Glossary
Market Terms,
In Plain Words
65 terms you will meet in an account-opening form, a contract note or a fund factsheet — each defined in a sentence or two.
A
- AMC (Asset Management Company)
- The company that manages a mutual fund’s schemes and invests the pooled money.
- AMO (After-Market Order)
- An order placed outside market hours that is sent to the exchange when the next session opens.
- ASBA
- Application Supported by Blocked Amount. The IPO payment method where money is blocked in your bank account and debited only on allotment.
- Authorised Person
- An individual or firm appointed by a stock broker, with exchange approval, to service clients on the broker’s behalf.
B
- Bid–Ask Spread
- The gap between the highest price a buyer offers and the lowest price a seller accepts.
- Bonus Issue
- Free additional shares given to existing shareholders in a fixed ratio, funded from reserves.
- Bracket Order
- An intraday order placed together with a target and a stop-loss; when one leg executes the other is cancelled.
C
- CAGR
- Compound Annual Growth Rate — the single yearly rate that takes a start value to an end value over a period.
- Call Option
- A contract giving the buyer the right, not the obligation, to buy the underlying at the strike price.
- Circuit Limit
- The maximum a security’s price may move in a session before trading is halted or restricted.
- Contract Note
- The legal record of trades a broker executed for a client on a day, issued within 24 hours.
- Corporate Action
- An event initiated by a company that affects its securities — dividend, split, bonus, rights, merger.
- Cut-off Price
- In an IPO, the option for retail investors to apply at whatever final price is discovered.
D
- Delivery
- Buying shares and holding them in your demat account beyond the trading day.
- Demat Account
- An account that holds securities in electronic form with a depository.
- Depository
- The institution — NSDL or CDSL — that maintains electronic records of securities ownership.
- Depository Participant (DP)
- The intermediary through which an investor opens and operates a demat account.
- Derivative
- A contract whose value is derived from an underlying asset such as a share, index or commodity.
- Dividend
- A portion of a company’s profit paid to shareholders.
- DRHP / RHP
- Draft and final Red Herring Prospectus — the offer documents filed for an IPO.
E
- ELSS
- Equity Linked Savings Scheme, a mutual fund category with a statutory lock-in and a tax deduction under prevailing law.
- ETF
- Exchange-Traded Fund — a fund that tracks an index or asset and trades on the exchange like a share.
- Exit Load
- A fee some mutual fund schemes charge if units are redeemed within a stated period.
- Expense Ratio
- The annual cost of running a mutual fund scheme, expressed as a percentage of assets.
- Expiry
- The date on which a derivatives contract ceases to exist and is settled.
F
- Face Value
- The nominal value of a share as stated in the company’s books.
- FPO
- Follow-on Public Offer — a listed company issuing further shares to the public.
- Futures
- A contract to buy or sell an underlying at a set price on a future date, marked to market daily.
G
- GTT (Good Till Triggered)
- An order that stays dormant until a trigger price is reached, then is sent to the exchange.
H
- Haircut
- The percentage reduction applied to the value of securities pledged as collateral.
- Hedging
- Taking an offsetting position to reduce the risk of an existing one.
- HUF
- Hindu Undivided Family — a family unit recognised as a separate entity that can hold a demat and trading account.
I
- Index
- A basket of securities used to represent a market or a segment, such as the Nifty 50 or Sensex.
- Intraday
- Buying and selling the same security within one trading day.
- IPO
- Initial Public Offering — a company’s first sale of shares to the public.
- ISIN
- The unique 12-character code that identifies a security.
K
- KYC
- Know Your Customer — the one-time identity and address verification required before investing.
L
- Limit Order
- An order to buy or sell at a specified price or better.
- Liquidity
- How easily a security can be bought or sold without moving its price.
- Lot Size
- The fixed quantity in which a derivatives contract or an IPO application is traded.
M
- Margin
- The funds or collateral a client must maintain to take or hold a leveraged position.
- Mark-to-Market (MTM)
- Daily settlement of gains and losses on open derivatives positions.
- Market Capitalisation
- Share price multiplied by shares outstanding — the market’s value of a company.
- Market Order
- An order to buy or sell immediately at the best available price.
N
- Nominee
- The person named to receive the assets in an account on the holder’s death.
- NRE / NRO Account
- Bank accounts for Non-Resident Indians: NRE for repatriable foreign earnings, NRO for income arising in India.
O
- Open Interest
- The number of outstanding derivatives contracts that have not been closed or settled.
P
- PAN
- Permanent Account Number — mandatory for all securities market transactions.
- PIS
- Portfolio Investment Scheme — the RBI route through which NRIs trade listed shares.
- Pledge
- Offering securities as collateral to obtain margin, while remaining their owner.
- Put Option
- A contract giving the buyer the right, not the obligation, to sell the underlying at the strike price.
R
- Rights Issue
- An offer to existing shareholders to buy additional shares, usually at a discount.
S
- SCORES
- SEBI’s online portal for lodging and tracking investor complaints.
- Settlement (T+1)
- Completion of a trade: shares and funds change hands one business day after the trade.
- SIP
- Systematic Investment Plan — investing a fixed amount in a mutual fund at regular intervals.
- SPAN Margin
- The exchange’s risk-based minimum margin for derivatives positions.
- Stock Split
- Division of each share into several of lower face value; the holder’s total value is unchanged.
- Stop-Loss Order
- An order that triggers when a price is hit, used to cap the loss on a position.
- Strike Price
- The price at which an option can be exercised.
- STT
- Securities Transaction Tax, levied on transactions on recognised stock exchanges.
- SWP
- Systematic Withdrawal Plan — redeeming a fixed amount from a mutual fund at regular intervals.
V
- Volatility
- The degree to which a price moves up and down over time.
X
- XIRR
- The annualised return on a series of cash flows made on different dates — the right measure for a SIP.
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