ADR Registered certificate with the Securities and Exchange Commission (SEC) issued and quoted on the US market

in USD and evidencing non-US equity paper. Holders of ADRs essentially enjoy the same ownership and membership rights as shareholders. Alpha Ratio which expresses risk-adjusted performance of an investment fund. If the average return on a security or portfolio is larger than its expected return, the alpha is positive. If the average return is smaller than expected, the alpha is negative. Arbitrage The simultaneous purchase and sale of identical or equivalent financial instruments or futures in order to benefit from a discrepancy in their price relationship. At-the-money When the price of the underlying security is equal to the strike price, an option is at-themoney. Blue Chip Stocks Stock in a well-established, financially-sound, and stable company that has demonstrated its ability to pay dividends in both good and bad times. Book Building The process of optimum price discovery in which the company decides the price of the security by asking various investors about how much and at what price would they invest in the companys equity. Cost of carry Cost of financing an asset Derivatives

A derivative instrument is an instrument which derives its value from the value of one or more underlying which can be commodities, precious metals, currency, bonds, stock, stock indices etc. Expiration Date The last day on which an option may be exercised. Also, the last day of trading for a futures contract. Green Shoe Option The green shoe option allows a company to retain the amount of oversubscription in case of a fresh public issue. Kerb Deals The sale/purchase of securities before and after the official trading hours of the stock exchange. Limit Order An order placed with a broker to buy or sell shares at a specified price or better than the specified price. Market Maker A person who provides both buy and sell quotes for a security. Mark-To-Market The daily adjustment of margin accounts to reflect profits and losses. Odd Lot A lot of share that is less than the marketable lot is called an odd lot. Open Interest The cumulative number of either long or short contracts which have been initiated on an exchange, and have not been offset. Open Order

An order to buy or sell a security that remains in effect until it is either canceled by the customer or executed. Over the Counter (OTC) A security which is not traded on an exchange, usually due to an inability to meet listing requirements. For such securities, brokers/dealers negotiate directly with one another over computer networks and by phone. Put A put option gives the buyer the right, but not the obligation, to sell an underlying security at a specific price for a specified time. The seller of a put option has the obligation to buy the underlying security should the buyer choose to exercise his option to sell. Rally An upward movement of prices following a decline; the opposite of a reaction. Reaction A decline in prices following an advance. The opposite of rally. Rights Issue Issue of additional equity to existing shareholders of a company Scalping Scalping normally involves establishing and liquidating a position quickly, usually within the same day, hour or even just a few minutes. Stock Split The division of a companys existing stock into more shares. In a 2-for-1 split, each stockholder would receive an additional share for each share formerly held. Tick Smallest increment of price movement possible

Earnings Per Share (EPS). Earnings, also known as net income or net profit, is the money that is left over after a company pays all of its bills. For many investors, earnings are the most important factor in analyzing a company. To allow for apples-to-apples comparisons, those who look at earnings use earnings per share (EPS).

Market Capitalization. The current market value of all of a companys shares outstanding. To calculate market value, you take the number of shares outstanding and multiply them by the current price of each share. You can find information about shares outstanding from the companys last quarterly report or any online quote service. For instance, if a company has 10 million shares outstanding and trades at $13 per share, the market capitalization is $130 million. Market = Shares Outstanding* Share =10 million * $13 = $130 million Price/Earnings Ratio (P/E). Earnings per share alone mean absolutely nothing. In order to get a sense of how expensive or cheap a stock is, you have to look at those earnings relative to the stock price. To do this, most investors employ the price/earnings (P/E) ratio. The P/E ratio takes the stock price and divides it by the last four quarters worth of earnings. If XYZ Corp. is currently trading at $15 a share with $1.00 of earnings per share (EPS), it would have a P/E of 15. Cap. Price

Relative Strength : Relative strength, also known as relative price strength, rates the performance of a stock versus the performance of the market as a whole over a given time period. The rating system gives a numerical grade just like the ones Mr. Spicer used to scrawl in bright red ink on your algebra quizzes to the performance of a stock over a given period, normally the past 12 months. Thus, relative strength is a momentum indicator. The most popular form of relative strength ratings are those published in Investors Business Daily, which go from 1 to 99. A relative strength of 95, for example, indicates a wonderful stock, one that has outperformed 95% of all other U.S. stocks over the past year. However, given that relative strength is only a mathematical relationship between the

stocks performance and an indexs performance, many others have created their own relative strength measures. Revenues. Also known as sales, revenues are how much the company has sold over a given period. Annual revenues would be the sales for a given year, whereas quarterly revenues would be the sales for a given quarter. Sales. Also known as revenues, sales are literally how much the company has sold over a given period. Annual sales would be the sales for a given year, whereas quarterly sales would be the sales for a given quarter. Utilities. A business that provides a service essential to almost everyone is called a utility. These businesses are almost always under some form of regulation by the government and normally have a monopoly position in a certain region. Electric companies, natural gas providers, and local phone companies are often referred to as utilities. Volume. The number of shares traded on a given day is known as the volume. Many investors look at volume over a month or a year to come up with average daily volume. Market watchers will say a company has traded at a certain number of times the average daily volume, giving the investor a sense of how active the stock was on a certain day relative to previous days. When major news is announced, a stock can trade as much as 20 or 30 times its average daily volume, particularly if the average daily volume is very low. The average number of shares traded gives an investor an idea of a companys liquidity how easy it is to buy and sell a particular stock. Highly liquid stocks trade easily in large batches with low transaction costs. Illiquid stocks trade infrequently and large sales often cause the price to rise or fall dramatically. Illiquid stocks on the Nasdaq also tend to carry the largest spreads, the difference between the buying price and the selling price. Bonus Shares Shares allotted to the existing shareholders by capitalizing the reserves into additional capital. When the market expects a company to come out with a Bonus Issue, the price of the shares normally goes up. Following a bonus issue, though the number of total shares increase, the proportional ownership of shareholders does not change.

Breakout A technical analysis term meaning a stock price has moved above or below a previous trading range. Bridge/Mezzanine Funding Financing for a company expecting to go public within 6-12 months; usually so structured as to be repaid from proceeds of a public offering, or to establish a floor price for public offer.

Broad Based Fund (sub-account)

A fund which has a minimum of 20 shareholders without any single investor holding more than 10 percent of the shares and units of the fund is known as broad Based Fund.

Capitalize
When costs of items such as buildings, equipment and other items with a useful lifetime exceeding one year are categorized as assets to be depreciated over a number of years, rather than being expensed in the year of purchase.

Circuit Breaker
A mechanism used to restrain the market when it gets overheated. The Exchange may relax the limit after a cooling off period of about half an hour.

Clear Title
A title to an asset proves your legal ownerships of that asset. That asset be mortgaged, sold, rented or otherwise transferred, temporarily or permanently, to another person. This represents an encumbrance on the title. Banks are reluctant to authorize loans against assets which have encumbrances and prefer a clear title.

Common Stock
Equity or ownership in a corporation. Stockholders participate in a company's profits or losses through dividends and changes in the stock's market value.

Derivatives
A financial contract between two or more parties based on the future value of an underlying asset. Options and similar other instruments are examples. For instance, the value of a call option on reliance (derivative) fluctuates with the price of reliance stock. The value is totally 'derived' from the value of the underlying asset such as securities, commodities, bullion, currency, live stock, etc. it is any hybrid contract of a pre-determined fixed duration such as forward, future, option, etc. linked for the purpose of contract fulfillment to the value of a specified real or financial asset or to an index of securities.

Equity per Share

Shows how much of a company's equity one share represents. If the market price is greater than the equity per share, the market believes that the company will generate extra value. Equity divided by number of shares at the close of the period.

Ex Bonus
A Share is described as ex dividend when the buyer is not entitled for the dividend. The seller remains the beneficiary. The day after dividends is paid!

Ex Rights
A share is described as ex rights when the buyer is not entitled for the Rights. The seller remains the beneficiary. Ex rights shares are cheaper than Cum Rights and offer a good 'buy' opportunity for investment oriented players.

Financial Futures
Legally binding agreements to buy or sell financial instruments at a future date (for example, bonds stocks, treasury bonds, foreign currency).

Front-End Load
Sales charge paid when purchasing a mutual fund.

Green Shoe
An agreement allowing the lead underwriter to buy additional shares of an IPO at the offering price after the IPO begins trading.

Growth Stocks
Stocks that pay low dividends, but are expected to grow. Strictly for long term investors who have a vision for the future and are not interested in maximizing short term profits.

Hedging
A practice of taking one market position to offset potential losses in another. For example using a futures a contract to reduce the impact of price fluctuations in a cash or physical market. Like when you may like to cover possible loss by also backing the horse for a place. In securities trading, since there is no win or place, you have to look for another investment avenue where the return is less but the risk is also correspondingly less. A hedger takes an equal and opposite position in the futures market to the one he holds in the equity market.

Index/Indices
An index is managed and publishes either by a stock exchange or a professional financial and investment body. It is representative of the market sentiment. Normally the index components are the highly traded

stocks of that exchange. Usually they represent about 80 to 85 percent of the market capitalization and trading. Sectored indices like Industrial, banking, Utilities, etc is made up of the highly traded stocks in that particular sector. The BSE Sensex is based on 30 stocks as is New York 's Dow average. These 30 stocks, in number, are a miniscule percent of the total listed shares, but in terms of value of trade and market capitalization, they represent anything up to 85 per cent.

Industry Group
Companies in related businesses.

Institutional Ownership
Shares of a company owned by pension funds, mutual fund, banks, financial institutions, etc.

Leverage
Any means of increasing value and return by borrowing funds or committing less of one's own money. For corporations, it refers to the ratio of debt (in the form of bonds and preferred stock outstanding) to equity (in the form of common stock outstanding) In the company's capital structure. The more long-term debt there is, the greater the financial leverage. Shareholders benefit from this financial leverage to the extent that the return on the borrowed money exceeds the interest costs of borrowing it. The market value of the company rises and so do its shares. Because of this effect, financial leverage is popularly called trading on the equity'. For individuals, leverage can involve debt, as when an investor borrows money from his broker on margin' and so is able to buy more stock than he otherwise could. If the stock goes up, he repays the broker the loan amount and keeps the profit himself. By borrowing money he has achieved a higher return on his investment than if he had paid for all the stock himself. Rights, warrants, futures and option contracts also provide leverage, not through debt but by offering the prospect of a high return for little or no investment. The downside: most individuals pledge existing stocks with their bankers or brokers for the loan, which is a percentage of the market value of the stocks pledged. Say you have pledged stocks worth Rs.100 on the market against which you are given a loan of Rs.50 (50 per cent). Now suppose the market value of the pledged stocks goes down to Rs.75. The lender is immediately going to ask you to pledge more stocks (or pay cash) to bring the level up to 200 per cent of the loan. Multiply this instance by thousands and you can imagine the margin pressure that is exerted on the market. This is when the market falls and we have what is known as a bear' market.

Margin
An upfront payment made by the customer to take a position in the market. His exposure limit is fixed based on the margin money brought in by him. The difference in the value of shares pledged and the loan amount sanctioned. The margin for physical shares is 50 percent (that is you can borrow only up to 50 percent of the values of your pledged shares. If one wants to borrow Rs.100, then it will have to pledge shares worth Rs.200. The margin for demat shares is35 percent. Margins are at the sole discretion of the bank and may even vary from scrip to scrip.

Mark to Market

A notional profit or loss of a long or short position as compared to the current market price.

Minimum Number of Companies Accepted

The minimum number of companies, whose shares have to be offered as security for obtaining loans. For example, in case of IDBI Bank the shares to be offered as security should be of at least of two companies. It is in your interest to pledge the shares of an number of companies when you take a loan; if the value of some shares drop in the market they may be offset by the other shares which have risen in price. Banks also profitability of a number of companies.

Momentum Analysis
Usually involves looking for stocks in a strong uptrend (high relative strength), strong earnings growth, and increasing earnings forecasts. In today's market, may include relative strength only.

Net Asset Value (NAV)

Net Asset Value (NAV) is the market value of the securities held by the scheme of a Mutual Fund.NAV varies on a day-to-day basis since the market value of securities changes regularly. The total market value divided by the total number of units of the scheme on a specific date is the NAV.To simplify, if you hold a unit in a mutual fund, the NAV is the value today of your unit.

Operating Cash Flow

Surplus cash generated from a company's basic operations without regard to income tax entries such as depreciation and amortization. Changes in levels of inventories, accounts receivable and accounts payable also affect cash flow. Also see Free Cash Flow.

Operating Earnings
Earnings without considering certain expenses such as inventory write downs, severance pay, depreciation and amortization charges, or just about anything else the company feels like excluding to make its earnings look better. Also known as core earnings, ongoing earnings, earnings excluding special items or operating earnings.

Operating Income
Sales minus all expenses except income taxes and other items not relaxed to basic business.

P/E (Price/Earnings Ratio)

Shows a share's market price in proportion to its earnings. Calculated by dividing the share price by the reported or forecast annual earnings per share. For an investor this means that, if the P?E ratio is 10, the price is equivalent to ten years earnings. The figure illustrates expectations of future company growth. In comparisons, it is best used for companies operating in the same field. For a portfolio, the ratio is the weighted average P/E, the greater the expectations for a company's future growth in earnings.

Penny Stocks

This term is typical to the USA stock markets. Low-priced issues, often highly speculative, selling at less than $1 a share. Frequently used as a term of disparagement although some penny stocks have developed into investment-caliber issues. In India they are called low-Capped stocks and BSE has a separate index for them. It is not unusual, When a bull market is raging, to find the index for these stocks outpacing the Sensex. These stocks offer larger returns but at higher risk.

Poison Pill
Steps taken by a corporation to thwart a hostile takeover attempt. For instance, a company could issue rights to purchase shares at a substantial discount after a merger, or it might issue preferred shares giving holders the right to redeem their shares at a discount after a merger.

Post-Offering Shares
The number of shares that will be outstanding after an IPO.

Private Placement
The sale of securities to a small group of investors that is exempt from the elaborate requirements of a public issue. Private placements are usually made to investment banks and financial lending institutions from whom the issuing company takes or intends to take, a loan. The private placement results in the lending institute holding the company's stock collateral.

Proxy Statement
Material given to stockholders when the corporation solicits shareholder votes. In effect, the company seeks temporary delegation of your voting rights. The proxy statement usually contains details on the corporation's executive compensations plans.

Pyramiding
So called because it is akin to building a pyramid. It involves pledging shares with a banker or broker to raise a loan to buy more shares of the same company, pushing up their prices. These shares are pledged again to secure a further loan to buy additional shares of the same company in a self-feeding cycle which is called pyramiding. In a bullish market this causes the price to rise further and increase the operator's profit. In a bear market this causes margin calls and substantial losses. it can, more appropriately, be called building a house of cards. The whiff of a market rumors and pyramid could collapse around you.

Redemption Fee
Fee charged when you sell a mutual fund, if you have not held the fund for the prescribed minimum time.

Rematerialisation
Process of converting the shares from electronic form to physical form.

Resistance
Historical price level at which rising prices have stopped rising and either moved sideways or reversed direction; usually seen as a price chart pattern.

Rights Issue
Issue of new shares to the existing shareholders at a price which is normally lower than the current market price of the old shares. it is issued in a fixed ratio to those shares which are already held.

Road Show
Presentations made by underwriters and IPO company officials to institutional buyers to create interest in the offering.

Rollover
A point where a stock price has fallen to support, or risen to resistance, and then reverses the up or down trend convincingly.

Second Stage Capital

Capital provided to expand marketing and meet growing working capital needs of an enterprise that has commenced production but does not have positive cash flows sufficient to take care of its growing needs.

Security Swapping
One has to pledge one's shares when availing of "loan against shares". Later on the person may withdraw some shares and pledge new ones to replace the shares he has withdrawn. This is popularly called security swapping.

Split
An increase in the number of shares outstanding. This increase in the number of shares result in the proportionate decrease of share price. For example, a company declares a "3 for 1 " stock split, the price of the stock is currently 60 a share, a shareholder with 100 shares before the split would have 300 shares after the split with a value of 20 a share. The shareholders equity does not change. A reverse split is where the total number of shares is decreased and the stock price increases proportionally. As in a split the total stock holders equity remains the same.

Support
Historical price level at which falling prices have stopped falling and either moved sideways or reversed direction; usually seen as a price chart pattern.

Third Stage Capital

Capital provided to an enterprise that has an established commercial production and basic marketing setup, typically for market expansion, acquisitions, product development etc.

Tick
The tick is the direction in which the price of stock moved on its last sale. An up-tick means the last trade was at a higher price than the one before than the price was at a higher price than one before it and a

down -tick means the last sale price was lower than the one before it. A zero-plus tick means the transaction was at the same price as the one before, but still higher than the nearest preceding price. The tick becomes especially important when large market movements trigger the implementation of certain circuit breakers meant to stabilize the market.

Top
A technical analysis term meaning the stock price is going down from here.

Value Traded
This is the total monetary value of all trading in a security for the market day. It is calculated by multiplying the volume traded by the average sale price.

Yield
In stocks and bonds, the amount of money returned to investors on their investments. Also known as rate of return. Interest and dividends paid to mutual fund shareholders as a percentage of share price (Net Asset Value). Also the effective interest rate on a bond. For instance, if a bond pays 1.00 interests annually, and is selling for 10.00, the yield is (1.00/10.00) 10 per cent.