Glossary ( Frequently used words )

Annual Report: Report released by company about its annual performance. It includes projects executed , balance report, futures prospects etc.


Arbitrage: is the practice of taking advantage of a price difference between two or more markets. striking a combination of matching deals that capitalize upon the imbalance, the profit being the difference between the market prices. Given the advancement in technology it has become extremely difficult to profit from mispricing in the market. Many traders have computerized trading systems set to monitor fluctuations in similar financial instruments. Any inefficient pricing setups are usually acted upon quickly and the opportunity is often eliminated in a matter of seconds.

      Arbitrage works in this way: A trader wants to sell a share at a specific price. He places sell order on the first exchange at that price and simultaneously buys order at a higher price on the second exchange.

As a result, some investors may then place a buy order on the first exchange lured by the higher price offered on the second exchange. As soon as his sell order matches a buy order on the first exchange, he cancels his buy order on the second exchange. Thus, he not only gets out of his illiquid stock but also actually makes good money out of it.

Book Value: It is the total value of the company's assets that shareholders would theoretically receive if a company were liquidated.By being compared to the company's market value, the book value can indicate whether a stock is under- or overpriced

Bonus: Companies give extra shares to existing share holders. If they announce 2:1 bonus for every single stock you are holding you get 2 shares extra. it mean if you have 100 shares after record date your total shares become 300

BRICS: Short form used to refer fastest developing countries Brazil, Russia, India, China and South Africa

Dividend: When company sits on good profits or cash reserves they share the money with investors in the form of dividends. If they say 200% dividend for a company with face value of 10% each investor get an amount of 20 rupees for each stock

DII: Domestic Institutional Investors

EBITDA: EBITDA stands for earnings before interest, taxes, depreciation and amortization. It is one of the best measures of a company's cash flow and is used for valuing both public and private companies.  To compute EBITDA, use a company’s income statement, take the net income and then add back interest, taxes, depreciation, amortization and any other non-cash or one-time charges.  This leaves you with a number that approximates how much cash the company is producing.  EBITDA is a very popular figure because it can easily be compared across companies, even if all of the companies are not profitable.

EPS: Earnings per share - is the total net income of the company divided by the number of shares outstanding. 

FII: Foreign Institutional Investors

Hedging: Hedging is the practice of purchasing and holding securities specifically to reduce portfolio risk. These securities are intended to move in a different direction than the remainder of the portfolio - for example, appreciating when other investments decline. A put option on a stock or index is the classic hedging instrument.

Inflation: is a rise in the general level of prices of goods and services in an economy over a period of time. When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a loss of real value in the internal medium of exchange and unit of account in the economy. In india WPI used to calculate Inflation. See also WPI

Market Capital:  is the value of all of the company's stock.  To measure it, multiply the current stock price by the fully diluted shares outstanding.

Networth: is the total assets minus total outside liabilities of company. For a company, this is called shareholders' preference and may be referred to as book value.Net worth is stated as at a particular year in time

Nifty: Index comprises of 50 stocks selected from different sectors like Banks, IT, manufacturing and FMCG etc.

NPA: Non performing asset- A classification used by financial institutions that refer to loans that are in situation of default. Once the borrower has failed to make interest or principal payments for 90 days the loan is considered to be a non-performing asset. Non-performing assets are problematic for financial institutions since they depend on interest payments for income

P/E: Current Market Price/ Earned per share

Price/Book: Current Market Price/ book value

P-Notes: Financial instruments used by investors or hedge funds that are not registered with the Securities and Exchange Board of India to invest in Indian securities. Indian-based brokerages  buy India-based securities and then issue participatory notes to foreign investors. Any dividends or capital gains collected from the underlying securities go back to the investors.However, Indian regulators are not very happy about participatory notes because they have no way to know who owns the underlying securities.

QIP: Qualified Institutional Placement - A form of securities issue to an Indian-listed company to raise capital from its domestic markets without the need to submit any pre-issue filings to market regulators

Sensex: Index comprises of 30stocks selected from different sectors like Banks, IT, manufacturing and FMCG etc.

WPI - Wholesale Price Index (WPI) is the price of a representative basket of wholesale goods. Some countries (like India and Philippines) use WPI changes as a central measure of inflation However, United States now report a producer price index instead. In India WPI s having 435 commodities in its basket

The Wholesale Price Index or WPI is the price of a representative basket of wholesale goods. Some countries use the changes in this index to measure inflation in their economies, in particular India – The Indian WPI figure is released weekly on every thursday and influences stock and fixed price markets. The Wholesale Price Index focuses on the price of goods traded between corporations, rather than goods bought by consumers, which is measured by the Consumer Price Index.The purpose of the WPI is to monitor price movements that reflect supply and demand in industry, manufacturing and construction. This helps in analyzing both macroeconomic and microeconomic conditions.