The equity market is often considered a highly technical world of investments limited to professionals and experts. However, young individuals with interest and enthusiasm for stock market can also participate in trading by acquiring some basic domain knowledge of the market to make the right decision.
Equities are traded on two major stock exchanges of India — the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). The Sensex is the benchmark index for equities on the BSE. It includes shares of 30 firms, which are listed on the BSE. The S&P Nifty is the benchmark for the NSE, which tracks 50 shares listed on the exchange.
The Securities and Exchange Board of India (SEBI), formed in 1992, is the regulatory body responsible for development, regulation and supervision of the stock market in India.
Here’s a look at 10 commonly-used stock market jargon that beginners should know before they start investing in the market.
Intraday trading
Intraday trading allows investors to place a trade and execute it within the trading session of the same day. Intraday trading takes place between 9.15 am and 3.30 pm on the Indian stock market. Compared to long-term holdings, intraday trading carries huge risk and volatility and is often done by professionals, speculators and market experts.
Blue-chip stocks
A stock with a huge market capitalisation is often referred to as a blue-chip stock. Mostly, it is the top three companies in its sector. Reliance Industries, SBI, Tata Consultancy, ITC and ONGC are blue-chip stocks. These are well-established companies which have a sound financial reputation, stable earnings and bear less volatility and risk in the market.
Initial public offer (IPO)
IPO is the process by which a private corporation offers equity to the public for the first time. IPOs are issued by smaller, younger companies that are looking to raise funds for expansion and growth. However, large companies also issue IPOs to become publicly-traded companies.
Bull and bear market
A bull market is when the stock price is increasing consistently or when stock prices are in an upward trend. If the stock prices trend in the downside or are falling consistently, it is said to be a bear market.
Rally
A stock market rally happens when there is constant increase in the prices of stocks, bonds or indexes. Such a rally often follows a period of flat or declining prices.
Correction
Stock advisors and market experts use the term ‘correction’ to denote the decrease in share prices of a company in a given time.
OHLC
OHLC is the abbreviation for open, high, low, and close of a stock price. Open is the price at which the stock started the day, high is the peak that the stock achieved during trading, low is the lowest point that the stock went to during the day, and close denotes the closing price of the stock.
Arbitrage
Market arbitrage means buying and selling the same share at the same time in different markets by a trader. It is often done by speculators and hedgers to reap the benefits of a price difference in two separate markets.
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Stop-loss order
A stop-loss order is given to a broker to buy or sell a specific stock when it reaches a certain price. A stop-loss helps to limit an investor's loss on a security position.
Market Capitalisation
This is the total value of a company’s outstanding shares. Market capitalisation is calculated by multiplying all outstanding shares of a company with the current market price of one share. This determines the company’s size in terms of its wealth.
