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STOCK TERMS

A group
The A group consists of 150 scrips in which carry forward (badla) facility is provided.
Acid test ratio
It is the ratio indicated by dividing a company's current assets to current liabilities. It
reflects the financial strength of a company and hence called Acid test ratio. Also known as
quick ratio.
Active market
Heavy volume for a specific share or the entire exchange.
Annual report
Audited document sent to the share holders at the end of each fiscal year reporting the
financial results of the company.
Asking price
The lowest price at which someone is willing to sell a security. Also known as Offer.
Assumed bond
Bond which is issued by one company but whose liability is taken over by another company.
B1 group
This is also called as non-specified group and consists of good quality, high volume scrips.
B2 group
This is also called as non-specified group and these are low market captialisation, thinly
traded stocks.
Badla
Carry Forward Trading.
Bear market
A bear market refers to a continuous phase of declining share prices. Bear markets are
characterised by overall pessimism as market participants expect prices to decline in the
future.
Bid
The highest price at which someone is willing to buy a security.
Blue-chip
The term 'Blue-chip' refers to stock of well-known companies with stable businesses. These
shares are actively traded, as the company's growth prospects are considered good.
Bonds
They are loan instruments. A bond holder is the creditor of the company. Bonds are
normally issued for a minimum period of three-years for a specific interest rate.
Bonus shares
Bonus shares are the shares given to share holders free of cost.
Book building
The process of securing the optimum price for a company's share. The issuing company
decides the price of the security by asking investors how many shares and at what price
they would be interested in.
Book runner
Institution that arranges and manages the book building process for the new public issue.
Book value
It is the value at which an asset is carried on a balance sheet. The book value of a share is
obtained by dividing the equity reserves of the company by the number of shares issued.

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Brokerage
Brokerage is the commission charged by a broker. The maximum brokerage chargeable, as
stipulated by SEBI is at present 2.5% of the trade value.
Bull market
A bull market refers to a continuous phase of rising share prices. Bull markets are
characterised by optimism about the upward movement of prices in the future.
Buy-back
The repurchase by a company of its own stock or bonds.
Capital market
Markets where the capital funds-debt and equity are traded. Included are private placement
sources of debt and equity as well as organized markets and exchanges.
Carry forward trading
The process of postponement of the payment by an investor for the purchase of securities
from one Settlement to another by paying a charge is called Carry Forward trading.
Circuit filter or Circuit breaker
The limit imposed by the stock exchange to control fluctuations in share prices in one
session. The circuit filter for a group stocks is 8% and that of B1 group is 25%.
Closing price
The trade price of a security at the end of a trading day. Based on the closing price of the
security, the base price at the beginning of the next trading day is calculated.
Common stock
A stock with a fixed dividend that is paid before preferred stock dividends. Generally, the
preferred dividend is higher than the common stock dividend.
Contango
This is one of the special conditions where a minimum quantity is specified for an order. In
carry forward transactions when the buyer pays interest on borrowed funds it is known as
Contango charges ( Vyaj Badla). When the seller pays a charge for borrowing securities it is
undha badla.
Cum dividend
The shares that are traded on dividend containing basis are called Cum dividend shares. The
Ex dividend shares become Cum dividend, immediately after the company declares
dividend.
Convertible bonds
Bonds that can be exchanged at the option of the holder for preference shares or equity
shares at a pre-decided price.
Current yield
Dividend or interest received calculated as a percentage of a share's or debenture's current
market price.
Debenture
Same as Bond.
Deferred equity
A common term for convertible debentures/ bonds referring to their equity component
which will ultimately get converted into equity shares.
Demat trading
Demat trading is trading of shares that are in the electronic form or dematerialised shares.
Dematerialisation is the process by which shares in the electronic form are cancelled and
credit in the form of electronic balances are maintained on highly secure systems at the
depository.

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Dividend
Dividend is the amount of money or stock that a company distributes to its shareholders, in
the ratio that they hold shares in the company.
Equity
Same as Stock.
Ex dividend shares
Ex dividend is the price of the share which does not contain dividend declared by the
company. The buyer is not entitled to the dividend amount.
Face value
The nominal value printed on the face of the share, debenture or bond. Also known as Par
Value.
Forward trading
Forward trading refers to trading where contracts traded today are settled at some future
date at prices decided today.
GDR (Global Depository Receipt)
It is an instrument issued abroad, listed and traded on foreign stock markets. A GDR is
convertible into shares, which are listed and traded on the domestic exchange, the dividend
being paid in the domestic currency.
IPO
Initial Public Offer. It is the first offering of equity shares made by a company to the general
public. Prior to the IPO the company's shares are held by a select group of people and are
not available to the public.
Liquidity
Liquidity refers to the amount of transactions in a particular counter, the larger the volume
of trading, higher the liquidity.
Listed securities
Securities listed on a stock exchange, as opposed to 'permitted securities', which are not
listed but can be traded on the exchange.
Lyon's Range
Calcutta Stock Exchange.
Market capitalisation
Market Capitalisation is the total market value, at the current stock exchange list price
multiplied by the total number of equity shares issued by a company.
NASDAQ
Short for National Association of Securities Dealer Automated Quotations system, a US-
based computerised stock exchange designed to facilitate over-the-counter stock trading.
Net worth
It is the total of equity share capital and reserves. It is also the value of total assets minus
total liabilities.
Nifty
Fifty selected stocks of National Stock Exchange.
Non- convertible bonds
Regular bonds are also called non-convertible bonds
NSE
National Stock Exchange.

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Online trading
The sale and purchase of securities over the Internet or through a broker's proprietary
software.
Over the counter trading
A market (unlike an exchange) where dispersed dealers trade, using a network of phones
and computer screens. The NASDAQ market is an OTC market in USA.
P/E ratio or Price- earnings ratio
The P/E ratio is calculated by dividing the stock’s market price per share to the firm’s
earnings per share, for the most recent 12-month period. P/E ratio is a measure of the
investors idea of a stock’s growth and risk prospects.
Par value
Face value, also referred to as the Par Value, is the nominal value of the share derived from
the total capital issued by the company and the number of shares issued to raise that
capital.
Portfolio
A collection of assests of an individual or organization. A portfolio may contain all the
financial assets such as shares, debentures, government bonds by the same individual or
organization.
Preferred stock
A stock with voting and dividend rights. In the event of liquidity, the preferred stock holders
are given a priority over the common stock holders.
Primary market
A market for new issues of shares, debentures and bonds, where investors apply directly to
the issuer for allotment on a pre-specified basis (price, minimum application amount etc).
Scrip
Same as Stock.
Secondary market
A market of buyers and sellers who trade in securities that have already been issued in the
primary market. Distinguished from the primary market in which the issuer sells shares
directly to the investor.
SEBI
Short for Securities and Exchange Board of India. The regulator for the Indian capital
markets.
Sensex
Measure of the performance of the collection of 30 "blue-chip" stocks traded on the BSE,
considered to represent the barometer of market activity and sentiment.
Settlement
Scrip-wise netting of trades by a broker after a trading period is over.
Settlement date
The date on which the transactions between members of a stock exchange, done during a
particular trading period, are settled by the delivery/receipt of shares.
Share Certificate
Share Certificate is a document that certifies a person's ownership of the interest in the
share-holding of the company.
Share Premium
The difference between the share's nominal value and its sale price. It is the amount in
excess of the face value of a share charged by a company on its share issue.

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Stock
Stock means representation of ownership in a company. Stock, share, security and equity,
scrip mean the same.
Stock exchange
Stock exchange is an organized marketplace for buying and selling listed securities. Stock
exchange is also known as bourse.
Stock index
Stock index is a measurement of the trend of share prices. The BSE, NSE NASDAQ are the
three most widely quoted market indexes.
Stock split
When a company splits its stock, it means that it will issue additional shares to the existing
investors by reducing the face value of a stock.
Stock trading
Buying and selling of stocks is called as stock trading.
Stockbroker
A member of the stock exchange who is licensed to buy or sell shares on his own or on his
client's behalf. He charges a commission brokerage on the deals.
Undervalued shares
Shares that are traded below their book value or the price-earning ratio.
Yield
Yield is the return earned by the investor or shareholder on his investment.

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