Glossary
Finance terms, defined. Each entry includes a formula where applicable and a real Indian example.
An RBI-regulated framework for secure, consent-based financial data sharing between financial institutions.
Excess return of an investment relative to its expected return based on risk (beta). Measures manager skill.
Orders placed after trading hours for the next trading day.
Date when company board announces corporate actions like dividend/bonus.
The split of a portfolio across asset classes such as equity, debt, and gold. It is set by goals, horizon, and risk tolerance rather than market views.
Measures how efficiently a company uses its assets to generate revenue. Higher ratio indicates better efficiency.
A volatility indicator that measures the average range of price movement over a period, considering gaps.
Process to settle trades when a seller fails to deliver shares (Short Delivery).
One hundredth of a percentage point. Interest rates, yields, spreads, and expense ratios are quoted in basis points to avoid ambiguity.
Measures a stock's volatility relative to the broader market (Nifty 50). Indicates systematic risk.
Difference between highest buy price (Bid) and lowest sell price (Ask).
A single trade with value > ₹10 Crore or 5 lakh shares.
Volatility bands placed above and below a moving average. Bands widen during volatility and contract during calm periods.
Free additional shares given to existing shareholders in proportion to their holding, capitalising reserves. No cash changes hands and total value is unchanged.
Free shares given to existing shareholders based on their current holding.
Process of discovering price by inviting bids within a price band.
The net asset value of a company divided by outstanding shares. Represents theoretical value if company was liquidated.
Net worth of the company per share.
Shareholders' equity divided by the number of shares outstanding. It is the accounting net worth attributable to each share.
SEBI's mandatory sustainability disclosure format for the top 1,000 listed Indian companies, covering environmental, social, and governance metrics.
Bullish: Expecting prices to rise. Bearish: Expecting prices to fall.
A company repurchasing its own shares, through a tender offer or open-market purchases, reducing share count. In India buybacks are governed by SEBI regulations.
The mean annual growth rate of an investment over a specified period longer than one year, assuming profits are reinvested at the end of each year.
A model that describes the relationship between systematic risk and expected return, used to price risky securities.
A digital form of sovereign currency issued by the RBI, piloted as the e-rupee in retail and wholesale segments. Unlike cryptocurrency, it is central-bank money.
Price bands set by exchanges (NSE/BSE) to halt trading during extreme volatility. Index-wide and stock-specific circuits exist.
Max allowed price movement in a day to check excessive volatility.
Interest calculated on both the initial principal and the accumulated interest from previous periods. The 'eighth wonder of the world.'
A legal record of trades executed on a given day.
Events initiated by a company that affect its shareholders.
The fixed annual interest a bond pays as a percentage of its face value. It is set at issue and does not change with the market price.
A condition attached to a loan or bond that the borrower must maintain, such as a maximum leverage ratio or minimum coverage ratio. Breaching one can trigger penalties or immediate repayment.
The rate of change in the prices of a consumption basket of goods and services. India's monetary policy targets CPI inflation at 4%, within a 2 to 6% band.
An agency's opinion of a borrower's ability to repay, expressed on a letter scale from AAA (highest safety) down to D (default). In India the major agencies are CRISIL, ICRA, and CARE.
The extra yield a corporate bond pays over a government bond of the same maturity, compensating for default risk and lower liquidity.
The share of deposits banks must hold as cash with the RBI, earning no interest. Changing it directly adds or drains banking-system liquidity.
The shortfall between a country's foreign earnings (exports, remittances) and foreign spending (imports). A persistent CAD must be financed by foreign capital inflows.
Measures a company's ability to pay short-term obligations. Compares current assets to current liabilities.
A measure of a company's financial leverage, showing the proportion of debt used to finance assets relative to shareholders' equity.
An account to hold securities (shares, bonds, ETFs) in electronic form. Managed by depositories NSDL or CDSL.
An account used to hold shares and securities in electronic format.
PAN Card, Aadhaar (Address Proof), Bank Proof (Cancelled Cheque), Photos.
Institutions that hold securities in electronic form (like a bank for shares).
Indian institutions such as mutual funds, insurers, and pension funds investing in domestic markets. Their flows are reported daily alongside FPI numbers.
A portion of the company's profits distributed to shareholders.
The share of net profit paid out as dividends. The remainder, the retention ratio, is reinvested in the business.
The annual dividend payment divided by the stock's current price, expressed as a percentage. Shows income return on investment.
Agent of the depository (Broker) who interacts with the investor.
Cash available for debt service divided by scheduled principal and interest payments. It measures whether operations generate enough cash to meet debt obligations as they fall due.
A measure of a bond's price sensitivity to interest-rate changes, expressed in years. Longer duration means bigger price swings when yields move.
The inverse of the P/E ratio: earnings per share divided by price. It expresses valuation as a percentage return, making stocks directly comparable with bond yields.
Operating profitability before interest, taxes, depreciation, and amortization as a percentage of revenue.
A type of moving average that gives more weight to recent prices, making it more responsive to new information than simple moving average.
A fixed payment amount made by a borrower to a lender at a specified date each month. Includes both principal and interest components.
The total value of a company including both equity and debt, minus cash. Represents what it would cost to acquire the entire business.
The portion of a company's profit allocated to each outstanding share of common stock. A key indicator of company profitability on a per-share basis.
A third-party assessment of a company's environmental, social, and governance practices. Different providers use different methodologies, and their scores often disagree.
Enterprise Value divided by EBITDA. A valuation metric that compares total company value to operating earnings.
A multiple comparing firm value to revenue. Used when earnings are negative or temporarily depressed, since revenue is harder to manipulate than profit.
The annual fee charged by a mutual fund to manage your money, expressed as a percentage of assets.
The nominal value of a share as stated in the company's charter. Used for accounting purposes and calculating dividends.
The original value of a share as listed in the company's books.
Free cash flow per share divided by the share price, or firm-level free cash flow divided by market cap. It shows the cash return the business generates on its current price.
Horizontal lines indicating potential support/resistance at key Fibonacci ratios before price continues in original direction.
The gap between government spending and its revenues, financed by borrowing. Expressed as a percentage of GDP in the Union Budget.
Overseas institutions and funds registered with SEBI to invest in Indian listed securities. Their daily buy and sell figures are published by the exchanges.
Already listed company issues new shares to public.
The portion of shares available for public trading, excluding promoter holdings, government holdings, and locked-in shares.
Market cap calculated using only shares available for public trading.
The value of a current asset at a future date based on an assumed growth rate. It calculates how much an investment made today will be worth in the future.
When a stock opens significantly lower than yesterday's close.
When a stock opens significantly higher than yesterday's close.
The rate of change in the total value of goods and services produced in the economy, reported quarterly in real (inflation-adjusted) terms.
Overstating or misrepresenting environmental credentials, in marketing, labels, or disclosures, without matching substance.
Gross profit as a percentage of revenue: what remains after direct production costs, before operating expenses.
India's unified indirect tax replacing multiple taxes. Has three components: CGST (Central), SGST (State), IGST (Inter-state).
A board member with no material relationship to the company or its promoters, meant to protect minority shareholders. Listing rules mandate minimum independent representation.
Benchmark tracking the performance of a group of stocks.
Measures how easily a company can pay interest on its outstanding debt. Higher is better.
Retail (Small), HNI (High Net Worth), DII (Domestic Institutions), FII (Foreign Institutions).
The day shares start trading on the exchange.
IPO: Fresh shares issued (Money to company). OFS: Existing shareholders sell (Money to seller).
The mandatory identity-verification process for financial accounts, using documents such as PAN and Aadhaar, increasingly completed digitally through video or Aadhaar-based flows.
Minimum number of shares you must buy (usually in F&O or SME IPOs).
Tax on profits from selling assets held for more than 12 months (equity). Currently 12.5% for equity above ₹1.25 lakh exemption.
Profit earned from selling a stock held for more than 12 months.
The price at which the last trade occurred.
A trend-following momentum indicator showing the relationship between two exponential moving averages of a security's price.
The gap between a stock's estimated intrinsic value and its market price. Buying below intrinsic value creates a cushion against errors in the estimate.
The total market value of a company's outstanding shares. Represents what the market believes a company is worth.
Total value of a company's shares.
Mandatory annual filing with Registrar of Companies containing a company's financial statements, auditor's report, and board report.
Annual return form containing information about shareholders, directors, and company structure filed with Registrar of Companies.
Financial institution managing the IPO process.
The per-unit value of a mutual fund scheme, calculated by dividing total value of all securities by number of units.
The percentage of revenue that remains as profit after all expenses, taxes, and costs are deducted.
India's benchmark stock index comprising 50 of the largest and most liquid companies listed on NSE, representing about 65% of free-float market cap.
Operating profit (EBIT) with tax removed, before any financing effects. It is the profit the business generates for all capital providers.
A loan on which interest or principal has remained overdue for more than 90 days. Banks must classify such loans separately and provide against expected losses.
The difference between the present value of cash inflows and outflows over time. Used to analyze the profitability of an investment.
A cumulative total of volume based on whether price closed up or down. Measures buying and selling pressure.
The sensitivity of operating profit to changes in revenue, driven by the share of fixed costs. High fixed costs mean small revenue changes produce large profit swings.
Operating profit (EBIT) as a percentage of revenue. It captures the profitability of the core business after all operating costs but before interest and tax.
Disclosed Quantity (show less than actual) to hide intent.
Market Order (Buy at current price), Limit Order (Buy at specific price).
Compares a stock's market value to its book value. Shows how much investors are paying for the net assets of a company.
The ratio of a company's current stock price to its earnings per share. Indicates how much investors are willing to pay for each rupee of earnings.
Platforms that match individual lenders directly with borrowers, regulated in India as NBFC-P2P entities with caps on exposure per lender and borrower.
A licensed intermediary that lets merchants accept many payment methods without direct bank integrations, holding funds briefly in escrow during settlement.
The P/E ratio divided by expected earnings growth rate. Adjusts valuation for growth expectations.
Promoters using their shares as collateral to take loans.
Session from 9:00 AM to 9:15 AM to stabilize opening price.
The current worth of a future sum of money given a specified rate of return. It's the reverse of future value calculation.
The price range within which investors can bid for IPO shares.
How IPO price is finalized based on bids received.
Share prices are determined by supply and demand in the market.
Allows companies to raise capital for growth and expansion.
The individual or group who starts the company and raises capital.
The percentage of shares held by the founders or controlling group, disclosed quarterly. Changes in it are closely watched.
Promoters borrowing against their own shareholding by pledging shares as collateral. Disclosed quarterly in Indian shareholding patterns.
Detailed document describing the company, risks, and financials for IPO.
A stricter liquidity measure that excludes inventory from current assets. Shows ability to meet obligations without selling inventory.
The actual return on investment after adjusting for inflation. Shows the true purchasing power gained.
Periodically restoring a portfolio to its target allocation by trimming what has grown and adding to what has lagged.
The cut-off date to determine which shareholders are eligible for dividends/bonus.
A deal between the company and parties connected to it, such as promoter entities or subsidiaries. Disclosed in the annual report and subject to audit-committee approval.
The rate at which the RBI lends overnight funds to banks against government securities. It is the primary policy rate set by the Monetary Policy Committee.
The rate at which banks park surplus funds with the RBI. Together with the repo rate it forms the corridor within which overnight market rates move.
An offer to existing shareholders to buy new shares, usually below the market price, in proportion to their holding. It raises fresh capital for the company.
Old physical floor trading method (now replaced by electronic).
Indicates how efficiently a company uses its assets to generate profit. Shows how much profit is generated for every rupee of assets.
A measure of how efficiently a company uses its total capital (equity + debt) to generate profits. Better for comparing capital-intensive businesses.
A measure of how efficiently a company uses shareholders' equity to generate profits. Shows percentage return on shareholder investment.
After-tax operating profit divided by the total capital invested in the business, both debt and equity. It measures how well the company converts all its capital into operating profit.
A momentum oscillator that measures the speed and magnitude of recent price changes. Oscillates between 0 and 100.
A simple way to estimate how long it takes for an investment to double at a given annual interest rate.
A bank deposit account that provides modest interest.
Regulations governing public issues (IPOs), rights issues, preferential allotments, and QIPs. Sets eligibility and disclosure requirements.
SEBI regulations that govern how listed companies must report data, maintain corporate governance, and disclose material information.
SEBI regulations that prohibit trading by insiders with unpublished price-sensitive information (UPSI). Covers designated persons and relatives.
The 'Takeover Code' governing acquisition of substantial shares, open offers, and change of control in listed companies.
A popular income tax deduction under the Old Tax Regime for investments up to ₹1.5 lakh in specified instruments.
Indices tracking specific sectors.
Primary Market (New securities issued) and Secondary Market (Existing securities traded).
The date when ownership is transferred and funds are exchanged.
Dividing existing shares into multiple shares to increase liquidity and reduce price per share.
Risk-adjusted return measure showing excess return per unit of total risk (standard deviation).
Selling shares you don't own, hoping to buy them back lower.
Interest calculated only on the principal amount. Unlike compound interest, it doesn't earn interest on accumulated interest.
A method of investing a fixed sum regularly in mutual funds. It automates investing and leverages rupee cost averaging.
The share of deposits banks must invest in approved securities, chiefly government bonds. It ensures bank liquidity and a captive market for government debt.
A measure of the dispersion of returns around the average. Higher standard deviation means higher volatility/risk.
Tax on profits from selling assets held for less than 12 months (equity) or less than 24/36 months (other assets).
A momentum indicator comparing a security's closing price to its price range over a given time period.
Dividing each share into several shares of lower face value. Count rises, price falls proportionately, and value is unchanged.
An order to sell automatically if price drops to a certain level to limit loss.
A tax levied on every purchase and sale of securities (equity shares, derivatives, mutual funds) on recognized stock exchanges.
Settlement cycle where trade-related settlements happen within 24 hours of the transaction. India moved to T+1 in 2023.
The value of all cash flows beyond the explicit forecast period in a DCF, usually estimated with the Gordon growth formula. It typically accounts for the majority of a DCF's total value.
Top Line refers to Revenue/Sales. Bottom Line refers to Net Profit.
An account used to place buy and sell orders in the stock market.
Electronic system where orders are matched automatically.
Studying historical price movements to predict future direction.
Risk-adjusted return measure using beta (systematic risk) instead of total risk. Better for diversified portfolios.
Institution guaranteeing to buy unsold shares in an IPO.
India's real-time, interoperable bank-to-bank payment system operated by NPCI. It lets any app move money instantly between accounts using simple identifiers.
Total number of shares traded in a specified period.
The average rate a company pays to finance its assets, weighted by proportion of debt and equity in capital structure.
The number of days cash stays locked in operations: inventory days plus receivable days minus payable days.
An index of prices at the wholesale level, weighted toward manufactured goods and commodities. It often diverges from CPI, which tracks consumer prices.
The annualised return of a series of cash flows on irregular dates, solved so their present values sum to zero. It is the correct return measure for SIPs and staggered investments.
The single discount rate at which a bond's future coupons and principal repayment equal its current market price. It is the total annualised return from holding the bond to maturity.