Glossary · 50 terms
Stock Market Basics
All stock market basics terms in the EquitiesIndia.com glossary — plain-English definitions written for Indian retail investors.
Absolute Return(Total Return)
Absolute return is the total percentage gain or loss on an investment over a specified period, measured from the initial investment amount, without annualising or adjusting for risk or time. It is the simplest measure of investment performance.
Alpha(Jensen's Alpha)
Alpha is the excess return generated by a stock or portfolio above its expected return (based on its beta and the market's return), representing the value added by skill, selection, or timing rather than simply riding market movements. Positive alpha indicates outperformance; negative alpha indicates underperformance.
Annualised Return(CAGR)
Annualised return converts an investment's total return over any period into an equivalent annual rate, enabling fair comparison across investments held for different durations. In India, mutual fund performance disclosures use annualised returns (CAGR) for periods exceeding one year.
Bear Market(Bear Run)
A bear market is a sustained decline of 20% or more in stock prices from recent highs, typically accompanied by negative investor sentiment, rising risk aversion, and deteriorating economic fundamentals. India's markets entered bear phases during the 2008 global financial crisis and the COVID-19 outbreak in early 2020.
Beta(Beta Coefficient)
Beta is a measure of a stock's price volatility relative to a benchmark index (typically Nifty 50 in India), indicating how much the stock tends to move for a given move in the market. A beta greater than 1 signals higher volatility than the market; less than 1 signals lower volatility.
Blue Chip(Blue-Chip Stock)
Blue chip stocks are shares of large, financially sound, and well-established companies with a long track record of stable earnings, reliable dividends, and strong market presence. In India, companies like TCS, Reliance Industries, and HDFC Bank are commonly regarded as blue chips.
Book Value(Net Asset Value (per share))
Book value is the net value of a company's assets as recorded in its financial statements, calculated as total assets minus total liabilities. Book value per share represents the accounting value of each share and serves as a foundational metric in fundamental analysis.
BSE(Bombay Stock Exchange)
The Bombay Stock Exchange (BSE), established in 1875, is Asia's oldest stock exchange and one of the world's largest by number of listed companies. It is headquartered in Mumbai and is home to the Sensex, India's most iconic market index.
Bull Market(Bull Run)
A bull market is a sustained period of rising stock prices, typically defined as a 20% or more increase from recent lows, accompanied by strong investor confidence and positive economic sentiment. India experienced notable bull markets in 2003–2008 and 2020–2024.
CAGR(Compound Annual Growth Rate)
CAGR (Compound Annual Growth Rate) is the rate at which an investment grows from its initial value to its final value over a specified period, expressed as an annual percentage, assuming the growth is compounded each year. It is the most widely used measure of long-term investment performance in India.
CDSL(Central Depository Services Limited)
CDSL (Central Depository Services Limited) is India's second depository, established in 1999 and promoted by BSE along with major banks. It holds securities in electronic form for investors through a network of Depository Participants and is regulated by SEBI. CDSL became a listed company itself on BSE in 2017.
Circuit Breaker(Market Circuit Breaker)
A circuit breaker is a regulatory mechanism that temporarily halts trading on stock exchanges when price movements or index levels breach predefined thresholds. SEBI mandates market-wide circuit breakers on NSE and BSE to prevent runaway crashes and allow markets to stabilise.
Consolidation(Sideways Market)
Consolidation in stock markets refers to a period where prices trade within a relatively narrow range after a significant move up or down, reflecting a balance between buyers and sellers as the market digests recent information. It is a pause rather than a directional trend.
Correction(Market Correction)
A market correction is a decline of 10% to 20% in stock prices from a recent peak, representing a temporary pullback within a longer-term trend. Corrections are a normal and healthy feature of equity markets that help reset stretched valuations.
Demat Account(Dematerialised Account)
A demat (dematerialised) account is an electronic repository that holds an investor's financial securities — shares, bonds, ETFs, and mutual fund units — in digital form, eliminating the need for physical certificates. In India, demat accounts are maintained by NSDL and CDSL through SEBI-registered Depository Participants.
Depository Participant(DP)
A Depository Participant (DP) is a SEBI-registered intermediary — typically a bank or stockbroker — that acts as an agent of NSDL or CDSL to provide demat account services to investors. The DP is the direct interface between the investor and the depository.
DII(Domestic Institutional Investor)
DII (Domestic Institutional Investor) refers to Indian institutional entities — primarily mutual funds, insurance companies, and pension funds — that invest in Indian securities markets. DIIs play an increasingly important stabilising role in Indian equity markets, particularly during periods of FII selling.
Equity(Shareholders' Equity)
Equity represents the ownership interest held by shareholders in a company after all liabilities have been subtracted from assets. In the Indian capital markets, equity shares are the most widely traded instruments on the NSE and BSE.
Face Value(Par Value)
Face value (also called par value) is the nominal value of a share as stated in the company's memorandum of association, typically Rs 1, Rs 2, Rs 5, or Rs 10 per share in India. It is the base value used for calculating dividend per share and is distinct from the market price.
FII(FPI)
FII (Foreign Institutional Investor) — now formally termed FPI (Foreign Portfolio Investor) under SEBI's updated regulations — refers to foreign entities such as hedge funds, mutual funds, pension funds, and insurance companies registered to invest in Indian securities markets. FII/FPI flows are a major driver of short-term market movements in India.
Free Float(Free-Float)
Free float refers to the proportion of a company's total shares that are available for trading in the open market, excluding shares held by promoters, governments, and strategic investors. Indian indices like the Nifty 50 and Sensex use free-float market capitalisation for index weighting.
India VIX(VIX)
India VIX (Volatility Index) is a measure of the market's expectation of near-term volatility, computed by NSE based on the order book of Nifty 50 options. It is often called the 'fear gauge' of Indian markets — rising when investors expect higher uncertainty and falling during calm, confident market conditions.
Intrinsic Value(Fundamental Value)
Intrinsic value is the estimated true or fundamental worth of a company or its shares, derived through financial analysis of its business prospects, cash flows, and assets — independent of its current market price. It forms the cornerstone of value investing.
ISIN(International Securities Identification Number)
An ISIN (International Securities Identification Number) is a 12-character alphanumeric code that uniquely identifies a financial security globally. In India, ISINs for listed securities begin with 'IN' and are assigned by NSDL as the national numbering agency.
Large Cap(Large-Cap)
Large-cap stocks refer to shares of companies ranked among the top 100 by full market capitalisation on Indian stock exchanges, as defined by AMFI. These are established businesses with significant market presence, stable earnings, and high institutional ownership.
Liquidity(Market Liquidity)
Liquidity in the context of stock markets refers to the ease with which a security can be bought or sold at a stable price without causing a significant market impact. Highly liquid Indian stocks like those in the Nifty 50 can be transacted in large quantities with minimal price distortion.
Lower Circuit(Lower Limit)
A lower circuit is the minimum price limit a stock can fall to in a single trading session, set as a fixed percentage below the previous day's closing price by SEBI and exchanges. Once triggered, no trade can occur below this price for the remainder of the session.
Market Capitalisation(Market Cap)
Market capitalisation is the total market value of a company's outstanding shares, calculated by multiplying the current share price by the total number of shares outstanding. SEBI uses market cap thresholds to classify Indian listed companies into large-cap, mid-cap, and small-cap categories.
Market Value(Current Market Price)
Market value is the current price at which a security trades on a stock exchange, reflecting the price agreed upon by buyers and sellers in the open market at any given moment. For a company, total market value equals its market capitalisation.
Mid Cap(Mid-Cap)
Mid-cap stocks are shares of companies ranked 101st to 250th by full market capitalisation among all listed Indian companies, as classified by AMFI. They occupy the space between large, established companies and smaller, emerging businesses, often offering a balance of growth potential and reasonable stability.
Nifty 50(Nifty)
The Nifty 50 is the flagship index of the National Stock Exchange of India, comprising 50 of the largest and most liquid companies listed on NSE. It serves as the primary benchmark for Indian equity performance and is the underlying asset for the country's most actively traded index derivatives.
Nifty 500(NSE 500)
The Nifty 500 is a broad-market index of the National Stock Exchange that represents the top 500 companies listed on NSE, covering approximately 95% of the total free-float market capitalisation of all NSE-listed stocks. It encompasses large-cap, mid-cap, and small-cap segments.
NSDL(National Securities Depository Limited)
NSDL (National Securities Depository Limited) is India's first and largest depository, established in 1996, that holds securities in electronic form and facilitates the transfer of ownership during trading. It is promoted by NSE, IDBI Bank, and UTI, and is regulated by SEBI.
NSE(National Stock Exchange)
The National Stock Exchange of India (NSE) is the country's largest stock exchange by trading volume, established in 1992 and headquartered in Mumbai. It introduced electronic trading to India and is home to benchmark indices such as the Nifty 50.
Penny Stock(Penny Shares)
Penny stocks are shares of small companies that trade at very low prices — typically below Rs 10 or Rs 20 per share in the Indian context — with very low market capitalisation and minimal liquidity. They are associated with high risk, low transparency, and susceptibility to price manipulation.
Pre-Open Session(Pre-Market Session)
The pre-open session is a 15-minute window (9:00 AM to 9:15 AM IST) on NSE and BSE that precedes the regular trading session, designed to facilitate price discovery and determine opening prices for securities through an order-matching mechanism.
Promoter(Promoter Holding)
A promoter is an individual or entity that has established or taken significant control of a company and holds a substantial portion of its equity. SEBI defines promoters formally for listed companies in India, and promoter shareholding is a key disclosed metric that investors monitor closely.
Rally(Market Rally)
A rally is a period of sustained price increases in a stock, sector, or broad market index after a period of decline or consolidation. Rallies can occur within both bull and bear markets and are driven by improving fundamentals, positive news flow, or shifts in investor sentiment.
Sensex(S&P BSE Sensex)
The Sensex, or S&P BSE Sensex, is the benchmark index of the Bombay Stock Exchange comprising 30 of the largest and most actively traded companies listed on BSE. It has served as the primary barometer of India's equity market health since its base year of 1978–79.
Share(Stock)
A share is a single unit of ownership in a company, representing an investor's proportionate stake in that company's equity capital. Shares of Indian companies are held in electronic form through a demat account regulated by SEBI-registered depositories.
Sharpe Ratio(Sharpe Index)
The Sharpe Ratio measures the risk-adjusted return of an investment by calculating how much excess return is earned per unit of total risk (standard deviation). A higher Sharpe Ratio indicates better return per unit of risk taken, making it a widely used tool for comparing investment strategies in India.
Small Cap(Small-Cap)
Small-cap stocks refer to shares of companies ranked 251st and below by full market capitalisation in the AMFI classification of listed Indian companies. They are characterised by higher growth potential, lower liquidity, and significantly higher risk compared to large-cap and mid-cap stocks.
Stock(Share)
A stock is a financial instrument that represents ownership in a company, entitling the holder to a proportional share of the company's assets and earnings. In India, stocks are traded on exchanges such as the NSE and BSE under the regulatory oversight of SEBI.
T+1 Settlement(T+1)
T+1 settlement means that the transfer of shares and funds is completed one working day after the trade date (T). India transitioned to T+1 settlement for all listed equities by January 2023, making it one of the fastest equity settlement systems in the world.
Trading Account(Brokerage Account)
A trading account is an account maintained with a SEBI-registered stockbroker that enables investors to place buy and sell orders for securities on Indian stock exchanges like NSE and BSE. It acts as the interface between the investor and the exchange, working in conjunction with a demat account.
Trading Hours(Market Hours)
Trading hours refer to the official time window during which buying and selling of securities takes place on Indian stock exchanges. NSE and BSE equity markets operate from 9:15 AM to 3:30 PM IST on weekdays, excluding public holidays declared by the exchanges.
Turnover(Trading Turnover)
Turnover in stock market terminology refers to the total value of shares traded over a given period, expressed in rupees (as opposed to volume, which is expressed in number of shares). NSE and BSE publish daily turnover figures as a measure of overall market activity.
Upper Circuit(Upper Limit)
An upper circuit is the maximum price limit a stock can reach in a single trading session on Indian exchanges, set as a percentage above the previous day's closing price. Once a stock hits its upper circuit, no further upward price movement is permitted for that session, though the stock can still be traded at that price.
Volatility(Market Volatility)
Volatility measures the degree of variation in an asset's price over a given period, reflecting the uncertainty or risk associated with the size of price changes. In Indian markets, volatility is formally tracked through the India VIX index published by NSE.
Volume(Trading Volume)
Volume in stock markets refers to the total number of shares traded in a given stock or index during a specified period, typically a single trading day. It is a key indicator of market activity and investor interest, used widely in both fundamental and technical analysis.