Stock Markets Jargons

The Indian stock market has its own set of jargons that can be confusing to new investors. Understanding these terms is essential for making informed investment decisions. In this article, we'll discuss some of the commonly used jargons in the Indian stock market.

Bull market and bear market: A bull market is a period when the stock prices are rising, and the investor sentiment is optimistic. On the other hand, a bear market is a period when the stock prices are falling, and the investor sentiment is pessimistic.

IPO: IPO stands for Initial Public Offering. It is the first time a company offers its shares to the public to raise capital. When an IPO is successful, the company's shares start trading on the stock exchange.

Stockbroker: A stockbroker is a licensed professional who helps investors buy and sell stocks on the stock exchange.

Blue-chip stocks: Blue-chip stocks are the shares of large, well-established companies with a history of stable earnings and a strong reputation. These stocks are considered to be safe investments.

P/E ratio: P/E ratio stands for Price-to-Earnings ratio. It is a measure of how much investors are willing to pay for each rupee of earnings generated by the company. A higher P/E ratio indicates that investors have high expectations for the company's future earnings growth.

Stock options: Stock options are a type of derivative that gives the holder the right, but not the obligation, to buy or sell a specific number of shares at a predetermined price before a specific date.

Circuit breaker: A circuit breaker is a mechanism designed to halt trading on the stock exchange when there is a sharp decline in the stock prices. This is done to prevent panic selling and to give investors time to reassess their investment strategy.

Bullish and bearish: A bullish investor is optimistic about the market and expects prices to rise. A bearish investor, on the other hand, is pessimistic about the market and expects prices to fall.

Margin trading: Margin trading is a practice where an investor borrows money from the stockbroker to buy stocks. The investor puts up a portion of the money, and the stockbroker lends the rest. This practice can magnify gains, but it also magnifies losses.

Stop-loss order: A stop-loss order is a type of order placed with the stockbroker to automatically sell a stock if it falls below a certain price. This is done to limit losses in case the stock price falls.

Market capitalization: Market capitalization is the total value of a company's outstanding shares. It is calculated by multiplying the number of outstanding shares by the current market price of the share.

Book value: Book value is the value of a company's assets minus its liabilities. It represents the net worth of the company and is an important measure for investors to assess a company's financial health.

Dividend: Dividend is the portion of a company's profits that is distributed to its shareholders. Dividends are usually paid out in cash, but they can also be paid out in the form of additional shares.

Blue-sky law: Blue-sky laws are state-level regulations that are designed to protect investors from fraudulent investment schemes. These laws require companies to disclose certain information to investors before selling securities.

Rights issue: A rights issue is a type of offering in which a company offers its existing shareholders the right to buy additional shares of the company at a discounted price.

Short selling: Short selling is a practice where an investor borrows shares from a stockbroker and sells them in the market. The investor hopes to buy back the shares at a lower price and return them to the stockbroker, pocketing the difference as profit.

Volume: Volume is the number of shares that are traded in a particular stock on a given day. High volume usually indicates that there is a lot of interest in the stock.

Resistance level: A resistance level is a price level at which the stock price has historically struggled to rise above. Investors often use resistance levels to determine when to buy or sell a stock.

Bid-ask spread: The bid-ask spread is the difference between the highest price that a buyer is willing to pay for a stock (the bid) and the lowest price that a seller is willing to accept for the same stock (the ask).

Market order: A market order is an order to buy or sell a stock at the current market price. Market orders are executed immediately, but the price at which the order is executed may be different from the price at which the order was placed.

Conclusion

These are some of the commonly used jargons in the Indian stock market. Understanding these terms is essential for making informed investment decisions. Investors should also keep themselves updated on the latest market trends and news to make informed investment decisions.