Uses Terms Of The Stock Market Or Terminology

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All traders come across words like Sensex, Nifty, correction and rally?

You may be interested in learning and reading what is sensex and what is Nifty.

Well, all readers of business newspapers should have come across these and a host of other terms that explain the activities of the stock market.

You should have also come across depth research reports from advisory houses that talk of selling, buying and holding of a company’s share.

Let us go, through some of important terms used in a daily routine talk in the stock market.


It is a stock index that represents the way of the companies that are traded on the BSE (Bombay Stock Exchange). The word Sensex comes from sensitive index.

The Sensex captures the rise or decline in stock prices of companies that it comprises. A number symbolizes this movement. At present, each and every one the 30 stocks that make up the Sensex have arrived at a value of 29,004.66 points.

These listed companies represent the many sectors of the Indian economy. Some of these companies and the sector they represent are: Maruti  (automobile), Infosys , Wipro , ACC (cement), Bajaj Auto, Tata Motors , TCS (information technology), ONGC, Reliance  (oil & gas), ITC, HLL  (fast moving consumer goods) etc.

The rise or decline in this index, the Sensex, is the effect of a related rise or decline in the stock market price of these 30 companies.

Every company has a weight assigned to it. Companies like RIL (Reliance industries), Infosys, and HLL have higher weight ages compared to others like Wipro, HDFC or a BHEL.


It is the Sensex’s corresponding to the NSE (National Stock Exchange).

The just difference b/w the two indices (the Nifty and Sensex) is that the Nifty listed comprises of 50 listed companies and therefore is more broad-based than the Sensex

Having said that one should keep in mind that the Sensex is the benchmark that are represent Indian equity markets globally. We are having said that one must keep in mind that the Sensex is the benchmark that are represents globally Indian equity markets.

The National Stock Exchange (NSE) Nifty functions accurately like (explained above) the Bombay Stock Exchange (BSE) Sensex.


A special kind of trader or investor who buys shares in the prospect that the stock price of that company’s share will raise.

He/see stock at a higher level price and gain more profits. Just put, the bulls purchase at a lower price and sell at a higher price.

For example, if a bull purchases a company’s share at 100 Rs, he/see would choose selling the similar stock at 120 Rs or any price higher than 100 Rs to build a profit.

Generally, a bull purchases initial at a lower level price and sells later than at a higher price than his/her cost of buy.

Bulls are joyful when the markets (the Nifty or Sensex) go upwards. A fall down market takes bulls into hibernation.


Bull’s corresponding is the bear.

A bear sells stocks initially that he/see borrows or owns from, speak a friend, and then buys the similar quantity of shares at a lower price.

If a bear sells initially, speak 100 shares of RIL at 400 Rs and afterward buys the similar number of shares at 375 Rs, then his/her profit is 25 Rs (400-375) for each share.

This approach he/her has obtained back the 100 shares of RIL and at the same time made a profit of 2500 Rs. The shares can later be going back to the bear’s friend if he/her had borrowed the similar from a friend.

Following are bears in the stock market that sell shares initially without really owning them different in the above instance. Such selling is called going short on a stock or naked short selling.

Bears are happy in a move down market.

Even as individual trader or investors can keep in selling initially and buying later (also submitted to as short selling), FII (foreign institutional investors) and mutual funds are not permitted this luxury in India yet.

Squaring off

A process whereby traders or investors sell or buy shares and after reverse their trade to finish a transaction process is called squaring off of a trade in stock market.

Indian stock markets continue open b/w 9:55 am to 3:30 pm (At the Indian time there are fail to link of the two stock exchanges the servers where sell and buy orders are matched). During this time period the trading is extended till 4:15 pm (At the Indian time) to make up for the time lost in b/w).

If you buy 50 shares of say TCS and sell them later previous to the stock market closes at the Indian time then you have squared off your purchase position.

Similarly, if you sell 100 shares of Marti and buy them after you have squared off your sell position

Indian Stock market rules permit traders or investors to engage in Intraday (day) trading.

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Intraday (Day) trading is a mechanism whereby traders or investors can purchase, speak 100 shares of a company the Bombay Stock Exchange (BSE), National Stock Exchange (NSE) opens (the BSE and NSE working hrs are 9:30 am to 3:30 pm in Indian time) and sell the equal amount of shares later (bulls) previous to the both stock exchanges are closed. However, a stock perched on the Bombay Stock Exchange (BSE) cannot be sold on the National Stock Exchange (NSE) and vice-versa.

Equally stock market traders or investors can also sell initially and buy later (bears) through the course of the day to square off their positions of sell.


The word recommends the profit gain by the Nifty or Sensex during the course of the day. If such stock markets gains profits are build on a regular basis then market participants like brokers, investors, etc call it as a stock market rally.

If the Sensex moves from 29,000 points to 30,000 points in a span of say 29 or for that matter 35 trading sessions (the markets remain closed on Saturdays, Sundays and other Indian festival) then the occurrence is referred to as a rally.

Bulls market are always said to be active during a stock market rally.

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As the word recommends, market crash refers to a move down in the value of Nifty and Sensex.

The Sensex then had fall down from around 29,049 levels to around 29,000points. This sudden and violent 49 -point go down is referred to as market crash or the crash.

Bears are said to happy and be active during the market crash as their style of trading (buy later and sell first) helps them make good profits during a market crash.

Bonus shares

Bonus shares are the free shares that a listed company provides its shareholders.

These are declared after a discussion between the board members that make up the organization of a company

A shares bonus issue is looked upon as a method of rewarding shareholders

For example, let us take a company A that has build a profit of Rs 200 crore in the financial year 2010 (April 1, 2009 to March 31, 2010),

Out of bonus shares amount the company might require Rs 100 crore for say purchasing constructing or machinery a new company or warehouse. And the remaining Rs 100 crore the company puts into its idle cash or reserve pool that the company has no any plans to spend.

It can be issue bonus shares out of these Rs 100 crore.

While company declares a bonus shares issue it converts this go back idle cash or pool into shares that are then distributed b/w its shareholders. This method is called capitalizing of reserves.

A bonus shares is generally declared as a ratio. A bonus shares issue in the ratio of 1:1 means you will get 1 free share for all one share of the company you own.

A 2:1 bonus shares issue (or 2 for each one held) means you will get 2 free shares of a company for each one that you own. Equally, a 6:1 bonus shares issue will provide you six free shares for each one share that you own.


It is another technique of rewarding a company’s shareholders. A dividend is usually issued as a percentage (%) of the face value of a share. Face value is the small price of a company’s share.

A share can have various face values like Re 1, Rs 2, Rs 5, Rs 10 or Rs 100. An 80 per cent dividend on a share of face value 2 Rs (Rs 1.6) will constantly be less than a dividend of 20 per cent declared on share of face value Rs 10 (Rs 4).

Book closure date

Book on closure date on which a company closes its books for business later it declares a dividend or bonus. The company’s registrar keeps a track of who have possession of how many shares of that particular company.

Any trader or investor having shares in her/ his demat account previous to this date becomes eligible for the dividend declared or the bonus shares issue.

Owner of company declares a 1:1 share bonus issue and the book closure date is Feb 28, 2015.

If you don’t itself this company’s share and want to benefit of the bonus offer then you should not only purchase this share previous to 28 February but also make sure that the number of shares bought by you are transferred to your account from the seller previous to this date.

This now sums up some terms used by participants of the stock market. We shall see a few more next day.

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