Stock Market Glossary

Clear definitions of commonly used terms in trading, investing, and market analysis.

A

Abandoned Baby Pattern

Abandoned Baby Pattern The Abandoned Baby Pattern is a rare candlestick pattern in technical analysis that signals a possible reversal in the market trend. It usually appears after a strong upward or downward move in a stock. This pattern consists of three candles. The first candle follows the existing trend, the second is a Doji (a candle where opening and closing prices are almost the same) that forms with a price gap on both sides, and the third candle moves in the opposite direction of the earlier trend. Because the middle candle stands alone with gaps on both sides, it appears “abandoned,” which is how the pattern gets its name. Example: If a stock has been falling and this pattern appears, it may signal that selling pressure is weakening and a price rise could follow. Traders often use this pattern as an early indication of a trend reversal.

ABC Wave Theory

ABC Wave Theory The ABC Wave Theory is part of Elliott Wave analysis, a method used in technical analysis to study market price movements. It describes the corrective phase of the market, where prices temporarily move against the main trend. In this theory, the correction happens in three waves: Wave A: The price starts moving against the previous trend. Wave B: A temporary move back in the direction of the original trend. Wave C: Another move against the main trend, usually completing the correction. Example: If a stock rises from ₹100 to ₹150 and then begins a correction, it may fall to ₹135 (Wave A), rise slightly to ₹145 (Wave B), and then drop again to ₹125 (Wave C) before the main trend resumes.

Abridged Prospectus

An Abridged Prospectus is a shortened version of a company’s full prospectus issued when it offers shares to the public through an Initial Public Offering (IPO). It contains the key information investors need to understand the offer. This document usually includes details such as the company’s business, financial highlights, risks, issue size, and how the funds will be used. It is designed to give investors a quick overview without having to read the entire detailed prospectus. Example: Before applying for an IPO, investors often read the Abridged Prospectus to understand the main details of the issue, while the complete information is available in the full prospectus or offer document.

Acceptance Credit

Acceptance Credit is a type of short-term financing mainly used in international trade. In this arrangement, a bank guarantees payment on behalf of a buyer, assuring the seller that the payment will be made on the agreed date. The bank “accepts” a bill of exchange issued by the seller, which means the bank takes responsibility for paying the amount when it becomes due. This helps build trust between buyers and sellers, especially when they are in different countries. Example: If a company imports machinery from another country, the exporter may ask for acceptance credit through a bank. The bank guarantees the payment, allowing the importer to receive the goods immediately while paying the amount later.

Accrued Expenses

Accrued Expenses are costs that a company has already incurred but has not yet paid. These expenses are recorded in the company’s accounts because the obligation to pay already exists, even though the payment will be made later. In financial statements, accrued expenses are usually shown as liabilities, since the company still owes that amount. Example: If a company has to pay employee salaries at the end of the month, but the financial statements are prepared before the payment date, the unpaid salaries are recorded as accrued expenses until they are paid.

Accrued Interest

Accrued Interest is the interest that has been earned or accumulated on a loan, bond, or investment but has not yet been paid. It builds up over time between two interest payment dates. This concept is commonly seen in bonds and fixed-income securities, where interest is paid periodically, but it continues to accumulate daily. Example: If a bond pays interest every six months, the interest that accumulates between the last payment date and the current date is called accrued interest. If an investor buys the bond during this period, they usually pay the seller the accrued interest along with the bond price.

B

Back End Load

A Back End Load is a fee charged when an investor redeems or sells units of a mutual fund, usually within a specified period. Example: If a fund charges a 1% exit load and an investor redeems ₹1,00,000, the fee deducted will be ₹1,000.

Back Months

Back Months refer to futures contracts with delivery dates further in the future, compared to near-month contracts. Example: If the current futures contract expires in April, the June or July contracts are called back months.

Backtesting

Backtesting is the process of testing a trading strategy using historical market data to evaluate how it would have performed in the past. Example: A trader may test a moving average crossover strategy on past 10 years of stock data to measure its effectiveness.

Balance Sheet

A Balance Sheet is a financial statement that shows a company’s assets, liabilities, and shareholders’ equity at a specific point in time. Example: If a company has ₹50 crore in assets and ₹30 crore in liabilities, the remaining ₹20 crore represents shareholders’ equity.

Balanced fund

A Balanced Fund is an investment fund that invests in both equities and fixed-income securities to balance risk and return. Example: A balanced fund may allocate 60% in stocks and 40% in bonds.

Balanced Mutual Fund

A Balanced Mutual Fund is a type of mutual fund that combines equity and debt investments in a single portfolio to provide both growth and stability. Example: An investor seeking moderate risk may invest in a balanced mutual fund with 65% equity and 35% debt.

C

Call Option

A Call Option is a financial contract that gives the buyer the right, but not the obligation, to purchase an asset at a specified price within a certain time period. Example: If an investor buys a ₹500 call option and the stock rises to ₹550, the option gains value.

Cancellation

Cancellation refers to the withdrawal of a previously placed trading order before it is executed. Example: If a trader places an order to buy shares at ₹300 but cancels it before execution, the order is cancelled.

Capital

Capital refers to financial resources or money used for investment or business activities. Example: An investor using ₹1 lakh to buy stocks is deploying capital in the market.

Capital Gain or Loss

A Capital Gain occurs when an asset is sold for a higher price than its purchase price, while a Capital Loss occurs when it is sold for less. Example: Buying a stock at ₹200 and selling it at ₹250 results in a capital gain of ₹50.

Capital Growth

Capital Growth refers to the increase in the value of an investment over time. Example: If a stock purchased at ₹100 rises to ₹160, the investment has achieved capital growth.

Capped Style Option

A Capped Style Option is a type of option where the maximum profit that can be earned is limited or capped at a predetermined level. Example: Even if the stock price rises significantly, the option holder’s profit cannot exceed the capped limit.

D

Debentures

Debentures are long-term debt instruments issued by companies to raise capital, usually offering fixed interest payments. Example: A company may issue 10-year debentures with a 7% interest rate to investors.

Debt Fund

A Debt Fund is a mutual fund that invests mainly in fixed-income securities such as bonds and treasury bills. Example: Investing in government bonds through a debt mutual fund.

Delivery date

The Delivery Date is the date on which the underlying asset must be delivered to fulfill a contract. Example: In commodity futures, the delivery date is when physical settlement may occur.

Delivery Notice

A Delivery Notice is a formal notification indicating the intention to deliver a commodity under a futures contract. Example: A trader holding a commodity futures contract may issue a delivery notice before expiry.

Delivery Points

Delivery Points are approved locations where commodities can be delivered to fulfill futures contracts. Example: A commodity exchange may designate specific warehouses as delivery points.

Delivery trading

Delivery Trading refers to buying stocks with the intention of holding them in a Demat account rather than selling them the same day. Example: Buying shares today and holding them for months or years.

E

Equilibrium Price

The Equilibrium Price is the price at which market demand equals supply. Example: In stock markets, trades occur when buyers and sellers agree on the same price.

Equity

Equity represents ownership in a company through shares. Example: Buying shares of a company makes the investor an equity shareholder.

Equity Options

Equity Options are options contracts where the underlying asset is a stock. Example: A call option on shares of a listed company.

Equity Trading

Equity Trading refers to buying and selling company shares on stock exchanges. Example: Trading stocks listed on NSE or BSE.

Exit Load

Exit Load is a fee charged when investors redeem mutual fund units before a specified holding period. Example: A fund may charge 1% exit load if units are redeemed within one year.

External Risk Factors

External Risk Factors are risks arising from economic conditions, government policies, or global events that may affect investments. Example: Changes in interest rates or geopolitical events impacting markets.

F

Filing

Filing refers to the submission of required documents to regulatory authorities. Example: A company filing its IPO documents with SEBI.

Firm Allotment

Firm Allotment refers to shares reserved for specific investors before a public issue opens to the public. Example: Shares allocated to institutional investors in an IPO.

Flipping

Flipping refers to selling shares immediately after an IPO listing to capture quick profits. Example: Investors selling IPO shares on the first day of listing.

Follow on Public Offering (FPO)

An FPO occurs when a listed company issues additional shares to raise more capital. Example: A company issuing new shares after its IPO.

Forward Price

The Forward Price is the agreed price at which an asset will be bought or sold in the future under a forward contract. Example: A company agreeing to buy oil at ₹6,000 per barrel after three months.

Forwards Market Commission (FMC)

The Forwards Market Commission was the regulatory authority for commodity futures markets in India, now merged with SEBI. Example: It earlier supervised commodity exchanges and futures trading.

G

Gamma

Gamma measures the rate of change in an option’s delta relative to the price movement of the underlying asset. Example: High gamma means the option’s sensitivity to price changes increases rapidly.

Gilt Fund

A Gilt Fund is a mutual fund that invests primarily in government securities, making it relatively low risk. Example: Investing in Indian government bonds through a gilt mutual fund.

GIM Membership (CBOT)

GIM Membership refers to a specific membership category in the Chicago Board of Trade, granting trading rights in certain financial instruments. Example: Members with GIM status could trade specific derivatives contracts on the exchange.

Global Fund

A Global Fund is a mutual fund that invests in companies across different countries around the world. Example: A global fund may invest in companies from the US, Europe, and Asia to diversify risk.

GLOBEX

GLOBEX is an electronic trading platform used for trading futures and options globally, allowing trading outside traditional exchange hours. Example: Traders can trade futures contracts electronically through the GLOBEX system.

Go Public

When a company goes public, it offers its shares to the public for the first time through an Initial Public Offering (IPO). Example: A private company launching an IPO to raise funds from public investors.

H

Hard Underwriting

In Hard Underwriting, the underwriter guarantees that the entire issue will be sold, purchasing any unsold shares themselves. Example: If investors do not subscribe fully, the underwriter buys the remaining shares.

Hedge Fund

A Hedge Fund is a pooled investment fund that uses advanced strategies such as leverage, derivatives, and short selling to generate returns. Example: Hedge funds may short stocks or trade derivatives to hedge risk.

Holding Company

A Holding Company is a company that owns controlling shares in other companies but does not usually produce goods or services itself. Example: A parent company owning major stakes in multiple subsidiaries.

Holding Period

The Holding Period is the length of time an investor holds an investment before selling it. Example: If an investor buys shares in 2022 and sells them in 2025, the holding period is three years.

Holdings

Holdings refer to the securities or assets owned by an investor or fund in a portfolio. Example: A mutual fund’s holdings may include stocks, bonds, and other securities.

I

ICAR

ICAR (Indian Council of Agricultural Research) is an organization responsible for agricultural research and education in India. Example: ICAR conducts research to improve crop production and agricultural practices.

IFFCO

IFFCO (Indian Farmers Fertiliser Cooperative Limited) is one of the largest fertilizer cooperatives in India, supporting agricultural development. Example: IFFCO produces fertilizers used by farmers across India.

Indices

Indices are statistical measures that track the performance of a group of stocks representing a market or sector. Example: The Sensex and Nifty 50 are major stock market indices in India.

Initial Public Offer (IPO) Aftermarket

The IPO Aftermarket refers to trading of shares in the stock market after they are listed following an IPO. Example: Investors buying or selling shares after the stock begins trading on the exchange.

Interval Funds

Interval Funds are mutual funds that allow investors to buy or redeem units only during specific intervals instead of daily. Example: Investors may redeem units once every six months.

Intraday Trading

Intraday Trading involves buying and selling stocks within the same trading day. Example: A trader buying shares at ₹500 and selling them at ₹510 on the same day.

J

Joint Applications

A Joint Application is an investment application made by two or more individuals together for securities or financial products. Example: A husband and wife applying jointly for shares in an IPO.

L

Lead Underwriter

The Lead Underwriter is the financial institution responsible for managing the entire public issue process and coordinating with other underwriters. Example: Investment banks often act as lead underwriters in IPOs.

Limit order

A Limit Order is an order to buy or sell a security at a specific price or better. Example: Placing an order to buy a stock only if the price falls to ₹500.

Listing

Listing refers to the process of a company’s shares being admitted for trading on a stock exchange. Example: A company’s shares becoming available for trading on NSE or BSE.

Listing Date

The Listing Date is the day when shares of a newly listed company start trading on the stock exchange. Example: Shares purchased during an IPO begin trading on the listing date.

Lock-In Period

A Lock-In Period is a time during which investors cannot sell their shares or investments. Example: Promoters in an IPO may have a lock-in period of several years.

Long Call Butterfly Strategy

A Long Call Butterfly is an options strategy used when a trader expects limited price movement in the underlying asset. Example: The strategy combines multiple call options at different strike prices.

M

MACD (Moving Average Convergence Divergence)

MACD is a technical indicator used to identify changes in trend direction, momentum, and potential buy or sell signals. Example: A MACD crossover above the signal line may indicate a bullish trend.

Market order

A Market Order is an order to buy or sell a security immediately at the best available market price. Example: Placing a market order to buy shares instantly at the current market price.

Micro Small Medium Enterprises (MSME)

MSMEs are businesses classified based on their investment and turnover size, supporting economic growth and employment. Example: Small manufacturing units and startups often fall under MSME classification.

Minimum Subscription

Minimum Subscription is the minimum amount of capital that must be raised in a public issue for it to proceed successfully. Example: If an IPO does not receive the required minimum subscription, the issue may be cancelled.

MSCCGMF

MSCCGMF (Market Stabilisation and Corporate Commodity Guarantee Mechanism Fund) refers to funds created to support market stability and manage risks in commodity trading environments. Example: Such funds may be used to support settlement obligations during market disruptions.

MSP (Minimum Support Price)

MSP is the minimum price set by the government at which it purchases crops from farmers to protect them from price fluctuations. Example: If the MSP for wheat is ₹2,200 per quintal, farmers are assured they will receive at least that price.

N

NABARD

NABARD (National Bank for Agriculture and Rural Development) is a financial institution that supports agricultural and rural development in India. Example: NABARD provides financial assistance to rural banks and agricultural projects.

NAFED

NAFED (National Agricultural Cooperative Marketing Federation of India) is a cooperative organization that promotes the marketing and trade of agricultural produce in India. Example: NAFED may procure crops from farmers to stabilize agricultural prices.

National Securities Depository Limited (NSDL)

NSDL is one of India’s main securities depositories that holds shares and other securities in electronic form. Example: When investors buy shares, they are credited to their Demat account maintained with NSDL or CDSL.

NBOT

NBOT (National Board of Trade) is an organization involved in commodity trading and related market activities. Example: Commodity contracts for agricultural goods may be traded through such exchanges.

NCDEX

NCDEX (National Commodity & Derivatives Exchange) is a commodity exchange in India where agricultural commodities futures are traded. Example: Farmers and traders may trade soybean or wheat futures on NCDEX.

Net Offer

Net Offer refers to the portion of shares offered to the public in a public issue after excluding reserved allocations. Example: In an IPO, some shares may be reserved for institutional investors and employees, while the rest form the net offer.

O

Offer Date

The Offer Date is the date on which a public issue or investment offer opens for subscription. Example: An IPO may open for investors on a specific offer date and remain open for several days.

Offer Document

An Offer Document provides detailed information about a company issuing securities, including financial data, risks, and issue details. Example: Investors read the prospectus before applying for an IPO.

Offline Trading

Offline Trading refers to placing trades through a broker via phone or physical instructions rather than online platforms. Example: An investor calling a broker to place a buy or sell order.

On-Balance Volume (OBV) Indicator

OBV is a technical indicator that uses trading volume to predict price movements. Example: If OBV rises along with the price, it may signal strong buying interest.

Open-ended Funds

Open-ended funds are mutual funds where investors can buy or redeem units at any time. Example: Most mutual funds allow daily purchase and redemption of units.

Options

Options are financial contracts that give the buyer the right, but not the obligation, to buy or sell an asset at a predetermined price before a specified date. Example: A call option allows an investor to buy a stock at a fixed price.

P

Payoff Profile of Buyer of Asset (Long Asset)

This shows the profit or loss when an investor owns an asset and the price changes. Example: If a stock bought at ₹100 rises to ₹120, the investor gains ₹20.

Payoff Profile of Seller of Asset (Short Asset)

This represents the payoff when an investor sells an asset expecting its price to fall. Example: If a stock sold at ₹100 falls to ₹80, the seller gains ₹20.

Payoff Profile for Buyer of Call Options (Long Call)

A long call payoff increases as the price of the underlying asset rises above the strike price. Example: Buying a ₹500 call option becomes profitable if the stock rises above ₹500.

Payoff Profile for Writer of Call Options (Short Call)

The short call writer earns the premium but faces losses if the stock price rises significantly. Example: Selling a call option at ₹500 strike while receiving premium income.

Payoff Profile for Buyer of Put Options (Long Put)

A long put gains value when the underlying asset price falls below the strike price. Example: Buying a ₹500 put option expecting the stock to fall.

Payoff Profile for Writer of Put Options (Short Put)

The seller of a put option earns the premium but may face losses if the price falls significantly. Example: Selling a ₹500 put option hoping the stock stays above ₹500.

R

Record Date

The Record Date is the date set by a company to determine which shareholders are eligible to receive dividends, bonus shares, or rights offerings. Example: If an investor owns shares on the record date, they will receive the announced dividend.

Redeem

Redeem refers to selling mutual fund units back to the fund house to get the investment amount back. Example: An investor deciding to redeem their mutual fund units to meet a financial goal.

Registrar

A Registrar is an institution that maintains records of shareholders and manages the process of share transfers and allotments. Example: Registrars are responsible for handling IPO applications and share allotments.

Relative Strength Index (RSI)

RSI is a momentum oscillator that measures the speed and change of price movements, used to identify overbought or oversold conditions. Example: An RSI value above 70 may suggest a stock is overbought, while below 30 may indicate it is oversold.

Rights Issue

A Rights Issue is an invitation to existing shareholders to purchase additional new shares of the company at a discounted price. Example: A company offering its shareholders the right to buy one new share for every five shares held.

Risk Management

Risk Management involves identifying, analyzing, and taking steps to reduce or control potential investment losses. Example: Using stop-loss orders and diversifying a portfolio are common risk management techniques.

S

Secondary Market

The Secondary Market is where investors buy and sell securities that have already been issued, such as shares traded on the stock exchange. Example: Buying and selling shares of listed companies on the NSE or BSE.

Sector Fund

A Sector Fund is a mutual fund that invests primarily in companies within a specific industry or sector. Example: A banking sector fund invests mainly in shares of various banks.

Securities

Securities are tradable financial instruments such as shares, bonds, and derivatives used to raise capital or invest. Example: Stocks and government bonds are common types of securities.

Securities and Exchange Board of India (SEBI)

SEBI is the regulatory body that oversees and governs the Indian securities market to protect investors and ensure fair trading. Example: SEBI sets the rules and regulations for stock exchanges, brokers, and mutual funds.

Security Symbol

A Security Symbol is a unique series of characters used to identify a specific company’s shares on a stock exchange. Example: “RELIANCE” is the security symbol for Reliance Industries on the exchange.

Self Regulatory Organization (SRO)

An SRO is an organization that exercises some degree of regulatory authority over an industry or profession. Example: Stock exchanges often function as SROs by monitoring the conduct of their members.

T

Technical Analysis

Technical Analysis is the study of past market data, primarily price and volume, to predict future price movements. Example: Using charts and indicators like moving averages to identify trading trends.

Tick Size

Tick Size is the minimum price change allowed for a security in the market. Example: In the Indian stock market, the tick size for most stocks is ₹0.05.

Time in Force

Time in Force refers to instructions given with an order that indicate how long the order will remain active before it is cancelled. Example: A “Day Order” remains active until the end of the trading day.

Trading Account

A Trading Account is used to buy and sell securities in the stock market, linking the bank account and Demat account. Example: When an investor wants to buy shares, they use their trading account to place the order.

Treasury Bills (T-Bills)

Treasury Bills are short-term government debt instruments used to raise funds for the government, considered to be risk-free. Example: The government issuing 91-day T-bills to manage short-term cash requirements.

U

Underwriter

An Underwriter is a financial institution that guarantees to purchase any unsold shares in a public issue, ensuring the company raises the required funds. Example: Investment banks act as underwriters for companies launching an IPO.

Underlying Asset

The Underlying Asset is the financial instrument on which the price of a derivative contract is based. Example: In Nifty futures, the Nifty index is the underlying asset.

Up-tick

An Up-tick refers to a transaction that occurs at a higher price than the previous transaction for the same security. Example: If a stock trades at ₹100 and the next trade is at ₹100.05, it is an up-tick.

V

Vertical Spread

A Vertical Spread is an options strategy that involves simultaneously buying and selling options of the same type with different strike prices but the same expiration date. Example: Buying a ₹500 call and selling a ₹520 call is a bull call vertical spread.

Volatility

Volatility measures the rate and extent of price changes in a security or market over a period of time. Example: A stock with high volatility experiences frequent and large price movements.

Volume

Volume refers to the total number of shares or contracts traded in a security during a specific period. Example: High trading volume often indicates strong interest in a stock.

W

Watchlist

A Watchlist is a list of securities that an investor monitors to track price movements and identify potential trading opportunities. Example: An investor may add 10 stocks they are interested in to their trading platform watchlist.

Writer

A Writer is a person or entity that sells an options contract, receiving a premium and taking on the obligation to fulfill the contract terms. Example: The writer of a call option earns the premium but must sell the stock if the option is exercised.

Y

Yield

Yield is the return on an investment, usually expressed as a percentage of the investment’s cost or market value. Example: If a bond pays ₹50 interest and costs ₹1,000, the yield is 5%.

Yield to Maturity (YTM)

YTM is the total return expected on a bond if it is held until it reaches its maturity date. Example: Investors use YTM to compare the potential returns of different bonds.

Z

Zero Coupon Bond

A Zero Coupon Bond is a bond that does not pay periodic interest but is issued at a deep discount and redeemed at its full face value. Example: Buying a bond for ₹700 that will be redeemed for ₹1,000 after 5 years.

52 Week High

The 52 Week High is the highest price at which a stock has traded during the last 12 months (one year).

52 Week Low

The 52 Week Low is the lowest price at which a stock has traded during the past 12 months (one year).

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