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 is a list of common stock market jargons explained in plain language, with Indian examples. I have grouped them by theme rather than listing them alphabetically, because terms make far more sense when you learn them alongside the ones they relate to.
Market Basics
NSE and BSE
India's two main stock exchanges — the National Stock Exchange and the Bombay Stock Exchange. Most actively traded stocks are listed on both, and you can buy on one and sell on the other only if you take delivery.
Nifty 50 and Sensex
The benchmark indices. Nifty 50 tracks 50 large companies on the NSE; Sensex tracks 30 on the BSE. When someone says "the market was up today," they usually mean one of these.
Demat Account
Short for dematerialised account. It holds your shares in electronic form, the way a bank account holds money. A trading account places the orders; the demat account stores what you own.
Bull Market
A bull market is when stock prices keep rising over time, and investors are optimistic. Everyone is buying, expecting higher prices.
Bear Market
The opposite — prices keep falling, and investors are pessimistic. Selling pressure dominates the market.
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
FII and DII
Foreign Institutional Investors and Domestic Institutional Investors. Their daily buy and sell figures are published after market close and are widely watched, because large institutional flows move index levels far more than retail activity does.
Corporate Actions
These are decisions a company makes that directly affect its shares. Each one has a record date — the cut-off by which you must hold the stock to be eligible.
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 or BSE for trading.
👉 Example: Zomato's IPO in 2021 gave retail investors a chance to become shareholders in the food delivery company.
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.
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.
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 has announced buybacks on several occasions to return cash to shareholders.
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.
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.
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.
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. Stocks added to an index often see heavy buying from funds that track it, and stocks removed see the reverse.
Trading Terms
Intraday vs Delivery
An intraday trade is opened and closed on the same day — you never actually own the shares. In a delivery trade the shares are credited to your demat account and you can hold them as long as you like. Intraday carries higher leverage and higher risk.
Volume
Volume shows how many shares were traded during a specific period. High volume means strong investor participation and confirms price movement. Volume is one of the most important confirmations for any chart pattern breakout.
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. Illiquid stocks are dangerous for beginners — you can enter easily but struggle to exit.
Support and Resistance
Support is a price level where buyers have repeatedly stepped in and stopped a decline. Resistance is where sellers have repeatedly stopped an advance. Almost all technical analysis is built on these two ideas — see the guide on drawing trendlines correctly for how to mark them.
Breakout
When price moves decisively above resistance or below support, it is called a breakout. A genuine breakout usually comes with a jump in volume; without it, the move often reverses.
52-Week High / Low
The highest and lowest price a stock has traded at over the past year. Stocks near their 52-week high are showing strength, which is why many momentum traders screen for them.
Circuit Limit (Upper and 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 absent; if it hits the lower circuit, buyers disappear and holders can be stuck.
Short Selling
In short selling, traders borrow shares and sell them with the hope of buying them back later at a lower price. If the price falls, they make a profit — but if it rises, losses can be unlimited. In the Indian cash market, short positions must be squared off the same day.
Stop Loss
A stop-loss is an automatic order to sell a stock when it falls to a certain price. It helps traders protect themselves from big losses during volatile market conditions. Placing one before you enter — not after the trade goes against you — is the single most important habit a beginner can build.
Valuation Terms
EPS (Earnings Per Share)
A company's net profit divided by its number of shares. It tells you how much the company earned for each share you own.
P/E Ratio (Price to Earnings Ratio)
The P/E ratio = Share Price ÷ Earnings per Share. 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 — or may be cheap for a good reason.
Book Value
What the company's assets are worth after subtracting its liabilities, divided by the number of shares. Comparing price to book value is one common way to judge whether a stock is expensive.
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.
Derivatives and Risk
Derivatives (Futures and Options)
Derivatives are financial contracts whose value depends on an underlying asset, like a stock or index. Traders use them to hedge risk or speculate for profits. They involve leverage, which magnifies both gains and losses.
Lot Size
Derivatives are not traded in single shares but in fixed lots set by the exchange. This is why F&O requires far more capital per position than the cash market, and why position sizing is harder to control there.
Expiry
Every futures and options contract has a fixed expiry date. Index and stock derivative positioning around expiry can move prices in ways that have nothing to do with the underlying company.
Margin
The amount your broker requires you to keep to hold a leveraged position. If the position moves against you and margin falls short, the broker can square off your trade automatically.
SEBI
The Securities and Exchange Board of India — the regulator that oversees exchanges, brokers, listed companies and investment advisers. Any adviser giving paid stock recommendations legally must be SEBI-registered.
STT and Brokerage
Securities Transaction Tax is levied on every trade, alongside brokerage, exchange charges, GST and stamp duty. On frequent intraday trading these costs add up quickly and are a common reason beginners lose money even on winning strategies.
Frequently Asked Questions
What are the most important stock market terms for a beginner?
Start with demat account, intraday versus delivery, volume, liquidity, stop loss, support and resistance, and market cap. Those seven cover most of what you need to place a first trade sensibly. The rest can be learned as you encounter them.
What is the difference between a rights issue and a bonus issue?
In a rights issue you pay to buy additional shares at a discounted price. In a bonus issue the shares are given free. A rights issue raises money for the company; a bonus issue does not.
What is the difference between an IPO and an FPO?
An IPO is the first time a company offers shares to the public. An FPO is any subsequent public offering by a company that is already listed.
What happens when a stock hits the upper circuit?
Trading continues only at that price level, and buyers usually far outnumber sellers, so orders may go unfilled. If the stock hits the lower circuit, the reverse happens and holders can find it very difficult to exit.
Do I need to know all these terms before I start investing?
No. Understanding market cap, liquidity, stop loss and the difference between intraday and delivery is enough to begin cautiously. Add the valuation and derivatives terms as your experience grows.
Where to go next
- Chart Patterns: The Complete Guide — how price structures form and what they mean
- Candlestick Patterns for Beginners — reading individual candles correctly
- How to Draw Trendlines Correctly — marking support and resistance
- Moving Averages in Trading — the simplest way to judge trend direction
- My Trading Journey — what I got wrong in my first decade
About the author
Written by Jithesh Shetty — software engineer and active trader in Indian equity markets since 2006. He trades intraday and swing setups on NSE and BSE stocks and writes about what actually worked, including the parts that did not. Read his trading journey or more about this blog.
Disclaimer: This article is for educational purposes only and does not constitute investment advice or a recommendation to buy or sell any security. Trading and investing in equities involves substantial risk of loss. Please consult a SEBI-registered investment adviser before making financial decisions. See our full disclaimer.
Comments
Post a Comment