The world of the share market (often called the stock market) is filled with its own set of jargons and terms. Here’s a list of some commonly used terms and their explanations:
1.Bull Market:
A market characterized by rising share prices. It typically indicates optimism about the economy and a sustained period of profitability.
2. Bear Market:
Opposite of a bull market, it’s a market where share prices are falling, leading to a widespread pessimism.
3. Blue Chip Stocks:
Shares of well-established and financially stable companies that have a history of producing reliable returns.
4. Dividend:
A portion of a company’s earnings distributed to shareholders, typically in the form of cash or additional shares.
5. Initial Public Offering (IPO):
The first sale of stock by a company to the public. Before an IPO, a company is considered private.
6. Portfolio:
A collection of financial assets such as stocks, bonds, and cash held by an investor or financial institution.
7. Bid:
The price a buyer is willing to pay for a security.
8. Ask (or Offer):
The price a seller is willing to sell a security for.
9. Spread:
The difference between the bid and ask prices.
10. Market Capitalization (Market Cap):
The total market value of a company’s outstanding shares of stock. Calculated as: Market Cap = Stock Price x Number of Outstanding Shares.
11. Limit Order:
An order to buy or sell a security at a specific price or better.
12. Stop-Loss Order:
An order placed with a broker to buy or sell once the stock reaches a certain price, helping limit an investor’s loss.
13. Broker:
A person or firm that’s licensed to buy and sell securities on behalf of its clients.
14. Index:
A statistical measure of change in the stock market, representing a portfolio of stocks, like the BSE Sensex or NSE Nifty in India.
15. Short Selling:
Selling a security you don’t own, with the belief that its price will drop, allowing you to buy it back at a lower price for a profit.
16. P/E Ratio (Price-to-Earnings Ratio):
A valuation ratio, calculated as: P/E Ratio = Market Price per Share / Earnings per Share (EPS). It indicates the rupee amount an investor expects to invest in a company to receive one rupee of that company’s earnings.
17. Yield:
Often refers to the dividend yield, which is the annual dividend income an investor can expect from an investment, expressed as a percentage of the stock’s price.
18. Volatility:
A measure of the risk potential of a stock or an index. High volatility indicates the price moves dramatically within short periods, and low volatility indicates a stable stock price.
19. Circuit Breaker:
A system to halt trading after extreme price moves to prevent panic-selling.
20. Book Value:
The value of an asset on a company’s balance sheet, calculated by subtracting liabilities from the total assets.
21. Face Value:
The nominal or dollar value of a security stated by the issuer. For shares, it’s the original cost of the stock shown on the certificate.
22. Leverage:
Using borrowed money to amplify potential returns. However, it can also increase potential losses.
23. Margin Call:
A demand from a broker to deposit more money or securities to cover potential losses in a margin account.
24. Rally:
A sustained period of increasing stock prices.
25. Correction:
A reverse movement, usually negative, of at least 10% in a stock, bond, commodity, or index to adjust for overvaluation.
