GLOSSARY OF SECURITIES MARKET TERMS

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Annual Report : Formal financial statements, the Auditors’ Report, together with the Directors’ Report issued by a company. These financial statements are usually prepared at the close of the company’s financial year.

Arbitrage : The simultanceous purchase and sale of the same security on different stock exchanges at prices which yield a profit.

Assets : What the company owns and various debts owing to it.

Balance Sheet : The Balance Sheet is a statement of the Company’s financial position

at a specific date.

Bear : An investor who anticipates for a decline in stock prices.

Bear Market : A market in which stock prices are declinig in general. A serious decline is called a depression. A short decline in a generally rising market is looked upon as a technical correction.

Bid and Asked : The bid is the highest price any one has offered to pay for a security at a given time; the asked is the lowest price any one has offered to accept for a security at a given time.

Blue Chip : A large well-established company with a history of profitable operation.

Bonds : Fixed-income securities, which entitle the holder to a pre-determined return during their life and repayment of principal at maturity.

Book Closing : The closure of books by a company to determine the shareholders’ rights to receive bonus, dividend, rights, etc. No transfers are recorded during this period.

Boom : Denotes greater activity on the stock exchange.

Bull : An investor who anticipates for a ri se in stocke prices.

Bull Market : A market in which stock prices are rising in general. If the market is recovering from a deep decline, the early stage of the up trend is called an up reversal, turnaround, rally or recovery.

Capital gain or Capital loss : Prifit or loss from the sale of a capital asset, including securities.

Capital Gain Tax : Tax payable on profit arising from appreciation in value of investment,

realized at the time of selling or maturity of investment.

Carry-over : Equity repurchase transactions, better known, as “Badla”; are an Trades established form of transactions used in the stock market for temporary financing of trades by speculators and jobbers.

Clearing : Settlement or cl earance of accounts in stock exchanges.

Collateral : Securities or other properties pledged by a borrower to secure the repayment of a loan.

Commission : The fees payable by a client to the sharebroker for buying or selling securities on his behalf.

Contract : A statement sent to a client by the stockbroker, giving details of securities purchased or sold.

Convertible : A bond, debenture, or preferred share that may be exchanged by the owner for common stock or other security, usually of the same company, in accordance with the terms of the issue.

Corner : To have control of supply of a security by buying on such large scale that the entire market is affected. It strongly influences the market prices in a way that the person with the corner may make undue profit or forces other with a short position to cover at a loss.

Cum-dividend : The term implies that the buyer is entitled to the dividend currently declared.

Cum-right : Shares having the right to receive the upcoming rights issues offered by the company.

Dividend : That part of a company’s profits which is distributed among shareholders,

usually expressed in rupee per share or percentage to paid up capital. It could be in the form of cash or stock (Bonus Share).

Earnings per : A profitability indicator calculated by dividing the net after tax earnings

share (EPS) available to common stockholders during a period by the average number of shares outstanding at the end of that period.

Equity : The owners’ interest in a company’s capital, usually referred to as ordinary shares.

Ex-dividend : A synonym for without dividend. The buyer of a stock selling exdivident

does not receive the recently declared dividend.

Face value : The value of a security that appears on the face of the certificate unless the value is otherwise specified by the issuing company. It is also termed as par value.

Floatation : The occasion when a company’s shares are offered on the stock market for the first time.

Fund managers : A company, which invests and manages investors’ money, with the aim of maximizing capital growth.

Gamble : To bet on uncertain outcome.

Initial Public : The offering of equity shares of a company to the general public for Offering (IPO) the first time.

Insider Trading : Insider trading normally occurs when an insider, that is, a director, an

officer, a banker or a favored customer, due to his access to special information about the company’s affairs, which has not been made available to the market influence the value of shares to his advantage.

Investment : To commit (money) in order to earn a financial return.

Investment : A company, which issues shares and uses its capital to buy securities company and shares in other companies.

Investor : An individual whose principal objective in the purchase of a security is regular dividend income, safety of the original investment and, if possible, capital appreciation.

Letter of : Usually sent with the letter of right. A shareholder may renounce the Renunciation shares offered in favour of some other individuals. The shareholder transfers the right to take up the shares offered to him.

Letter of Right : A letter sent by a company to shareholders offering them the right to subscribe in a specified number of shares.

Liabilities : What the company owes to its shareholders and creditors.

Listed company : A company whose securities are admitted for listing on a stock exchange.

Market : The total value of a company’s equity capital at the current market capitalization price.

Market maker : A person who commits itself to always being ready to deal in a range of securities for his own account taking temporary position.

Market price : In case of a security, market price is usually considered the last reported

price at which the security is sold.

Net change : The change in the price of a security between the closing price on one day and the closing price on the following day on which the stock is traded. In case of a stock that is entitled to dividend one day but is traded ex-dividend the next, the dividend is considered in computing

the change.

Nominee : A person or company holding securities on behalf of others, but who is not the owner of such securities.

Odd-lot : An amount of stock less than the established unit of trading.

Option : The right (but not the obligation) to buy or sell securities at a fixed price within a specified period.

Ordinary shares : The most common form of shares, which entitle the owners to jointly

own the company. Holders may receive dividends depending on profitability of the company and recommendation of directors.

Portfolio : A collection of investments

Price/earning : The P/E ratio is a measure of the level of confidence (rightly or wrongly)

ratio (P/E ratio) investors have in a company. It is calculated by dividing the current

share price by the last published earnings per share.

Primary Market : Where a company issues new shares, either for the first time, or at the

time of issuing additional securities.

Privatization : Conversion of a state-owned company to a public limited company

(plc) status.

Private Limited : A company that is not a public company and which is not allowed to

Company offer its shares to the general public.

Profit & Loss : A financial statement which shows the amount of money a company

Account has earned during the period.

Proxy : A person who represents the shareholder, on the basis of written authorization, in the annual meeting of a company. A proxy does not have the right to speak, though he may vote on behalf of the shareholder.Proxy in also used to refer to the instrument by which the shareholder

authorizes another individual, who may not be a shareholder, to so represent him.

Public Limited : A company whose shares are offered to the general public and traded

Company (plc) freely on the open market and whose share capital is not less than a statutory minimum.

Retained : Profits earned and retained in the business to meet operating expenses Earnings or for acquiring additional assets or for any other purpose.

Rights Issue : The issue of additional shares to existing shareholders when companies

want to raise more capital.

Securities : A broad term for shares, corporate bonds or any other instrument of investment in the capital market.

Settlement : Once a trade has been executed, the settlement process transfers stock from seller to buyer and arranges the corresponding exchange of money between buyer and seller.

Short covering : Buying stock to return stock previously borrowed to make delivery on a short sale.

Short sale : It occures when a person sells shares that he does not own. A short sale is usually made in the hope that a subsequent market decline will enable the seller to ‘cover his position’ at a profit, that is, to buy at a later date and at a lower price the shares he needs to deliver against

his original short sale.

Speculate : To assume a business risk in hope of gain, especially to buy or sell in expectation of profit from market fluctuations.

Split : The division of shares of a large denomination into shares of smaller denominations.

Spread : The difference between the bid and offer price of a market maker.

Stock : Securities that represent an ownership interest in a company. If the company has also issued preferred stock, both common and preferred having ownership rights, but the preferred stock normally has prior claim on dividends and in the event of liquidation on assets.

Stockbroker : A member of the stock exchange who deals in shares for clients and advises on investment decisions.

Stock dividend : A dividend paid in securities rather than cash.

Stock Market : The market place where shares of public listed companies are bought and sold.

Unit trust : An open-ended mutual fund that invests funds in securities and issues units for sale to the public. It can repurchase these units at any time.

Yield : Also known as return. The dividend or interest paid by a companyexpressed as a percentage of the current price or, if you own the security, of the price you originally paid. The return on stock is calculated by dividing the total of dividend paid in the preceding 12 months by the current market price.

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GLOSSARY OF SECURITIES MARKET TERMS