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Market Basics & Instruments

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Market Basics & Instruments

Grey Market Premium

The unofficial price above an IPO's issue price at which its shares are quoted in an informal, unregulated market before listing.

Grey Market Premium = Unofficial Quoted Price - IPO Issue Price
Market Basics & Instruments

Growth Stock

A share of a company expected to grow revenue and earnings materially faster than the market, and priced accordingly.

Test: expected earnings growth well above the market average, usually with a high P/E and low or nil dividend payout qualitative
Market Basics & Instruments

Initial Public Offering

The first sale of a company's shares to the public, after which the shares are listed and traded on a stock exchange.

Total IPO size = Fresh Issue Amount + Offer for Sale Amount ₹ crore
Market Basics & Instruments

Intraday Trading

Buying and selling the same security within a single trading session so that no position is carried overnight.

Test: the position is opened and closed within the same trading day, leaving a net quantity of zero at the close qualitative
Market Basics & Instruments

Investor

A market participant who buys securities for their expected long-term cash flows and business performance rather than for short-term price…

Test: the holding decision rests on the underlying business or issuer's economics, with a horizon measured in years qualitative
Market Basics & Instruments

ISIN

The twelve-character International Securities Identification Number that uniquely identifies a security worldwide.

ISIN = 2-letter country code + 9-character national identifier + 1 check digit (12 characters total) qualitative
Market Basics & Instruments

Large-Cap Stock

A share of one of the largest listed companies by market capitalisation — in India, one of the top 100 under SEBI's classification.

Rank all listed companies by average market capitalisation; ranks 1 to 100 are large-cap qualitative
Market Basics & Instruments

Last Traded Price

The price at which the most recent trade in a security was executed on the exchange.

LTP = execution price of the most recent trade, regardless of its size
Market Basics & Instruments

Liquidity

The ease with which a security can be bought or sold in size without materially moving its price.

Test: a normal order size executes near the prevailing quote, with a narrow bid-ask spread and depth on both sides of the book qualitative
Market Basics & Instruments

Listed Company

A company whose shares are admitted to trading on a recognised stock exchange and which is therefore subject to continuous disclosure…

Test: the company's securities are admitted to dealings on a recognised exchange and it files under the listing regulations qualitative
Market Basics & Instruments

Long Position

A position created by buying a security, which gains when its price rises and loses when it falls.

Profit or Loss = (Exit Price - Entry Price) x Quantity
Market Basics & Instruments

Market Capitalisation

The total market value of a company's outstanding shares, obtained by multiplying the share price by the number of shares.

Market Capitalisation = Market Price per Share x Total Shares Outstanding ₹ crore
Market Basics & Instruments

Market Price

The price at which a security most recently changed hands on the exchange.

Market Price = price of the most recent executed trade
Market Basics & Instruments

Mid-Cap Stock

A share of a company ranked 101st to 250th by market capitalisation under India's classification.

Rank all listed companies by average market capitalisation; ranks 101 to 250 are mid-cap qualitative
Market Basics & Instruments

Multibagger

A colloquial label for a share whose price has risen to a multiple of its purchase price, such as a five-bagger for a fivefold rise.

Bagger Multiple = Current Price / Purchase Price ratio (x, times)
Market Basics & Instruments

Offer for Sale

A sale of shares by existing shareholders to the public, in which the proceeds go to those sellers and not to the company.

Test: the shares offered already exist and the issuer receives none of the proceeds qualitative
Market Basics & Instruments

Opening Price

The price at which a security's first trade of the session is executed, determined in India by a pre-open call auction.

Opening Price = the price in the pre-open auction that maximises executable quantity
Market Basics & Instruments

Penny Stock

An informal label for a very low-priced share, typically of a small company with thin trading and limited disclosure.

Test: low absolute price per share combined with small market capitalisation and low daily turnover qualitative
Market Basics & Instruments

Positional Trading

Holding a position for weeks to months, aiming to capture a sustained trend rather than a single swing.

Test: holding period measured in weeks or months, with the exit governed by trend condition rather than by an intraday level qualitative
Market Basics & Instruments

Preference Share

A share that receives a fixed dividend ahead of equity shares and ranks ahead of them in a winding-up, usually in exchange for giving up…

Annual preference dividend = Face Value x Coupon Rate x Number of Preference Shares
Market Basics & Instruments

Previous Close

The official closing price of the prior trading session, used as the reference point for the current day's change and circuit limits.

Day's Change % = (Current Price - Previous Close) / Previous Close x 100
Market Basics & Instruments

Primary Market

The market in which securities are created and sold by the issuer for the first time, with the proceeds going to the issuer.

Test: does the money paid by the buyer reach the issuing company or government? If yes, the transaction is primary qualitative
Market Basics & Instruments

Realised Gain

The profit that is locked in once a position has actually been sold and settled.

Realised Gain = (Actual Sale Price - Purchase Price) x Quantity Sold - Transaction Costs
Market Basics & Instruments

Scalping

Trading for very small price increments many times a day, holding each position for seconds to minutes.

Net Profit per Trade = Gross Price Movement Captured - Round-Trip Transaction Costs