Stock Market Jargons Every Beginner Should Know
When I first stepped into the stock market, I was often confused by the many jargons that sounded complicated. Terms like MSCI rebalancing, rights issue, or stock split can easily overwhelm beginners. If you feel the same, don’t worry — you’re not alone. To make your investing journey simple, here’s a list of common stock market jargons explained in plain language with easy-to-understand examples.
1. MSCI Rebalancing
MSCI (Morgan Stanley Capital International) maintains global stock indices that large investors and funds follow. Rebalancing means updating the list of companies and adjusting their weight in the index.2. Rights Issue
When a company needs extra funds, it offers its existing shareholders the chance to buy more shares at a discounted price. This is called a rights issue. Shareholders can accept the offer or ignore it.3. IPO (Initial Public Offering)
An IPO is when a private company sells its shares to the public for the first time. After this, the shares get listed on NSE/BSE for trading.👉 Example: Zomato’s IPO in 2021 gave retail investors a chance to become shareholders in the food delivery giant.
4. FPO (Follow-on Public Offering)
When an already listed company issues more shares to raise additional funds, it is called an FPO. Unlike an IPO, this is a second-time share offering.5. Buyback of Shares
A buyback happens when a company repurchases its own shares from the open market. This reduces the number of shares available and often boosts the stock price.👉 Example: Infosys regularly announces buybacks to reward shareholders.
6. Dividend
Dividends are part of a company’s profit distributed to shareholders. They can be given in cash or additional shares. Regular dividend payments show the financial health of a company.👉 Example: ITC is well-known for paying consistent dividends.
7. Bonus Issue
Companies sometimes reward shareholders with free additional shares, called a bonus issue. For instance, in a 1:2 bonus, you get 1 free share for every 2 shares you already hold.8. Stock Split
In a stock split, a company divides one high-priced share into multiple lower-priced shares to make them affordable and improve liquidity.👉 Example: A ₹1000 share split into 10 shares of ₹100 each.
9. Circuit Limit (Upper & Lower Circuit)
SEBI sets daily limits on how much a stock price can rise (upper circuit) or fall (lower circuit) to control volatility. If a stock hits its upper circuit, only sellers are present; if it hits the lower circuit, only buyers are stuck.10. Market Capitalization (Market Cap)
Market cap is the total value of a company’s shares = Share Price × Number of Shares.Large Cap: Big and stable companies (Reliance, TCS).
Mid Cap: Medium-sized growth companies.
Small Cap: Smaller but high-growth and risky companies.
11. Bull Market
A bull market is when stock prices keep rising over time, and investors are optimistic. Everyone is buying, expecting higher prices.12. Bear Market
A bear market is the opposite — prices keep falling, and investors are pessimistic. Selling pressure dominates the market.13. Volume
Volume shows how many shares were traded during a specific period. High volume means strong investor participation and confirms price movement.14. Liquidity
Liquidity tells us how easily a stock can be bought or sold without affecting its price. Highly liquid stocks trade in large numbers daily, like Reliance or Infosys.15. P/E Ratio (Price to Earnings Ratio)
The P/E ratio = Share Price ÷ Earnings per Share (EPS). It shows whether a stock is expensive or cheap compared to its earnings. High P/E stocks are considered growth stocks, while low P/E stocks may be undervalued.16. Blue-Chip Stocks
These are stocks of large, financially strong companies with a proven record of stability and steady performance.👉 Example: Infosys, HDFC Bank, and Reliance are considered blue-chip stocks.
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