Market Glossary

Section 80C of Income Tax Act — allows deductions up to ₹1.5 lakh for investments in ELSS, PPF, EPF, NSC, life insurance premiums, and home loan principal.

Assets Under Management — total market value of assets a fund manages. Larger AUM generally indicates investor trust but can limit flexibility for smaller stocks.

Index of the 12 most liquid and large-cap banking stocks on NSE. Highly volatile and popular among options traders.

A prolonged period of falling stock prices, typically a 20%+ decline from recent highs. Often associated with recessions or economic uncertainty.

Free additional shares given to existing shareholders in proportion to their holdings (e.g., 1:1 bonus = 1 free share for every share held). Stock price adjusts proportionally.

Net assets of a company per share (Total Assets − Total Liabilities ÷ Shares). If market price is below book value, stock may be undervalued.

Bombay Stock Exchange — Asia's oldest stock exchange, founded in 1875. Home to the Sensex index.

A prolonged period of rising stock prices, typically 20%+ gains from recent lows. Associated with economic optimism and investor confidence.

Company repurchases its own shares from the market. Reduces outstanding shares, increases EPS, and is often a signal that management believes the stock is undervalued.

Compound Annual Growth Rate — the rate at which an investment grows annually over a period, assuming profits are reinvested. The most honest way to measure investment returns.

Central Depository Services Limited — one of two depositories in India (alongside NSDL) that holds securities in dematerialised form.

A regulatory mechanism that halts trading when a stock moves beyond a certain % (5%, 10%, 20%). Prevents panic selling or manipulation.

A period where a stock trades sideways within a range, neither making new highs nor lows. Often precedes a breakout or breakdown.

A decline of 10–20% from recent highs. Considered healthy and normal in bull markets. Distinct from a crash (sharp, sudden drop).

Dematerialised account that holds shares and securities in electronic form. Mandatory for trading in India. Opened with a depository participant (DP).

A portion of company profits distributed to shareholders, usually quarterly or annually. Companies declare a record date — you must hold shares before this date to receive the dividend.

Annual dividend per share divided by current stock price, expressed as %. A 3% yield means ₹3 dividend for every ₹100 invested.

Depository Participant — an intermediary (bank or broker) registered with SEBI that provides demat account services.

Earnings Before Interest, Taxes, Depreciation, and Amortisation. A measure of core operational profitability, useful for comparing companies across different capital structures.

Equity Linked Savings Scheme — a tax-saving mutual fund under Section 80C with a 3-year lock-in. Combines tax savings + equity returns.

Earnings Per Share — company's net profit divided by total number of shares. Higher EPS generally indicates better profitability.

Annual fee charged by a mutual fund for managing your money, expressed as % of AUM. Direct plans have lower expense ratios than regular plans.

Futures and Options — derivative contracts that derive their value from an underlying asset (stock, index, commodity). High risk, requires margin and expertise.

Follow-on Public Offer — when an already-listed company issues new shares to the public to raise additional capital.

Proportion of a company's shares available for public trading (excluding promoter holdings). Higher free float = more liquidity.

A contract to buy or sell an asset at a predetermined price on a future date. Both buyer and seller are obligated to fulfill the contract.

Grey Market Premium — the unofficial price at which IPO shares trade before listing. Indicates expected listing gains but is unregulated and unreliable.

High Net Worth Individual — investors applying for more than ₹2 lakh in an IPO. Reserved a separate portion (15%) of the IPO.

A mutual fund that passively tracks a market index (like Nifty 50) with minimal intervention. Lower costs, no manager bias, and historically beats most active funds long-term.

Initial Public Offering — when a private company first sells shares to the public and lists on a stock exchange. Investors apply during the subscription window.

International Securities Identification Number — a 12-character alphanumeric code that uniquely identifies a security globally.

Minimum number of units per F&O contract. For Nifty, it's 75 units. You can't buy fractional lots — all or nothing.

Long Term Capital Gains — profit from selling listed equity shares held for more than 1 year. Taxed at 12.5% above ₹1.25 lakh gains (post-Budget 2024).

Total market value of a company's outstanding shares (Price × Total Shares). Used to classify companies as Large-Cap (>₹20,000 Cr), Mid-Cap (₹5,000–20,000 Cr), or Small-Cap (<₹5,000 Cr).

Net Asset Value — per-unit price of a mutual fund. Calculated daily as (Total Assets − Liabilities) ÷ Units Outstanding.

New Fund Offer — launch of a new mutual fund scheme. Like an IPO for mutual funds. NFO price is typically ₹10 per unit.

Benchmark index of the National Stock Exchange (NSE) comprising 50 large-cap Indian companies across key sectors. Widely used to gauge the health of the Indian economy.

National Securities Depository Limited — the first and largest depository in India, established in 1996.

National Stock Exchange — India's largest stock exchange by trading volume, located in Mumbai.

Total number of open derivative contracts that haven't been settled. Rising OI with rising price = bullish confirmation.

A contract giving the buyer the right (not obligation) to buy (Call) or sell (Put) an asset at a specific price (strike price) before expiry.

Price-to-Earnings ratio — stock price divided by earnings per share (EPS). A P/E of 20 means investors pay ₹20 for every ₹1 of profit. Lower is generally cheaper, but context matters.

The price paid by the options buyer to the seller. This is the maximum loss for the buyer, and the maximum profit for the seller.

Qualified Institutional Buyer — large institutional investors (mutual funds, banks, FIIs) who get a reserved portion (75%) of an IPO allocation.

A period of sustained price increases in a stock or market, typically after a decline. Can occur within both bull and bear markets.

Company offers existing shareholders the right to buy new shares at a discount before they are offered to the public.

Return on Capital Employed — EBIT divided by total capital employed. Shows how effectively a company uses all its capital (equity + debt).

Return on Equity — net profit divided by shareholders' equity. Measures how efficiently a company uses shareholder money to generate profit. >15% is generally considered good.

Securities and Exchange Board of India. The regulator for Indian securities markets, protecting investor interests and promoting orderly development.

Benchmark index of the Bombay Stock Exchange (BSE) comprising 30 financially sound companies. "Sensex" comes from Sensitive Index.

Systematic Investment Plan — investing a fixed amount in a mutual fund at regular intervals (monthly). Leverages rupee cost averaging to reduce timing risk.

Short Term Capital Gains — profit from selling listed equity held for less than 1 year. Taxed at 20% (post-Budget 2024).

Dividing existing shares into multiple shares. A 2:1 split doubles shares and halves the price. Total value remains the same — improves liquidity.

The fixed price at which an option contract can be exercised. A Call option profits when market price > strike price.

Securities Transaction Tax — a small tax on every stock market transaction in India. Collected at source; non-negotiable.

Tax Deducted at Source — tax deducted by the company before paying dividends. Currently 10% on dividends above ₹5,000 per year.

Volume Weighted Average Price — average price a stock has traded throughout the day weighted by volume. Institutional traders use it as a benchmark.