| Financial markets are a
countries economic
barometer. Stock markets enable trading of a company's stock. In India, NSE or
National Stock Exchange and BSE or Bombay Stock Exchange are the most
important exchanges.
Traditionally stocks are traded through a stock broker.
Broker takes a commission for trading stocks. Here we list some of the most
important terms you must be familiar with while dealing in shares and the stock market.
Essential Terms:
 Index - What is a stock market index? There won't be
many who have not at least heard of the SENSEX. SENSEX is an
index. SENSEX consists
of the 30 largest and most actively traded stocks, representative of various
sectors, on the Bombay Stock Exchange.
See the SENSEX through
Indiamart
Other examples of indexes are NIFTY of the
National Stock Exchange and American DOW Jones. Practically index is an
indication for you to immediately gather how the markets are behaving generally.
A birds eye view of the overall performance of all shares listed in that
exchange. This means that when the SENSEX goes down, the shares that you own are likely to be loosing in value if you have participated in India.
If it is up, your shares are likely
to be gaining in value.
Note that your portfolio of shares does not have to rise or fall according
to
the SENSEX or NIFTY. However it is more likely to happen that way.
Bull Market - A bull market is a market that is
constantly going up. It is a market where there is optimism of further rise,
better business results and other positive factors. Bull markets can
sometimes continue for years. For investors this is the preferred market
trend. However no bull market can continue for very long.
Bear Market - Bear market is a market that is
showing a persistent downtrend. A 15-20 % downward movement of the market is
generally termed as a bear market.
Correction - A correction is a short-term
reduction in stock market price or activity. This is a term retail investors
are scared of but experts call for when market is in a relentless uptrend.
Experts call a correction to be good for a healthy market.
Diversification - Diversification is the
technique of investing in unrelated business sectors simultaneously so that
a risk
that affects a particular sector does not affect your overall investment.
For example your portfolio of shares includes sectors like Information
Technology, Real Estate, Capital goods, Auto etc.
Risks - Risks are those threats that affect stocks
markets. There are risks that affect all sectors and those that
affect only certain sectors and businesses. Knowledge of risks and
understating the possibility of sharp
downturns due to those risks are essential to any market participant.
Political or economic risks are examples of risks.
DMAT - DMAT or dematerialization
is a process in which the
physical share certificates in paper are replaced by an
equivalent number of securities in electronic form at the request of the
investor. In the case of online trading you never handle physical shares. It
is always dmated shares that come to you in your online account.
IPO - Initial Public Offering. This is where stocks take birth. Stocks of a
company when they enter the financial markets are first sold through the
primary market. When the stocks are sold for the first time by a private
company is what IPO or initial public offering mean. IPOs are sold to
individuals by the company directly.
Secondary Market - This is where the share trading actually
happen. In secondary markets one can sell his shares directly to another
through the stocks markets. Here you are dealing with another investor who is
holding a company's shares directly than the issuing company. FII
or Foreign Institutional Investors. An investor or investment fund that is
from or registered in a country outside of the one in which it is
currently investing. Foreign institutional investors have made a sizable
investment in Indian financial markets. There are currently about 900 FIIs registered in India.
Their heavy selling in the Indian market normally cause havoc and their continued
investment and buying often takes the market to newer heights.
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Online Share Trading Advantages |
