Whether you are a first-time retail investor just opening a Demat account or a seasoned trader navigating the derivatives desk, understanding the language of the stock market is your most powerful asset. India’s capital market has grown at a remarkable pace – as of early 2026, the BSE lists over 5,700 companies, the NSE sees daily equity turnover exceeding ₹1,00,000 crore, and SEBI continues to roll out investor-protection regulations that reshape how the market operates.
This blog – Stock Market Terminology A-Z, Part 1 (A to M) – is your definitive, jargon-busting reference guide. Every term is explained in plain English, illustrated with real-world Indian examples (in ₹), and cross-referenced with relevant SEBI circulars or RBI guidelines where applicable. Bookmark this page; share it with your investing community; and use it as a daily cheat-sheet on your investing journey.
A
1. Ask Price (Offer Price)
What Is the Ask Price?
The Ask Price is the lowest price at which a seller is willing to sell a share on the exchange. It is the opposite of the Bid Price. Together they form the Bid-Ask Spread – a key indicator of market liquidity.
Indian Example: Infosys (INFY) Ask Price: ₹1,820.50. A buyer clicking ‘Buy at Market’ will pay this price.
Why It Matters
- A narrow spread (₹1-₹2) = highly liquid stock (e.g., Reliance Industries)
- A wide spread (₹10-₹50) = illiquid stock; trading costs are higher
- SEBI mandates order-book transparency on BSE/NSE so investors always see the Ask Price
2. Asset Allocation
Definition
Asset Allocation is the strategy of distributing investment capital across different asset classes – equities, bonds, gold, real estate, and cash – based on an investor’s risk tolerance, time horizon, and financial goals.
Rule of Thumb (India 2026): 100 minus your age = % in equities. A 30-year-old should hold ~70% in equities.
Popular Models in India
- Conservative: 30% Equity | 50% Debt | 20% Gold/Real Estate
- Moderate: 60% Equity | 30% Debt | 10% Gold
- Aggressive: 80% Equity | 10% Debt | 10% Alternative Assets
3. Annual Report
What Is It?
A document published by every listed company (mandatory under Companies Act, 2013 and SEBI LODR Regulations) disclosing financial performance, director’s report, auditor’s report, and corporate governance compliance for the financial year ending March 31st (Indian FY).
Key Sections to Read
- Balance Sheet – financial position as on 31 March
- P&L Statement – revenue, expenses, and PAT (Profit After Tax)
- Cash Flow Statement – operational, investment, and financing activities
- MD&A (Management Discussion & Analysis) – qualitative commentary
- Notes to Accounts – accounting policies and contingent liabilities
4. Arbitrage
Concept
Arbitrage is the simultaneous purchase and sale of the same (or equivalent) security in different markets to profit from temporary price differences. It is considered risk-free profit when executed perfectly.
Indian Example: TCS trades at ₹4,000 on BSE and ₹4,005 on NSE simultaneously. An arbitrageur buys on BSE and sells on NSE, pocketing ₹5 per share (minus brokerage and STT).
Types of Arbitrage in India
- Cash-Futures Arbitrage – buy stock, sell futures at a premium
- Exchange Arbitrage – price difference between BSE and NSE
- Merger Arbitrage – buy target company shares during an open offer under SEBI Takeover Code
5. At-the-Money (ATM) Option
An option is said to be At-the-Money when the current market price of the underlying asset is equal (or very close) to the option’s strike price.
Example: Nifty 50 is at 22,500. A Call or Put option with strike 22,500 is ATM.
ATM options have the highest time value (theta) and maximum sensitivity to price movement (delta ≈ 0.50).
B
6. Bear Market
Definition
A Bear Market is a sustained decline of 20% or more from recent highs in a broad market index (e.g., Nifty 50 or Sensex) over at least two months. It reflects widespread pessimism, declining corporate earnings, and risk-off sentiment.
Historical Indian Example: March 2020 Covid Crash – Nifty fell from ~12,350 (Jan 2020) to ~7,511 (March 2020), a 39% decline.
Bear Market Survival Strategies
- SIP (Systematic Investment Plan) – rupee-cost averaging reduces average buy price
- Shift to defensive sectors – FMCG, Pharma, IT Services
- Increase debt/gold allocation temporarily
- Avoid panic selling – stay invested for long-term wealth creation
7. Beta (β)
What Is Beta?
Beta measures the volatility of a stock relative to its benchmark index. It is a core concept in CAPM (Capital Asset Pricing Model).
- β = 1 → stock moves in line with the index (e.g., index ETF)
- β > 1 → more volatile than index (e.g., small-cap stocks, β = 1.5 means 50% more volatile)
- β < 1 → less volatile (e.g., utility stocks, FMCG – HUL β ≈ 0.6)
- β < 0 → moves inversely to market (e.g., Gold ETFs in some periods)
Formula: β = Cov(Stock Returns, Market Returns) / Var(Market Returns)
8. Bid Price
The Bid Price is the highest price a buyer is willing to pay for a security at any given moment. It is always lower than the Ask Price.
Bid-Ask Spread Formula: Spread = Ask Price − Bid Price
On NSE’s NEAT system, the entire order book with all bids and asks is visible to all market participants, ensuring price transparency as mandated by SEBI.
9. Blue-Chip Stock
Characteristics
Blue-chip stocks are shares of large, well-established, financially sound companies with a long track record of reliable performance.
- Market Cap: ₹20,000 crore+ (typically Large-Cap under SEBI/AMFI classification)
- Consistent dividend payment history
- Strong brand equity and market leadership
- Examples: Reliance Industries, TCS, HDFC Bank, Infosys, ITC, HUL
SEBI/AMFI Classification (2026)
- Large Cap: Top 100 companies by market cap
- Mid Cap: 101st to 250th companies
- Small Cap: 251st onwards
10. Bond
A Bond is a fixed-income debt instrument issued by governments (Central/State) or corporations to raise capital. The issuer promises to pay periodic interest (coupon) and return the principal at maturity.
Example: Government of India 7.26% GS 2032 Bond – Face Value ₹1,000, semi-annual coupon of ₹36.30, matures in 2032.
Types of Bonds in India
- Government Securities (G-Secs) – issued by RBI on behalf of GoI; sovereign guarantee
- State Development Loans (SDLs) – issued by state governments
- Corporate Bonds – issued by companies (rated by CRISIL, ICRA, CARE)
- Sovereign Gold Bonds (SGBs) – gold-linked, issued by RBI; interest 2.5% p.a. + gold price gain
- Infrastructure Investment Trusts (InvITs) – bond-like structure for infrastructure assets
11. Book Value (BV) Per Share
Book Value is the net asset value of a company as per its balance sheet – total assets minus total liabilities. Divided by total shares outstanding gives Book Value Per Share.
Formula: BVPS = (Total Shareholders’ Equity) / (Total Shares Outstanding)
Example: If Tata Steel’s equity = ₹80,000 crore and shares = 1,200 crore, BVPS = ₹66.67
Price-to-Book (P/B) Ratio = Market Price / BVPS. Banking stocks are often valued on P/B. HDFC Bank P/B in 2026 ≈ 2.8x.
12. BSE (Bombay Stock Exchange)
Established in 1875, BSE is Asia’s oldest stock exchange and the world’s largest by number of listed companies (5,700+). Its flagship index is the S&P BSE SENSEX, comprising 30 of the largest and most actively traded stocks.
Key BSE Indices (2026)
- SENSEX – 30 large-cap stocks; base year 1978-79 = 100
- BSE 100, BSE 200, BSE 500
- BSE MidCap, BSE SmallCap
- BSE IPO Index, BSE BANKEX
BSE operates under SEBI oversight. Settlement cycle: T+1 (implemented for all securities from January 27, 2023).
13. Bull Market
A Bull Market is a sustained period of rising stock prices – generally defined as a 20%+ rise from a recent low. It is characterized by investor optimism, strong economic indicators, and robust corporate earnings.
Indian Example: Post-Covid Bull Run (April 2020 – October 2021) – Nifty surged from 7,511 to ~18,477, a 146% rally in 18 months.
Bull Market Strategies
- Momentum investing – ride high-performing stocks
- Increase equity allocation gradually
- Use trailing stop-loss to protect gains
- Rebalance portfolio as valuations stretch
C
14. CAGR (Compound Annual Growth Rate)
CAGR represents 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.
Formula: CAGR = [(Ending Value / Beginning Value)^(1/n)] – 1
Example: SIP investment of ₹5,000/month for 15 years grew to ₹25 lakh → CAGR ≈ 12.5% p.a.
Nifty 50 CAGR (last 25 years, 2001-2026) ≈ 14% p.a., making India one of the best-performing major equity markets globally.
15. Call Option
A Call Option gives the buyer the RIGHT (but not the obligation) to BUY the underlying asset at a predetermined strike price before or on the expiry date. The buyer pays a premium to the seller (writer).
Example: Nifty 50 Call Option – Strike 22,500, Premium ₹150, Lot Size 50. Total premium paid = ₹7,500. If Nifty rises to 23,000, intrinsic value = (23,000–22,500) × 50 = ₹25,000.
Important Points – SEBI/NSE Norms 2026
- Equity derivatives expiry: Last Thursday of the month (monthly) or weekly Thursdays
- Margins required as per SEBI’s risk-based margin framework (SPAN + Exposure)
- Weekly index options (Nifty/BankNifty/Sensex) are India’s most actively traded contracts
16. Capital Gains Tax (India 2026)
Short-Term Capital Gains (STCG)
If listed equity shares/equity mutual funds held for less than 12 months are sold at a profit:
STCG Tax Rate (Post Budget 2024): 20% (increased from 15%) on gains above ₹0 (no basic exemption)
Long-Term Capital Gains (LTCG)
If held for 12 months or more:
LTCG Tax Rate: 12.5% on gains exceeding ₹1.25 lakh per financial year (increased from ₹1 lakh exemption limit – Budget 2024)
Debt Mutual Funds (Post April 2023)
Gains from debt MFs (holding <35% equity) are taxed at slab rates as ordinary income, regardless of holding period. This was a landmark change from Budget 2023 that shifted many HNI investors from debt MFs to direct bonds.
17. Circuit Breaker (Price Band / Trading Halt)
A Circuit Breaker is an automatic mechanism to halt trading temporarily when the market or individual stock moves beyond a pre-defined percentage limit – protecting investors from extreme volatility.
Individual Stock Circuit Filters (NSE/BSE 2026)
- 2% / 5% / 10% / 20% bands – applied based on liquidity and index membership
- Nifty/Sensex 500 stocks: 20% upper/lower circuit in cash segment
Index-Level Circuit Breakers
- 10% movement → 45-minute trading halt (before 1 PM) / 15-minute halt (1-2:30 PM) / close for the day (after 2:30 PM)
- 15% movement → 1 hour 45 minutes / 45 minutes / close for the day
- 20% movement → Close for the day regardless of time
18. Commodity Market
India’s commodity derivatives market is regulated by SEBI (merged with FMC in 2015). Key exchanges are MCX (Multi Commodity Exchange) and NCDEX (National Commodity and Derivatives Exchange).
Major Commodity Categories Traded in India
- Bullion: Gold (₹/10 gm), Silver (₹/kg)
- Energy: Crude Oil (₹/barrel), Natural Gas (₹/MMBTU)
- Base Metals: Copper, Zinc, Nickel, Aluminium, Lead
- Agri: Soybean, Castor Seed, Coriander, Turmeric (on NCDEX)
India’s Largest Commodity: Gold – India consumes ~700-800 tonnes annually; MCX Gold is the key hedging instrument
19. Consolidated Financial Statements
Consolidated financials include the parent company and all its subsidiaries in a single combined financial report. SEBI LODR mandates quarterly and annual consolidated results for listed companies.
Example: Tata Motors’ consolidated results include TCS, Jaguar Land Rover (UK), and all subsidiaries – giving the true picture of the conglomerate’s financial health.
20. CRR (Cash Reserve Ratio)
CRR is the minimum percentage of a bank’s Net Demand and Time Liabilities (NDTL) that must be maintained as cash deposits with the RBI. It is a key monetary policy tool.
CRR (as of April 2026): 4.00% (maintained by RBI)
An increase in CRR reduces money supply (tightening) → negative for bank stocks. A decrease is expansionary → positive for markets.
D
21. Demat Account
A Demat (Dematerialised) Account holds securities in electronic form, eliminating the need for physical share certificates. It is mandatory to have a Demat account to trade/invest in the Indian stock market.
Key Regulators and Depositories
- CDSL (Central Depository Services Ltd) – BSE-promoted depository
- NSDL (National Securities Depository Ltd) – NSE-promoted depository
- Regulated by SEBI under Depositories Act, 1996
Account Charges (2026)
- Account Opening: ₹0 (most brokers offer free opening)
- AMC (Annual Maintenance Charge): ₹0 – ₹300/year
- Transaction Charges: ₹15–₹25 per debit instruction
- DP Charges on selling: ₹13.5 + 18% GST per scrip per day (CDSL standard)
22. Derivative
A derivative is a financial contract whose value is derived from an underlying asset – such as equity shares, indices, commodities, currencies, or interest rates.
Types of Derivatives in Indian Markets
- Futures – standardized contract to buy/sell at a future date and price
- Options – right (not obligation) to buy or sell
- Forwards – OTC (over-the-counter), customized futures
- Swaps – exchange of cash flows (Interest Rate Swaps – RBI regulated)
India’s F&O Market Size (2026): NSE is the world’s largest exchange by number of contracts traded in equity derivatives
23. Dividend
A Dividend is a portion of a company’s profit distributed to shareholders, typically declared as ₹X per share or as a percentage of face value.
Types of Dividends
- Interim Dividend – declared and paid during the financial year
- Final Dividend – declared at the AGM after year-end
- Special Dividend – one-time payment (e.g., from asset sale proceeds)
Tax on Dividends (India 2026)
Dividends are taxable in the hands of the investor at their applicable income tax slab rate. TDS @ 10% is deducted by the company if dividend exceeds ₹5,000 per year to a single investor.
Dividend Yield: Formula = Annual DPS / Current Market Price × 100
Example: ITC pays ₹7.50 DPS; stock at ₹500 → Dividend Yield = 1.5%
24. Diversification
Diversification is the practice of spreading investments across various asset classes, sectors, and geographies to reduce unsystematic (company-specific) risk without sacrificing expected returns.
Academic Basis: Modern Portfolio Theory (Markowitz, 1952) – holds that a diversified portfolio with uncorrelated assets reduces risk
- Sector diversification: IT, Banking, Pharma, FMCG, Auto, Infra
- Asset class diversification: Equity, Debt, Gold, REITs, International Funds
- Geographic diversification: India + US + Emerging Markets
25. Dividend Yield
Already covered under Dividend (Term #23). As a standalone concept: High Dividend Yield stocks (typically PSU companies) are favoured by conservative investors and income-seeking retirees in India.
High Yield India 2026 Examples: Coal India ~8%, ONGC ~5-6%, ITC ~3-4%
E
26. EPS (Earnings Per Share)
EPS is one of the most widely used profitability metrics. It represents the portion of a company’s profit allocated to each outstanding share of common stock.
Formula: EPS = (Net Profit – Preference Dividends) / Weighted Average Shares Outstanding
Example: Infosys Q3 FY26 Net Profit = ₹7,200 crore; Shares = 420 crore → EPS = ₹17.14/share
Types of EPS
- Basic EPS – uses actual shares outstanding
- Diluted EPS – includes potential shares from ESOPs, convertible bonds
- TTM EPS (Trailing Twelve Months) – used for current P/E calculation
27. EBITDA
Earnings Before Interest, Taxes, Depreciation, and Amortization. EBITDA is a proxy for operating cash flow and is widely used to compare profitability across companies and sectors.
Formula: EBITDA = Net Profit + Interest + Taxes + Depreciation + Amortization
EBITDA Margin: EBITDA / Revenue × 100. IT companies target 20-25%, Pharma 25-35%, Commodity companies 15-25%
Indian context: EBITDA is referenced heavily in quarterly analyst calls. A company growing EBITDA faster than revenue is improving operational efficiency.
28. Equity
Equity (also called Shareholders’ Equity or Net Worth) represents the ownership interest in a company. In investing, ‘equity’ typically refers to stocks/shares.
Equity vs. Debt: Key Differences
- Equity holders are owners; debt holders are lenders
- Equity has no guaranteed return; dividends at company’s discretion
- In case of liquidation, debt is paid first; equity holders get residual value
- Equity is higher risk → higher potential long-term reward
29. ETF (Exchange Traded Fund)
An ETF is a marketable security that tracks an index, commodity, bonds, or a basket of assets. It trades on stock exchanges like individual stocks.
Popular ETFs in India (2026)
- Nippon India Nifty 50 BeES – India’s oldest and most liquid equity ETF
- SBI Nifty ETF – largest AUM equity ETF
- CPSE ETF – PSU stocks; favourable tax treatment for EPFO investments
- Bharat Bond ETF – government-backed debt ETF (1-year to 15-year maturities)
- Gold ETFs – HDFC Gold ETF, Nippon Gold BeES
ETF vs MF: ETFs have lower expense ratio (0.05%-0.20%) vs active mutual funds (0.5%-1.5%). But ETFs need a Demat account.
30. Exchange Rate Risk (Currency Risk)
The risk that changes in currency exchange rates will affect returns, especially for companies with significant import/export revenue (IT sector revenues in USD, oil import payments in USD).
2026 Context: ₹/USD exchange rate fluctuates between ₹83–87 range. IT companies benefit from ₹ depreciation (higher ₹ revenue per USD earned).
F
31. Face Value (FV or Par Value)
Face Value is the nominal or original cost of a stock as stated in the company’s memorandum of association. It is the base value on which dividends are declared and stamp duty is calculated.
Common Face Values in Indian Stocks
- ₹10 – traditional face value (e.g., TCS, Wipro)
- ₹2 – post-split (e.g., Infosys, HDFC Bank after splits)
- ₹1 – MRF, some FMCG companies
- ₹5 – mid-size companies
Note: Do NOT confuse face value with market price or book value. MRF has FV ₹10 but market price ₹1,20,000+
32. FII / FPI (Foreign Institutional Investor / Foreign Portfolio Investor)
FPIs (previously called FIIs) are foreign entities (mutual funds, pension funds, hedge funds, sovereign wealth funds) registered with SEBI to invest in Indian securities markets.
FPI Categories (SEBI 2019 onwards)
- Category I: Government entities, Central Banks, Sovereign Wealth Funds
- Category II: Regulated entities – foreign MFs, banks, insurance companies
- Category III: All other FPIs
FPI Holding Limit: 24% of paid-up capital per company (can be raised to sectoral limit with board approval)
FPI Flows (FY26): Net FPI equity inflows: approx. ₹1.5 lakh crore into Indian equities (indicative as of 2026)
33. Free Float Market Capitalisation
Free Float Market Cap considers only the shares available for public trading, excluding promoter holdings, government holdings, and locked-in strategic shares.
Formula: Free Float Market Cap = Market Price × Free Float Shares
Nifty 50 and Sensex are constructed on Free Float market cap methodology, ensuring index accurately represents investable market.
Example: Reliance Industries promoter holding ≈ 50.3%. Free Float = 49.7%. Only this 49.7% counts in index weight.
34. Fundamental Analysis
Fundamental Analysis involves evaluating a company’s financial health, business model, competitive position, and macroeconomic environment to determine its intrinsic value and decide whether it is undervalued or overvalued.
Key Parameters in Fundamental Analysis
- Quantitative: EPS, P/E, P/B, ROE, ROA, EBITDA Margin, Debt/Equity, Current Ratio
- Qualitative: Management quality, Brand moat, Regulatory environment, Industry tailwinds
- Macro: GDP growth, Interest rates (RBI repo rate), Inflation (CPI/WPI), Currency
Value Investing (Warren Buffett Approach – Indian Context)
Buy companies with strong fundamentals trading below intrinsic value. Investors like Rakesh Jhunjhunwala (late), Vijay Kedia, and Ramdeo Agrawal are celebrated Indian value investors who applied fundamental analysis.
35. Futures Contract
A Futures Contract is a legally binding agreement to buy or sell an asset at a predetermined price on a specific future date. Both buyer and seller are obligated to fulfil the contract.
F&O in India – Key Facts (2026)
- Regulated by SEBI under SC(R)A, 1956 and SEBI (F&O) Regulations
- Settlement: Mark-to-Market (MTM) daily; final settlement in cash for index futures
- Lot sizes fixed by SEBI based on underlying value (~₹5–10 lakh contract value)
- Nifty Futures Lot Size: 25 units. One lot at 22,500 = ₹5.625 lakh contract value
- Margin: SPAN Margin + Exposure Margin (typically 8-15% of contract value)
G
36. Gap Up / Gap Down
A Gap occurs when a stock opens at a significantly higher (Gap Up) or lower (Gap Down) price than its previous day’s closing price, leaving a ‘gap’ on the price chart. Gaps are caused by after-market news, earnings results, regulatory actions, or global market moves.
Example: A pharmaceutical company gets USFDA approval after market hours. Next day opens 15% higher (Gap Up) from ₹1,000 to ₹1,150.
Types of Chart Gaps
- Common Gap – minor, quickly filled; low significance
- Breakaway Gap – significant; marks start of new trend
- Runaway (Continuation) Gap – confirms existing trend momentum
- Exhaustion Gap – appears near end of trend; reversal signal
37. GDP (Gross Domestic Product)
GDP measures the total monetary value of goods and services produced within a country in a given period. It is India’s most important macro indicator for equity markets.
India GDP (FY26 Estimate): ~₹300 lakh crore nominal; ~6.5-7.0% real growth rate
GDP growth is directly correlated with corporate earnings growth. Rising GDP → corporate profitability → bull market conditions. NSE/BSE indices tend to reflect GDP growth over long periods.
38. Golden Cross & Death Cross
Golden Cross
When the 50-Day Moving Average (DMA) crosses ABOVE the 200-DMA – a bullish signal indicating upward momentum. Traders use this to initiate long positions.
Death Cross
When the 50-DMA crosses BELOW the 200-DMA – a bearish signal. Often precedes or confirms entry into a bear market.
Indian Context: Nifty 50 Death Cross occurred in March 2020 (Covid). Golden Cross confirmed in May 2020, signalling the start of the mega bull run.
39. Grey Market Premium (GMP)
GMP refers to the unofficial premium at which IPO shares trade in the unregulated grey market before listing. It gives an indication (not guarantee) of expected listing gains.
Example: Ola Electric IPO GMP = ₹70 (above issue price ₹76 → total estimated listing price ₹146). Actual listing may differ.
SEBI does not regulate the grey market. It is informal and carries legal and financial risk. Investors should not rely solely on GMP for IPO investment decisions.
H
40. Hedging
Hedging is a risk management strategy to reduce potential losses by taking an offsetting position in a correlated asset or derivative.
Common Hedging Strategies in India
- Buy Protective Put – hold shares of Reliance, buy Reliance Put Option to limit downside
- Short Futures Hedge – hold portfolio, short Nifty Futures to protect against index decline
- Currency Hedge – an IT exporter buys USD/INR Forward contracts to lock in exchange rates
- Gold as Portfolio Hedge – gold often rises when equity falls (negative correlation)
SEBI Note: Hedging in commodity futures is permitted for eligible market participants (exporters, importers, processors)
41. High Net Worth Individual (HNI)
SEBI defines HNI (also called Non-Institutional Investors / NIIs in IPO context) as investors applying for shares worth more than ₹2 lakh in an IPO. There are two sub-categories:
- Small HNI (sHNI): Application amount ₹2 lakh to ₹10 lakh – 1/3rd of HNI quota reserved
- Big HNI (bHNI): Application amount above ₹10 lakh – 2/3rd of HNI quota
IPO Allocation: Retail ≤ ₹2 lakh (35%), HNI >₹2 lakh (15%), QIB (50%) – subject to SEBI norms
42. Holding Period
The length of time an investor holds a security. Critical for tax calculation (STCG vs LTCG) and investment strategy.
- 1 day – Intraday (speculative income – 30% slab tax)
- <12 months – Short-term holding (STCG @ 20%)
- ≥12 months – Long-term holding (LTCG @ 12.5% above ₹1.25 lakh exemption)
I
43. Index
A stock market index is a statistical measure tracking the performance of a selected group of stocks representing a market segment. Indices serve as benchmarks for portfolio performance.
Major Indian Indices (2026)
- S&P BSE SENSEX – 30 stocks; oldest (1986); base value 100 in 1978-79
- Nifty 50 (NSE) – 50 large-cap stocks; most actively tracked; base 1000 on Nov 3, 1995
- Nifty Bank (BankNifty) – 12 banking stocks; options most actively traded
- Nifty Midcap 150, Nifty Smallcap 250
- Nifty IT, Nifty Pharma, Nifty Auto, Nifty FMCG – sectoral indices
- India VIX – volatility index (fear gauge); high VIX = high uncertainty
44. Inflation & Its Impact on Equity
Inflation (measured by CPI – Consumer Price Index in India) erodes purchasing power. The RBI’s mandate is to keep CPI inflation at 4% (±2% band).
Impact of Inflation on Stock Market
- Moderate inflation (3-5%) → positive for corporate revenue; supports equity markets
- High inflation (7%+) → RBI raises repo rate → borrowing costs rise → company profits fall → stock prices fall
- Inflation beneficiaries: Commodity stocks, Real Estate, Gold
- Inflation victims: High-debt companies, consumer discretionary (demand falls)
CPI Inflation (FY26): Approximately 4.2-4.8% – within RBI’s comfort zone
45. Initial Public Offering (IPO)
An IPO is the process through which a private company offers its shares to the public for the first time, listing on BSE/NSE and raising capital from investors.
IPO Process in India (SEBI ICDR Regulations 2018)
- DRHP (Draft Red Herring Prospectus) filed with SEBI → SEBI review (30 days)
- RHP (Red Herring Prospectus) – price band disclosed
- Subscription period: 3 working days
- Allotment: T+6 days from issue close; listing: T+6 for mainboard (T+3 for SME)
- OFS (Offer for Sale) – promoters sell existing shares; no fresh capital to company
- Fresh Issue – new shares; proceeds go to company for capex/debt repayment
India’s IPO Market (2025-26)
India’s IPO market has been among the most active globally. FY26 saw many tech unicorns, new-age companies, and traditional businesses go public, with retail participation at record levels.
46. Insider Trading
Insider Trading is the illegal act of buying or selling securities based on material, non-public information (MNPI) by a company insider (directors, employees, auditors) or any person who receives such information.
SEBI Insider Trading Regulations: SEBI (Prohibition of Insider Trading) Regulations, 2015 (amended through 2024)
Penalties for Insider Trading (India 2026)
- Civil penalty: Up to ₹25 crore or 3 times profit made (whichever is higher)
- Criminal prosecution: Imprisonment up to 10 years and/or fine up to ₹25 crore
- SEBI has a dedicated Surveillance department using AI-based tools to detect insider trading patterns
47. Interest Coverage Ratio (ICR)
ICR measures a company’s ability to pay interest on its debt obligations from its operating profits.
Formula: ICR = EBIT / Interest Expense
- ICR > 3 → comfortable (company earns 3x of its interest obligation) → financially safe
- ICR 1-2 → risky; any revenue decline may cause default
- ICR < 1 → company cannot service debt from operations → red flag / potential NPA
48. Intrinsic Value
Intrinsic Value is the true, inherent worth of a stock based on its fundamentals – future cash flows, earnings, assets – as opposed to its current market price.
Methods to Calculate Intrinsic Value
- DCF (Discounted Cash Flow) Model – most theoretically sound; discounts future free cash flows
- Graham Number – √(22.5 × EPS × BVPS)
- Sum of Parts Valuation – for conglomerates (Tata Group, Adani Group)
Margin of Safety: Benjamin Graham’s principle: Buy only when market price is significantly below intrinsic value (20-30% discount)
J
49. Joint Venture (JV)
A Joint Venture is a business arrangement in which two or more parties agree to pool resources for a specific business objective while maintaining their separate legal identities.
Indian Example: Maruti Suzuki India Ltd – JV between Suzuki Motor Corporation (Japan) and Government of India (now public company). Hero MotoCorp was initially a JV with Honda.
Announcement of a JV or partnership often leads to stock price movement. Investors analyse the JV’s strategic fit and potential revenue contribution.
50. J-Curve Effect
The J-Curve in equity investing refers to the pattern where a private equity or new investment initially shows negative returns before turning positive, creating a ‘J’ shape on a return-time graph.
In macro context: India’s Current Account Deficit (CAD) may worsen initially after a Rupee depreciation (import prices rise) before improving (export competitiveness kicks in) – classic J-Curve.
K
51. KYC (Know Your Customer)
KYC is the mandatory process by which financial institutions verify the identity, address, and financial profile of their clients as per SEBI, RBI, and PMLA (Prevention of Money Laundering Act) requirements.
KYC in Indian Capital Markets
- Aadhaar-based e-KYC – most brokers complete in minutes via OTP/Biometric
- CKYC (Central KYC) – one-time KYC done once for all financial services
- In-person verification (IPV) – required for offline KYC
- Documents: PAN Card (mandatory for demat/trading), Aadhaar/Passport/VoterId, Bank proof
- PMLA compliance: Income proof required for high-value trading or F&O activation
52. KPI (Key Performance Indicator)
KPIs are quantifiable metrics used by analysts and investors to evaluate a company’s operational and financial performance against benchmarks or industry peers.
Sector-Specific KPIs – India
- Banking: NIM (Net Interest Margin), GNPA %, CASA Ratio, PCR (Provision Coverage Ratio)
- IT/Technology: Revenue per employee, Deal TCV (Total Contract Value), Attrition Rate, EBIT Margin
- FMCG: Volume Growth, Gross Margin, Distribution Reach (towns/villages)
- Auto: Wholesale dispatches, Market share by segment, EV penetration %
- Real Estate: Pre-sales bookings (₹ crore), Collections, Net Debt/Equity
L
53. Large Cap / Mid Cap / Small Cap
SEBI/AMFI Classification (2026 Updated)
AMFI publishes a bi-annual list categorising companies based on market capitalisation. This classification is binding for mutual funds.
- Large Cap: Top 100 companies by full market cap (approx. above ₹50,000-60,000 crore)
- Mid Cap: 101st to 250th companies (approx. ₹15,000–50,000 crore range)
- Small Cap: 251st and below (approx. below ₹15,000 crore)
- Micro Cap / Nano Cap: Very small companies (<₹500 crore) – high risk, low liquidity
54. Leverage
Leverage is the use of borrowed capital (debt or margin) to amplify potential investment returns. It also magnifies potential losses proportionally.
F&O Leverage Example: Nifty Futures contract value = ₹5.625 lakh (Nifty at 22,500, Lot 25). Margin required ≈ ₹65,000. Leverage ≈ 8-9x. A 1% market move = 8-9% gain or loss on margin capital.
SEBI’s Leverage Restrictions (2026)
- SEBI has progressively reduced intraday leverage offered by brokers
- Peak Margin Norms (implemented from September 2021) – clients must have 100% margin upfront
- No leverage beyond exchange-mandated limits for retail investors in F&O
55. Limit Order
A Limit Order is an instruction to buy or sell a security at a specified price (or better). It gives the investor price control but does not guarantee execution.
Example – Buy Limit Order: Place Buy Order for HDFC Bank at ₹1,650 (current price ₹1,680). Order executes only if price drops to ₹1,650 or below.
Example – Sell Limit Order: Place Sell Order for Infosys at ₹1,900 (current price ₹1,860). Executes only if price rises to ₹1,900 or above.
Order Types on NSE/BSE
- Market Order – immediate execution at best available price
- Limit Order – specified price or better
- Stop-Loss Order – triggers at specified loss level (SL-M or SL-Limit)
- AMO (After Market Order) – placed after market hours; executed on next open
- GTD (Good Till Date) / GTC (Good Till Cancelled)
56. Liquidity
Market Liquidity
Liquidity refers to how quickly and easily an asset can be converted to cash without significantly affecting its price. In stock markets, it’s measured by trading volume and bid-ask spread.
Liquidity Indicators
- Trading Volume: High daily volume = liquid (e.g., Reliance Industries often trades 1–2 crore shares/day)
- Market Depth: More buyers and sellers = better liquidity
- Bid-Ask Spread: Narrow spread = highly liquid
- Impact Cost: SEBI requires NSE to publish Impact Cost data for index stock eligibility
Company Liquidity
Current Ratio = Current Assets / Current Liabilities. >1 is generally acceptable. <1 may indicate liquidity stress.
Quick Ratio (Acid Test) = (Current Assets – Inventory) / Current Liabilities
57. Listed Company
A listed company is one whose shares are admitted to trading on a recognised stock exchange (BSE/NSE). Listing involves compliance with SEBI’s LODR (Listing Obligations and Disclosure Requirements) Regulations, 2015.
Key SEBI LODR Compliance Requirements
- Quarterly results within 45 days of quarter end (60 days for Q4/annual)
- Board meeting intimation 2 days in advance
- Prompt disclosure of material events (mergers, acquisitions, regulatory orders)
- Minimum public shareholding (MPS): 25% for private companies, 10% for PSUs
M
58. Margin / Margin Trading Facility (MTF)
Margin is the minimum amount an investor must deposit with a broker to open or maintain a position. In equity cash segment, SEBI allows brokers to offer Margin Trading Facility (MTF) for approved securities.
MTF Rules (SEBI 2026)
- Funding at broker’s cost (typically 12-18% p.a. interest)
- Maximum leverage: up to 4x for eligible securities under MTF
- Margin pledge required – shares pledged digitally via CDSL/NSDL
- Margin call triggered if portfolio value falls below maintenance margin
59. Market Capitalisation
Market Capitalisation (Market Cap) is the total market value of a company’s outstanding shares. It represents what the market collectively thinks the company is worth.
Formula: Market Cap = Current Share Price × Total Shares Outstanding
Example: Reliance Industries: Share Price ₹2,900 × Shares 13,500 crore = ₹39.15 lakh crore (₹39.15 trillion) – India’s largest company by market cap in 2026
India’s Total Market Cap (2026)
India’s total BSE market cap crossed USD 4 trillion (approx. ₹335 lakh crore) in 2024, making it the 4th largest equity market globally, ahead of Hong Kong and behind only USA, China, and Japan.
60. Market Order
A Market Order is an instruction to buy or sell a security immediately at the best available current market price. It guarantees execution but not price.
When to Use: Use Market Orders for highly liquid stocks (Nifty 50 constituents) where bid-ask spread is ₹1-₹2. Avoid for illiquid stocks where spread can be wide.
61. Mutual Fund (MF)
A Mutual Fund pools money from many investors and invests in a diversified portfolio of stocks, bonds, or other securities. Managed by AMCs (Asset Management Companies) regulated by SEBI under SEBI (Mutual Fund) Regulations, 1996.
Categories of Mutual Funds in India (SEBI Categorisation)
- Equity Funds: Large Cap, Mid Cap, Small Cap, Flexi Cap, ELSS (Tax Saving), Sectoral/Thematic
- Debt Funds: Overnight, Liquid, Short Duration, Medium Duration, Long Duration, Gilt, Credit Risk
- Hybrid Funds: Conservative, Balanced Advantage (BAF), Aggressive Hybrid, Arbitrage
- Solution-Oriented: Retirement Fund, Children’s Fund
- Index Funds & ETFs: Tracking Nifty 50, Sensex, Nifty Next 50, etc.
Key Mutual Fund Metrics
- NAV (Net Asset Value) – price of one unit; calculated daily
- AUM (Assets Under Management) – total corpus managed by the fund
- Expense Ratio – annual fee charged; direct plans 0.1-1.0%, regular plans 0.5-2.0%
- Exit Load – penalty for early redemption (typically 1% if redeemed within 1 year for equity funds)
- XIRR – personalised return metric for SIP investors
SIP (Systematic Investment Plan) – India’s Favourite Investment Tool
SIP allows investors to invest a fixed amount monthly/quarterly in MFs. India’s monthly SIP inflow reached ₹26,000+ crore in 2026, reflecting surging retail participation in capital markets.
62. Moving Average (MA)
A Moving Average is a technical analysis indicator that smooths out price data by creating a constantly updated average price over a specified time period.
Types of Moving Averages
- SMA (Simple Moving Average) – equal weight to all data points; 50-DMA and 200-DMA are most watched
- EMA (Exponential Moving Average) – more weight to recent prices; faster to react; 9-EMA, 20-EMA popular
- VWAP (Volume Weighted Average Price) – intraday benchmark; used by institutional traders
- HMA (Hull Moving Average) – reduces lag significantly
Trading Signals Using MA
- Price above 200-DMA → long-term uptrend; bullish bias
- Price below 200-DMA → long-term downtrend; bearish bias
- Golden Cross (50-DMA > 200-DMA) → buy signal
- Death Cross (50-DMA < 200-DMA) → sell/short signal
Indian Application: Nifty 50 tested its 200-DMA multiple times in 2023-24. Sustaining above 200-DMA is key for technical bulls.
Whether you are a first-time retail investor just opening a Demat account or a seasoned trader navigating the derivatives desk, understanding the language of the stock market is your most powerful asset. India’s capital market has grown at a remarkable pace – as of early 2026, the BSE lists over 5,700 companies, the NSE sees daily equity turnover exceeding ₹1,00,000 crore, and SEBI continues to roll out investor-protection regulations that reshape how the market operates.
This blog – Stock Market Terminology A-Z, Part 1 (A to M) – is your definitive, jargon-busting reference guide. Every term is explained in plain English, illustrated with real-world Indian examples (in ₹), and cross-referenced with relevant SEBI circulars or RBI guidelines where applicable. Bookmark this page; share it with your investing community; and use it as a daily cheat-sheet on your investing journey.
🔤 A
1. Ask Price (Offer Price)
What Is the Ask Price?
The Ask Price is the lowest price at which a seller is willing to sell a share on the exchange. It is the opposite of the Bid Price. Together they form the Bid-Ask Spread – a key indicator of market liquidity.
Indian Example: Infosys (INFY) Ask Price: ₹1,820.50. A buyer clicking ‘Buy at Market’ will pay this price.
Why It Matters
- A narrow spread (₹1-₹2) = highly liquid stock (e.g., Reliance Industries)
- A wide spread (₹10-₹50) = illiquid stock; trading costs are higher
- SEBI mandates order-book transparency on BSE/NSE so investors always see the Ask Price
2. Asset Allocation
Definition
Asset Allocation is the strategy of distributing investment capital across different asset classes – equities, bonds, gold, real estate, and cash – based on an investor’s risk tolerance, time horizon, and financial goals.
Rule of Thumb (India 2026): 100 minus your age = % in equities. A 30-year-old should hold ~70% in equities.
Popular Models in India
- Conservative: 30% Equity | 50% Debt | 20% Gold/Real Estate
- Moderate: 60% Equity | 30% Debt | 10% Gold
- Aggressive: 80% Equity | 10% Debt | 10% Alternative Assets
3. Annual Report
What Is It?
A document published by every listed company (mandatory under Companies Act, 2013 and SEBI LODR Regulations) disclosing financial performance, director’s report, auditor’s report, and corporate governance compliance for the financial year ending March 31st (Indian FY).
Key Sections to Read
- Balance Sheet – financial position as on 31 March
- P&L Statement – revenue, expenses, and PAT (Profit After Tax)
- Cash Flow Statement – operational, investment, and financing activities
- MD&A (Management Discussion & Analysis) – qualitative commentary
- Notes to Accounts – accounting policies and contingent liabilities
4. Arbitrage
Concept
Arbitrage is the simultaneous purchase and sale of the same (or equivalent) security in different markets to profit from temporary price differences. It is considered risk-free profit when executed perfectly.
Indian Example: TCS trades at ₹4,000 on BSE and ₹4,005 on NSE simultaneously. An arbitrageur buys on BSE and sells on NSE, pocketing ₹5 per share (minus brokerage and STT).
Types of Arbitrage in India
- Cash-Futures Arbitrage – buy stock, sell futures at a premium
- Exchange Arbitrage – price difference between BSE and NSE
- Merger Arbitrage – buy target company shares during an open offer under SEBI Takeover Code
5. At-the-Money (ATM) Option
An option is said to be At-the-Money when the current market price of the underlying asset is equal (or very close) to the option’s strike price.
Example: Nifty 50 is at 22,500. A Call or Put option with strike 22,500 is ATM.
ATM options have the highest time value (theta) and maximum sensitivity to price movement (delta ≈ 0.50).
🔤 B
6. Bear Market
Definition
A Bear Market is a sustained decline of 20% or more from recent highs in a broad market index (e.g., Nifty 50 or Sensex) over at least two months. It reflects widespread pessimism, declining corporate earnings, and risk-off sentiment.
Historical Indian Example: March 2020 Covid Crash – Nifty fell from ~12,350 (Jan 2020) to ~7,511 (March 2020), a 39% decline.
Bear Market Survival Strategies
- SIP (Systematic Investment Plan) – rupee-cost averaging reduces average buy price
- Shift to defensive sectors – FMCG, Pharma, IT Services
- Increase debt/gold allocation temporarily
- Avoid panic selling – stay invested for long-term wealth creation
7. Beta (β)
What Is Beta?
Beta measures the volatility of a stock relative to its benchmark index. It is a core concept in CAPM (Capital Asset Pricing Model).
- β = 1 → stock moves in line with the index (e.g., index ETF)
- β > 1 → more volatile than index (e.g., small-cap stocks, β = 1.5 means 50% more volatile)
- β < 1 → less volatile (e.g., utility stocks, FMCG – HUL β ≈ 0.6)
- β < 0 → moves inversely to market (e.g., Gold ETFs in some periods)
Formula: β = Cov(Stock Returns, Market Returns) / Var(Market Returns)
8. Bid Price
The Bid Price is the highest price a buyer is willing to pay for a security at any given moment. It is always lower than the Ask Price.
Bid-Ask Spread Formula: Spread = Ask Price − Bid Price
On NSE’s NEAT system, the entire order book with all bids and asks is visible to all market participants, ensuring price transparency as mandated by SEBI.
9. Blue-Chip Stock
Characteristics
Blue-chip stocks are shares of large, well-established, financially sound companies with a long track record of reliable performance.
- Market Cap: ₹20,000 crore+ (typically Large-Cap under SEBI/AMFI classification)
- Consistent dividend payment history
- Strong brand equity and market leadership
- Examples: Reliance Industries, TCS, HDFC Bank, Infosys, ITC, HUL
SEBI/AMFI Classification (2026)
- Large Cap: Top 100 companies by market cap
- Mid Cap: 101st to 250th companies
- Small Cap: 251st onwards
10. Bond
A Bond is a fixed-income debt instrument issued by governments (Central/State) or corporations to raise capital. The issuer promises to pay periodic interest (coupon) and return the principal at maturity.
Example: Government of India 7.26% GS 2032 Bond – Face Value ₹1,000, semi-annual coupon of ₹36.30, matures in 2032.
Types of Bonds in India
- Government Securities (G-Secs) – issued by RBI on behalf of GoI; sovereign guarantee
- State Development Loans (SDLs) – issued by state governments
- Corporate Bonds – issued by companies (rated by CRISIL, ICRA, CARE)
- Sovereign Gold Bonds (SGBs) – gold-linked, issued by RBI; interest 2.5% p.a. + gold price gain
- Infrastructure Investment Trusts (InvITs) – bond-like structure for infrastructure assets
11. Book Value (BV) Per Share
Book Value is the net asset value of a company as per its balance sheet – total assets minus total liabilities. Divided by total shares outstanding gives Book Value Per Share.
Formula: BVPS = (Total Shareholders’ Equity) / (Total Shares Outstanding)
Example: If Tata Steel’s equity = ₹80,000 crore and shares = 1,200 crore, BVPS = ₹66.67
Price-to-Book (P/B) Ratio = Market Price / BVPS. Banking stocks are often valued on P/B. HDFC Bank P/B in 2026 ≈ 2.8x.
12. BSE (Bombay Stock Exchange)
Established in 1875, BSE is Asia’s oldest stock exchange and the world’s largest by number of listed companies (5,700+). Its flagship index is the S&P BSE SENSEX, comprising 30 of the largest and most actively traded stocks.
Key BSE Indices (2026)
- SENSEX – 30 large-cap stocks; base year 1978-79 = 100
- BSE 100, BSE 200, BSE 500
- BSE MidCap, BSE SmallCap
- BSE IPO Index, BSE BANKEX
BSE operates under SEBI oversight. Settlement cycle: T+1 (implemented for all securities from January 27, 2023).
13. Bull Market
A Bull Market is a sustained period of rising stock prices – generally defined as a 20%+ rise from a recent low. It is characterized by investor optimism, strong economic indicators, and robust corporate earnings.
Indian Example: Post-Covid Bull Run (April 2020 – October 2021) – Nifty surged from 7,511 to ~18,477, a 146% rally in 18 months.
Bull Market Strategies
- Momentum investing – ride high-performing stocks
- Increase equity allocation gradually
- Use trailing stop-loss to protect gains
- Rebalance portfolio as valuations stretch
🔤 C
14. CAGR (Compound Annual Growth Rate)
CAGR represents 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.
Formula: CAGR = [(Ending Value / Beginning Value)^(1/n)] – 1
Example: SIP investment of ₹5,000/month for 15 years grew to ₹25 lakh → CAGR ≈ 12.5% p.a.
Nifty 50 CAGR (last 25 years, 2001-2026) ≈ 14% p.a., making India one of the best-performing major equity markets globally.
15. Call Option
A Call Option gives the buyer the RIGHT (but not the obligation) to BUY the underlying asset at a predetermined strike price before or on the expiry date. The buyer pays a premium to the seller (writer).
Example: Nifty 50 Call Option – Strike 22,500, Premium ₹150, Lot Size 50. Total premium paid = ₹7,500. If Nifty rises to 23,000, intrinsic value = (23,000–22,500) × 50 = ₹25,000.
Important Points – SEBI/NSE Norms 2026
- Equity derivatives expiry: Last Thursday of the month (monthly) or weekly Thursdays
- Margins required as per SEBI’s risk-based margin framework (SPAN + Exposure)
- Weekly index options (Nifty/BankNifty/Sensex) are India’s most actively traded contracts
16. Capital Gains Tax (India 2026)
Short-Term Capital Gains (STCG)
If listed equity shares/equity mutual funds held for less than 12 months are sold at a profit:
STCG Tax Rate (Post Budget 2024): 20% (increased from 15%) on gains above ₹0 (no basic exemption)
Long-Term Capital Gains (LTCG)
If held for 12 months or more:
LTCG Tax Rate: 12.5% on gains exceeding ₹1.25 lakh per financial year (increased from ₹1 lakh exemption limit – Budget 2024)
Debt Mutual Funds (Post April 2023)
Gains from debt MFs (holding <35% equity) are taxed at slab rates as ordinary income, regardless of holding period. This was a landmark change from Budget 2023 that shifted many HNI investors from debt MFs to direct bonds.
17. Circuit Breaker (Price Band / Trading Halt)
A Circuit Breaker is an automatic mechanism to halt trading temporarily when the market or individual stock moves beyond a pre-defined percentage limit – protecting investors from extreme volatility.
Individual Stock Circuit Filters (NSE/BSE 2026)
- 2% / 5% / 10% / 20% bands – applied based on liquidity and index membership
- Nifty/Sensex 500 stocks: 20% upper/lower circuit in cash segment
Index-Level Circuit Breakers
- 10% movement → 45-minute trading halt (before 1 PM) / 15-minute halt (1-2:30 PM) / close for the day (after 2:30 PM)
- 15% movement → 1 hour 45 minutes / 45 minutes / close for the day
- 20% movement → Close for the day regardless of time
18. Commodity Market
India’s commodity derivatives market is regulated by SEBI (merged with FMC in 2015). Key exchanges are MCX (Multi Commodity Exchange) and NCDEX (National Commodity and Derivatives Exchange).
Major Commodity Categories Traded in India
- Bullion: Gold (₹/10 gm), Silver (₹/kg)
- Energy: Crude Oil (₹/barrel), Natural Gas (₹/MMBTU)
- Base Metals: Copper, Zinc, Nickel, Aluminium, Lead
- Agri: Soybean, Castor Seed, Coriander, Turmeric (on NCDEX)
India’s Largest Commodity: Gold – India consumes ~700-800 tonnes annually; MCX Gold is the key hedging instrument
19. Consolidated Financial Statements
Consolidated financials include the parent company and all its subsidiaries in a single combined financial report. SEBI LODR mandates quarterly and annual consolidated results for listed companies.
Example: Tata Motors’ consolidated results include TCS, Jaguar Land Rover (UK), and all subsidiaries – giving the true picture of the conglomerate’s financial health.
20. CRR (Cash Reserve Ratio)
CRR is the minimum percentage of a bank’s Net Demand and Time Liabilities (NDTL) that must be maintained as cash deposits with the RBI. It is a key monetary policy tool.
CRR (as of April 2026): 4.00% (maintained by RBI)
An increase in CRR reduces money supply (tightening) → negative for bank stocks. A decrease is expansionary → positive for markets.
🔤 D
21. Demat Account
A Demat (Dematerialised) Account holds securities in electronic form, eliminating the need for physical share certificates. It is mandatory to have a Demat account to trade/invest in the Indian stock market.
Key Regulators and Depositories
- CDSL (Central Depository Services Ltd) – BSE-promoted depository
- NSDL (National Securities Depository Ltd) – NSE-promoted depository
- Regulated by SEBI under Depositories Act, 1996
Account Charges (2026)
- Account Opening: ₹0 (most brokers offer free opening)
- AMC (Annual Maintenance Charge): ₹0 – ₹300/year
- Transaction Charges: ₹15–₹25 per debit instruction
- DP Charges on selling: ₹13.5 + 18% GST per scrip per day (CDSL standard)
22. Derivative
A derivative is a financial contract whose value is derived from an underlying asset – such as equity shares, indices, commodities, currencies, or interest rates.
Types of Derivatives in Indian Markets
- Futures – standardized contract to buy/sell at a future date and price
- Options – right (not obligation) to buy or sell
- Forwards – OTC (over-the-counter), customized futures
- Swaps – exchange of cash flows (Interest Rate Swaps – RBI regulated)
India’s F&O Market Size (2026): NSE is the world’s largest exchange by number of contracts traded in equity derivatives
23. Dividend
A Dividend is a portion of a company’s profit distributed to shareholders, typically declared as ₹X per share or as a percentage of face value.
Types of Dividends
- Interim Dividend – declared and paid during the financial year
- Final Dividend – declared at the AGM after year-end
- Special Dividend – one-time payment (e.g., from asset sale proceeds)
Tax on Dividends (India 2026)
Dividends are taxable in the hands of the investor at their applicable income tax slab rate. TDS @ 10% is deducted by the company if dividend exceeds ₹5,000 per year to a single investor.
Dividend Yield: Formula = Annual DPS / Current Market Price × 100
Example: ITC pays ₹7.50 DPS; stock at ₹500 → Dividend Yield = 1.5%
24. Diversification
Diversification is the practice of spreading investments across various asset classes, sectors, and geographies to reduce unsystematic (company-specific) risk without sacrificing expected returns.
Academic Basis: Modern Portfolio Theory (Markowitz, 1952) – holds that a diversified portfolio with uncorrelated assets reduces risk
- Sector diversification: IT, Banking, Pharma, FMCG, Auto, Infra
- Asset class diversification: Equity, Debt, Gold, REITs, International Funds
- Geographic diversification: India + US + Emerging Markets
25. Dividend Yield
Already covered under Dividend (Term #23). As a standalone concept: High Dividend Yield stocks (typically PSU companies) are favoured by conservative investors and income-seeking retirees in India.
High Yield India 2026 Examples: Coal India ~8%, ONGC ~5-6%, ITC ~3-4%
🔤 E
26. EPS (Earnings Per Share)
EPS is one of the most widely used profitability metrics. It represents the portion of a company’s profit allocated to each outstanding share of common stock.
Formula: EPS = (Net Profit – Preference Dividends) / Weighted Average Shares Outstanding
Example: Infosys Q3 FY26 Net Profit = ₹7,200 crore; Shares = 420 crore → EPS = ₹17.14/share
Types of EPS
- Basic EPS – uses actual shares outstanding
- Diluted EPS – includes potential shares from ESOPs, convertible bonds
- TTM EPS (Trailing Twelve Months) – used for current P/E calculation
27. EBITDA
Earnings Before Interest, Taxes, Depreciation, and Amortization. EBITDA is a proxy for operating cash flow and is widely used to compare profitability across companies and sectors.
Formula: EBITDA = Net Profit + Interest + Taxes + Depreciation + Amortization
EBITDA Margin: EBITDA / Revenue × 100. IT companies target 20-25%, Pharma 25-35%, Commodity companies 15-25%
Indian context: EBITDA is referenced heavily in quarterly analyst calls. A company growing EBITDA faster than revenue is improving operational efficiency.
28. Equity
Equity (also called Shareholders’ Equity or Net Worth) represents the ownership interest in a company. In investing, ‘equity’ typically refers to stocks/shares.
Equity vs. Debt: Key Differences
- Equity holders are owners; debt holders are lenders
- Equity has no guaranteed return; dividends at company’s discretion
- In case of liquidation, debt is paid first; equity holders get residual value
- Equity is higher risk → higher potential long-term reward
29. ETF (Exchange Traded Fund)
An ETF is a marketable security that tracks an index, commodity, bonds, or a basket of assets. It trades on stock exchanges like individual stocks.
Popular ETFs in India (2026)
- Nippon India Nifty 50 BeES – India’s oldest and most liquid equity ETF
- SBI Nifty ETF – largest AUM equity ETF
- CPSE ETF – PSU stocks; favourable tax treatment for EPFO investments
- Bharat Bond ETF – government-backed debt ETF (1-year to 15-year maturities)
- Gold ETFs – HDFC Gold ETF, Nippon Gold BeES
ETF vs MF: ETFs have lower expense ratio (0.05%-0.20%) vs active mutual funds (0.5%-1.5%). But ETFs need a Demat account.
30. Exchange Rate Risk (Currency Risk)
The risk that changes in currency exchange rates will affect returns, especially for companies with significant import/export revenue (IT sector revenues in USD, oil import payments in USD).
2026 Context: ₹/USD exchange rate fluctuates between ₹83–87 range. IT companies benefit from ₹ depreciation (higher ₹ revenue per USD earned).
🔤 F
31. Face Value (FV or Par Value)
Face Value is the nominal or original cost of a stock as stated in the company’s memorandum of association. It is the base value on which dividends are declared and stamp duty is calculated.
Common Face Values in Indian Stocks
- ₹10 – traditional face value (e.g., TCS, Wipro)
- ₹2 – post-split (e.g., Infosys, HDFC Bank after splits)
- ₹1 – MRF, some FMCG companies
- ₹5 – mid-size companies
Note: Do NOT confuse face value with market price or book value. MRF has FV ₹10 but market price ₹1,20,000+
32. FII / FPI (Foreign Institutional Investor / Foreign Portfolio Investor)
FPIs (previously called FIIs) are foreign entities (mutual funds, pension funds, hedge funds, sovereign wealth funds) registered with SEBI to invest in Indian securities markets.
FPI Categories (SEBI 2019 onwards)
- Category I: Government entities, Central Banks, Sovereign Wealth Funds
- Category II: Regulated entities – foreign MFs, banks, insurance companies
- Category III: All other FPIs
FPI Holding Limit: 24% of paid-up capital per company (can be raised to sectoral limit with board approval)
FPI Flows (FY26): Net FPI equity inflows: approx. ₹1.5 lakh crore into Indian equities (indicative as of 2026)
33. Free Float Market Capitalisation
Free Float Market Cap considers only the shares available for public trading, excluding promoter holdings, government holdings, and locked-in strategic shares.
Formula: Free Float Market Cap = Market Price × Free Float Shares
Nifty 50 and Sensex are constructed on Free Float market cap methodology, ensuring index accurately represents investable market.
Example: Reliance Industries promoter holding ≈ 50.3%. Free Float = 49.7%. Only this 49.7% counts in index weight.
34. Fundamental Analysis
Fundamental Analysis involves evaluating a company’s financial health, business model, competitive position, and macroeconomic environment to determine its intrinsic value and decide whether it is undervalued or overvalued.
Key Parameters in Fundamental Analysis
- Quantitative: EPS, P/E, P/B, ROE, ROA, EBITDA Margin, Debt/Equity, Current Ratio
- Qualitative: Management quality, Brand moat, Regulatory environment, Industry tailwinds
- Macro: GDP growth, Interest rates (RBI repo rate), Inflation (CPI/WPI), Currency
Value Investing (Warren Buffett Approach – Indian Context)
Buy companies with strong fundamentals trading below intrinsic value. Investors like Rakesh Jhunjhunwala (late), Vijay Kedia, and Ramdeo Agrawal are celebrated Indian value investors who applied fundamental analysis.
35. Futures Contract
A Futures Contract is a legally binding agreement to buy or sell an asset at a predetermined price on a specific future date. Both buyer and seller are obligated to fulfil the contract.
F&O in India – Key Facts (2026)
- Regulated by SEBI under SC(R)A, 1956 and SEBI (F&O) Regulations
- Settlement: Mark-to-Market (MTM) daily; final settlement in cash for index futures
- Lot sizes fixed by SEBI based on underlying value (~₹5–10 lakh contract value)
- Nifty Futures Lot Size: 25 units. One lot at 22,500 = ₹5.625 lakh contract value
- Margin: SPAN Margin + Exposure Margin (typically 8-15% of contract value)
🔤 G
36. Gap Up / Gap Down
A Gap occurs when a stock opens at a significantly higher (Gap Up) or lower (Gap Down) price than its previous day’s closing price, leaving a ‘gap’ on the price chart. Gaps are caused by after-market news, earnings results, regulatory actions, or global market moves.
Example: A pharmaceutical company gets USFDA approval after market hours. Next day opens 15% higher (Gap Up) from ₹1,000 to ₹1,150.
Types of Chart Gaps
- Common Gap – minor, quickly filled; low significance
- Breakaway Gap – significant; marks start of new trend
- Runaway (Continuation) Gap – confirms existing trend momentum
- Exhaustion Gap – appears near end of trend; reversal signal
37. GDP (Gross Domestic Product)
GDP measures the total monetary value of goods and services produced within a country in a given period. It is India’s most important macro indicator for equity markets.
India GDP (FY26 Estimate): ~₹300 lakh crore nominal; ~6.5-7.0% real growth rate
GDP growth is directly correlated with corporate earnings growth. Rising GDP → corporate profitability → bull market conditions. NSE/BSE indices tend to reflect GDP growth over long periods.
38. Golden Cross & Death Cross
Golden Cross
When the 50-Day Moving Average (DMA) crosses ABOVE the 200-DMA – a bullish signal indicating upward momentum. Traders use this to initiate long positions.
Death Cross
When the 50-DMA crosses BELOW the 200-DMA – a bearish signal. Often precedes or confirms entry into a bear market.
Indian Context: Nifty 50 Death Cross occurred in March 2020 (Covid). Golden Cross confirmed in May 2020, signalling the start of the mega bull run.
39. Grey Market Premium (GMP)
GMP refers to the unofficial premium at which IPO shares trade in the unregulated grey market before listing. It gives an indication (not guarantee) of expected listing gains.
Example: Ola Electric IPO GMP = ₹70 (above issue price ₹76 → total estimated listing price ₹146). Actual listing may differ.
SEBI does not regulate the grey market. It is informal and carries legal and financial risk. Investors should not rely solely on GMP for IPO investment decisions.
🔤 H
40. Hedging
Hedging is a risk management strategy to reduce potential losses by taking an offsetting position in a correlated asset or derivative.
Common Hedging Strategies in India
- Buy Protective Put – hold shares of Reliance, buy Reliance Put Option to limit downside
- Short Futures Hedge – hold portfolio, short Nifty Futures to protect against index decline
- Currency Hedge – an IT exporter buys USD/INR Forward contracts to lock in exchange rates
- Gold as Portfolio Hedge – gold often rises when equity falls (negative correlation)
SEBI Note: Hedging in commodity futures is permitted for eligible market participants (exporters, importers, processors)
41. High Net Worth Individual (HNI)
SEBI defines HNI (also called Non-Institutional Investors / NIIs in IPO context) as investors applying for shares worth more than ₹2 lakh in an IPO. There are two sub-categories:
- Small HNI (sHNI): Application amount ₹2 lakh to ₹10 lakh – 1/3rd of HNI quota reserved
- Big HNI (bHNI): Application amount above ₹10 lakh – 2/3rd of HNI quota
IPO Allocation: Retail ≤ ₹2 lakh (35%), HNI >₹2 lakh (15%), QIB (50%) – subject to SEBI norms
42. Holding Period
The length of time an investor holds a security. Critical for tax calculation (STCG vs LTCG) and investment strategy.
- 1 day – Intraday (speculative income – 30% slab tax)
- <12 months – Short-term holding (STCG @ 20%)
- ≥12 months – Long-term holding (LTCG @ 12.5% above ₹1.25 lakh exemption)
🔤 I
43. Index
A stock market index is a statistical measure tracking the performance of a selected group of stocks representing a market segment. Indices serve as benchmarks for portfolio performance.
Major Indian Indices (2026)
- S&P BSE SENSEX – 30 stocks; oldest (1986); base value 100 in 1978-79
- Nifty 50 (NSE) – 50 large-cap stocks; most actively tracked; base 1000 on Nov 3, 1995
- Nifty Bank (BankNifty) – 12 banking stocks; options most actively traded
- Nifty Midcap 150, Nifty Smallcap 250
- Nifty IT, Nifty Pharma, Nifty Auto, Nifty FMCG – sectoral indices
- India VIX – volatility index (fear gauge); high VIX = high uncertainty
44. Inflation & Its Impact on Equity
Inflation (measured by CPI – Consumer Price Index in India) erodes purchasing power. The RBI’s mandate is to keep CPI inflation at 4% (±2% band).
Impact of Inflation on Stock Market
- Moderate inflation (3-5%) → positive for corporate revenue; supports equity markets
- High inflation (7%+) → RBI raises repo rate → borrowing costs rise → company profits fall → stock prices fall
- Inflation beneficiaries: Commodity stocks, Real Estate, Gold
- Inflation victims: High-debt companies, consumer discretionary (demand falls)
CPI Inflation (FY26): Approximately 4.2-4.8% – within RBI’s comfort zone
45. Initial Public Offering (IPO)
An IPO is the process through which a private company offers its shares to the public for the first time, listing on BSE/NSE and raising capital from investors.
IPO Process in India (SEBI ICDR Regulations 2018)
- DRHP (Draft Red Herring Prospectus) filed with SEBI → SEBI review (30 days)
- RHP (Red Herring Prospectus) – price band disclosed
- Subscription period: 3 working days
- Allotment: T+6 days from issue close; listing: T+6 for mainboard (T+3 for SME)
- OFS (Offer for Sale) – promoters sell existing shares; no fresh capital to company
- Fresh Issue – new shares; proceeds go to company for capex/debt repayment
India’s IPO Market (2025-26)
India’s IPO market has been among the most active globally. FY26 saw many tech unicorns, new-age companies, and traditional businesses go public, with retail participation at record levels.
46. Insider Trading
Insider Trading is the illegal act of buying or selling securities based on material, non-public information (MNPI) by a company insider (directors, employees, auditors) or any person who receives such information.
SEBI Insider Trading Regulations: SEBI (Prohibition of Insider Trading) Regulations, 2015 (amended through 2024)
Penalties for Insider Trading (India 2026)
- Civil penalty: Up to ₹25 crore or 3 times profit made (whichever is higher)
- Criminal prosecution: Imprisonment up to 10 years and/or fine up to ₹25 crore
- SEBI has a dedicated Surveillance department using AI-based tools to detect insider trading patterns
47. Interest Coverage Ratio (ICR)
ICR measures a company’s ability to pay interest on its debt obligations from its operating profits.
Formula: ICR = EBIT / Interest Expense
- ICR > 3 → comfortable (company earns 3x of its interest obligation) → financially safe
- ICR 1-2 → risky; any revenue decline may cause default
- ICR < 1 → company cannot service debt from operations → red flag / potential NPA
48. Intrinsic Value
Intrinsic Value is the true, inherent worth of a stock based on its fundamentals – future cash flows, earnings, assets – as opposed to its current market price.
Methods to Calculate Intrinsic Value
- DCF (Discounted Cash Flow) Model – most theoretically sound; discounts future free cash flows
- Graham Number – √(22.5 × EPS × BVPS)
- Sum of Parts Valuation – for conglomerates (Tata Group, Adani Group)
Margin of Safety: Benjamin Graham’s principle: Buy only when market price is significantly below intrinsic value (20-30% discount)
🔤 J
49. Joint Venture (JV)
A Joint Venture is a business arrangement in which two or more parties agree to pool resources for a specific business objective while maintaining their separate legal identities.
Indian Example: Maruti Suzuki India Ltd – JV between Suzuki Motor Corporation (Japan) and Government of India (now public company). Hero MotoCorp was initially a JV with Honda.
Announcement of a JV or partnership often leads to stock price movement. Investors analyse the JV’s strategic fit and potential revenue contribution.
50. J-Curve Effect
The J-Curve in equity investing refers to the pattern where a private equity or new investment initially shows negative returns before turning positive, creating a ‘J’ shape on a return-time graph.
In macro context: India’s Current Account Deficit (CAD) may worsen initially after a Rupee depreciation (import prices rise) before improving (export competitiveness kicks in) – classic J-Curve.
🔤 K
51. KYC (Know Your Customer)
KYC is the mandatory process by which financial institutions verify the identity, address, and financial profile of their clients as per SEBI, RBI, and PMLA (Prevention of Money Laundering Act) requirements.
KYC in Indian Capital Markets
- Aadhaar-based e-KYC – most brokers complete in minutes via OTP/Biometric
- CKYC (Central KYC) – one-time KYC done once for all financial services
- In-person verification (IPV) – required for offline KYC
- Documents: PAN Card (mandatory for demat/trading), Aadhaar/Passport/VoterId, Bank proof
- PMLA compliance: Income proof required for high-value trading or F&O activation
52. KPI (Key Performance Indicator)
KPIs are quantifiable metrics used by analysts and investors to evaluate a company’s operational and financial performance against benchmarks or industry peers.
Sector-Specific KPIs – India
- Banking: NIM (Net Interest Margin), GNPA %, CASA Ratio, PCR (Provision Coverage Ratio)
- IT/Technology: Revenue per employee, Deal TCV (Total Contract Value), Attrition Rate, EBIT Margin
- FMCG: Volume Growth, Gross Margin, Distribution Reach (towns/villages)
- Auto: Wholesale dispatches, Market share by segment, EV penetration %
- Real Estate: Pre-sales bookings (₹ crore), Collections, Net Debt/Equity
🔤 L
53. Large Cap / Mid Cap / Small Cap
SEBI/AMFI Classification (2026 Updated)
AMFI publishes a bi-annual list categorising companies based on market capitalisation. This classification is binding for mutual funds.
- Large Cap: Top 100 companies by full market cap (approx. above ₹50,000-60,000 crore)
- Mid Cap: 101st to 250th companies (approx. ₹15,000–50,000 crore range)
- Small Cap: 251st and below (approx. below ₹15,000 crore)
- Micro Cap / Nano Cap: Very small companies (<₹500 crore) – high risk, low liquidity
54. Leverage
Leverage is the use of borrowed capital (debt or margin) to amplify potential investment returns. It also magnifies potential losses proportionally.
F&O Leverage Example: Nifty Futures contract value = ₹5.625 lakh (Nifty at 22,500, Lot 25). Margin required ≈ ₹65,000. Leverage ≈ 8-9x. A 1% market move = 8-9% gain or loss on margin capital.
SEBI’s Leverage Restrictions (2026)
- SEBI has progressively reduced intraday leverage offered by brokers
- Peak Margin Norms (implemented from September 2021) – clients must have 100% margin upfront
- No leverage beyond exchange-mandated limits for retail investors in F&O
55. Limit Order
A Limit Order is an instruction to buy or sell a security at a specified price (or better). It gives the investor price control but does not guarantee execution.
Example – Buy Limit Order: Place Buy Order for HDFC Bank at ₹1,650 (current price ₹1,680). Order executes only if price drops to ₹1,650 or below.
Example – Sell Limit Order: Place Sell Order for Infosys at ₹1,900 (current price ₹1,860). Executes only if price rises to ₹1,900 or above.
Order Types on NSE/BSE
- Market Order – immediate execution at best available price
- Limit Order – specified price or better
- Stop-Loss Order – triggers at specified loss level (SL-M or SL-Limit)
- AMO (After Market Order) – placed after market hours; executed on next open
- GTD (Good Till Date) / GTC (Good Till Cancelled)
56. Liquidity
Market Liquidity
Liquidity refers to how quickly and easily an asset can be converted to cash without significantly affecting its price. In stock markets, it’s measured by trading volume and bid-ask spread.
Liquidity Indicators
- Trading Volume: High daily volume = liquid (e.g., Reliance Industries often trades 1–2 crore shares/day)
- Market Depth: More buyers and sellers = better liquidity
- Bid-Ask Spread: Narrow spread = highly liquid
- Impact Cost: SEBI requires NSE to publish Impact Cost data for index stock eligibility
Company Liquidity
Current Ratio = Current Assets / Current Liabilities. >1 is generally acceptable. <1 may indicate liquidity stress.
Quick Ratio (Acid Test) = (Current Assets – Inventory) / Current Liabilities
57. Listed Company
A listed company is one whose shares are admitted to trading on a recognised stock exchange (BSE/NSE). Listing involves compliance with SEBI’s LODR (Listing Obligations and Disclosure Requirements) Regulations, 2015.
Key SEBI LODR Compliance Requirements
- Quarterly results within 45 days of quarter end (60 days for Q4/annual)
- Board meeting intimation 2 days in advance
- Prompt disclosure of material events (mergers, acquisitions, regulatory orders)
- Minimum public shareholding (MPS): 25% for private companies, 10% for PSUs
🔤 M
58. Margin / Margin Trading Facility (MTF)
Margin is the minimum amount an investor must deposit with a broker to open or maintain a position. In equity cash segment, SEBI allows brokers to offer Margin Trading Facility (MTF) for approved securities.
MTF Rules (SEBI 2026)
- Funding at broker’s cost (typically 12-18% p.a. interest)
- Maximum leverage: up to 4x for eligible securities under MTF
- Margin pledge required – shares pledged digitally via CDSL/NSDL
- Margin call triggered if portfolio value falls below maintenance margin
59. Market Capitalisation
Market Capitalisation (Market Cap) is the total market value of a company’s outstanding shares. It represents what the market collectively thinks the company is worth.
Formula: Market Cap = Current Share Price × Total Shares Outstanding
Example: Reliance Industries: Share Price ₹2,900 × Shares 13,500 crore = ₹39.15 lakh crore (₹39.15 trillion) – India’s largest company by market cap in 2026
India’s Total Market Cap (2026)
India’s total BSE market cap crossed USD 4 trillion (approx. ₹335 lakh crore) in 2024, making it the 4th largest equity market globally, ahead of Hong Kong and behind only USA, China, and Japan.
60. Market Order
A Market Order is an instruction to buy or sell a security immediately at the best available current market price. It guarantees execution but not price.
When to Use: Use Market Orders for highly liquid stocks (Nifty 50 constituents) where bid-ask spread is ₹1-₹2. Avoid for illiquid stocks where spread can be wide.
61. Mutual Fund (MF)
A Mutual Fund pools money from many investors and invests in a diversified portfolio of stocks, bonds, or other securities. Managed by AMCs (Asset Management Companies) regulated by SEBI under SEBI (Mutual Fund) Regulations, 1996.
Categories of Mutual Funds in India (SEBI Categorisation)
- Equity Funds: Large Cap, Mid Cap, Small Cap, Flexi Cap, ELSS (Tax Saving), Sectoral/Thematic
- Debt Funds: Overnight, Liquid, Short Duration, Medium Duration, Long Duration, Gilt, Credit Risk
- Hybrid Funds: Conservative, Balanced Advantage (BAF), Aggressive Hybrid, Arbitrage
- Solution-Oriented: Retirement Fund, Children’s Fund
- Index Funds & ETFs: Tracking Nifty 50, Sensex, Nifty Next 50, etc.
Key Mutual Fund Metrics
- NAV (Net Asset Value) – price of one unit; calculated daily
- AUM (Assets Under Management) – total corpus managed by the fund
- Expense Ratio – annual fee charged; direct plans 0.1-1.0%, regular plans 0.5-2.0%
- Exit Load – penalty for early redemption (typically 1% if redeemed within 1 year for equity funds)
- XIRR – personalised return metric for SIP investors
SIP (Systematic Investment Plan) – India’s Favourite Investment Tool
SIP allows investors to invest a fixed amount monthly/quarterly in MFs. India’s monthly SIP inflow reached ₹26,000+ crore in 2026, reflecting surging retail participation in capital markets.
62. Moving Average (MA)
A Moving Average is a technical analysis indicator that smooths out price data by creating a constantly updated average price over a specified time period.
Types of Moving Averages
- SMA (Simple Moving Average) – equal weight to all data points; 50-DMA and 200-DMA are most watched
- EMA (Exponential Moving Average) – more weight to recent prices; faster to react; 9-EMA, 20-EMA popular
- VWAP (Volume Weighted Average Price) – intraday benchmark; used by institutional traders
- HMA (Hull Moving Average) – reduces lag significantly
Trading Signals Using MA
- Price above 200-DMA → long-term uptrend; bullish bias
- Price below 200-DMA → long-term downtrend; bearish bias
- Golden Cross (50-DMA > 200-DMA) → buy signal
- Death Cross (50-DMA < 200-DMA) → sell/short signal
Indian Application: Nifty 50 tested its 200-DMA multiple times in 2023-24. Sustaining above 200-DMA is key for technical bulls.