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Market Basics & Instruments

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Market Basics & Instruments

52-Week High

The highest price at which a security has traded during the preceding fifty-two weeks.

52-Week High = maximum traded price over the trailing 52 weeks, adjusted for corporate actions
Market Basics & Instruments

52-Week Low

The lowest price at which a security has traded during the preceding fifty-two weeks.

52-Week Low = minimum traded price over the trailing 52 weeks, adjusted for corporate actions
Market Basics & Instruments

Blue-Chip Stock

An informal label for shares of large, long-established, consistently profitable companies with strong balance sheets.

Test: sustained profitability across cycles, low leverage, large market capitalisation, and an uninterrupted record of meeting obligations qualitative
Market Basics & Instruments

Broker

A SEBI-registered intermediary that routes client orders to an exchange and holds the client's trading account.

Test: the firm holds a SEBI registration as a stock broker and is admitted as a trading member of an exchange qualitative
Market Basics & Instruments

Brokerage

The fee a broker charges for executing a trade, levied either as a flat amount per order or as a percentage of turnover.

Brokerage = Turnover x Percentage Rate, or a flat fee per executed order, whichever the broker's schedule specifies
Market Basics & Instruments

Capital Gain

The profit made when a capital asset is sold for more than its cost of acquisition.

Capital Gain = Sale Consideration - Cost of Acquisition - Transfer Expenses
Market Basics & Instruments

Capital Loss

The loss incurred when a capital asset is sold for less than its cost of acquisition.

Capital Loss = Cost of Acquisition + Transfer Expenses - Sale Consideration
Market Basics & Instruments

Closing Price

The official end-of-day price of a security, computed in India as the volume-weighted average price of trades in the last thirty minutes.

Closing Price = VWAP of all trades between 15:00 and 15:30
Market Basics & Instruments

Commodity

A standardised raw material or primary product that is traded in interchangeable units, such as gold, crude oil or cotton.

Test: units of the good are fungible against a published quality specification, so one unit is a perfect substitute for another qualitative
Market Basics & Instruments

Contract Note

The legally binding document a broker must issue after each trading day, itemising every trade executed and every charge levied.

Net Amount = Trade Value +/- Brokerage + STT + Exchange Charges + SEBI Fees + Stamp Duty + GST
Market Basics & Instruments

Currency Pair

A quotation of one currency's value in terms of another, such as USD/INR, where the first currency is bought or sold against the second.

Quote convention: BASE/QUOTE, where the price states how many units of the quote currency buy one unit of the base
Market Basics & Instruments

Cyclical Stock

A share whose earnings rise and fall with the economic cycle, typically in sectors such as metals, cement, autos and construction.

Test: earnings correlate strongly with GDP growth, commodity prices or credit conditions, with wide peak-to-trough swings qualitative
Market Basics & Instruments

Day High

The highest price at which a security traded during the current session.

Day High = maximum executed trade price between the session open and the current moment
Market Basics & Instruments

Day Low

The lowest price at which a security traded during the current session.

Day Low = minimum executed trade price between the session open and the current moment
Market Basics & Instruments

Defensive Stock

A share whose earnings hold up through downturns because demand for its products barely changes with the economy.

Test: earnings show low correlation with GDP growth, typically in consumer staples, pharmaceuticals or utilities qualitative
Market Basics & Instruments

Delivery-Based Trading

Buying shares with the intention of taking them into a demat account, rather than squaring off within the session.

Test: the position survives the session close and settles into the buyer's demat account on T+1 qualitative
Market Basics & Instruments

Depository Receipt

A negotiable instrument issued in one country that represents shares of a company listed in another.

Underlying Shares Represented = Number of Receipts x Receipt Ratio shares
Market Basics & Instruments

Dividend Stock

A share of a company that distributes a substantial and reasonably reliable portion of its profits as dividends.

Test: a sustained payout ratio and dividend yield materially above the market average, supported by free cash flow qualitative
Market Basics & Instruments

Equity

The residual ownership interest in a company: what would remain for its owners once every liability had been settled.

Equity = Total Assets - Total Liabilities ₹ crore
Market Basics & Instruments

Equity Share

The ordinary ownership share of a company, carrying voting rights and a claim on profits only after every other claimant has been paid.

Payout rank: secured creditors, then unsecured creditors, then preference shares, then equity shares qualitative
Market Basics & Instruments

Face Value

The nominal value assigned to a share by the company at issue, used for accounting and for expressing dividends, and unrelated to what the…

Paid-up Share Capital = Face Value x Number of Shares Issued
Market Basics & Instruments

Follow-on Public Offer

A public issue of shares by a company that is already listed, made after its initial public offering.

Test: the issuer is already listed and is offering further shares to the public at large qualitative
Market Basics & Instruments

Free Float

The portion of a company's shares that is actually available for public trading, excluding promoter, strategic and locked-in holdings.

Free Float = Total Shares Outstanding - Promoter Holding - Strategic and Locked-in Holdings shares
Market Basics & Instruments

Free-Float Market Capitalisation

The market value of only those shares available for public trading, used to weight constituents in Indian indices.

Free-Float Market Capitalisation = Market Price x Free Float Shares ₹ crore