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Technical Analysis & Chart Patterns

Retest

A return of price to a level it has recently broken through, to see whether that level now holds from the other side.

Test: price returns to within a small band of the broken level after the initial breach qualitative Fundamental Analysis & Valuation

Return on Assets

Net profit as a percentage of total assets, measuring how much profit the asset base generates regardless of funding.

ROA = Net Profit / Average Total Assets x 100 % Fundamental Analysis & Valuation

Return on Capital Employed

Operating profit as a percentage of the total capital, both equity and debt, used to generate it.

ROCE = Operating Profit (EBIT) / (Shareholders' Equity + Total Debt) x 100 % Fundamental Analysis & Valuation

Return on Equity

Net profit expressed as a percentage of shareholders' equity, measuring what the business earns on the owners' capital.

ROE = Net Profit Attributable to Shareholders / Average Shareholders' Equity x 100 % Fundamental Analysis & Valuation

Return on Invested Capital

After-tax operating profit as a percentage of the capital actually invested in operations, excluding surplus cash.

ROIC = Net Operating Profit After Tax / (Total Debt + Equity - Cash) x 100 % Financial Statements & Accounting

Revenue

The income a company earns from its principal business activities during a period, before any costs are deducted.

Revenue = Units Sold x Average Selling Price, summed across products and services ₹ crore Economy, Macro & Market Cycles

Revenue Deficit

The excess of the government's revenue expenditure over its revenue receipts.

Revenue Deficit = Revenue Expenditure - Revenue Receipts % Fundamental Analysis & Valuation

Revenue Growth

The rate at which a company's sales increase from one period to the next.

Revenue Growth = (Current Period Revenue - Prior Period Revenue) / Prior Period Revenue x 100 % Financial Statements & Accounting

Revenue Recognition

The accounting rules determining when and how much revenue a company may record from a contract with a customer.

Test: recognise revenue when control of the goods or services transfers to the customer, in the amount expected to be received qualitative Economy, Macro & Market Cycles

Reverse Repo Rate

The rate at which the Reserve Bank borrows from commercial banks, absorbing surplus liquidity from the system.

Test: it is the rate the central bank pays banks for parking surplus funds with it % Corporate Actions, Dividends & Governance

Reverse Stock Split

A consolidation of several shares into one, raising the face value and the price proportionally.

New Share Count = Old Count / Consolidation Ratio; Adjusted Price = Old Price x Consolidation Ratio shares Derivatives, Futures & Options

Rho

The change in an option's price for a one-percentage-point change in the risk-free interest rate.

Rho = Change in Option Price / Change in Risk-Free Rate (per 1 percentage point) ₹ Corporate Actions, Dividends & Governance

Rights Issue

An offer of new shares to existing shareholders in proportion to their holdings, usually at a discount to the market price.

Theoretical Ex-Rights Price = (Existing Shares x Cum-Rights Price + New Shares x Issue Price) / Total Shares After Issue ₹ Technical Analysis & Chart Patterns

Rising Wedge

A formation in which both boundaries slope upward but converge, with the lower boundary rising more steeply than the upper.

Test: higher highs and higher lows, with the line through the lows rising faster than the line through the highs qualitative Risk & Portfolio Management

Risk

The possibility that an investment's actual outcome differs from what was expected, including permanent loss of capital.

Test: the range of possible outcomes is wide, and at least some of those outcomes are materially worse than the expected one qualitative Market Psychology & Behavioural Finance

Risk Aversion

The preference for a certain outcome over an uncertain one with the same expected value.

Test: the certainty equivalent accepted is less than the gamble's expected value qualitative Risk & Portfolio Management

Risk Capacity

How much loss an investor can absorb financially without their plans failing.

Test: the loss that could be sustained while still meeting known obligations from other resources and income % Risk & Portfolio Management

Risk Management

The practice of identifying, measuring and limiting the losses a portfolio can suffer.

Test: a maximum acceptable loss is defined in advance, and position sizes are set so that it cannot be exceeded in normal conditions qualitative Risk & Portfolio Management

Risk of Ruin

The probability that a series of losses reduces capital below the level needed to continue.

Rises with the fraction of capital risked per position, with the loss rate, and falls with the ratio of average win to average loss % Risk & Portfolio Management

Risk Tolerance

How much volatility and loss an investor is emotionally willing to endure without abandoning their plan.

Test: the largest decline the investor would hold through without selling, judged by past behaviour rather than by stated intention % Risk & Portfolio Management

Risk-Free Rate

The return available on an investment considered to carry no default risk, used as the baseline for all other returns.

Test: the instrument is a sovereign obligation in the domestic currency, with maturity matching the horizon being analysed % Risk & Portfolio Management

Risk-Reward Ratio

The ratio of a position's intended gain to the loss that would be taken if the thesis fails.

Risk-Reward Ratio = (Target Price - Entry Price) / (Entry Price - Stop Price) ratio (x, times) Market Psychology & Behavioural Finance

Risk-Seeking Behaviour

Preferring an uncertain outcome to a certain one of the same expected value, typically when facing losses.

Test: the gamble is preferred to a certain outcome of equal or higher expected value, usually in the loss domain qualitative Funds, ETFs & Index Investing

Riskometer

SEBI's mandated six-level graphic indicating a mutual fund scheme's risk, disclosed monthly.

Levels: Low, Low to Moderate, Moderate, Moderately High, High, Very High, computed from the portfolio's own risk characteristics qualitative