Every term an Indian investor keeps running into, explained in plain English with a worked example. Search it, or browse by category.
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44 terms across 8 categories
Any item of economic value owned by an individual or corporation. In investing, assets include stocks, bonds, real estate, gold, and cash.
Example: 100 shares of Reliance, a house, gold jewellery and a bank deposit are all assets. So is money a customer owes you.
A period of rising stock prices and investor optimism. Generally defined as a 20% or more increase in stock prices from recent lows.
Example: The Indian stock market experienced a strong bull run from March 2020 to October 2021, with Sensex rising from 25,000 to over 60,000 points.
A period of declining stock prices and investor pessimism. Typically defined as a 20% or more decline from recent highs.
Example: During the COVID-19 pandemic in March 2020, Indian markets fell from 42,000 to 25,000 points in just a few weeks, representing a classic bear market.
A payment made by companies to shareholders from their profits. Dividends can be paid in cash or additional shares.
Example: A company declares a dividend of ₹20 a share and you own 100 shares: you receive ₹2,000. Dividends are added to your income and taxed at your slab rate.
Ownership interest in a company represented by shares of stock. Equity holders have voting rights and claim on company profits.
Example: When you buy shares of Tata Consultancy Services (TCS), you become an equity shareholder and partial owner of the company.
A financial instrument where money is deposited for a fixed period at a predetermined interest rate. Principal and interest are guaranteed.
Example: ₹1,00,000 in a one-year FD at 6.5% becomes ₹1,06,500. The interest is taxed at your slab rate, so in the 30% bracket you keep about ₹4,470 of the ₹6,500.
Share price divided by earnings per share: the number of years of today's profit you are paying for.
P/E Ratio = Current Share Price ÷ Earnings Per Share
Example: TCS closed at ₹2,082 on 25 September 2026 and earned ₹136.01 a share in FY26, a P/E of 15.3. A P/E of 15.3 is an earnings yield of 6.5%.
The total value of a company’s shares in the stock market. It’s calculated by multiplying share price by total number of shares.
Market Cap = Share Price × Total Outstanding Shares
Example: Reliance has about 1,353 crore shares. At ₹1,226 a share in September 2026, its market cap was about ₹16.6 lakh crore.
The net worth of a company as recorded on its balance sheet. It’s calculated as total assets minus total liabilities.
Book Value = Total Assets – Total Liabilities
Example: If a company has assets worth ₹1,000 crores and liabilities of ₹400 crores, its book value is ₹600 crores.
The portion of a company’s profit allocated to each outstanding share. It’s a key indicator of company profitability.
EPS = Net Income ÷ Outstanding Shares
Example: TCS earned ₹49,454 crore in FY26 across about 362 crore shares, an EPS of ₹136.01.
Net profit divided by shareholders' equity: what each rupee the owners have put in earned in a year.
ROE = Net Income ÷ Shareholders’ Equity × 100
Example: In FY26 TCS earned about ₹51,800 for every ₹1 lakh of shareholders' equity (ROE 51.8%). Reliance earned about ₹8,910 (ROE 8.9%).
Borrowings divided by shareholders' equity. It shows how much of the business lenders are funding for every rupee the owners have put in.
Debt-to-Equity = Total Debt ÷ Total Equity
Example: At 31 March 2026, Reliance had ₹4,02,962 crore of borrowings against ₹9,04,030 crore of equity, a debt-to-equity ratio of 0.45. Maruti Suzuki's was close to zero.
A dematerialized account that holds shares in electronic form. Essential for trading in Indian stock markets.
Example: When you buy 100 shares of HDFC Bank through your broker, these shares are credited to your demat account in electronic form instead of physical certificates.
Buying and selling stocks within the same trading day. Positions must be closed before market closing to avoid delivery.
Example: You buy 1000 shares of Wipro at ₹400 at 10 AM and sell them at ₹405 at 2 PM on the same day, making a profit of ₹5,000.
An order to sell a stock when it reaches a certain price to limit losses. It helps protect against significant downside risk.
Example: You buy at ₹1,000 and set a stop loss at ₹900. If the price falls to ₹900, your order becomes a sell order. If the stock opens far below ₹900 after bad news, you are sold at that lower price, not at ₹900.
An order to buy or sell a stock at a specific price or better. It gives you control over the execution price.
Example: You place a limit order to buy ITC shares at ₹450. The order will only execute if the price drops to ₹450 or below.
Price limits set by exchanges to prevent extreme volatility. Trading halts when a stock hits upper or lower circuit.
Example: If a stock has a 10% circuit limit and opens at ₹100, it can only trade between ₹90 and ₹110 for that day.
The difference between the highest price a buyer is willing to pay (bid) and the lowest price a seller is willing to accept (ask).
Example: If the bid for a stock is ₹995 and the ask is ₹1,000, the bid-ask spread is ₹5. This represents the cost of immediate execution.
The per-unit value of a mutual fund scheme. It’s calculated by dividing the total value of assets minus liabilities by the number of units.
NAV = (Total Assets – Total Liabilities) ÷ Total Units
Example: If a mutual fund has assets worth ₹1,000 crores, liabilities of ₹50 crores, and 9.5 crore units outstanding, its NAV is ₹100 per unit.
Investing a fixed amount in a mutual fund on the same date every month. You buy more units when prices are low and fewer when they are high.
Example: ₹10,000 a month into a Nifty 50 index fund for 20 years, at 12% a year, grows to about ₹1 crore. You pay in ₹24 lakh of it.
The yearly fee a mutual fund takes from your money, as a percentage of what you hold. It is deducted from the NAV every day, so it never appears as a charge on your statement.
Example: At 1.5% a year, ₹1,00,000 costs you about ₹1,500 a year. On a ₹10,000 SIP over 20 years, a 1.5% plan instead of a 0.5% plan costs about ₹11.6 lakh.
A fee charged when you redeem mutual fund units before a specified period. It discourages frequent trading.
Example: A fund has 1% exit load if redeemed within 1 year. If you redeem ₹50,000 worth of units within 6 months, you’ll pay ₹500 as exit load.
An equity mutual fund with a three-year lock-in. Under the old tax regime, up to ₹1.5 lakh a year invested in it is deductible from taxable income. The new regime, which is the default, gives no deduction.
Example: Under the old regime, ₹1,50,000 in an ELSS fund saves ₹46,800 of tax in the 30% bracket, including cess. Under the new regime it saves nothing, but it is still an ordinary equity fund.
Measures a fund’s performance relative to its benchmark. Positive alpha indicates outperformance, negative alpha indicates underperformance.
Example: If a fund generates 15% returns while its benchmark gives 12%, the fund has an alpha of +3%, indicating superior performance.
The degree of variation in a stock’s price over time. High volatility indicates larger price swings, while low volatility suggests stable prices.
Example: A stock that fluctuates between ₹90-₹110 daily has higher volatility than one that moves between ₹98-₹102.
Measures a stock’s sensitivity to market movements. Beta of 1 means the stock moves with the market, >1 means more volatile, <1 means less volatile.
Example: If a stock has beta of 1.5 and the market rises 10%, the stock is expected to rise 15%. If market falls 10%, stock may fall 15%.
Measures risk-adjusted returns by comparing excess return to volatility. Higher Sharpe ratio indicates better risk-adjusted performance.
Sharpe Ratio = (Portfolio Return – Risk-free Rate) ÷ Standard Deviation
Example: A portfolio with 15% returns, 6% risk-free rate, and 12% volatility has a Sharpe ratio of 0.75, indicating good risk-adjusted returns.
The mean annual growth rate of an investment over a specified period longer than one year. It assumes reinvestment of returns.
CAGR = (Ending Value ÷ Beginning Value)^(1/n) – 1
Example: If you invest ₹1,00,000 and it grows to ₹2,00,000 in 5 years, the CAGR is 14.87%, meaning your investment doubled with consistent 14.87% annual growth.
A statistical measure of volatility. It shows how much returns deviate from the average. Higher standard deviation means higher risk.
Example: A fund with average returns of 12% and standard deviation of 8% means returns typically range between 4% to 20% (12% ± 8%).
Measures how two investments move in relation to each other. Ranges from -1 to +1. Perfect correlation (+1) means they move together, negative correlation (-1) means they move opposite.
Example: Gold has had low correlation with Indian shares over long periods, which is why a little of it steadies a portfolio. In a sharp panic both can fall together, as they briefly did in March 2020.
The benchmark index of BSE comprising 30 largest and most liquid stocks. It represents the overall health of Indian stock market.
Example: Sensex includes companies like Reliance, TCS, HDFC Bank, and Infosys. When these stocks perform well, Sensex rises, indicating positive market sentiment.
NSE’s flagship index comprising 50 large-cap stocks across various sectors. It’s widely used as a benchmark for Indian equity performance.
Example: Many index funds and ETFs track Nifty 50. When you invest in UTI Nifty Index Fund, your returns mirror Nifty 50’s performance.
The 50 companies ranked just below the Nifty 50 by size. Many companies pass through it on their way into the Nifty 50.
Example: A Nifty Next 50 index fund has been noticeably more volatile than a Nifty 50 fund, with deeper falls in bad years and stronger rises in good ones.
Indices that track specific sectors like banking, IT, pharma, or auto. They help investors focus on particular industries.
Example: Nifty Bank Index includes HDFC Bank, ICICI Bank, and SBI. If you’re bullish on banking sector, you can invest in banking-focused funds or ETFs.
Profit on listed shares or equity funds held for more than 12 months. Taxed at 12.5% on gains above ₹1.25 lakh a year, plus 4% cess. These rates have applied since 23 July 2024.
Example: You buy for ₹1,00,000 and sell after two years for ₹3,00,000. The gain is ₹2,00,000. The first ₹1,25,000 is exempt, so tax is 12.5% of ₹75,000: ₹9,375, or ₹9,750 with cess.
Profit on listed shares or equity funds held for 12 months or less. Taxed at 20% whatever your income, plus 4% cess. This rate has applied since 23 July 2024.
Example: You buy for ₹50,000 and sell after six months for ₹70,000. The ₹20,000 gain is taxed at 20%: ₹4,000, or ₹4,160 with cess.
Tax levied on buying and selling of securities. Rates vary by transaction type and are automatically deducted by brokers.
Example: When you sell equity shares, STT of 0.1% is charged on the transaction value. For a ₹1,00,000 sale, you pay ₹100 as STT.
Tax taken off a payment before it reaches you and credited against your final tax bill. Dividends face 10% TDS once one company or fund pays you more than ₹10,000 in a year.
Example: A company pays you ₹20,000 in dividends in a year. It deducts ₹2,000 as TDS and pays you ₹18,000. The ₹2,000 counts towards your tax when you file.
The regulatory body that oversees Indian securities markets. It protects investor interests and ensures fair trading practices.
Example: SEBI regulates mutual funds, stock exchanges, and brokers. It sets rules for IPO processes, disclosure requirements, and investor protection measures.
A price level where a stock tends to find buying interest and stops falling. It acts as a floor for the stock price.
Example: If HDFC Bank consistently bounces back from ₹1,600 level multiple times, ₹1,600 becomes a strong support level for the stock.
A price level where a stock faces selling pressure and struggles to move higher. It acts as a ceiling for the stock price.
Example: If Reliance repeatedly fails to cross ₹2,800 and falls back, ₹2,800 becomes a resistance level that needs to be broken for further upside.
The average price of a stock over a specific period. It smooths out price fluctuations and helps identify trends.
Example: 50-day moving average of TCS at ₹3,500 means the average closing price over the last 50 days is ₹3,500. If current price is above this, it indicates uptrend.
A momentum oscillator that measures the speed and change of price movements. Values above 70 indicate overbought, below 30 indicate oversold.
Example: An RSI above 70 is read as overbought and below 30 as oversold. Strong stocks can stay above 70 for months, so on its own it tells you about momentum, not about value.
The number of shares traded during a specific period. High volume confirms price movements, while low volume suggests weak trends.
Example: A price move on three times the usual volume has more buyers or sellers behind it than one on thin volume. That makes it more likely to be real, but not certain.