Until a few years ago, FD and gold were the most popular in the name of investment in India. But it has changed a lot over time. Now people like to invest the most in the stock market and mutual funds.
If you also want to invest in the stock market, but you are not able to get the right information about the terminology of the stock market, then today your problem will end.
Friends, in this article we will know the terminology of the entire stock market, which will eliminate all doubts about your stock market terminology.
Stock Market Terminology
[1] Share
Share means “part” i.e. a part of the ownership of a company which is a share. Thus a share is the smallest part of the company’s capital.
By definition, share means “the smallest part of the capital that is formed when the total capital of a company is divided into several equal parts is called a share.” ”
You can buy shares of any company through a stock broker.
[2] Bonus Share
When the reserve made by a company from its earned profits is divided proportionately among the existing shareholders in the form of shares, it is called bonus shares.
For example, if a company has announced a bonus in 2:1, then each shareholder who owns one share will get two additional shares.
Bonus shares are given as an alternative to dividends.
[3] Dividend
Dividend is what a company distributes from its net profits to its shareholders. The company also gives some of the company’s profits to its shareholders as a reward for investing and expressing confidence in the company.
Dividends are credited directly to the bank account of the shareholder.
[4] Stock Split
Share split is the process of splitting the stocks of a company. Stock split is a corporate action in which companies divide their stocks in a certain proportion.
In proportion to the stock split, the shares of that company become pieces and each piece becomes a new share. Due to the stock split, the company’s shares increase in the market.
With this, the share price and face value of the company decrease in the same proportion in which the stock is split.
Let’s say we have 10 shares of XYZ Limited with a share price of ₹1,000. While its face value is ₹ 10. Thus the value of our total investment was ₹10,000 (₹1,000×10).
XYZ Limited decides to split its shares at 2:1. This means that 1 share of this company will be converted into 2 shares. With this, the share price and face value will be halved.
After the stock split, our 10 shares will turn into 20 shares. While the share price will go up from ₹1,000 to ₹500. Also, the face value will be from ₹ 10 to ₹ 5.
[5] Bid Price
Bid price is the price of a stock at which a buyer is willing to buy that stock. For example, you have to buy a share of SBI Bank for ₹ 500 and you place your order at this price. Your price of ₹ 500 will be called bid price.
[6] Ask Price
Ask price is the price of a stock on which any seller is ready to sell that share.
[7] Spread
The difference between bid price and ask price of a stock is called spread.
[8] Bull Market
In the bull market, the stock market is bullish. Investors in the bull market expect the stock price to rise.
[9] Bear Market
There is a recession in the bear market. Investors in the bear market expect prices to fall.
[10] Limit Order
Limit order is an order in which buy or sell is ordered at a certain price. When these prices hit, your order is executed.
Friends, if you like the knowledge of the terminology of the stock market, then keep reading the article –
[11] Market Order
Any deal you put in a market order is immediately executed at the current market price.
[12] MIS or intraday orders
MIS stands for Margin Intraday Square-Off. When you want to take advantage of the ups and downs in a stock on a single trading day, you have to choose a MIS or intraday order.
In this type of order, you do not get the actual delivery of shares.
[13] CNC or Delivery Order – CNC or Delivery Order
The full form of CNC is Cash and Carry. CNC or delivery deals are made when you pick up the actual delivery of shares.
CNC or delivery option is chosen to hold shares for the long term.
[14] Stop Loss
Stop loss is the price point of a stock, where a trader or investor is ready to exit the stock by booking his loss. Stop loss is used to control losses in the stock market.
[15] Short Sale
In normal trading, we buy shares first and then sell them. But in short sell, shares are sold first and bought later.
Thus, in short selling, the investor borrows the shares from the broker and sells them to take advantage of the fall in the share price. It is called shorting because the stock is sold despite not having possession.
As soon as the stock price comes down, the trader buys back the stock. In this way, he takes his position off the square.
The difference between selling price and buying price is your profit/loss.
[16] Broker
Brokers work to combine buyers and sellers. Thus a stockbroker acts as an intermediary between the stock exchange and the investor.
You can buy and sell shares using the broker’s platform.
[17] Stock Exchange
Stock exchanges are places where all companies are listed. All stockbrokers are members of Stock Exchange. Currently NSE and BSE are the two main stock exchanges in India.
[18] Trading Account
Trading account is necessary to buy and sell shares. Trading accounts are opened with a stockbroker.
[19] Demat Account
If you buy shares of a company, you will need a demat account to hold them. Demat account acts exactly like your bank account.
[20] Sensex
Sensex is an index of the Indian stock market. Sensex represents all companies listed on the Bombay Stock Exchange (BSE).
Sensex is made up of top 30 companies of BSE. These 30 companies are listed on the Bombay Stock Exchange, which is the largest company based on market capitalization. Just as blood reports tell the condition of a person’s health, similarly Sensex also tells the condition of the entire market. Therefore, Sensex is also considered to be the pulse of the Indian domestic market.
If the value of these 30 Sensex companies increases, then the Sensex also goes up. Similarly, due to the decline in the value of Sensex shares, the value of Sensex is also seen to decline.
[21] Nifty 50
Nifty 50 is also an index, which represents companies listed on nse (National Stock Exchange).
Nifty 50 is made up of the 50 largest companies based on NSE’s market capitalization.
[22] SEBI Securities Exchange Board of India
SEBI stands for Securities Exchange Board of India. SEBI is the regulator of stock market in India. Just as rbi is the regulator for banks, sebi is in the stock market.
[23] Margin
Margin is like a borrowing which is provided by a stockbroker. Shares are bought and sold using margins.
For example, if you have ₹100 and your broker allows you to trade on it at a total of ₹200, then the above ₹100 will be of margin.
[24] Volatility
Volatility refers to the extent of fluctuations in share prices. During the trading session, unusual highs and lows are seen in high volatility stocks. Whereas low volatile stocks have less volatility.
[25] BTST – Buy Today Sell Tomorrow Trading
Buying a stock today and selling it tomorrow is called BTST (Buy Today Sell Tomorrow Trading).
[26] IPO – Initial Public Offering
By the process of IPO, a private company or corporation becomes a public company by selling some of its share.
With the ipo of a company coming to the market, investors have a golden opportunity to buy their shares and become a partner in that company’s business. Through the IPO, the shares of that company are listed on the stock exchange.
[27] FII Foreign Institutional Investors
FII means Foreign Institutional Investors. When foreign institutional investors (FIIs) invest in the market, the movement of the market is much faster, while when it withdraws money from the market, the market can fall drastically.
[28] Annual Statement – Annual Report
An annual report is the financial evaluation of a company. The annual report reports the financial position and operations of the company.
Annual reports reflect the performance of a company in a given financial year.
It includes about the main persons of the company, about the activities of the company, financial results of the company, upcoming projects, audit reports, balance sheets, profit-loss accounts, etc.
[29] Market Capitalization
The market price of the total shares issued by a company is called ‘market capitalization’ of that company.
For example, if a company has 1 lakh shares in the market and the price per share in the market is ₹10 lakh, then the market capitalization of that company will be ₹ 10 lakh. (1 lakh shares × ₹10)
The company’s large cap, mid cap and small cap positions are decided on the basis of market capitalization.
[30] NSE – National Stock Exchange
NSE is india’s largest stock exchange. Companies are listed on the stock exchange.
[31] BSE – Bombay Stock Exchange
BSE is india’s second largest and oldest stock exchange, where companies are listed.
[32] Buy Back – Buy Back
When a company decides to buy back its shares from the market, it is called ‘buy back’. Through buyback, the company reduces the number of shares available in the market. This process increases the profit per share as well as improves the balance sheet.
[33]Insider Trading
Insider trading is an illegal act. When a person has secret information about a company, he can thus make a profit by buying and selling a large amount of shares. This type of trading is called insider trading.
[34] Upper Circuit
Sebi has fixed different types of circuit levels which are usually 2%, 5%, 10% and 20%. If the price of a stock touches its predetermined upper level on a trading day, then it is an upper circuit.
If there is an upper circuit on a stock, it means that the buyers of that stock are very high. But sellers don’t exist. Due to this, the upper circuit is hit due to high demand and law supply.
[35] Lauer Circuit
If the price of a stock touches its predetermined low level on a trading day, then it is a lower circuit.
When a stock hits the lower circuit, there are a lot of sellers in it. Due to law demand and high supply, there is a lower circuit on the stock.
[36]Swing Trading
Swing trading is a well-known method of active trading, in which a stock is held for more than one day or two weeks.
In swing trading, positions are kept at least overnight, as the positions cannot be squared off on the same day as intraday trading.
Swing traders operate on the same principles as intraday traders, as their purpose is to make profits from short-term price movements.
[37]Positional Trading
In position trading, a stock is sold within a few months to 1 year.
[38] Pledged Share
Shares are financial securities over which the promoter or investor has full authority.
If promoters need money to run the company, they can pledge the shares to the banks for money, and borrow in return.
[39] Penny Stock
Generally penny stocks are stocks that are priced below ₹10. These types of stocks have the potential to give high returns with high risk.
[40] Contract Note
When shares are bought and sold from the market, the stockbroker sends contract notes to its clients. The contract note contains information related to the transaction of the share, rate, brokerage, tax, etc.
[41] DP – Depository Participate
Depository participant (DP) is the link between a stock exchange and an investor who stores shares or securities electronically. For example, if your demat account is in Upstox or Zerodha, then your shares will be stored in CDSL.
NSDL (National Securities Depository) and CDSL (Central Depository Services India Limited) are the two depositories in India.
[42] Forex Market
Forex market is the market where currency (such as rupees, dollars, pounds, euros) is bought and sold.
[43] 52-Week High
The highest price of a stock within the last 52 weeks is called a 52 week high.
[44] 52-Week Low
The lowest price of a stock within the last 52 weeks is called 52 weeks low.
[45] ETF – Exchange Traded Funds
ETF is a type of security that consists of a collection of stocks, securities that belong to a particular index or sector.
Trades are made on ETF exchanges such as NSE, BSE. This means that to buy and sell ETFs on Exchange, it is necessary to have a buyer and seller. The way ETFs buy and sell is exactly the same as shares.
[46] Corporate Action
When a decision related to a company is taken by a company, it is called corporate action, such as bonus issue, right issue, dividend, etc.
[47] Portfolio
A portfolio is a collection of different shares, mutual funds or other instruments such as bonds, debentures, etc. you buy. The portfolio can include only stocks or other financial instruments.
[48] Bonds
When a company or government borrows money directly from the general public, it issues bonds to the public in return.
In return, they promise to pay a fixed interest rate. Interest rates are written on these issued bonds, which is also called coupon rate.
[49] Debenture
Debentures are also like bonds, in exchange for which money is raised from the market by companies. They’re not as secure as bonds.
[50] Multibagger
Whenever a stock makes a very good profit and that share multiplies your money, then that profit is called multibagger return and stock is called multibagger stock.
[51] Commodity Market
This market is the market where commodities such as gold, silver, crude oil, etc. are bought and sold.
Friends, today you have learned and understood the entire terminology of the stock market in this article.