A recession is a slowdown or a massive contraction in economic activities. A significant fall in spending generally leads to a recession. Such a slowdown in economic activities may last for some quarters thereby completely hampering the growth of an economy. In such a situation, economic indicators such as GDP,

STT is a kind of turnover tax where the investor has to pay a small tax on the total consideration paid or received in a share transaction.  STT was introduced in the Budget of 2004 and implemented in Oct 2004. The objective behind the levy is to mitigate tax evasion

A derivative is a contract between two parties that derives its value/price from an underlying asset. The most common types of derivatives are futures, options, forwards, and swaps. It is a financial instrument that derives its value/price from the underlying assets. Originally, the underlying corpus is first created which can

Delisting involves the removal of listed securities of a company from a stock exchange where it is traded on a permanent basis.  Delisting curbs the securities of the delisted company from being traded on the stock exchange. It can be done either on the voluntary decision of the company or

Day trader refers to the market operator who indulges in day trading. A day trader buys and subsequently sells financial instruments like stocks, currencies or futures and options within the same trading day, which means all the positions that he creates are closed on the same trading day. A successful

 It is a place where shares of pubic listed companies are traded. The primary market is where companies float shares to the general public in an initial public offering (IPO) to raise capital.  Once new securities have been sold in the primary market, they are traded in the secondary market—where

Squaring off is a trading style used by investors/traders mostly in day trading, in which a trader buys or sells a particular quantity of an asset (mostly stocks) and later in the day reverses the transaction, in the hope of earning a profit (price difference net of broker charges and

Sharpe ratio is the measure of the risk-adjusted return of a financial portfolio. A portfolio with a higher Sharpe ratio is considered superior relative to its peers. The measure was named after William F Sharpe, a Nobel laureate and professor of finance, emeritus at Stanford University. Sharpe ratio is a

 A stock is a general term used to describe the ownership certificates of any company. A share, on the other hand, refers to the stock certificate of a particular company. Holding a particular company's share makes you a shareholder.  Stocks are of two types—common and preferred. The difference is while

Stop-loss can be defined as an advance order to sell an asset when it reaches a particular price point. It is used to limit loss or gain in a trade. The concept can be used for short-term as well as long-term trading. This is an automatic order that an investor

Security-based lending is the practice of raising a loan by offering your existing investments in stocks/mutual funds/ETFs as collaterals. The loan can then be used for making purchases like real estate or personal items like cars. The only thing that this loan cannot be used for is making further security

Asset turnover ratio is the ratio between the value of a company’s sales or revenues and the value of its assets. It is an indicator of the efficiency with which a company is deploying its assets to produce revenue. Thus, the asset turnover ratio can be a determinant of a

Domestic Institutional Investors are those institutional investors who undertake investment in securities and other financial assets of the country they are based in.  Institutional investment is defined to be the investment done by institutions or organizations such as banks, insurance companies, mutual fund houses, etc in the financial or real

Foreign institutional investors (FIIs) are those institutional investors which invest in the assets belonging to a different country other than that where these organizations are based.  Foreign institutional investors play a very important role in any economy. These are the big companies such as investment banks, mutual funds etc, who

Bullish Trend A 'trend' in financial markets can be defined as a direction in which the market moves. 'Bullish Trend' is an upward trend in the prices of an industry's stocks or the overall rise in broad market indices, characterized by high investor confidence. Bearish Trend 'Bearish Trend in financial

Bollinger Bands is one of the popular technical analysis tools, where three different lines are drawn, with one below and one above the security price line. Its specific period moving average is denoted as midline to form an ‘envelope’. These lines show a band or a volatility range in which

Stocks that give returns that are several times their costs are called multibaggers. These are essentially stocks that are undervalued and have strong fundamentals, thus presenting themselves as great investment options. Multibagger stock companies are strong on corporate governance and have businesses that are scalable within a short span of

In the stock market, margin trading refers to the process whereby individual investors buy more stocks than they can afford to. Margin trading also refers to intraday trading in India and various stock brokers provide this service. Margin trading involves buying and selling of securities in one single session. Over

An employee stock ownership plan or Employees Stock Option (ESOP)  is a type of employee benefit plan which is intended to encourage employees to acquire stocks or ownership in the company.  Under these plans, the employer gives certain stocks of the company to the employee for negligible or less costs

Insider trading is defined as a malpractice wherein trade of a company's securities is undertaken by people who by virtue of their work have access to otherwise non-public information which can be crucial for making investment decisions.  When insiders, e.g. key employees or executives who have access to the strategic

Relative Strength Index (acronym RSI) is one of the most extensively used momentum oscillators in the realm of technical analysis of stocks. It was introduced by Welles Wilder in June 1978 and its computation is explained in detail in his book New Concepts in Technical Trading System. Momentum oscillator measures

The issuing company fixes a particular date when the investor must own shares in order to be eligible to participate in corporate events like receiving dividend, bonus shares etc. This is called record date. By this date, the company identifies its shareholders and sends them dividends, bonus shares or notice

Settlement date is the day on which a trade or a derivative contract must be settled by transferring the actual ownership of a security to the buyer, against necessary payment for the same. After a trade order is executed, it generally takes one to three days to settle it depending

Stochastic Oscillator is one of the important tools used for technical analysis in securities trading. This technique was developed in late 1950s by Dr. George Lane. The indicator picks one observation point in current base and refers to all points in the defined range from where the highest and lowest

Moving average convergence divergence, or MACD, is one of the most popular tools or momentum indicators used in technical analysis. This was developed by Gerald Appel towards the end of 1970s. This indicator is used to understand the momentum and its directional strength by calculating the difference between two time

It is a rate at which the price of a security increases or decreases for a given set of returns. Volatility is measured by calculating the standard deviation of the annualized returns over a given period of time. It shows the range to which the price of a security may

Penny stocks are those that trade at a very low price, have very low market capitalisation, are mostly illiquid, and are usually listed on a smaller exchange. Penny stocks in the Indian stock market can have prices below Rs 10. These stocks are very speculative in nature and are considered

STT is a kind of turnover tax where the investor has to pay a small tax on the total consideration paid or received in a share transaction. STT was introduced in the Budget of 2004 and implemented in Oct 2004. The objective behind the levy is to mitigate tax evasion

Bonus shares are additional shares given to the current shareholders without any additional cost, based upon the number of shares that a shareholder owns. These are company's accumulated earnings which are not given out in the form of dividends, but are converted into free shares. The basic principle behind bonus

When a company declares a stock split, the number of shares of that company increases, but the market cap remains the same. Existing shares split, but the underlying value remains the same. As the number of shares increases, price per share goes down. Stock split is done to infuse liquidity

A market structure characterized by a single seller, selling a unique product in the market. In a monopoly market, the seller faces no competition, as he is the sole seller of goods with no close substitute.  In a monopoly market, factors like government license, ownership of resources, copyright and patent

Cash and carry trade is an arbitrage strategy which involves buying the underlying asset of a futures contract in the spot market and carrying it for the duration of the arbitrage. Traders use this strategy to take advantage of the difference between the price of the underlying security and its

The Return On Equity ratio essentially measures the rate of return that the owners of common stock of a company receive on their shareholdings. Return on equity signifies how good the company is in generating returns on the investment it received from its shareholders. Mathematically, Return on Equity = Net

Return on Capital Employed or RoCE essentially measures the earnings as a proportion of debt+equity required by a business to continue normal operations. In the long run, this ratio should be higher than the investments made through debt and shareholders’ equity. Otherwise diminishing returns shall render the business unsustainable. This

Dividend refers to a reward, cash or otherwise, that a company gives to its shareholders. Dividends can be issued in various forms, such as cash payment, stocks or any other form. A company’s dividend is decided by its board of directors and it requires the shareholders’ approval. However, it is

Beta is a numeric value that measures the fluctuations of a stock to changes in the overall stock market. Beta measures the responsiveness of a stock's price to changes in the overall stock market. On comparison of the benchmark index for e.g. NSE Nifty to a particular stock returns, a

 It is a rate at which the price of a security increases or decreases for a given set of returns. Volatility is measured by calculating the standard deviation of the annualized returns over a given period of time. It shows the range to which the price of a security may