21 Basic Stock Exchange Market Terminology- A Beginners Guide

When we hear stock exchange market two terms immediately strikes our mind. Bombay Stock exchange (BSE) & National Stock Exchange (NSE). But it may come as a surprise to many people that currently there are six active stock exchanges in India other than BSE & NSE namely Ahmedabad Stock Exchange Ltd., Calcutta Stock Exchange Ltd., India International Exchange (India INX) (valid upto Dec 28, 2018) Magadh Stock Exchange Ltd., Metropolitan Stock Exchange of India Ltd. (valid up to Sep 15, 2018) NSE IFSC Ltd. (valid up to May 28, 2018).

The Stock market has become a continuous source of income for many brokers. But again and again, it amuses, shocks and surprises every day. We have the example of Symphony going from 16 paisa (2003) to Rs 1600 (2015) and EDUCOMP going from Rs 1100 (2008) to Rs 11(2017).   Though nobody can guarantee income in stock market but if you are a beginner in stock market then unless you know the below jargons, you will be wasting your money. So let’s start to understand each term one by one.

You can also read other finance related topics here.

Basic Stock Market Terms for Beginners

Stock – It is nothing but share. Share represents an ownership in company.


Bull Market– The time when the stock prices are rising. It is increasing trend of stock market.


Bear Market – The time when the stock market is falling downwards.


Broker– Any person cannot directly enter into stock market so a mediator is required who is called a Broker. Through them we sell or purchase any stock and in return they charge a fee known as brokerage.


Close Price – The last price of stock at which it was traded on that trading day.


Portfolio– The joint holding of one or more than one share by an investor is called portfolio. For e.g. if Ram holds Apple share, Infosys share and Tata chemicals share then these three shares combined is called Ram’s portfolio. A portfolio can contain one share also say Ram hold only Apple share then also it will be called Ram’s portfolio.


Trading – the activity of purchase or sale is called as Trading. Trading session is from the time market opens till the time market closes. i.e. 9.15 a.m. till 3.30 p.m.


Intra Day or Day Trading – The process of purchasing or selling the stock or vice versa in same trading day. Since the market opens on 9.15 and closes by 3.15 p.m. so both activity of purchase or sale should be within this trading session.


Exchange – It is the place where trading of stocks happens. Like NSE, BSE Ahmedabad Stock exchanges, etc.


Foreign Institutional Investors- Foreign investors who invest through shares in India are called FIIs. India allowed FIIs in 1990s only. These FII are mainly Banks, insurance companies, Mutual funds pension funds, etc. Foreign Individual investor cannot invest in stock market directly as of now.


Index – It shows the direction of the shares of that stock exchange E.g. Nifty is a combination of 50 stocks so if Nifty rises by 500 points then it means share prices of these 50 companies are rising. Different weightage given to each stocks.  BSE comprises 30 stocks. These 50/30 stocks are changed every quarter. These 50/30 stocks are from different sectors which are financially sound companies.


Market capitalization – The value in INR of Company’s all shares multiplied with current market price of one share. It determines company’s size in the market. Currently three market caps are there Small size, midsize and large size.


Rally – A rapid increase in the price of a stock or the market.


IPO (Initial public offer) – The first time launch of shares by companies in the stock market is called as IPO.  Companies sells its shares for the first time in the stock market at some specified price. These shares can be purchased by general public at that specific price.

Demat Account – In India, the delivery of shares are not held physically but to be held electronically. The account in which these share are held are called Demat Account. A Demat account shows total outstanding portfolio of an investor as on a day.


Order –If an investor wants to sell/buy 500 stocks then we say Investor has put an order of sell/buy of 500 stocks. A normal order/ market is executed on current market price.


Limit order – If an order to be executed not of current market price but on specific price then we use Limit order.  It defines the minimum price at which seller is ready to sell or maximum price at which buyer is ready to purchase.


Stop Loss– It is a limit order of sell at the specified price to minimize the loss. Suppose an investor wants to sell some share at Rs 50 but current market price is Rs 47. Investor fears that price may go down further then for say stop loss by investor is 46, so if the prices goes down further down to 46, system will execute order to sell at 46 automatically.


Quote – Stocks’ latest price in the market.


Sector – Stocks of same business like Pharmaceuticals sector. Like Bacil, Lupin, Ranbaxy, Cipla, etc.


Volume – The number of stocks traded during a particular time period.


Hope this helps you at least to keep your basics right before you start investing in stocks. If you have any query regarding any terms that has been used here or you want to add your valuable views do let us know in the comments section.

Divya Rai

A CA by profession, currently working as a tax expert with India's leading Government Petroleum firm.

One thought on “21 Basic Stock Exchange Market Terminology- A Beginners Guide

  • March 21, 2018 at 11:26 pm
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    What affects the value of stock?

    Reply

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