Part 1

• Arbitrage
  Profiting from price differences in different markets.
  Example: Buying a stock at ₹100 in one market and selling at ₹105 in another.
• Ask Size
  The number of shares a seller is offering at a given price.
  Example: 1,000 shares available at ₹200.
• Bid Size
  The number of shares a buyer wants to purchase at a given price.
  Example: 500 shares requested at ₹195.
• Candlestick Chart
  A chart showing price movement in a specific time frame.
  Example: A green candlestick indicates a price increase.
• Corporate Action
  Events that affect shareholders, like dividends or splits.
  Example: Infosys announces a 1:1 bonus issue.
• Debt-to-Equity Ratio
  Ratio comparing company debt to equity.
  Example: A ratio of 2 means ₹2 debt for every ₹1 equity.
• Delisting
  Removing a company’s shares from the stock exchange.
  Example: Company X delisted from NSE due to non-compliance.
• ESOP (Employee Stock Option Plan)
  Stocks offered to employees at a discounted rate.
  Example: TCS employees receive shares under ESOP.
• Face Value
  Original price of a share set by the company.
  Example: A share has a face value of ₹10.
• Fundamental Analysis
  Evaluating a stock based on company performance and financials.
  Example: Studying earnings, revenue, and future growth potential.
• Technical Analysis
  Predicting stock price movements using charts and trends.
  Example: Using moving averages to identify entry points.
• Greeks
  Variables used in options pricing models.
  Example: Delta measures price sensitivity to stock changes.
• Intraday Trading
  Buying and selling stocks within the same trading day.
  Example: Buying Tata Motors at 10:00 AM and selling at 2:00 PM.
• Market Order
  An order to buy or sell at the current market price.
  Example: Buying a stock immediately at ₹250.
• Limit Order
  An order to buy or sell at a specified price or better.
  Example: Setting a buy limit order for ₹100.
• Oversold
  A stock considered undervalued due to excessive selling.
  Example: A stock drops sharply and becomes oversold.
• Overbought
  A stock considered overvalued due to excessive buying.
  Example: Nifty IT stocks after a long rally.
• Order Book
  A list of buy and sell orders for a stock.
  Example: Buyers offer ₹250; sellers demand ₹255.
• Payout Ratio
  Percentage of earnings paid as dividends.
  Example: A 40% payout ratio means ₹40 dividend from ₹100 earnings.
• PEG Ratio (Price/Earnings-to-Growth)
  Evaluates stock value by considering growth rate.
  Example: A PEG ratio below 1 indicates undervaluation.
• Stock Buyback
  Company repurchases its shares from the market.
  Example: Infosys announces a ₹10,000 crore buyback.
• Short Covering
  Buying shares to close a short position.
  Example: Traders rush to buy stocks they borrowed earlier.
• SEBI (Securities and Exchange Board of India)
  Regulatory body overseeing Indian stock markets.
  Example: SEBI regulates stock exchanges like NSE and BSE.
• Spread Betting
  Speculating on price movement without owning the stock.
  Example: Betting on Nifty rising above 20,000 points.
• Swing High
  A peak point in price movement.
  Example: Nifty 50 touched 19,000 before declining.
• Swing Low
  A trough point in price movement.
  Example: A stock drops to ₹1,000 before recovering.
• Time Decay
  Reduction in option value as expiration approaches.
  Example: An option loses value as its expiry nears.
• Volatility Index (VIX)
  Measures market volatility expectations.
  Example: High VIX indicates increased market uncertainty.
• Wealth Management
  Financial planning to grow and protect wealth.
  Example: Investing in diversified portfolios for long-term growth.
• Yield Curve
  A graph showing bond yields across maturities.
  Example: A steep yield curve signals strong economic growth.
• Zombie Company
  A company barely earning enough to pay interest on debt.
  Example: A startup surviving on loans without profits.
• Momentum Investing
  Investing in stocks with upward trends.
  Example: Buying high-performing IT stocks during a tech rally.
• Book Building
  Process of determining share price in IPOs.
  Example: An IPO price range is set between ₹500 and ₹600.
• Trailing Stop Loss
  A stop-loss order that moves with the stock price.
  Example: Setting a trailing stop loss 5% below the current price.
• Initial Margin
  The minimum amount required to start trading futures or options.
  Example: Paying ₹10,000 as initial margin for a futures trade.
• Collateral
  Assets pledged to secure a loan or trade.
  Example: Shares used as collateral for a margin account.
• Derivatives
  Financial instruments derived from underlying assets.
  Example: Futures and options are derivatives of stocks.
• Index Fund
  A mutual fund mirroring a stock index.
  Example: A fund tracking the Nifty 50 index.
• ETF (Exchange-Traded Fund)
  A fund traded on stock exchanges like a stock.
  Example: Nifty Bees is an ETF tracking Nifty 50.
• Growth Stock
  A stock expected to grow faster than average.
  Example: A startup in a booming tech sector.
• Value Stock
  A stock trading below its intrinsic value.
  Example: An undervalued company with strong fundamentals.
• Intrinsic Value
  The actual worth of an asset.
  Example: Calculating an option’s intrinsic value using its strike price.
• Payout Day
  The day dividends are credited to shareholders.
  Example: Dividends are paid on 15th November.
• Mutual Fund
  A pool of money collected to invest in stocks, bonds, etc.
  Example: An equity mutual fund invests primarily in stocks.
• Asset Allocation
  Dividing investments among various asset classes.
  Example: 60% stocks, 30% bonds, and 10% gold.
• Sector Rotation
  Moving investments between sectors based on performance.
  Example: Investing in IT during tech growth and shifting to FMCG later.
• Leveraged ETF
  An ETF using debt to amplify returns.
  Example: A 2x leveraged ETF moves double the index.
• Dark Pool
  Private trading platforms not open to the public.
  Example: Large institutional trades occur in dark pools to avoid market impact.
• Block Trade
  A large trade executed privately.
  Example: A mutual fund buying 1 million shares of Tata Steel in a single deal.
• Stop Order
  An order to buy or sell once the price reaches a specific point.
  Example: A stop order to sell a stock if it falls below ₹1,000.

It allows seamless communication with brokers, advisors, and fellow traders.

Misunderstanding terms can lead to costly errors in trading or investing.

Knowledge of terminology boosts confidence in navigating the market.

50 Share Market Terminologies with Definitions and Examples

1. Stock
   A unit of ownership in a company.
   Example: If you buy a stock of Company A, you become a partial owner.
2. Share
   A single unit of stock.
   Example: Buying 10 shares of Reliance means you own 10 units of its stock.
3. Bull Market
   A market where prices are rising.
   Example: When the Sensex rises continuously, it’s a bull market.
4. Bear Market
   A market where prices are falling.
   Example: If Nifty 50 drops by 20%, it’s a bear market.
5. Dividend
   A portion of a company’s profits distributed to shareholders.
   Example: Company X declares a ₹10 dividend per share.
6. IPO (Initial Public Offering)
   When a company sells shares to the public for the first time.
   Example: Zomato launched its IPO in 2021.
7. Market Capitalization
   Total value of a company’s shares.
   Example: Market cap = Share price × Total shares outstanding.
8. Equity
   Ownership in a company.
   Example: Buying shares of Infosys is buying its equity.
9. Portfolio
   A collection of investments.
   Example: Stocks, mutual funds, and bonds in one account.
10. Index
    Measures the performance of a group of stocks.
    Example: Sensex and Nifty are market indices.
11. Volume
    The number of shares traded in a period.
    Example: 1 lakh shares of Tata Motors were traded today.
12. Liquidity
    Ease of buying or selling a stock.
    Example: Blue-chip stocks are highly liquid.
13. P/E Ratio (Price-to-Earnings)
    Measures a stock’s price relative to earnings.
    Example: If the P/E ratio is 20, you pay ₹20 for ₹1 of earnings.
14. Blue-Chip Stock
    Shares of well-established, financially stable companies.
    Example: TCS, Infosys, and HDFC Bank.
15. Penny Stock
    Low-priced shares of small companies.
    Example: A stock trading at ₹10 per share.
16. Day Trading
    Buying and selling stocks within the same day.
    Example: Buying 100 shares of Wipro at 10 AM and selling at 2 PM.
17. Swing Trading
    Holding stocks for a few days to weeks.
    Example: Holding Tata Steel for 10 days before selling.
18. Stop-Loss Order
    An order to sell a stock to limit losses.
    Example: Selling a stock if it drops below ₹500.
19. Margin Trading
    Borrowing funds to trade.
    Example: Using ₹10,000 to buy ₹50,000 worth of shares.
20. Broker
    A person or platform facilitating stock trading.
    Example: Zerodha or Angel Broking.
21. Demat Account
    An account to store stocks in electronic form.
    Example: Your Demat account holds your TCS shares.
22. Trading Account
    An account to buy and sell stocks.
    Example: Used to execute stock trades.
23. Bid Price
    The highest price a buyer is willing to pay.
    Example: A buyer bids ₹150 for a share.
24. Ask Price
    The lowest price a seller is willing to accept.
    Example: A seller asks ₹155 for the same share.
25. Spread
    The difference between the bid and ask prices.
    Example: If the bid is ₹150 and ask is ₹155, the spread is ₹5.
26. Capital Gains
    Profit from selling a stock.
    Example: Buying at ₹100 and selling at ₹150 earns ₹50 capital gains.
27. Short Selling
    Selling borrowed shares hoping to buy them back at a lower price.
    Example: Selling at ₹200 and repurchasing at ₹150.
28. Bullish
    Expecting prices to rise.
    Example: An analyst is bullish on Reliance.
29. Bearish
    Expecting prices to fall.
    Example: An investor is bearish on IT stocks.
30. Support Level
    A price level where a stock tends to stop falling.
    Example: Infosys has support at ₹1,000.
31. Resistance Level
    A price level where a stock tends to stop rising.
    Example: Reliance faces resistance at ₹2,500.
32. Volume Weighted Average Price (VWAP)
    Average price of a stock based on volume.
    Example: VWAP = ₹1,200 for Tata Steel today.
33. Circuit Limit
    The maximum price movement allowed in a day.
    Example: Upper circuit is 10%; lower circuit is 10%.
34. Leverage
    Using borrowed funds to trade.
    Example: Trading ₹50,000 with only ₹10,000.
35. Futures Contract
    Agreement to buy/sell at a future date and price.
    Example: Buying a gold futures contract for delivery next month.
36. Options Contract
    Right to buy/sell a stock at a fixed price.
    Example: Buying a call option on HDFC Bank.
37. Strike Price
    The price at which an option can be exercised.
    Example: A call option with a strike price of ₹1,200.
38. Hedge
    Reducing risk by taking an offsetting position.
    Example: Buying put options to hedge against falling prices.
39. Rally
    A sustained rise in stock prices.
    Example: IT stocks rallied after good quarterly results.
40. Correction
    A temporary decline in stock prices.
    Example: A 10% drop after a prolonged rally.
41. Yield
    Earnings from an investment expressed as a percentage.
    Example: A ₹1,000 bond yielding 5% returns ₹50 annually.
42. Book Value
    The net asset value of a company.
    Example: Book value = Total assets – Total liabilities.
43. Multibagger Stock
    A stock that gives multiple returns.
    Example: Titan became a multibagger over 10 years.
44. Stock Split
    Dividing existing shares into multiple shares.
    Example: A 1:2 stock split doubles the number of shares.
45. Bonus Shares
    Free shares given to shareholders.
    Example: 1:1 bonus means one free share for every share held.
46. Buyback
    A company repurchasing its own shares.
    Example: TCS announces a buyback at ₹4,000 per share.
47. Volatility
    Fluctuations in stock prices.
    Example: High volatility in Nifty during budget announcements.
48. Alpha
    Excess returns generated compared to the market.
    Example: A fund with 5% alpha outperformed the market by 5%.
49. Beta
    Measures stock sensitivity to market movements.
    Example: A beta of 1.5 means the stock moves 1.5x the market.
50. NAV (Net Asset Value)
    Value per unit of a mutual fund.
    Example: A fund’s NAV is ₹200 per unit.

What is a Demat Account?

A Demat account, short for “dematerialized account,” is a digital account that holds your financial securities like stocks, bonds, mutual funds, and other investments in an electronic format. Instead of physical certificates, these holdings are maintained digitally, making it easier and safer for investors.

Importance of a Demat Account in Today’s Financial World

As online trading becomes increasingly popular, a Demat account serves as a secure medium for buying and selling shares without the hassle of handling physical documents. It streamlines the investment process, allowing investors to manage and monitor their portfolios seamlessly.

How Does a Demat Account Work?

A Demat account acts as a digital vault for holding securities. When you buy shares, they are credited to your Demat account, and when you sell them, they are debited. This system, maintained by depository participants (DPs) linked to central depositories like NSDL or CDSL in India, ensures that your investments are safely stored and easy to access.

Types of Demat Accounts

• Personal Demat Account: Primarily for individual investors who want to trade or invest in stocks and securities.
• Corporate Demat Account: Used by companies or organizations, often with more comprehensive features to manage bulk investments and transactions.

Difference Between a Demat Account and a Trading Account

While a Demat account stores your securities, a trading account facilitates buying and selling. Think of the Demat account as a wallet for your shares, while the trading account is the tool you use to buy and sell. Both are essential for trading, but they serve different purposes.

Steps to Open a Demat Account

Opening a Demat account is straightforward. Here’s what you need to do:

• Required Documents: PAN card, Aadhaar card, bank statement, and passport-sized photographs.
• Choosing a Depository Participant (DP): Select a DP that suits your needs. Look for a reputable provider with good customer service and low fees.

Features of a Demat Account

Some unique features include quick transfers, secure storage, easy access to statements, and seamless integration with your trading account. These make the account user-friendly and ideal for modern trading needs.

Benefits of Having a Demat Account

• Easy Transfer of Shares: With a few clicks, you can transfer shares from one account to another.
• Safe and Secure Storage: Demat accounts eliminate the risk of theft, damage, or forgery associated with physical share certificates.

Costs Involved with a Demat Account

Owning a Demat account does involve costs, which can vary depending on the DP:

• Account Opening Charges: Some DPs charge a nominal fee to set up the account, though many offer free account openings.
• Annual Maintenance Fees: This fee varies by provider and is charged to maintain the account yearly.

Understanding the Role of Depository Participants (DPs)

DPs act as intermediaries between investors and the central depositories (like NSDL and CDSL). They facilitate the opening and maintenance of Demat accounts, enabling investors to trade smoothly.

How to Use a Demat Account for Buying and Selling Securities

Once your Demat and trading accounts are linked, you can buy and sell securities directly. All transactions will be automatically updated in your Demat account, reflecting the current holdings.

Best Practices for Managing Your Demat Account

To make the most of your Demat account:

1. Monitor Account Statements: Regularly check your statements for accuracy.
2. Beware of Charges: Keep an eye on maintenance fees and transaction charges.
3. Update Personal Information: Ensure your contact details are always current to receive alerts and updates.

Common Mistakes to Avoid with Your Demat Account

• Not Monitoring Regularly: Failing to check account statements can lead to unnoticed discrepancies.
• Ignoring Charges: Additional fees can accumulate, affecting your returns.
• Not Updating Personal Information: Outdated information may cause issues with communication and transactions.

Conclusion

A Demat account is essential for trading and investing in today’s digital world. It provides a secure and convenient way to hold and manage investments without the need for physical certificates. Understanding the benefits, costs, and best practices can help you make the most of your Demat account, ensuring smooth and successful trading.

FAQs

1. What is the purpose of a Demat account?
   A Demat account stores financial securities like shares in an electronic format, enabling easy management and transfer.
2. Can I open a Demat account without a trading account?
   Yes, though it is ideal to have both for seamless buying and selling of shares.
3. Are there any hidden charges in a Demat account?
   Charges vary by provider, so always check for annual maintenance fees and transaction charges.
4. How do I transfer shares from one Demat account to another?
   You can request a transfer from your DP, usually done online or with a transfer form.
5. Is it safe to open a Demat account online?
   Yes, as long as you choose a reputable DP with secure, regulated systems.