Glossary A–Z.

B

Bear marketA sustained fall in share prices, commonly defined as a drop of 20% or more from a recent peak.Blue-chipShares of large, established and financially strong companies.BondA loan to a government or company that pays interest (the coupon) and returns the money on a set date.Bond yieldThe return an investor earns on a bond, shown as an annual percentage. Yields move in the opposite direction to bond prices: when investors sell bonds, prices fall and…Brent crudeOil from the North Sea whose price is a global benchmark for much of the world’s internationally traded crude.Bull marketA long period in which share prices rise and investors are confident.

C

Circuit breakerAn automatic pause in trading when prices move too far, too fast. Indian exchanges halt the whole market if the Sensex or Nifty moves 10%, 15% or 20% in a day.CryptocurrencyDigital money that is created and transferred using cryptography and recorded on a shared ledger (a blockchain), rather than issued by a central bank.

D

Demat accountAn account that holds shares and other securities electronically. Indian investors need one to buy and hold listed shares.DividendA share of a company’s profit paid out to its shareholders.

E

Exchange-traded fundA fund that holds a basket of assets — often an index or gold — and is bought and sold on a stock exchange like a share.Expense ratioThe yearly fee a mutual fund charges, as a percentage of the money invested. It is taken out of the fund’s returns.

F

Foreign portfolio investorAn investor from abroad who buys Indian shares, bonds or other financial assets without taking control of the companies. Their buying and selling can move both the…Futures and optionsDerivative contracts whose value depends on a share, an index or a commodity. They are used to hedge and to speculate; SEBI studies have found that most individual…

G

Government securitiesBonds and bills issued by the Union and state governments to borrow money, often called G-secs. In India they are issued through the Reserve Bank of India.

H

HedgeAn investment made to reduce the risk of losses on another — for example an exporter locking in an exchange rate.

I

Index fundA mutual fund that simply copies a market index such as the Nifty 50, usually at a low cost.IPOInitial public offering: the first sale of a company’s shares to the public, after which its shares trade on a stock exchange.

L

Long-term capital gains taxTax on the profit from selling an asset held for longer than a set period. For listed shares and equity mutual funds in India, a holding counts as long-term after more…

M

Market capitalisationThe total stock-market value of a company: its share price multiplied by the number of shares in issue.Mutual fundA fund that pools money from many investors and invests it in shares, bonds or other assets, run by a professional manager. Each investor owns units whose value rises…

N

Net asset valueThe value of one unit of a mutual fund: the fund’s assets minus its liabilities, divided by the number of units.Nifty 50The National Stock Exchange’s benchmark index of 50 large Indian companies across sectors.

P

Price-to-earnings ratioA company’s share price divided by its earnings per share — a common, rough gauge of whether a share is cheap or expensive.

R

Real returnThe return on an investment after subtracting inflation. A 7% return with 5% inflation is a real return of about 2%.

S

SEBIThe Securities and Exchange Board of India, the regulator of India’s stock, bond and commodity markets. It was set up in 1988 and given statutory powers in 1992.SensexThe benchmark index of BSE (formerly the Bombay Stock Exchange), made up of 30 large, actively traded companies. Its daily moves are the most quoted measure of the…Short sellingSelling shares you have borrowed in the hope of buying them back later at a lower price and keeping the difference. If the price rises instead, the losses can be large.SIPSystematic investment plan: investing a fixed amount in a mutual fund at regular intervals, usually every month, instead of a lump sum. Our SIP calculator shows how the…StablecoinA cryptocurrency designed to keep a steady value, usually by being pegged to the US dollar and backed by reserves.

T

Treasury yieldThe return on US government debt. The yield on the 10-year Treasury note is a benchmark for borrowing costs around the world, including for mortgages and company loans.

V

Volatility indexA measure of how much investors expect share prices to swing, worked out from options prices. The US VIX, based on the S&P 500, is often called the “fear gauge”; India…

Y

Yield curveA line showing the interest rates on bonds of different lengths. It normally slopes upward; when short-term rates rise above long-term ones the curve is “inverted”…