to Bill ratio of more than 1 means that there’s more demand and less supply.

Whereas, a Book to Bill ratio of less than 1 means that there’s less demand and more supply. Using these indicators, the company can work on increasing or limiting production.

Book value of an asset is what you get by subtracting its accumulated depreciation from the original cost of the asset.

That’s why book value is referred to as the Net Asset Value (NAV) in the UK.

For a company, the book value is its total assets subtracted by liabilities, intangible assets and/or goodwill.

Bottom line in finance is used to refer to a company’s crucial metrics like earnings, profits, net profits, earnings per share (EPS), and others.

Any move or action that can impact a company’s profit or net profit in a positive or negative direction is also referred to as the bottom line.

“Bottom line” is called such because the crucial metrics of a company are generally found at the bottom of a financial statement.

Bottom-up investing is a stock picking strategy that uses analysis of individual companies and shares for decision-making instead of focusing on the broader economy, market, or industry.

• The company need not worry about subscription as the investment bank will purchase the entire offering
• The investment bank can negotiate with the company and get the shares at a discount
  
  

• It is up to the investment bank to sell the shares to investors in order to recoup the principal or make a profit
• The investment bank also runs the risk of receiving no interest in the shares from other investors
• Guarantee purchase

Bounce trading refers to buying a position in security when its price falls to a particular support level with the anticipation that it will “bounce” back to a certain price level. Technical analysis is the bedrock of bounce trading but various patterns and strategies can be used to achieve the desired goal.

• Bull call spread : two call options with a lower and upper strike price
• Bear put spread : buying and selling puts at different strike prices of the same underlying asset with the same expiration

• Buy or sell order at market price
• Target order to square off & book profits
• Stop-loss order to limit loss

A broker is an intermediary between a securities exchange and investors. Only registered entities can place trades on a securities exchange. These members can be individuals or firms known as stockbrokers.

That’s why investors must go through a broker when they want to trade or invest in stocks, ETFs, futures, options, and others.

Brokerage is the fee that an investor or trader must pay to a brokerage in exchange for its services. Brokerage varies from platform to platform. But, broadly speaking, brokerage on intraday, futures, and options trading is known to be higher than equity delivery (investing).

Bombay Stock Exchange or BSE is a stock exchange that allows companies to issue new securities through IPOs or FPOs and enables traders & investors to buy and sell securities like shares and ETFs. Established in 1875 under a banyan tree in Mumbai, BSE is the oldest stock exchange in India and Asia.

Bull market is a positive trend in the stock market where price of shares increase by 20% or more after falling by 20%. Investors may say they’re bullish or expect a bull market to arrive when they believe that there will be prolonged periods of increase in the stock market.

Bullion is used to refer to gold, silver, and other non-ferrous metals that have been designed to have high purity. These metals are generally molded into bars, coins, and other valuable items.

Bureau Of Indian Standards (BIS) is responsible for standardizing and certifying goods and services from third parties so that the end consumer knows that the products are safe and reliable.

BIS was established in 1986 and was rebranded from the Indian Standards Institution (ISI) to BIS during the year to adapt to the changing product landscape of India.

A butterfly spread is an options strategy that combines bull and bear spreads to generate a small chunk of profit. To achieve this, a butterfly strategy consists of four positions in four options contracts that have the same expiration but different strike prices.

Buy and hold is a long term investment strategy that is designed to help investors ride out market volatility by buying and holding fundamentally solid businesses that have the potential to grow over decades.

• Premium: the price paid to buy a call option
• Strike price: the pre-agreed price of the underlying asset
• Expiration date: the day after which the option contract will be worthless

• High (for the period)
• Low (for the period)
• Open price
• Closing price
  
  

• Current quarterly Earnings Per Share (EPS): compare this fundamental indicator with the same figure from the previous quarter. If the figure grows (by 20% or more as a rule of thumb), the company is fundamentally strong.


• Annual earnings: Compare this fundamental indicator from the previous years. If there’s year-on-year growth, the company is fundamentally strong. If the year-on-year growth is by 20-25%, even better.


• New product or service: strong companies continue to innovate. That’s what this letter is about - checking if the company is continuously launching new products, services, or holding events.


• Supply: a fundamentally strong business should have a good supply and demand when it comes to its goods, services, and stock. Executive supply of shares may reduce the value of the company - that’s why it should always be scarce in supply.


• Leader: the company should be a leader in its own right, either in or across industries.


• Institutional holding: a valuable company will have higher institutional ownership, the percentage of which should always be tracked.


• Market trend: an investor must check whether the company or stock is going or against the trend by comparing it to broader indices.

Capital Asset Pricing Model or CAPM is used to determine the expected return one can earn on an asset by evaluating the associated risks and how markets price the asset.

Capital expenditure or CapEx is the amount of money a company spends on maintaining, upgrading, or buying new assets like machinery, equipment, property, and others.

A capital gain is a profit that an investor or trader earns by selling an asset while a capital loss is the money a trader or investor loses after selling an asset. Capital gains are taxed while capital losses can be used to offset gains.

A capital gain is a profit an investor or trader earns by selling shares, commodities, futures, options, currencies, and other assets. More literally, a profit is a gain on the capital that’s invested - hence the term capital gains.

Say someone buys a share for Rs. 1000 and sells it for Rs. 1100. The capital gains will be Rs. 100 in this case. The taxation of capital gains varies based on the asset type and the duration after which it was sold.

Capital gains exemption is the tax break that a government offers on profits earned by selling assets. Generally, an investor must pay a tax on the short-term capital gains or long-term capital gains earned.

But in certain cases, the government allows investors to offset taxes. For example, if an investor sells property and reinvests the entire amount back again into another property, they can avail of capital gains exemption.

Asset Type	Gains Type	Holding Period	Tax Rate
Equity	Short Term Capital Gains	< 1 year	15%
	Long Term Capital Gains	> 1 year	10%
Debt	Short Term Capital Gains	< 3 years	As per I-T slab
	Long Term Capital Gains	> 3 years	20%

Capital growth is the profits an investment generates on the principal amount. Since the capital grows on earning profits, the term capital growth is also used to describe the overall corpus of an individual (principal + profits).

Capital is the total amount of money that a trader can use to buy and sell securities. There are variations of the term, the most common one is “starting capital”. This is the amount of money a trader starts their journey with.

• Up market capture ratio
• Down market capture ratio
  
  

Carrying charge or cost of carry is the money involved in the upkeep or general holding of an asset or financial instrument. Examples of carrying charges include maintenance costs, insurance, and others.

A carrying charge can increase the cost of owning an asset. At times, the cost of carry may exceed the potential returns, in which case an investor must evaluate whether the asset is worth keeping.

• Cash: money like cash holdings in a bank account, petty cash, and others
• Cash equivalents: assets or investments like T-bills, commercial paper, and others that have a short maturity which can easily be converted into cash

A cash commodity refers to physical goods like aluminium, cotton, gold, silver, zinc, and other tangible goods which are delivered to a trader or company most commonly after exercising derivatives like options and futures contracts.

Cash commodities are also known as actuals. A derivative contract for cash commodities will explicitly state the delivery date, price, and quantity. These details are necessary as some contracts may not involve the delivery of goods.

A cash contract is an agreement between two parties in which the delivery of goods is involved at a predetermined price and date. Typically, bulk buyers like big companies enter into cash contracts on the spot price of a commodity.

These companies aren’t in the business of speculation. As a result, the delivery of goods is always involved in cash contracts, unlike futures where the contract can be settled with cash without taking delivery.

• DIO: Days Inventory Outstanding is the average number of days it takes for a company to turn inventory into cash through sales
• DSO: Days Sales Outstanding is the average number of days it takes for a company to collect its receivables
• DPO: Days Payable Outstanding is the average number of days it takes fo a company to fulfil its obligations or payables

• Positive cash flow: more money earned than spent
• Negative cash flow: more money spent than earned
  
  

• Operating Activities: cash flows from the core activities of a business that generate income as well as cash equivalents (current assets & liabilities)
• Investing Activities: cash flows from investments or sales of long term assets
• Financing Activities: an action or activity that brings a change in a business’ equity capital and/or borrowings

A cash market is a place where assets, goods, and services are bought and sold on the spot. That’s why it is also known as the “spot market”.

A stock market exchange like NSE or BSE is an example of a cash market as trades are settled on the spot at the spot price. Derivatives like futures are not a part of the cash market are trades are settled in the future.

A cash ratio measures a company’s ability to fulfill short-term debt obligations using only its cash and cash equivalents, which are known to have high liquidity. The formula for calculating cash ratio is:

Cash Ratio: Cash + Cash Equivalents / Current Liabilities

• It acts as a reserve or collateral because banks borrow money from the RBI
• The RBI decides the interest rate for borrowing based on the CRR
  
  

• Short position: Current price of security + accrued interest
• Long position: Settlement price x conversion factor + accrued interest

Circuit Breaker Trigger	Trading Halt Duration
10%	0-45 minutes
15%	45 minutes; 1 hour 45 minutes; rest of the day
20%	Rest of the day

• Futures contracts
• Options contracts
• Cash contracts
  
  

• Indian Commodity Exchange (ICEX)
• Multi Commodity Exchange of India (MCX)
• National Commodity & Derivatives Exchange Limited (NCDEX)
• National Multi Commodity Exchange of India (NMCX)

• Derivatives market: this is where commodity exchanges allow futures, options, forwards, and other derivatives to be traded
• Spot market: this is where commodity exchanges allow buying and selling of commodities in real-time (on the spot), including cash contracts
  
  

• Indian Commodity Exchange (ICEX)
• Multi Commodity Exchange of India (MCX)
• National Commodity & Derivatives Exchange Limited (NCDEX)
• National Multi Commodity Exchange of India (NMCX)
  
  

• Crude oil
• Coffee
• Corn
• Cotton
• Gold
• Natural gas
• Silver
• Sugar
• Wheat

A commodity futures is a contract between two parties to buy or sell an underlying commodity like gold, silver, corn, and others are a pre-determined price and date.

A commodity futures contract is an obligation that’s entered into not just by retail traders but also companies who want to lock in a favorable price. This is the place to understand all about futures contracts in trading.

A commodity option is a contract that gives the buyer or seller the right but not the obligation to execute a trade for a commodity like copper, cotton, zinc, and others at a pre-agreed price and date. Commodity options are derivative contracts that require a trader to pay a premium in order to secure the “option”.

A commodity spread straddle or simply a commodity straddle is an options trading strategy where a trader will buy call and put options with the same strike price and expiration date.

The goal of a commodity straddle is to create a neutral strategy that wins in the event that the underlying security’s price rises or falls. That said, the profits must be higher than the total premium paid for the options.

• Get higher returns
• A part of the assets left after a company is liquidated (in case of default)

A debenture is a debt instrument that a company uses to take out a loan in exchange for a fixed interest rate. Debentures can either be used to refer to bonds or documents created in exchange for a medium to long-term loan.

Comparable Company Analysis (CCA) is a method used to evaluate a company’s value by comparing its essential metrics like EBIT, EBITA, and more with other companies.

The underlying assumption of CCA or “Comps” is that publicly traded companies from the same sector or industry will have similar metrics that are comparable.

Compounded Annual Growth Rate shows how much returns on average an investment can generate over a year, given the data for a period of time (say 5+ years).

CAGR is an indicative measure of yearly returns growth that assumes the profits are reinvested. The formula to calculate Compound Annual Growth Rate is:

CAGR = [(Ending value/Beginning Value)^(1/N)]-1

A consolidated financial statement is a record of all the assets, liabilities, income, expenses, and other financial data of a company and its subsidiaries.

The Consumer Price Index (CPI) measures how costly goods and services have become over time. It is calculated by measuring the weighted average of the percentage change in the price of a basket of goods and services.

If the CPI increases, it means that inflation is on the rise. In India, the CPI replaced Whosale Price Index (WPI) as the primary measure of inflation in 2013.

A contingent liability is shown on a balance sheet for an event that may or may not happen in the future. The potential liability arising out of such an uncertain event is recorded as a contingency in both GAAP and IFRS accounting standards.

A contract note is a compilation of all the trades and transactions made through a stockbroker on a stock exchange. It is a legal record that all recognized stockbrokers must send to traders and investors at the end of each trading day.

A convertible arbitrage is a trading strategy that involves buying convertible securities - most commonly bonds and preferred stock - and a short option on the common stock of the same company.

Because of this combination of purchases, a convertible arbitrage strategy is known as a neutral strategy designed to profit from the supposed inefficiencies that lie in the pricing of convertible securities.

Don’t convert bond: face value of the bond is transferred to the holder on maturity

A convertible debenture is a long term debt instrument that can be converted into equity on maturity. Convertible debentures are generally unsecured loans that small to mid-size companies take on in exchange for an interest rate.

• Principal: The loan amount or the money lent by an investor
• Tenure: The duration of the loan
• Interest rate: The rate of interest
• Repayment: Terms and conditions of the amount to be repaid
  
  

The debt to equity ratio is a measure of a company’s financial health that’s calculated by dividing liabilities from shareholder equity.

Debt to equity ratio: Total liabilities / Shareholder equity

A high debt to equity ratio means that a company is taking on more debt to run its business. A low debt to equity ratio means that a company is operating at low debt.

That’s why investors calculate the D/E ratio to understand a company’s ability to operate without debt. Generally, D/E is used for comparative analysis within sectors, not across industries because the ideal debt ratio may vary.

A defensive stock refers to the shares of iconic companies that generate stable and consistent returns and dividends, regardless of the market conditions.

Defensive stocks are rare because companies that have defense against every market condition are rare.

While defensive stocks may not generate high returns, they are known to add stability and defense against declining economic conditions. In India, stock of ITC Limited is an example of a defensive stock.

The term deferred tax in a financial statement is used to refer to future tax payments in the case of temporary differences, a situation where an asset or liability on the balance sheet is realised but is taxable in the future.

Common examples of deferred tax include line items such as employee bonus or PF contributions, depreciation of fixed assets, net losses, and others.

• Depreciation of fixed assets
• Net financial loss
• Bad debt

• Paying less tax
• Sales in instalments

The delivery date of a cash or derivative contract refers to the final day and time on which the underlying asset should be delivered to the contract holder to fulfil the terms and obligations of the contract.

A delivery notice is produced by the seller of a commodity futures contract. It is proof of confirmation of the sellers intention to physically deliver the underlying commodity to the buyer at the pre-agreed date.

Delivery trading refers to buying a stock or ETF and holding it for more than one day. In such a scenario, the buyer take delivery of the asset instead of squaring off their position in the same trading session. Delivery trading is applicable for short term and long term trades and can last overnight to a decade or more.

A Dematerialized or Demat account is used to store shares and ETFs in the electronic format. It is linked to a bank account and is necessary for trading or investing that involves delivery, that is, where the asset is held overnight.

A depository participant is a financial institution that acts as a bridge between a depositories like NSDL/CDSL and investors. Moreover, a depository participant is responsible for holding shares in the Dematerialized format in a Demat account.

At the same time, a depository participant gives traders and investors access to an online trading account that can be used to buy and sell securities. The right depository participant will also ensure that your securities are safe.

• Futures
• Options
• Forwards
• Swaps

The derivatives market is a place where financial contracts like futures, options, forwards, and swaps are traded. It is a complex market that is a subset of the stock market, commodity market, currency market, and others depending on the underlying asset that’s a part of the derivative contract.

Derivatives trading means buying and selling derivatives contracts like futures, options, swaps, and forwards either on an exchange or over the counter.

Trading derivatives means trading contracts that derive their value from an underlying asset like stocks, commodities, currencies, indexes, interest rates, and more.

The buyer of the contract can decide to take delivery to the underlying asset or offset it with an opposite contract.

Differential pricing is a strategy that involves setting different prices for the same product or service based on the type of customer or tming.

For example, a zoo ticket may cost Rs. 10 for domestic visitors and Rs. 100 for international visitors. Or, when buying a product gets costlier as and when the last date for the sale approaches.

That’s why differential pricing is also known as discriminatory pricing and variable pricing.

Differential Voting Rights or DVRs are special types of shares that carry more or less voting rights, depending on the issuing company. For example, a DVR share that carries less than usual voting rights may generate relatively high dividends.

A publicly traded company that wants to issue DVR shares must go through a postal ballot. There are other caveats as well. But broadly speaking, a company must have a healthy finanical track record if they want to issue DVR shares.

A Direct Public Offering or DPO allows a company to issue shares directly to the public without an intermediary like investment banks. In the process, the company becomes publicly traded.

The cost of a DPO is known to be relatively low compared to an IPO.

Furthermore, the issuer of the DPO has control over the issue price while the paperwork and effort involved is also comparatively low. That said, the company must go through proper regulatory procedures during the process.

Discount brokers are platforms that offer essential stock trading and investment services rather than a full stack of services that may or may not be useful for everyone.

Discount brokers are discount brokers because their service is priced competitively, meaning the cost of trading and investing may be significantly low than a fullservice broker.

Discounted cash flow is a method of valuing a company in the present based on future cash flows. An investment may be profitable in the present if the discounted cash flow is above the current cost of investing.

The formula to calculate discounted cash flows is:

DCF = Cash Flow Year 1 / (1+r1)^1 + Cash Flow Year 2 / (1+r2)^2 + Cash Flow Year N / (1+r)^n

Diversification is the act of investing in more than one asset class, sector, industry, or country to mitigate risk. It is an investment strategy designed to reduce risk by pairing a volatile asset class like equities with a fixed income asset class like fixed deposits. Or, by investing in equities in one country and complementing it by investing a portfolio in stocks from another country.

The Dividend Payout Ratio refers to dividends paid to shareholders as a percentage of the net income or Earnings Per Share (EPS) of a company. The formula to calculate dividend payout ratio is:

DPR = Dividend / Net income

or

DPR = Dividend / Earnings Per Share

A higher dividend payout ratio means that a company is redistributing a chunk of its profits to shareholders, which generally implies that the company is well-established.

Dividend per share indicates the amount of dividends paid as a ratio of the number of shares outstanding. Or, dividend per share could also refer to the product of earnings per share and dividend payout ratio.

Thus, the formula to calculate dividend per share is:

DPS: Total dividend amount / Number of shares outstanding

Or

DPS: Earnings Per Share x Dividend Payout Ratio

An investor can determine how much dividends they stand to earn for each share they own by calculating dividends per share.

A Dividend Reinvestment Plan is a feature where an investor can reinvest the dividends they earn to buy additional shares or units of a mutual fund, either fractional or whole.

Stocks and mutual funds offer Dividend Reinvestment Plans. As a result of reinvesting dividends, investors can add more money to their existing holdings for better compounding. That said, dividends that are reinvested are taxable.

• Coal India
• Indian Oil Corporation (IOC)
• ONGC
• SAIL
• Tata Steel

Dividend stripping is a strategy of buying a company’s stock days before it announces a dividend and then selling the same stock at a lower price once the current holder is entitled to get the dividend previously announced.

The resulting loss in capital gains is generally offset by the profits from dividends. Dividend stripping was once non-taxable, which made the strategy lucrative for smart investors. However, dividends in India are now subject to tax.

A dividend yield is a ratio of dividends paid per share by the latest share price, expressed as a percentage. It is used to understand how much dividends a company pays per share outstanding. The formula to calculate dividend yields is:

Dividend Yield: Dividend Per Share / Current Shar Price

A high dividend yield indicates a company’s willingness to redistribute more profits to shareholders, while a low dividend yield signals the opposite.

A Doji is a candlestick pattern that is formed when the open and close price of a share or market is identical. The word Doji means indecision in Japanese, which is fitting because the Doji pattern is an indicator of indecisiveness. In terms of appearance, a Doji looks like a cross or like the letter T.

A Donchian Channel is the area between upper (highest price) and lower (lowest price) bands formed around the median as a result of calculating the moving average of a security’s price over a period of time. Visually, the Donchian Channel will have three lines.

A draft offer document is the preliminary version of the IPO document that a company must file with SEBI 21 days before submitting the actual IPO document. The draft offer document is open to the public for comments during the 21 -day period. SEBI may suggest changes to the draft offer document in this period.

Earnings Per Share or EPS refers to the amount of profit that a company generates per outstanding share it has in the stock market. It is calculated by dividing the net income of a company by its shares outstanding.

Formula to calculate Earnings Per Share: Net Income / Number of Outsanding Shares

Generally, dividends distributed to preferred shareholders are deducted from the net income for EPS calculations. The EPS of a company can thus indicate whether or not it is generating enough profit. It can also be used as a valuation metric.

EBITDA is short for Earnings Before Interest, Taxes, Depreciation, and Amortization. EBITDA allows investors to understand cash flow from all operations while excluding certain non-cash expenses related to interest, depreciation, amortization, and taxes.

That’s why investors use EBITDA as a valuation technique to determine the profitability of a company. Interestingly, EBITDA is a variation of operating income which is known as EBIT.

While there are many ways to calculate EBITDA, the most common methods include:

1) EBITDA = Net Income + Taxes + Interest + Depreciation + Amortization 2) EBITDA = Operating Income + Depreciation & Amortization

EBITDA margin is the ratio of Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) by revenue, represented as a percentage. It is used to understand whether a company is profitable and as a valuation technique.

The formula to calculate EBITDA margin is: EBITDA Margin = (EBITDA/Revenue)*100

Just like EBITDA, the EBITDA margin also excludes non-cash expenses. That’s why a positive EBITDA margin doesn’t necessarily mean that a company is profitable.

Enterprive Value is a metric used to determine the total value of a company. It is valuation technique used by companies to understand how much money they need to pay to acquire another company.

Conversely, Enterprise Value is also used to figure out the amount of money a company can get on selling their business. To calculate the EV of a company, the total market capitalization is combined with the net debt or cash subtracted from debt. The formula to calculate Enterprise Value is:

EV = Market Capitalization + Net Debt

Or

EV = Market Capitalization + Debt - Cash

Equilibrium price is achieved when the demand is exactly equal to the supply. It is a state where buyers and sellers have enough goods and services to meet each other’s demands - not more, not less. One could say that equilibrium price is a perfectly balance state in the market.

The term equities can be used to describe two different things. First, equities refers to stocks held by shareholders. Equities of this type represent residual ownership or stake in a company.

Second, equities are the amount of money shareholders shall receive in the event that a company is liquidated. In such a case, the equities will be calculated by subtracting the total debt from total assets.

Equity is generally defined as a stake or per share ownership in a company. That's why stocks are often called equity or equities. In the broader markets, equity is also used to refer to the total amount of money shareholders stand to get in case a company is liquidated.

Equity capital markets (ECMs) are a place where companies raise money by offering equity shares to financial firms, institutional investors, and retail investors.

Fund raising of this kind is often done through private placements or Initial Public Offerings (IPOs) in the primary market, which is a part of the ECM. The biggest IPOs in India are all part of the ECM.

The equity capital market is also a place where shares, futures, options, and other financial instruments are traded. This part of the ECM is known as the secondary market. The stock market is a popular example of an ECM.

In equity delivery, shares are delivered to an investor’s Demat account after the settlement period. That’s why it is called equity delivery. However, equity delivery is also known as delivery trading and long term investing.

For example, let’s say you place an order for 10 HDFC shares on Tuesday with a view of holding onto them for the long term. The trade will be settled on Thursday shortly after which the shares will be delivered to your Demat account.

• Primary Market: An equity market where shares are offered to investors for the first time through IPOs while fundraising also happens through private placements.
• Secondary Market: An equity market where shares, bonds, futures, options, more are traded

An equity option gives the holder the right but not the obligation to buy or sell the underyling shares at a pre-agreed price and date. Equity options are derivative contracts that derive value from underlying shares.

Every equity option comes with a lot size that specifies the total number of underlying shares the contract contains. A trade who wants to start options trading can procure the derivative contract by paying a premium.

The total amount of money that is raised by a company through the issuance of shares is known as equity share capital. Shares issued could be classified as common or preferred shares, both of which are a part of the equity share capital.

In general, share capital is known to be the money raised by issuing shares. Companies have the option of raising more equity share capital by issuing additional shares through a Follow on Public Offer (FPO) or other financing methods.

Equity shares is a term used to describe stock of a company that’s issued via an Initial Public Offer (IPO), already issued and traded on the stock market, or freshly available through a Follow on Public Offer (FPO).

For a company, the goal of issuing equity shares is to raise money while investors who buy these equity shares get perks like voting rights, dividends, and even a share of the assets in case the company is liquidated.

Equity trading refers to the buying and selling of equity shares on the primary and secondary market, either through a stock exchange or over the counter. Trading equity is done in many ways.

Some equity traders square-off their positions within one trading day. This is called intraday equity trading. Others look to ride price swings across days, weeks, or months. This is known as swing equity trading.

An individual who wants to engage in equity trading will need to open a trading & demat account. The charge for opening an equity trading account varies but the process is relatively simple.

A European Option allows a trader to exercise the contract only on the day of expiry. For example, let’s say an options trader bought a European Call Option that expires on 01-01-2023.

The options trader can only exercise the call option, that is, buy the underlying assets on the day of expiry which is 01-01-2023. In India, traders can only engage in European options.

The ex-dividend date is the trading day on and after which a new buyer of the stock is not entitled to any dividends. Most traders say that a stock has gone ex-dividend when this happens.

Traditionally, the ex-dividend date is set a day before the record date when a company evaluates its records for existing shareholders. If a trader buys a stock that has gone ex-dividend from a seller, the one who'll get dividends is the seller.

Exit load is a type of premature withdrawal fee that mutual funds charge. The goal of charging an exit load is to ensure that investors think twice before exiting a fund, as premature withdrawals can affect existing investors.

Every mutual fund charges a different exit load based on the discretion of the fund manager. ETFs, liquid funds, and other debt funds typically have little to no exit load whereas equity funds do.

An expense ratio is a management fee that investors must pay for the services of the fund manager and their team. Mutual funds are handled by fund managers who take care of everyday stock analysis, buying & selling, and other activities. The expense ratio is a fee to compensate for this day-to-day management.

Exponential Moving Average (EMA) is a technical indicator used to follow price trends over a specific period of time. EMA assigns more weight to recent prices than older prices. The formula to calculate EMA is:

Exponential Moving Average = (K x (CP - PP)) + PP

C: Current Price of stock, currency, commodity, etc. P: The EMA of preceding periods K: Exponential smoothing constant

A Simple Moving Average (SMA) is used to calculate the value of the first period. Furthermore, the EMA can be used to identify support and resistance areas. However, it may not be optimal for identifying precise entry and exit points.

The term face value refers to the actual price of a stock that’s obtained by dividing a company’s net value by its total shares outstanding. In India, the face value of shares can range from Rs. 1 to Rs. 100.

However, the market value of the share may vary. At times, the difference can be drastic. For example, the face value of an MRF share is Rs. 10 but the market value (LTP) of the same share is Rs. 86,313.45.

Face value is also known as nominal value or par value. The latter is used frequently in the case of bonds.

The face value of a bond is the amount that an investor receives from the issuer on maturity. Similar to stocks, bonds and other fixed income instruments may have a different face value and market value.

The fair value of a stock, product, or service is the price at which the buyer and seller willingly agree on without being on the losing end of the deal. Think of fair value as a win-win situation for both parties, assuming that all conditions are normal.

Say Mr. Apple is offered to buy shares of Mr. Orange’s company at Rs. 1000 per share. Mr. Apple evaluates the business and figures out that he can sell the same shares for Rs. 1200, even though Mr. Orange is content to sell the shares at Rs. 200 lower. Both parties agree on the deal at Rs. 1000 because both view it as a good deal.

The formula for the fair value of a stock or index is:

Fair Value = Cash * { 1 + r (X / 360)} - D

Where,

Cash = Latest stock or index value

r = interest rate on purchase

x = number of days to contract expiry

Dividend = Dividends

The definition of fair value is slightly different in the futures market. In the futures market, the fair value is reached when the supply meets the demand, which simply means that the spot price is equal to the futures contractprice.

However, due to inherent volatility of the markets, the price of a futures contract is known to fluctuate around the fair value of a stock or index. Thus, in the fair value in the context of futures is what the price of the contract should be, given the value of the stock or index, dividends, and others.

A Fibonacci Retracement is a predictive technical indicator that is used to determine possible direction or trend reversal of a stock or index’s price with horizontal lines for potential support as well as resistance levels.

Fibonacci retracement in action

The logic behind tuning to a Fibonacci Retracement is the assumption that prices will reverse direction towards a previous price-level, especially after a new trend is in motion.

Fililng is the process of submitting important information and documents to SEBI before an Initial Public Offer (IPO). This term is commonly used when a company submits a Draft Offer Document, Draft Red Herring Prospectus (DRHP), and Final Offer Documents in order to go public.

The process of filing any document with SEBI before an IPO is done to ensure that a company is completely compliant and transparent. That’s how SEBI ensures that public investors can make informed decisions. Thus, filing is a crucial step in the IPO process.

• Foreign Institutional Investors (FIIs): 30%
• Development Financial Institutions (DFIs): 20%
• Mutual Funds: 20%
• Regular Employees (permanent): 10%
• Employee of Promoting Company: 10%
• Lead Bankers: 5%

• Certificates of Deposit
• Corporate Bonds
• Municipal Bonds
• Treasury Bonds
• Treasury Bills

Flipping is the act of buying and selling an asset quickly to make a profit. The term is commonly used in real estate where an investor buys a property and sells it within a short span of time, say days or weeks, to make a quick buck.

The real estate investor may flip the property after making small improvements to it, thereby increasing the chance of making potentially lucrative returns. Flipping is also a term used to describe an investor’s actions during an IPO.

For example, let’s assume Mr. Apple invests in the IPO of Juice & Co. and intends to sell the shares days or weeks after the company’s stock is available on the secondary market.

The stock soars on the first day of listing, right at the opening bell, and Mr. Apple sells. In such a case, Mr. Apple will have earned potential profits by flipping IPO shares.

The rate of interest that changes across the tenure of a loan, generally every quarter, due to the government’s interest rate, market conditions, and other factors is known as a floating interest rate.

Personal loans and home loans are typical examples of borrowing that carry a floating interest rate. A point to note here: the floating interest rate is added on top of a base interest rate that is charged by lenders.

A Follow On Public Offer or FPO allows a publicly traded company to issue more stock to public investors. FPOs are similar to IPOs because FPOs allow companies to raise additional capital through the public market.

For an FPO to be possible, a company must have already done an IPO. FPO shares are typically issued at a discount by a company whose track record is already clear because they are publicly traded.

Foreign Direct Investment (FDI) is the act of acquiring a majority stake in a company located in a different country with the intention of assisting, growing, and managing the business.

FDIs and FPIs may seem similar but there is a major difference - lasting interest. When a company or investor obtains at least 10% control of foreign company with the intention of actively managing the business, it’s known as lasting interest.

A company that establishes a subsidiary in another country can also be classified as FDI. FDIs can also be made through mergers and acquisitions as well as collaborations with foreign companies

A Foreign Portfolio Investment includes stocks, bonds, ETFs, derivatives, and other financial instruments from another country. Generally, FPIs do not give an investor the right to ownership or a controlling stake in any organization. Instead, FPIs act as a passive income vehicle. That’s why FPIs are different to Foreign Direct Investment (FDI) in which an ownership stake is acquired with the intention of controlling and influencing business decisions.

• Forex pair: the currency you will buy in exchange of the other at the end of the futures contract
• Lot size: the value of the currency included in the contract
• Contract price: the price at which the futures contract is trading
• Spot price: the latest forex rate for the currency pair, different from the contract price
• Margin: the amount of money you’re required to deposit with your currency trading platform
• Tick size: the minimum amount by which a forex futures contract can move, which is Rs. 0.0025 in India
• Expiration date: the preagreed day on which the contract must be excercised or squared off

Forex options are exchange-traded derivative contracts that give the right but not the obligation to buy or sell a pair of underlying currencies at a pre-agreed price and date. Forex options are also known as currency options.

Every forex option can be split into a call or put option. A forex call option gives the holder the right to buy underlying forex pairs while a forex put option gives the holder the right to sell underlying currency pairs.

In either case, there is no obligation to exercise the contract but there is a pre-agreed price and expiration date attached. In India, forex options are only available for the USD-INR currency pair.

Forex trading means buying and selling currency pairs through exchange-traded derivatives or on the OTC market. A currency can only be bought and sold in exchange for another currency, which is why forex trading is always done in pairs.

Trading forex derivatives is carried out on stock exchanges authorized by regulatory bodies (SEBI & RBI), in tandem with approved brokers who allow users to engage with the forex futures trading and options trading markets.

The forward market is a place where forward contracts are traded. A forward is an over-the-counter derivative that carries a pre-agreed expiration date and price on which the contract must be exercised. It carries a right and an obligation.

Forwards are similar to futures but there is one major difference - forwards are unregulated instruments. Any entity writing a forward contract can customize the lot size and other details to fit their needs.

The forward market, as a whole, is an unregulated market whose typical participants include banks, vendors, and other large financial players.

The forward price is the final value at which a forward contract is exercised, that is, delivered to the buyer by the seller. It is different from the spot price of the underlying asset as it includes the cost of carry like interest rates, storage cost, and other carrying charges. The formula to calculate forward price is:

Forward price: Spot Price − Cost of Carry (storage costs, interest rate, etc)

The term founders stock refers to shares issued to the founders of a company. This type of stock is issued at face value and carries a vesting period, which is a lock-in period during which the shares cannot be sold.

During this period, the founders stock may not earn any returns, unless there are dividends attached to it. Founders stock is not an accounting term - it is used colloquially to denote the shares issued to founders.

In accounting and earnings reports, free cash flow refers to the amount of money a company has after paying its maintenance expenses, salaries, utility expenses, and other operating expenses as well as capital expenditures.

The formula to calculate free cash flow: Operating Cash Flow − Capital Expenditures

Free cash flow is an important metric, especially for investors because it is a direct indicator of the financial competence of a company. For example, the amount of FCF a company has can decide whether it has enough cash to offer dividends, expand business, buy back shares, etc.

Free float market capitalization is the market cap of a company based on the total freely available publicly traded outstanding shares. The formula to calculate free float market capitalization is:

Free float market capitalization = Share Price x (Number of Shares Available for Trading – Private and Locked-In Shares)

When calculating the free float market cap of a company, the number of shares held privately or the shares that are locked-in are not taken into account. Typically, these shares are held by promoters and the government.

Full market capitalization is the market value of the total shares outstanding issued by a company, including public and private stock. This includes stock that’s locked-in and unexercised. That’s why full market capitalization is also referred to as total market capitalization.

Futexagri refers to the commodity index of futures on NCDEX that’s equal-weighted, meaning all components have equally proportional weights assigned to them, comprised of the futures contracts of the most recent month.

Futures trading is the buying and selling of futures contracts on a recognized exchange or over the counter. Futures contracts are derivatives that oblige a trader to buy or sell the underlying security at a predetermined price and date.

Trading futures is possible for equity shares, commodities, currencies, as well as interest rates. Those who trade futures are generally classified as speculators or hedgers.

Speculators trade futures to make a profit. Hedgers delve into futures trading to manage risk, which simply means protecting themselves from unfavorable movements in the market.

Futures are derivative contracts that serve as an agreement and obligation between two parties to buy or sell underlying securities at a pre-agreed price and date. Underlying securities in futures can be stocks, bonds, interest rates, currencies, and commodities.

Futures and options are derivative contracts that derive their value from one or more underlying financial securities like stocks, bonds, interest rates, currencies, and commodities.

Every futures and options contract contains an expiration date and a price for the underlying that’s pre-agreed. Futures are a right and an obligation whereas options are a right but not an obligation to exercise the terms of the contract.

A futures contract is a derivative instrument that is legal agreement between two parties for the mandatory purchase or sale of an underlying asset at a pre-agreed price and date.

Every futures contract contains a standard lot size on top of the agreed price and date as they are a standardized derivative traded on a stock exchange, most commonly on NSE and BSE.

The price of a futures contract is known to vary from the spot price of the same underlying asset due to factors like the cost of carry, interest rates, and more.

Futures expiry is the date on which the derivative contract’s terms and conditions must be fulfilled. Alternatively, it’s the day on or before which the trader must square-off their futures contract to avoid delivery. In India, futures expire on the final Thursday of the expiry month.

Gamma is a mathematical formula used to measure the change in the delta of an options contract price.

Delta is the change in the price of an options contract in relation to the underlying asset’s price.

In simple terms, gamma can be called as the change of the change. The formula to calculate gamma of an options contract is: Γ = ∂2V/∂S2

• Book Building
• Fixed price

A gold ETF is an exchange-traded fund that invests in gold bullion. Every unit of a gold ETF is backed by one gram of gold of assured purity that is held in the physical or demat form (digital).

Gold ETFs combine the lucrative value of gold with the liquidity of stocks. Thus, gold ETFs track the price of gold bullion and are traded on stock exchanges like NSE and BSE.

Gold futures are commodity derivatives that derive their value from gold bullion. A trader who buys a gold futures contract acquires the right and obligation to buy gold at a later date and price that’s pre-agreed. Gold futures in India are eligible for physical delivery once the terms of the contract are successfully fulfilled.

• Treasury Bills
• Fixed Rate Bonds
• Floating Rate Bonds
• State Development Loans
• Sovereign Gold Bonds
• Zero Coupon Bonds

A Gravestone Doji is a candlestick pattern that signals the reversal of a bullish trend into a bearish one. The key marker of a Gravestone Doji pattern is the open, low, and closing prices being near to one another.

This is a price action type trading strategy that is formed with a tall upper shadow, which is a signal of a bearish reversal.

The grey market is an unofficial yet legal marketplace where unlisted or soon-to-be-listed securities are traded.

By definition, the grey market is an over-the-counter market because of the lack of regulation and structure.

Underwriters of an IPO gauge market demand for a share by analyzing the grey market premium for it before going public.

The Gross Domestic Product is an economic measure of the financial value of all goods and services produced by a country during a specific time period.

Growth stocks are shares of companies that have the potential to outperform the market. These are stocks can grow faster than the market due to strong fundamental characteristics like a strong balance sheet, high Earnings Per Share, solid P/E, and more that can bolster its profits in the medium to long term.

• The main body shows the difference between the financial security’s opening and closing price.
• The wick (shadow) of the candlestick shows the high and low prices of the security for the day.

A hard underwriting occurs when the underwriter agrees to buy their share of stock before the IPO opens. This is known as hard underwriting because in a regular underwriting process, the underwriter is liable to buy all unsold shares after the issue opens.

Hedging is a risk management technique where potential loss is offset by securing a safer, more stable trade. For example, buying stock (risky) and offsetting the risk with commodity (stable) is a common hedging practice in the securities market.

In the derivatives market, hedging is followed by merchants and businesses who want to protect against adverse price movements in commodities or currencies. They do so by entering into a futures or options contract.

High Beta stocks are shares that outperform the market in terms of returns but carry high risk. Such shares are called “High Beta” because of their significantly high Beta Coeffient value, which measures the correlation of a stock and the market. A Beta value on the high side typically indicates more volatility and the potential for higher returns.

High Dividend Yield Stocks are shares of companies that generate above average dividends on top of regular market-based returns. These shares are known to be valued highly because they generate passive income as well as capital gains.

High volatility stocks are shares that fluctuate based on market conditions, typically more than others. The volatility could be a result of inherent fundamentals or other factors like the industry or domain. Identifying high volatility stocks is possible through indicators like Average True Range and Bollinger Bands.

A holding company is a parent organization that holds a controlling interest in one or more subsidiary companies. The goal of a holding company is not to create products or services but to hold financial securities, typically in the form of equity, in other companies that create products or services. For example, Raise Financial Services is a holding company while Dhan is its subsidiary.

The holding period of a financial security is the time period between buying and selling the said security. It is the total amount of time for which the security has been held in the portfolio of an investor. At times, there’s a mandatory holding period attached to a security. During this mandatory holding period, the security can not be sold.

Holdings are the financial assets in the portfolio of an investor or company. They can include stocks, bonds, derivatives, commodities, currencies, and more.

An Iceberg Order is used to slice and execute large orders into multiple “legs”. Large orders have the potential to drastically affect stock prices and subsequently investor behaviour.

That’s why institutional investors or traders with a relatively large buy or sell order place an Iceberg Order, thus masking their total transaction value and effectively going under the radar.

Brokers and trading platforms offer Iceberg Orders as a feature, which is activated after a certain quantity of scrips or contracts are selected, typically above 100.

• TenkanSen: The short-term indicator
• KijunSen: The long-term indicator
  
  

• Uptrend: If the price is above the cloud
• Downtrend: If the price is below the cloud
• Neutral: If the price is in the cloud

• Tenkan-sen
• Kijun-sen
• Senkou span A
• Senkou span B
• Chikou span

An identifiable asset is a tangible or intangible asset that be assigned a fair value at any point in time. This concept is important during acquisitions and mergers as not all assets on a company’s balance sheet can easily be valued.

Simple examlpeps of identifiable assets include machinery. You can easily identify machinery as a separate entity and assign it a value based on various factors.

An illiquid asset is something of value that can not be exchanged for cash easily. Although an illiquid asset may have value, you will not be able to find buyers for it readily. As a result, illiquid assets are typically sold at a significant discount or worse, lose value and expire.

Implied volatility in options is a measure of the expected volatility of the underlying stock over the period of the options tenure. You could say that an option’s premium is related to the implied volatility - the change in the underlying share’s value over time affects the share price. In fact, the implied volatility rises when the options premium rises.

An income statement of a company is a document that displays crucial financial information like profit, loss, revenue, expenses, taxes, and more. Income statements are logically divided and published in monthly or quarterly manner for better accounting and financial modelling. A combination of these statements is what you see as the quarterly or annual report published by publicly listed companies.

Income stocks are shares of companies that help you earn a steady income, typically in the form of dividend payouts. At the same time, income stocks are known to have lower risk compared to others and thus, relatively decent returns over a period of time. But the consistently growing dividend yield makes up for the perceived lack of returns.

Index arbitrage is the method of generating returns by trading the difference between the same or different indices that have a standard value but has diverged momentarily. The way one does index arbitrage can vary as it is possible to trade indices via ETFs, Options, Futures, and more.

Index futures are derivative instruments that track an underlying sectoral, thematic, or benchmark index like Nifty Bank, Finnifty, Nifty 50, and others. While trading index futures, a trader avoids individual share risk by trading an entire index.

India VIX is an index that measures volatility and market sentiment. The term VIX stands for Volatility Index and thus, the full form of India VIX is Indian Volatility Index.

A higher India VIX means higher volatility whereas India VIX would be lower due periods of low volatility. In fact, there are absolute values that help understand volatility via India VIX.

India VIX typically moves between 15 to 30, which represents a range that is considered “normal” as far as volatility is concerned.

However, India VIX has touched 90 during the 2008 financial crisis and trended near the value once again when the pandemic broke out in 2020.

Indices are a collection of financial instruments that measure the performance of those very instruments.

For example, stock market indices like Nifty 50 and Sensex measure the top 50 and 30 stocks by market capitalization.

If indices go up, it generally means that the underlying stocks are performing well. The opposite is true when indices plummet.

By the way, there’s no limit to how many instruments an index can track. The Nifty Smallcap 250 tracks 250 stocks whereas Nifty Bank tracks 12 stocks.

Industry Analysis is a method of understanding the level of competition, potential profit/loss, supply and demand cycle, & other crucial factors within an industry.

Inflation is defined as the rise in the price of goods and services with a declining purchasing power amongst the general population. The primary cause of inflation is a surge in demand that can not be met with the same level of supply.

Information Ratio (IR) compares the returns generated by an asset adjusted for risk compared to a benchmark. IR helps you identify the level of consistency with which a fund or fund manager performs over time. This can help you compare fund managers who follow a similar investment strategy.

Insider trading refers to the often illegal act of trading shares based on information that is not publicly available, typically obtained through dubious sources.

This privileged access to confidential information is termed “insider trading” because information is generally sourced through insiders or employees working at a publicly traded firm.

Institutional Investor refers to the often illegal act of trading shares based on information that is not publicly available, typically obtained through dubious sources.

This privileged access to confidential information is termed “Institutional Investor” because information is generally sourced through insiders or employees working at a publicly traded firm.

Interest Coverage Ratio (ICR) is used to determine the likelihood of a company’s ability to pay interest on existing outstanding debt. A low ICR typically indicates that a company is less likely to pay interest.

In fact, it indicates that the company may be heading towards bankruptcy. A higher ICR means that a company’s financial health is solid and more than likely to pay interest on existing outstanding debt.

Interest rate futures are derivative contracts whose underlying instrument is any instrument that bears interest.

Just like any other futures contract, interest rate futures also give the right and obligation to fulfil the terms of the contract on expiry.

The price of interest rate futures and the interest rate itself shares an inverse relationship. If interest rates move higher, then the futures will be less valuable.

Interest rate risk refers to the probable decline in the value of a fixed income security because of a fluctuation in the interest rate. Fixed income securities lose value when interest rates rise whereas a bond or other debt instruments become more valuable when interest rates fall. Equity shares and securities do not carry interest rate risk.

Internal Rate Of Return (IRR) is used to measure the compound annual return generated by a financial asset. IRR is a tool in Discounted Cash Flow financial analysis that operates by bringing the Net Present Value (NPV) of cash flow to zero. That’s why IRR can be used to compare a variety of financial assets from the equity market or bond market to real estate.

Intraday trading refers to the buying and selling of financial instruments within the same day. There is no delivery involved in intraday trading as a result. Equity shares are the most popular instrument for intraday day but commodity options and forex futures trading also make it to the list.

Intrinsinc value of a share is the actual value of a stock, not the value at which it is trading in the secondary market. There are multiple ways to calculate the intrinsic value of a share. The most common method include discounted cash flow while adjusting the time value of money to calculate the present value of the stock is also a popular method.

An IPO or Initial Public Offering is the method in which a privately held company becomes a publicly listed company. Existing shareholders must approve the IPO plan before the company can go public. Once shareholders approve, the company will either hire an intermediary or go for a Direct Public Offering, the result of which will be the determination of a price for the new equity shares that will be listed in the primary market.

The Iron Condor is an options trading strategy wherein the trader will buy two calls and two puts each with different strike prices but the same expiration date. It is a version of the Butterfly Option Strategy. If the underlying asset averages out or in other words, closes between the middle strike prices, then the Iron Condor generates the maximum profit.

Irredeemable debentures are debt instruments that can not be sold unless the company is sold or shuts up shop. Those who hold irredeemable debentures will be paid an interest as long as the company operates its business.

The issue price is the price at which a company sells its newly issued shares during an IPO. The company that is set to go public will conduct thorough market analysis before deciding the issue price.

An issuer is the company that sells its shares to the public for the first time via an IPO. Investors can buy the freshly issued shares from the issuer by meeting the issue price. Large Cap Stocks

The lead underwriter is a financial institution that is in charge of ensuring that an IPO is successful on the primary market. Companies may also hire lead underwriters to carry out a FPO.

Leverage is a loan that a broker offers to allow traders to take up bigger positions by paying lesser capital. This feature is known as Margin Trading Facility (MTF) or simply margin funding. Leverage is often represented as a multiple like 2X, 3X, 4X, 5X and so on. For example, getting 5X leverage on a trade worth ₹1,00,000 means you’ll pay ₹20,000 and the broker will cover the rest of the ₹80,000.

Liabilities are debt that a company owes to individuals or financial institutions in the form of bonds, debentures, salary, tax, and others.Liabilities play an important role in the balance sheet of a company as it signals competence to existing and prospective stakeholders.

A limit order is an instruction that specifies the price at which a financial security should be bought and sold known as the limit price. The broker will execute the order only if the limit price is met. But there is no guarantee that a limit order will be executed since it is essentially in queue.

Liquidity determines the ease with which an asset can be sold in exchange for cash at or around its current market price. Liquidity is also used in the context of businessess, where the term indicates the company’s ability to secure loans to fulfil short term debt obligations or to sell its assets and procure cash in exchange.

The Liquidity Ratio is a tool in financial analysis for measuring a company’s ability to fulfil short-term debt obligations without the need to secure external financing. The key term here is liquidity.

Liquidity Risk is the potential inability of a company to fulfil its debt obligations. It also refers to the lack of liquidity that an equity share of other financial instruments like commodity futures may carry.

A Liquidity Trap is an economic event where the general public stashes cash in their bank savings account instead of investing in bonds because of the assumption that a rise in interest rates is imminent, even though interest rates are low.

Listing is the process of a private company making its shares available for trading to the public on a recognized stock exchange. To do so, the company meet regulatory requirements and checks. Getting approval means going public and welcoming bids from potential investors.

The listing date is the specific date on which a company's shares are available for trading & investing on a stock exchange, in the secondary market. You could say that the listing date marks the beginning of the company's journey as a publicly traded entity.

Lock-in is the period during which you can not sell shares or other financial instruments. The purpose of a lock-in is to ensure that the price and liquidity of the instrument do not take a sudden nosedive. Lock-in is commonly applied to shares held by promoters or major shareholders. You may have heard the term while investing in mutual funds as well, where it is used in reference to close-ended funds and ELSS funds.

A long strangle is an options strategy involving the purchase of both a call option and a put option on the same underlying asset with the same expiration date. The strike price of the call option is typically higher than the current market price, while the strike price of the put option is lower. Long strangles are used to generate a profit regardless of the underlying’s price direction.

Long-term capital gain tax is the tax imposed on profits from selling shares or financial securities held for a period of at least three years. The tax rate applied is typically lower than the short-term capital gains tax, which are profits from the sale of shares held for a shorter duration.

Long-term stocks are shares of companies that investors hold for three years or more with the intention of getting lucrative returns combined with solid future prospects. Long-term stocks are typically chosen based on fundamental analysis, including factors such as the company's financial health, growth potential, competitive advantage, and industry trends.

Lump sum refers to a one-time, single payment made in a single installment, as opposed to a series of smaller periodic payments. It commonly refers to a large sum of money paid at once, like a mutual fund investment or a share market investment, rather than spread out over multiple payments like SIPs.

MACD (Moving Average Convergence Divergence) is a technical indicator used to identify entry or exit signals when trading stocks, futures, options, and others. MACD consists of two lines as follows: MACD line Signal line The MACD line represents the difference between two exponential moving averages, while the signal line is a moving average of the MACD line.

Margin funding is a feature offered by brokers that allows users to borrow funds from the broker to increase purchasing power for trading or investing in financial markets. Margin funding is effectively a loan and as a result, there’s collateral to be pledged in the form of shares either already owned to about to be bought. Thus, margin funding amplifies profit and loss.

Margin trading is a strategy that involves borrowing funds from a broker to take bigger positions in stocks, commodities, currencies, futures, or options.

Macro analysis is the study of broad economic factors that influence financial markets as a whole. It includes interest rates, inflation, economic growth, government policies, and global events that shape overall market direction.

Management Discussion & Analysis (MD&A) is a section of a company’s annual or quarterly report where management explains financial results, conditions, and future outlook in their own words. Also, they provide context beyond raw numbers, liquidity, operations, risks, and strategic plans to help investors understand performance and prospects.

Margin call occurs when a brokerage firm requires the investor to deposit funds in their account or sell their securities in order to meet the minimum margin requirement in their account because the value of their leveraged investments has dropped below a required level. If market participants fail to do so, the broker forcibly closes the position to protect their loaned funds.

Margin of Safety refers to the difference between a company’s intrinsic value and its market price. For example, if a stock’s intrinsic value is ₹100 and it trades at ₹70, then the ₹30 difference is the margin of safety.

Mark-to-market is the practice of valuing an asset or position at its current market price rather than its purchase price. For instance, a futures contract is marked to market daily, meaning profits or losses are adjusted each day based on the latest market price.

Market Capitalization (or Market Cap) is the total value of a company in the stock market. It is calculated by multiplying the total number of outstanding shares by the current share price. For example, if a company has 1 crore shares priced at ₹100, its market capitalisation is ₹100 crore.

The number of buy and sell orders available at different price levels for a stock denotes its Market Depth. It helps traders understand supply and demand in the market. Strong market depth means there are many buyers and sellers, making it easier to enter or exit trades without causing large price changes.

Market Lot is the minimum number of shares or contracts that must be bought or sold in a single trade. It is set by the exchange to standardize trading. For example, if the market lot for a stock is 100 shares, trades must be placed in multiples of 100.

A market maker is an individual or a firm that continuously quotes bid (buy) and ask (sell) prices in order to provide liquidity and ensure smooth trading. They act as intermediaries, buying from sellers and selling to buyers from their own inventory, which facilitates smooth, efficient trading and reduces price volatility for other investors. This role is generally played by financial institutions like brokerage firms or investment banks.

A market order is an order placed to execute a buy or sell transaction instantly using the prevailing market prices. It prioritizes speed over price certainty, meaning the trade is executed quickly, but the final price may differ slightly from the last traded price.

Market Out Clause is a provision in a contract that allows a party, usually an underwriter or buyer, to withdraw from or renegotiate a deal if major market conditions change suddenly. It protects parties from unexpected events like market crashes, extreme volatility, or economic shocks that could significantly affect the value or feasibility of the transaction.

Market Sentiment reflects the overall attitude or mood of investors toward a particular market, stock, or asset class. It shows whether participants are generally optimistic or pessimistic. It may influences price movements in the short term.

Market-on-Close (MOC) is an order to buy or sell a security at the market price as close as possible to the closing price of the trading session. It is commonly used by traders and investors who want execution at the day’s end, reflecting the final market sentiment.

Matching Orders refers to the process by which a stock exchange pairs buy and sell orders, prioritising based on price and time (Price-Time Priority). If a buyer’s price matches a seller’s price (order matching), a trade is executed. This automated mechanism ensures fair, transparent, and efficient order execution in the market.

Mean Absolute Deviation (MAD) is a statistical measure that shows how much the values in a data set differ from the average. It is calculated by taking the average of the absolute differences between each value and the mean.

Mean Reversion is a market concept that suggests prices can approach back towards their historical average over time. When a stock trades far above or below its usual level, it is expected to gradually return to the mean.

Micro Cap Stocks are shares of very small companies with a relatively low market capitalisation, typically below ₹500 crore. These stocks can offer high growth potential but also come with higher risk, lower liquidity, and greater price volatility compared to larger, well-established companies.

Mid-Cap companies are those ranked 101 to 250 by market capitalisation in the overall market. They are generally larger and more stable than small-cap companies while still offering higher growth potential than large-cap stocks. Mid-cap stocks often appeal to investors seeking a balance between growth opportunities and risk.

Minority Interest refers to the portion of a subsidiary’s equity that is owned by shareholders other than the parent company. It represents the non-controlling stake in the subsidiary’s profits and net assets. It is shown separately in consolidated financial statements to reflect ownership accurately.

Modern Portfolio Theory (MPT) is an investment framework that focuses on maximizing returns for a given level of risk through diversification. It suggests that combining assets with different risk and return characteristics can reduce overall portfolio risk, rather than evaluating investments in isolation.

In fixed income, Modified Duration is a measure used to estimate the sensitivity of a bond’s price with respect to changes in interest rates. It shows the approximate percentage change in a bond’s price for a 1% change in yield, helping investors assess and manage interest rate risk.

Momentum Indicator is a technical analysis tool that measures the speed and strength of price movements. It helps traders identify whether a trend is gaining or losing strength by comparing current prices to past prices, making it useful for spotting potential trend continuations or reversals.

Momentum Investing is an investment approach that focuses on buying securities that have shown strong recent price performance and selling those with weak performance. The strategy is based on the idea that assets trending in one direction often continue moving that way for some time due to market behavior and investor psychology.

Money Flow Index (MFI) is a momentum-based technical indicator that uses trading volume and price to measure selling and buying pressure. Often called a volume-weighted RSI, it helps traders identify overbought or oversold conditions and potential trend reversals in the market.

The Morning Star Pattern is a three-candle bullish formation that appears after a decline and suggests a shift in market momentum. It begins with a clear bearish move, followed by a phase of indecision, and ends with a strong bullish candle. Traders often view this pattern as an early signal of renewed buying interest.

Moving Average (SMA/EMA) is a trend-following indicator that reduces noise by averaging past prices. Simple moving average (SMA) takes an equal average of prices over a chosen period, while Exponential moving average (EMA) emphasises recent prices, allowing it to react faster to changes in market direction.

Moving Average Convergence Divergence (MACD) is a popular momentum indicator used to identify trend direction and strength. It is derived by taking the difference between a short-period EMA and a long-period EMA and is typically used along with a signal line to spot potential buy or sell signals.

A multi-bagger refers to a stock that delivers returns multiple times higher than its original investment value. For example, a stock that grows five times from its purchase price is called a five-bagger. Investors often associate multi-baggers with strong business growth, long-term holding, and effective capital allocation.

A mutual fund is a financial instrument that collects funds from investors and invest in different assets, like equity, bonds, etc. A professional fund manager handles the investments, making it easier for individuals to invest and spread their risk without needing deep market knowledge.

Mutual Fund Sahi Hai is a popular investor awareness slogan/website launched by the Association of Mutual Funds in India (AMFI). It aims to educate people about mutual funds and encourage informed, long-term investing by highlighting the benefits of diversification, professional management, and disciplined investment habits.

Naked Option refers to an options position where the seller does not hold the underlying asset or a hedging position. This exposes the trader to potentially unlimited losses if the market moves sharply against the position. Naked options are generally considered high risk and are used by experienced traders only.

A narrow market describes a situation where only a few stocks or sectors influence market movement, while the majority of stocks have low trading volume. It has few active participants on either the buy or sell side of the market. This limited participation suggests that the market trend is not broadly supported across the entire market.

Negative Correlation describes a relationship between two assets where they move in opposite directions. When one increases in value, the other tends to decrease. In finance, it is often used to reduce portfolio risk by combining assets that do not move together. An example is gold and equity market.

Negative Working Capital refers to a situation where a company’s short-term assets are lower than its short-term liabilities. This implies the business is using supplier credit or advance payments to run its operations. Although it may suggest cash pressure, in certain business models, it can reflect operational efficiency.

Net Asset Value (NAV) indicates the value of one unit of an investment fund at a given point in time. It reflects the fund’s total assets after expenses, spread across all outstanding units, and helps investors track how the fund’s value changes from day to day.

Net Present Value (NPV) is a technique that assesses whether an investment is worthwhile by discounting future cash flows to today’s value and weighing them against the upfront cost. If the result is positive, the project is likely to add value; a negative result signals potential loss.

Net Profit Margin shows the portion of revenue that remains as profit once all operating costs, interest, and taxes have been deducted. It is expressed as a percentage and helps investors understand a company’s overall profitability and cost efficiency.

Net Worth represents the overall financial value of an individual or company after subtracting total liabilities from total assets. It shows the true financial position at a given point in time and is commonly used to assess financial strength and stability.

The New York Stock Exchange (NYSE) is one of the world’s largest and oldest stock exchanges, located in New York City, USA. It provides a platform for buying and selling shares of publicly listed companies and is known for hosting many large, well-established global corporations.

Nifty 50 is a key stock market index made of the 50 largest companies by market cap listed on the National Stock Exchange (NSE) in India. It serves as an indicator of overall market movement and helps investors understand how the broader Indian equity market is performing.

Nominee is a person appointed by an investor to receive the assets or benefits of an investment in case of the primary investor’s death. Adding a nominee helps ensure the smooth transfer of securities, bank balances, or mutual fund units to the rightful beneficiaries.

Non-Cyclical Stocks are shares of companies whose performance is relatively stable regardless of economic ups and downs. These businesses provide essential goods or services, so demand remains steady even during slow economic periods, making such stocks less volatile than cyclical stocks.

Non-Voting Shares are shares that give investors ownership and dividend rights but do not grant the right to vote on company matters. These shares are often issued to raise capital without diluting control, allowing founders or promoters to retain decision-making power while offering economic benefits to shareholders.

Notional Value refers to the total value of an underlying asset represented by a financial contract, such as derivatives or futures. It is used to calculate exposure and risk, even though the actual amount invested or exchanged may be much smaller than the notional value itself.

NSE (National Stock Exchange) is India’s largest electronic stock exchange, where shares, derivatives, and other financial instruments are traded. It is known for its fully automated trading system, transparency, and high liquidity, making trading faster and more efficient for investors across the country.

An odd lot is a trade involving a number of shares that does not match the standard trading lot set by the exchange. For instance, if the regular lot size is 100 shares, a transaction of 30 or 50 shares would be classified as an odd lot.

Off-Board Trading refers to the buying or selling of securities outside a recognized stock exchange. These transactions are usually conducted directly between parties or through private arrangements and are not recorded on the exchange’s trading platform, making them less transparent and less regulated than on-exchange trades.

Offer for Sale (OFS) is a process that allows current shareholders, typically promoters, to sell their stake in a company when it gets listed via an Initial Public Offering (IPO). It is often used to dilute ownership or comply with regulatory norms and is completed within a short, predefined trading window.

On-Balance Volume (OBV) is a volume-based indicator that tracks market pressure by linking volume with price movement. Volume is accumulated when prices close higher and reduced when prices close lower, helping traders judge the strength behind a trend.

Open Interest is created when a new seller and a new buyer enter into a fresh contract. It represents the total number of active futures or options contracts that are still open and not squared off on an exchange like the NSE. Open Interest helps traders understand market participation, liquidity, and sentiment in stocks or indices such as the Nifty. Rising Open Interest with rising prices indicates bullish strength, while rising Open Interest with falling prices signals bearish sentiment.

An open-end fund, also referred to as a mutual fund in India, is an investment vehicle that is constantly issuing new shares to investors and also redeeming shares on request. This structure means that the fund's total assets under management (AUM) and the number of outstanding shares change daily depending on the investor's purchases and redemptions.

The Opening Range is the range of trading prices (from the highest point to the lowest point) of a security in the initial period, after the market opening. In the Indian stock market (NSE and BSE), the opening period is defined as the first 15 - 30 minutes of trading. Traders, especially day traders, pay close attention to the opening range because it often sets the tone for the rest of the trading day and offers potential support and resistance levels.

Operating Cash Flow (OCF) measures the amount of cash generated by a company from its normal, day-to-day business activities. It is a key element in a company's cash flow statement. OCF indicates the company's ability to generate enough cash internally to sustain and expand its operations without access to external financing. A consistently positive and growing OCF is a sign of strong financial health and operational efficiency.

Operating Leverage is a measure of how much a company's operating income changes as its sales revenue changes. It is defined by the ratio between fixed cost and variable cost within the cost structure of a company. A company with high operating leverage has a higher percentage of fixed costs relative to variable costs. Companies in capital-intensive sectors such as manufacturing, telecommunications, or infrastructure are likely to have high operating leverage. High operating leverage can result in a higher increase in profits as sales rise, but can also cause a higher decrease in profits as sales fall.

An Option Chain is the complete list of all the options contracts, both calls and puts, for a given underlying security, across a wide range of expiration dates and strike prices. It shows real-time data of bid price and ask price, trading volume, and open interest for each contract. Traders use the option chain to analyse market depth and identify where the most trading activity is concentrated (often suggesting potential support and resistance levels).

An option contract is said to be out of the money (OTM) if it would not be profitable to exercise the contract immediately. Options with no intrinsic value; call options with a strike price higher than the current market price, or put options with a strike price lower than the market price. OTM options are less expensive than ITM options. Indian F&O traders often purchase OTM options for leveraged bets, though they expire worthless if the market doesn't move favourably.

An Over-Allotment Option, often referred to as a Greenshoe option in the Indian primary market, gives the underwriters the right to sell more shares (usually 15%) over and above the original IPO size if there is strong demand. If the share price drops below the issue price, the underwriters can use the proceeds from the extra shares to repurchase shares in the open market for support. If the price goes up, they exercise the option and sell the extra shares to the market. This mechanism is regulated by SEBI in India, and the primary purpose is price stabilisation.

Over-the-Counter (OTC) refers to a decentralised marketplace wherein financial instruments are traded directly between two parties without the supervision of a formal exchange, such as NSE or BSE. This trading is done through a dealer network (broker-dealers) over the phone or electronically. The OTC market is less regulated and less transparent than exchange-traded markets and frequently involves customised agreements between institutions.

An overbought term refers to a security whose price has advanced sharply, and the broader market sentiment suggests that a price correction or reversal is likely to occur in the near future. It does not necessarily mean the price will go down, but that the upward momentum is unsustainable. Technical indicators such as the Relative Strength Index (RSI) or Stochastic Oscillator are widely used by traders for identifying overbought situations. An RSI above 70 is considered an overbought indicator.

A company is said to be overcapitalised if it has issued more debt and equity than is financially prudent or necessary, resulting in an inefficient capital structure. This means that the company is carrying an excessively large amount of capital (whether in the form of high paid-up capital, retained earnings, or borrowings) compared to its actual needs or its ability to generate proportionate profits.

Oversold is a term that is used to denote that a security's price has dropped sharply, and the broader market sentiment indicates a high probability of rebound or price correction in the near term. It implies that the selling pressure is likely to be nearing exhaustion. Traders use indicators such as the Relative Strength Index (RSI) to detect oversold levels. When the RSI level is below 30, the particular security is oversold. An oversold condition implies that the price decline may be due for a pause or reversal, but it is not a sure sign of a price increase.

The Price to Book (P/B) Ratio is a valuation metric used by investors to compare a company's current market price per share to its book value per share. The book value is the net asset value of the company (Total Assets - Total Liabilities). A low P/B ratio (e.g., below 1) indicates that the stock is undervalued, but it could also signal underlying issues with the company. A high P/B ratio indicates that the investors are willing to pay a premium for the net asset value of the company, often because of strong growth expectations.

The Price to Earnings Growth (PEG) Ratio is an extension of the traditional P/E ratio, which takes into account the expected earnings growth rate. It is popular in the Indian market for evaluating equity growth stocks. The formula is: PEG Ratio = P/E Ratio/Annual EPS Growth Rate. A PEG ratio of 1 or less is often seen as an indicator that a stock is fairly valued or undervalued relative to the expected growth rate of the stock. A lower PEG implies a better value proposition because investors are paying less for every unit of future earnings growth.

The Forward Price to Earnings (Forward P/E) Ratio is a valuation metric that compares the current stock price of a company to its estimated earnings per share (EPS) for the next four quarters or the next fiscal year. The formula is: Forward P/E = Current Share Price/ Estimated Future EPS. Indian analysts and investors often use the Forward P/E to forecast how expensive a stock is, given what the company is expected to earn in the future, which gives a more relevant picture for making investment decisions than historical earnings.

Price to Earnings (P/E) Ratio is one of the most popular valuation ratios used by Indian investors. It measures the relationship between the current stock price and the earnings per share (EPS) of a company. The formula is: P/E Ratio = Market Price per Share / Earnings per Share (EPS). The P/E ratio shows how many times more than its earnings investors are willing to pay for one share of the company.

The Trailing Price-to-Earnings (Trailing P/E) Ratio is the most common version of the P/E ratio, where the historical earnings of the company are used to calculate it. It compares the current stock price to the actual earnings per share (EPS) over the last four quarters (12 months) of the company. The formula for this is: Trailing P/E = Current Share Price / EPS for the last 12 months. Trailing P/E is based on concrete, reported financial results and is therefore reliable for historical comparison, but may not fully reflect a company's current or future prospects.

Paid-Up Capital is the amount of money that the company has received from its shareholders in exchange for the company's stock. It is thus the portion of the authorised capital which has actually been subscribed by the investors and paid for. Paid-up capital of the company appears in the balance sheet.

Pair Trading is a market-neutral trading strategy that involves taking opposite positions in two highly correlated securities. The aim is to make a profit from the temporary difference in the prices. A trader may purchase the relatively underperforming stock (the 'long' position) and short-sell the relatively outperforming stock (the 'short' position) in the pair. The expectation is that the prices will eventually return to their historical mean relationship (convergence).

Paper profit or loss ( Unrealised profit or loss) is the profit or loss on an investment that has not been converted into actual cash. Paper profit occurs when the current market value of a security is higher than its purchase price while when the current market value of a security is less than its purchase price, it is paper loss. The profit or loss is only realised when the investor sells the security, thus it is also called paper trading and virtual trading. Indian tax laws don't tax profits on paper until realised through sale.

Par value, also known as face value or nominal value, is the stated, fixed amount on a financial instrument (such as a stock or bond) fixed at the time of issuance, the minimum amount for accounting and legal purposes. For bonds, it's the amount repaid at maturity, and used to calculate interest; for stocks, it's the minimum price the company can sell shares for initially. Market price is different from par value.

Passive Investing is an investment strategy where the goal is to mimic the performance of an index representing a broad market, as opposed to attempting to beat the market through active stock picking or market timing. The purpose is to have market returns with minimum costs. This strategy is implemented mostly in Index Funds and exchange-traded funds (ETFs). Passive investing is characterised by low expense ratios and steady performance in the long term, thus avoiding potential human error or poor fund manager decisions.

The Payback Period is a capital budgeting metric that calculates the amount of time it takes for a project or investment to pay back its initial cost. It is one of the simplest methods for evaluating potential investments. The formula is: Payback Period = Initial Investment/Annual Cash Flow. A shorter payback period is usually preferred as it means a faster return of capital and less risk. However, it is a limited metric, as it does not take into account the time value of money and the cash flows generated after the initial investment is recovered.

A Pennant is a continuation chart pattern used in technical analysis, and is shaped like a small, symmetrical triangle or a flag. It is formed following a sharp, significant move in price (either up or down) and represents a brief consolidation phase where volume is declining. The pennant pattern is characterised by two converging trend lines. Once the consolidation is over, a breakout from the pennant pattern (in the direction of the initial move) is anticipated, which indicates a continuation of the previous trend. Traders look for a large volume to accompany the breakout to confirm the move.

Penny Stocks are those shares of small companies trading at low prices, often below the price of a Rs. 10 or Rs. 20 share in the Indian stock market, and have low market capitalisation. These stocks are characterised by high volatility, low liquidity, and a high degree of speculation, which makes investments in these stocks extremely risky. While they have the potential to provide attractive returns, they are also subject to manipulation and can lead to the total loss of capital.

PIP stands for Point in Percentage and is the smallest unit of price movement of a currency pair, which is used mostly in forex trading. Pips are used by traders to calculate the spread between the bid and ask prices of the currency pair, and express the profit or loss that their position has made. It is usually one hundredth of a percent, and can have a significant effect on the overall exchange rate.

Placing, or Private Placement, is a process of raising capital in which a company sells its securities (stocks or bonds) to a selected group of investors (such as banks, mutual funds, insurance companies) or high net worth individuals instead of selling them to the general public through a public offering (like an IPO). In India, companies frequently use private placement to raise funds in a short period of time from specific investors. This is a faster and less expensive process than a public issue.

The Plowback Ratio (or Retention Ratio) is the ratio of the net income of a company that is retained by the company to be reinvested in the company's business operations and growth (rather than paid out as dividends). The formula is: Plowback Ratio = (Net Income - Dividends Paid) / Net Income. High-growth companies in the IT or manufacturing sector often have a high plowback ratio as they see higher benefit in re-investing their profits to fuel expansion. A low plowback ratio indicates that a company is mature and returns a larger portion of its earnings to its shareholders.

A Portfolio is a collection or grouping of financial assets of an investor. A portfolio can have a diversified mix of assets such as equity shares, mutual fund units, government bonds, fixed deposits, gold, and real estate. The aim of building a portfolio is to manage the risk by diversification, ensuring that the poor performance of one asset is compensated for by the high performance of another. Portfolio management is one of the most important elements of financial planning for an investor.

Position Sizing is a risk management technique for market participants to decide the number of units (shares, futures contracts, or option lots) of a specific security to buy or sell. The main objective is to restrict the potential amount of loss from any single trade to a small percentage of the overall trading capital (e.g., 1% or 2%). Traders use position sizing to ensure that even if a trade goes against them, the loss won't significantly damage their overall capital.

Positional Trading is a trading strategy where a trader keeps their position (long or short) for weeks to months. Unlike intraday trading or swing trading, positional traders do not pay attention to minor price fluctuations and focus on fundamental analysis, economic trends, and long-term technical patterns to predict the overall direction of a security. This strategy is less time-intensive and is often preferred by traders who are looking to capture major moves in the market with lower transaction costs.

Pre-IPO (or Pre-Initial Public Offering) refers to the phase of a company where it raises capital by selling its shares to private investors (such as venture capitalists, private equity firms, or institutional investors) before officially going public with an IPO. These shares are bought at a discount to the expected IPO price. Investing in pre-IPO shares is for experienced investors because the shares are illiquid and have a high risk, but have the potential for high returns if the company performs well after listing.

Pre-Market Trading is a trading session (9:00-9:08 AM for Equity) that takes place on an exchange before the start of normal market hours. India has a short pre-open session on both the NSE and BSE. This session is mainly for finding the price for the day and includes a restricted number of trade types. The pre-market session is important in absorbing news and events that have occurred overnight, which will decide the opening price for the different stocks, giving market participants an idea of how the market is likely to open.

Preferred stock is a class of ownership in a corporation that has a higher claim on assets and earnings than common stock. Preferred stockholders receive dividends, and they must be paid out prior to any dividends being distributed to common stockholders. Unlike common stock, preferred stock does not come with voting rights. It is a hybrid security, with elements of both equity (ownership) and debt (fixed payments of dividends).

In finance, a premium is the excess amount that the price of a security or asset is over its nominal value, intrinsic value, or its price in another market or context. For options, the premium is the price that a buyer pays for an option contract. In insurance, a premium is the sum of money that an individual or business is required to pay for an insurance policy. A stock may trade at a premium if the market price is higher than its book value, which often reflects strong growth potential or market optimism.

Price action is the movement of the price of a security plotted over time. Traders who study price action make trading decisions based on the analysis of raw price movements, which often includes patterns, swings, and support/resistance levels rather than relying on traditional technical indicators. Price action analysis is the skill of interpreting the sentiments and activities of the market by reading candlesticks, bar charts, and volume data.

A price band is a regulatory mechanism or a voluntary limit set by an exchange or company that restricts the maximum and minimum price at which a security is allowed to trade for a given day. These bands, which are often expressed as a percentage above and below the previous day's closing price, are mainly implemented to prevent excessive volatility and market manipulation. Trading in the security is stopped or suspended if the price moves outside the set price band.

Price discovery is the process of determining the market price of an asset or security. It is a continuous, dynamic process that is driven by many factors such as supply and demand, investor sentiment, macroeconomic news, company-specific information, and market liquidity. In efficient markets, the forces of buying and selling naturally converge to establish a fair and current market price.

The Price-to-Sales (P/S) Ratio is a valuation metric that divides a company's current market capitalisation by its total sales or revenue of the last twelve months. It is used to gauge the amount investors are willing to pay for every rupee of a company's revenue. This ratio is useful when looking at companies that are not yet profitable or have volatile earnings, because revenue is often less volatile and less susceptible to accounting manipulations than earnings are. A lower P/S ratio is often thought to be more favorable.

The primary market is where the securities are created and first issued to investors. This is where companies raise funds by selling stocks and bonds. Key activities in the primary market are Initial Public Offerings (IPOs), Further Public Offerings (FPOs), and rights issues. The proceeds from these sales go directly to the issuing company or government entity.

Profit-taking is the process of selling an investment that has increased in value to realise the profits. It is when an investor feels the price of an asset has peaked or is likely to reverse its trend, and that's when they would close their position. While a natural part of the investment cycle, widespread profit-taking can cause a temporary or sustained decline in the price of a security.

Program trading, which is frequently linked with algorithmic trading, is the use of computer algorithms for automatically generating and executing orders in large volumes based on predetermined sets of rules, such as price or timing conditions. It is the buying or selling of a basket of stocks at the same time. Program trading has significantly increased the speed and volume of market transactions and is commonly employed in arbitrage, index arbitrage, and portfolio insurance strategies.

Promoter holding refers to the percentage of total shares held by the promoters of a company. Promoters are a group of individuals who are responsible for the foundation or management of the company. High promoter holding can signal strong management conviction in the future of the company, but can also lead to concerns about corporate governance and a lack of sufficient free float of shares for the public market.

Proprietary trading is when a financial firm or commercial bank uses its own money to trade stocks, bonds, options, commodities, or other financial instruments, as opposed to client money. The purpose is to produce profits directly to the firm. This type of trading involves market-making, arbitrage, and various speculative strategies. Separated from the client's business to avoid conflicts. Involves higher risk-taking than client brokerage.

A prospectus is a legal document that gives detailed disclosure about a company's financial condition, its operations, management, and the terms of a new securities offering (such as an IPO). It is mandated by regulatory bodies and must be provided to potential investors to provide them with all the information they need to make an informed investment decision. The two key parts are the preliminary prospectus (red herring prospectus) and the final prospectus.

Pump and dump is a type of stock market manipulation. It involves artificially inflating the price of a stock (the pump) through false positive statements, often via social media or email spam, and then selling the cheaply acquired stock (the dump) once the price has increased because of the resulting buying frenzy. Common in Indian penny stocks with poor liquidity. SEBI actively monitors and penalises these manipulations. Investors should avoid tips and conduct their own independent research before making investment decisions.

A put option is a contract that gives the buyer the right, but not the obligation, to sell a specified amount of an underlying security (like a stock) at a predetermined price (the strike price) on or before a specified date (the expiration date). Buyers of put options typically expect the price of the underlying asset to decline. Put options are used for speculation or for hedging a long position in the underlying asset.

The Put-Call Ratio (PCR) is a popular sentiment indicator used by contrarian investors. It is determined by dividing the total volume of traded put options by the total volume of traded call options over a particular period. A high PCR (more puts than calls) is often seen as an overly pessimistic market, and it is a bullish signal (a sign the market is due for a rebound). On the flip side, a low PCR could be a sign of excessive optimism and a possible bearish reversal.

Quantitative analysis (QA) is the application of mathematical and statistical modeling, measurement, and research to understand and predict behavior in the financial markets. Quantitative analysts use complex mathematical models and algorithms to analyse trading opportunities, manage risk, and execute trades using large amounts of historical data and computational power, rather than qualitative factors such as management experience and company reputation.

Quarterly Results refer to the financial statements released by publicly listed companies every three months, covering a specific quarter of the fiscal year. These reports include income statements, balance sheets, cash flow statements, and key metrics like revenue, net profit, earnings per share (EPS), expenses, etc. They offer investors and analysts a snapshot of operational performance, growth trends, and future guidance, enabling better assessment of the company’s financial health and strategic direction compared to annual reports.

The Quick Ratio, also known as the acid-test ratio, measures a company’s ability to meet short-term liabilities using its most liquid assets. It is calculated as (Current Assets - Inventory) divided by Current Liabilities, excluding less liquid inventory from current assets. A Quick Ratio above 1 indicates a company's strong liquidity to cover obligations without selling inventory, helping investors evaluate financial stability and short-term solvency.

A Rally describes a sustained upward movement in the price of a stock, index, or market over a short to medium term, often driven by positive news, strong earnings, or improved investor sentiment. It typically follows a period of decline or consolidation, reflecting renewed buying interest and momentum. Traders monitor rallies for entry points, but they can reverse if underlying fundamentals weaken or profit-taking occurs.

Range Bound refers to a market or stock price that fluctuates within a defined horizontal channel, between clear support and resistance levels, without establishing a strong trend. Prices oscillate as buying pressure at the lower bound meets selling at the upper bound, indicating indecision among investors. This condition suits range-trading strategies using oscillators like RSI, but breakouts can signal trend changes.

A Real Estate Investment Trust (REIT) is a company that owns, operates, or finances income-generating real estate, allowing investors to earn dividends from property portfolios without direct ownership. In India, REITs are listed on stock exchanges and must distribute at least 90% of taxable income as dividends. They provide liquidity, diversification, and exposure to commercial properties like offices and malls.

Realized Gain is the actual profit earned from selling an asset, such as a stock or mutual fund, at a price higher than its purchase cost, after accounting for fees. It differs from unrealized (paper) gains, as it triggers tax liability only upon sale. Investors track realized gains for performance evaluation and tax planning, ensuring compliance with capital gains rules.

The Record Date is the specific cutoff date set by a company to determine eligible shareholders for dividends, bonuses, stock splits, or rights issues. Investors must hold shares by the end of this date to qualify, even if the actual payout or entitlement occurs later. It ensures accurate distribution and is critical for retail investors to check before corporate actions.

A Red Herring Prospectus (RHP) is a preliminary offer document filed with SEBI when a company plans to go public through an IPO, outlining the company’s business, financials, risks, management, and most issue details. It does not include the final offer price or the exact number of shares being issued. It is marked with a bold red disclaimer indicating that certain key information like price and share count is incomplete or subject to change, and it helps investors assess the company before subscription. Once the offer price and share details are finalised (usually after book-building), the final prospectus with complete priced details is issued for public use.

The Relative Strength Index (RSI) is a momentum oscillator that measures the speed and change of price movements on a scale of 0-100. Readings above 70 signal overbought conditions, suggesting potential reversals, while below 30 indicates oversold levels. Traders use 14-period RSI to identify entry/exit points and confirm trends in stocks or indices.

The Relative Vigor Index (RVI) is a technical oscillator comparing the closing price to the opening price relative to the day’s trading range, smoothed over periods. Positive values show bullish vigor as closes exceed opens, while negative signal bearish weakness. It helps confirm trends and spot divergences, often used alongside other indicators for trading signals.

A resistance level is a specific price point where a stock or asset repeatedly finds it challenging to move higher. The selling pressure usually increases at this level as traders book profits or expect a reversal. When the price breaks above this level with strong volume, it shows increasing bullish strength. It carries the potential for continued upward momentum.

Return on Assets (ROA) is a parameter used to measure the efficiency of a company in using its assets to generate profits. The ROA is calculated by dividing the net income by the total assets. A higher ROA implies the business is optimising the use of its assets, like plants, equipment, or cash, in order to earn money. The ROA metric is particularly useful when analysts compare companies in the same industry.

Return on Capital Employed is a parameter that shows how efficiently a company managed to use its overall capital to generate profits. The ROCE is obtained by dividing the operational profit by the capital used. A higher ROCE points to strong business efficiency and smart usage of capital. Therefore, it is a crucial metric that can evaluate the long-term performance of a company and the management of its quality.

The Return on Equity is a metric that helps to find the how effectively a company uses the money of its shareholders to generate profits. The ROE can be obtained by dividing the new profit generated by the equity of shareholders. When a company has a higher ROE, it implies that it has a strong management and strong profitability. Investors often compare the companies within the same sector using the ROE. The ROE also helps investors determine the potential of the company to generate wealth in the long term.

A reverse stock split is a corporate action that involves a company reducing the number of outstanding shares it has, while the stock price increases proportionately. For instance, if there is a 1:5 reverse split, five shares are combined into one. A reverse stock split does not change the value of a company. However, it is often used to meet the requirements of listing on an exchange or improve the perception in the market.

A rights issue is a common type of corporate action. When rights are issued, the existing shareholders of a company get the option to buy additional shares at a discounted price. In the process, the company raises fresh capital that it uses for different purposes. Some of the common uses of issuing rights include capital for expansion, reducing debt, or creating a working capital. Shareholders have the option to subscribe, ignore, or sell their rights, depending on the structure of the issue.

The Risk-Free Rate of Return is the return an investor can expect with almost no risk. Usually, such returns come from government securities like Treasury bills. These assets come with minimal risk of defaulting. The risk-free rate of return serves as a standard based on which other investments are evaluated. Any additional return expected is the compensation for taking additional risk.

A runway gap or a continuation gap sometimes appears in the middle of a strong price trend. It reflects that the stock price is gaining sustained momentum. Often, these gaps show up when traders rush in. As a result, the prices can move sharply higher or lower. A runaway gap sends a strong signal to those who follow trends. It confirms the strength in price and suggests that the healthy momentum may continue for some time.

The S&P 500 is a stock market index in the US and tracks 500 of the largest publicly listed companies in the country. The S&P 500 represents a wide range of industries. Often, it is used as a benchmark for the performance of the global equity market. Many investors consider the index as a picture of how the overall US economy is performing. It also reflects the overall market sentiment.

Scalping is a short-term trading strategy. Here, traders can make strong profits as they engage in transactions as the stock prices frequently move. Usually, these positions are held for seconds or minutes. The liquidity of the stock and tight spreads determine the success of the strategy. In scalping, each trade generates a small profit. However, with consistency and discipline, traders can benefit from scalping over time.

The Securities and Exchange Board of India is the authority that regulates the securities market in India. It protects the interests of investors and ensures that trading practices are fair. The body also promotes transparency across different exchanges and intermediaries. SEBI regulates brokers and prevents the market from being manipulated. Thus, the authority plays a crucial role in regulating Indian financial markets and maintaining transparency.

In the Secondary Market, investors can buy and sell securities that are already issued. These include stocks and bonds. The secondary market involves stock exchanges like the NSE and the BSE. Companies don’t receive money from these trades. However, the secondary market ensures liquidity and serves as an easy entry or exit point for investors.

Sector rotation is an investment strategy where investors keep shifting their funds between sectors based on economic cycles or market trends. For example, defensive sectors tend to perform better during slowdowns. Cyclical sectors perform impressively during phases of growth. With strategic sector rotation, investors can manage risk while capitalizing on opportunities in different market conditions.

Securities Lending is a process through which investors can lend their shares to borrowers, usually for short selling. In return, they receive interest or fees. The lender continues to be the owner of the assets. The borrower needs to return the securities later. Securities lending helps in improving liquidity in the market. Long-term investors can also earn extra income on holdings that remain idle for a while.

The settlement cycle refers to the time taken to complete a trade once it is executed. Equities in India have T+1 days for settlement. This indicates the shares and funds are exchanged only one business day after the trade is executed. A shorter settlement cycle reduces counterparty risk. It also ensures that investors get faster access to their money or securities.

Shares outstanding is the overall number of shares of a company that investors are currently holding. These shares are presently held by promoters, institutions, and the public. The number of shares outstanding is used to calculate important metrics like market capitalisation and earnings per share. When there’s a change in this number, it can impact the prices of stocks and investor valuations.

A shooting star refers to a bearish candlestick pattern that appears after an uptrend. This pattern has a small body close to the low in a day, and a long upper wick. This shows that buyers pushed the prices up, but by the close, sellers took control over the stock. A shooting star often points to a possible trend reversal or short-term weakness.

Short selling is a popular intraday selling strategy. Through this strategy, traders can sell shares that they currently don’t own. They expect the prices to fall, so they borrow the shares and sell them at the current price. The goal is to buy the stock back later at a lower price. However, traders can incur significant losses if the prices rise instead. That’s why risk management is crucial in short selling.

A short squeeze takes place when the price of a stock rises sharply, which forces short sellers to buy the shares to keep losses low. This sudden buying results in more upward pressure. This pushes the prices even higher. Often, short squeezes occur in stocks that are heavily shorted, and can lead to volatile price movements.

Slippage refers to the difference between the expected price of a trade and the price at which it actually gets executed. Usually, it happens during periods of high volatility or low liquidity. Small slippage is normal, but the returns can get significantly impacted by large slippages. Active traders using market orders or scalping strategies must take guard against these risks.

Small cap stocks are the shares of companies that have a market capitalisation below INR 5,000 crore. Often, these companies have a high growth potential, but tend to be more volatile and riskier compared to large cap stocks. In favourable markets, small cap stocks can deliver impressive returns. However, they tend to react sharply to economic changes. Investors must carefully research and consider their risk tolerance before investing in small cap stocks.

Standard deviation is a metric that shows the extent to which the returns on investment of a stock fluctuate around its average. When the standard deviation is higher, it indicates higher risk and volatility. On the contrary, a lower standard deviation indicates that the returns are more stable. Investors use this metric to understand the predictability of an asset and compare risk levels between investments or portfolios.

The Stochastic oscillator is a momentum indicator used in technical analysis. Investors use this indicator to identify conditions where a stock may be overbought or oversold. It compares the closing price of a stock to its price range over a certain period. If the value is above 80, it indicates overbought conditions. If it is below 20, the conditions are considered oversold. The Stochastic oscillator helps investors identify potential reversals.

A stop loss order is an instruction to automatically sell a stock when a certain price is reached. This type of order helps investors limit potential losses and manage their risk. Stop loss orders are vital for intraday traders, particularly in volatile markets. Once a stop loss order is set, traders need not monitor the stock price constantly. This ensures peace of mind while they can protect their capital.

The strike price refers to the fixed price at which a trader can buy (call) or sell (put) the underlying asset. The strike price is a key component in options trading. It helps traders determine whether or not the option would be profitable when it expires. The intrinsic value of an option is influenced by the difference between the market price and strike price.

The support level refers to a specific price point where traders or investors consistently find buying interest in a stock or asset. This prevents the price from falling further. It works like a base that holds the price up. However, if the price breaks the support and drops below this level, it may indicate weakness in the stock. On the other hand, bouncing off the support level points to a potential buying opportunity.

A swap is a financial agreement between two parties. They exchange cash flows or liabilities, mostly to manage risk. Common examples of swaps include currency swaps or interest rate swaps. For instance, one party may swap a fixed interest payment for a floating one to hedge against changes in interest rates. A swap helps both parties involved manage exposure and optimize financing costs.

A systematic investment plan is a method in which an investor can contribute a fixed amount regularly to mutual funds. Usually, investors maintain a monthly frequency for SIPs. This investment strategy helps them build wealth over time through discipline. The power of compounding comes into play, while the rupee-cost averaging reduces the impact of volatility in the market. SIP is one of the most effective and popular tactics used in goal-based investments.

T-Plus Settlement is a settlement system in trading. The fund transfer takes place one business day after the trade. For instance, if you buy a stock on Monday, the transaction is completed on Tuesday. The T+1 system reduces risk in settlements and improves liquidity. It ensures that investors can access their money on securities faster.

A takeover bid is an offer that an individual, company, or investor makes to acquire a controlling stake in another company. A takeover bid can be friendly, when the approval of the board is sought, or hostile, where the bid is placed directly to the shareholders without the consent of the management. Takeover bids are mostly used for expansion, strategic growth, or restructuring purposes.

The target price refers to the projected price level that analysts expect a stock to reach within a predefined time frame. This estimate is based on financial analysis, market trends, and the performance of the company. The target price is often used as a benchmark by investors as they make decisions related to buying, holding, or selling. However, the actual prices may vary as a result of market fluctuations.

Technical analysis refers to the study of past price movements of a stock and trading volumes. This type of analysis is used by investors and traders to predict price trends in the future. The evaluation is carried out based on charts, patterns, and indicators like moving averages or RSI. Investors and traders can make informed decisions based on technical analysis. It differs from fundamental analysis as the focus lies on price behavior and not the financials of the company. As a result, investors get to know easy entry and exit points.

A technical indicator is a tool that uses mathematical calculations based on price, volume, or open interest data to analyse market trends and price behaviour. It helps traders identify potential entry and exit points, momentum shifts, and trend strength. Common indicators include moving averages, RSI, MACD, and Bollinger Bands.

Theta measures the rate at which an option loses value as time passes, assuming other factors remain constant. It reflects time decay, which accelerates as the option nears expiry. For option buyers, theta works as a cost over time, while for option sellers, it can be a favourable component of returns.

Tick size is the minimum price movement allowed for a security in a given market. It determines how prices can change and at what increments orders can be placed. Tick size influences liquidity, bid-ask spreads, and execution precision, particularly in high-volume trading environments.

A ticker symbol is a unique series of letters used to identify a security listed on an exchange. It helps investors and traders quickly locate and track a stock, ETF, or other listed instrument in market systems. Ticker symbols vary by exchange and are widely used in trading platforms and reports.

Time Value of Money (TVM) is the concept that money available today is worth more than the same amount in the future due to its earning potential. It forms the foundation of financial decision-making and valuation. TVM is applied in investments, loans, discounting cash flows, and retirement planning.

Total Shareholder Return (TSR) measures the overall return generated for investors, combining share price appreciation and dividends received over a period. It provides a more complete view of performance than price returns alone. TSR is commonly used to evaluate long-term value creation and management effectiveness.

Tracking error measures how closely a portfolio or fund follows the performance of its benchmark index. It represents the volatility of the difference between fund returns and benchmark returns. A lower tracking error indicates closer alignment, while a higher tracking error suggests greater deviation due to costs, strategy, or holdings.

A trailing stop loss is a risk-management order that adjusts automatically as the market price moves in a favourable direction. It locks in gains while limiting downside risk by setting a stop level at a fixed percentage or price distance below the current price. If the price reverses, the order helps exit the position.

Treasury Bills (T-Bills) are short-term debt instruments issued by the government with maturities typically ranging from a few days up to one year. They are considered low-risk investments and are sold at a discount to face value. The return is earned through the difference between purchase price and maturity value.

Treasury stock refers to shares that a company has repurchased from the open market and holds in its own treasury. These shares do not pay dividends and typically have no voting rights. Companies repurchase shares to improve earnings per share, optimise capital structure, or support stock price stability.

A trendline is a straight line drawn on a price chart to indicate the direction of a market trend. It connects a series of higher lows in an uptrend or lower highs in a downtrend. Trendlines help identify support and resistance levels, assess trend strength, and anticipate potential breakouts or reversals.

A triple top is a bearish chart pattern where a stock or index reaches the same resistance level three times but fails to break above it. This repeated failure signals weakening buying momentum and a potential trend reversal from uptrend to downtrend. For example, if a stock rises to ₹500 three times over several months and falls each time, it may form a triple top, indicating a possible decline ahead.

A triple bottom is a bullish chart pattern where the price tests the same support level three times without breaking below it. This suggests selling pressure is reducing, and a reversal from downtrend to uptrend may follow. For example, if a stock falls to ₹200 on three occasions and rebounds each time, it may form a triple bottom, suggesting a potential price rise.

A stock is considered undervalued when its market price is lower than its intrinsic or fair value based on fundamentals such as earnings, cash flow, or assets. For example, if a company with strong profits and stable growth trades below its historical valuation multiples, investors may view it as undervalued and expect price appreciation.

An unrealized gain refers to the increase in value of an investment that has not yet been sold. For instance, if an investor buys shares at ₹500 and their current market price rises to ₹650, the ₹150 increase is an unrealized gain until the shares are actually sold.

Unsystematic risk is the risk specific to a company or industry and not the overall market. It includes factors such as management decisions, labour strikes, or product failures. For example, a lawsuit affecting only one pharmaceutical company represents unsystematic risk and can be reduced through diversification.

Value investing is an investment strategy focused on buying securities that appear undervalued relative to their fundamentals. Investors look for stocks trading below intrinsic value due to temporary issues, such as short-term earnings decline, expecting that prices will rise once the market corrects its mispricing.

A value trap occurs when a stock appears cheap based on valuation metrics but continues to underperform due to underlying business problems. For example, a company with declining revenues and poor management may trade at low price-to-earnings ratios, misleading investors into thinking it offers value when its fundamentals are deteriorating.

Venture capital refers to funding provided to early-stage or high-growth companies with strong future potential but higher risk. For example, a venture capital firm investing in a fintech startup in exchange for equity expects substantial returns if the company scales successfully or goes public.

The VIX, often called the “fear index,” measures market expectations of near-term volatility based on options pricing. When the VIX rises sharply, it indicates increased investor anxiety, such as during market crashes or geopolitical events, while a low VIX suggests stable and confident market conditions.

Volatility refers to the degree of price fluctuations in a security or market over a period of time. A highly volatile stock may move sharply up or down within short durations, such as technology stocks during earnings announcements, while low volatility indicates more stable and predictable price movements.

Volume represents the total number of shares or contracts traded in a security during a specific period. High trading volume often confirms the strength of a price movement, such as a stock breaking out of resistance with heavy volume, while low volume may indicate weak investor interest.

VWAP is a trading benchmark that calculates the average price of a security weighted by trading volume throughout the day. Institutional traders often compare execution prices to VWAP; buying below VWAP suggests efficient trade execution, while prices above it may indicate higher-than-average transaction costs.

A warrant is a financial instrument that gives the holder the right, but not the obligation, to buy a company’s shares at a predetermined price before a specific expiry date. For example, investors may receive warrants during fundraising rounds, benefiting if the company’s share price rises above the exercise price.

A wash trade is an illegal trading practice where the same investor simultaneously buys and sells a security to create artificial trading volume. This misleading activity gives the impression of market interest or price movement without any real change in ownership, often used to manipulate market sentiment.

Weighting refers to the proportion of an asset or security within a portfolio or index. For example, in a market index where one stock has a 10% weighting, its price movement has a greater impact on the index’s overall performance compared to stocks with smaller weightings.

Window dressing is a strategy used by fund managers near reporting periods to improve the appearance of portfolio performance. This may involve selling underperforming stocks and buying well-known or strong-performing ones before disclosures, making the portfolio look more attractive to investors without changing long-term strategy.

Working capital represents a company’s short-term financial health and operational efficiency, calculated as current assets minus current liabilities. For instance, a business with sufficient working capital can comfortably pay suppliers and meet day-to-day expenses, while negative working capital may indicate liquidity challenges.

Yield is the income generated from an investment, expressed as a percentage of its price or value. For example, a bond paying ₹50 annually on a ₹1,000 investment offers a 5% yield, helping investors compare income potential across different assets like bonds, dividends, or fixed deposits.

The yield curve is a graphical representation showing yields of bonds with different maturities. A normal upward-sloping yield curve indicates higher returns for long-term bonds, while an inverted yield curve, where short-term yields exceed long-term yields, often signals expectations of economic slowdown or recession.

Yield to Maturity is the total return an investor can expect if a bond is held until maturity, accounting for interest payments and any gain or loss if purchased at a discount or premium. For example, buying a bond below face value increases its YTM beyond the coupon rate.

A zero-coupon bond is a debt instrument that does not pay periodic interest but is issued at a deep discount to its face value. Investors earn returns when the bond matures at full value, such as purchasing a ₹1,000 bond for ₹700 and receiving ₹1,000 at maturity.

A zero-sum game is a situation where one participant’s gain is exactly equal to another’s loss. In certain short-term trading scenarios, such as derivatives trading before costs, profits earned by one trader come directly from losses incurred by another, making the net outcome zero.