FEW BASIC TERMS

SHARES
In everyday language, when we talk of shares we normally refer to equity shares or ordinary shares of a company. The terms shares and stock essentially means the same things, the letter being a more common In American usage, An equity share is evidence of ownership in a company. The physical evidence of this ownership of this document is called the Share Certificate. Now days, shares are usually kept in electronic, or dematerialized, form with a depository participant (Banks, brokers, financial institutions) of the National Securities Depository Limited (NSDL). However, if one wants one can still hold the share in the physical form which has your name endorsed on it, and is proved that you are a part owner of the company. Your ownership rights are proportionate to the number of share you own. Companies issue shares of a certain fixed denomination, called face value or par value of that share, which is clearly indicated on a share certificate in the physical form.

SCRIPTS
The company, which has more than one working area, it has to issue the share separately than that company is the company which has the script of its name. E.g. The Reliance this company has its several working area Namely Reliance, Capital Reliance, Info com Reliance Energy, Reliance Industry. So reliance company issues separate share for separate working area but the bold name which is given to the working area is Reliance. So in this case Reliance has its own scripts. Other examples include Ambuja, Birla, Etc.

GROUPS
When the shares are issued by the company they are given the particular group by the Stock exchange according to its demand in the market. There are mainly 7 groups. The scripts traded on the BSE have been classified into A,B1,B2,C,F and Z groups. The A group represents those, which are in the carry forward system. The F group represents the debt market segment (fixed income securities). The Z group scripts are of the blacklisted companies. The C group covers the odd lot securities in A, B1&B2 groups.

STOCK MARKET INDEX In the stock market world, you need a way to compare the movement of the market, up and down, from day to day, and from year to year. An index is just a benchmark or yardstick expressed as a number that makes it possible to do this comparison. For e.g. S&P, CNX Nifty is the index of NSE and SENSEX is the index of BSE.

SENSEX
When the shares are issued to the public the stock exchange gives a particular group to the company. For ex. The Reliance Group is given the group A like this there are several companies which fall in A Group. The weight age mean is calculated according to its equity when all the companies of Group A has calculated this weight age mean they are added all together when this addition is done the result which comes down is known as Sensex . The trading of shares of A group is totally depended on this sensex value. The price of the share raises this Sensex value also raises and when the price of this share comes down the sensex value also comes down.

NIFTY
Nifty Fifty was an informal term used to refer to 50 popular large cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks. The fifty are credited with propelling the bull market of the early 1970s. Most are still solid performers, although a few are now defunct or otherwise worthless. The long bear market of the 1970s that lasted until 1982 caused valuations of the nifty fifty to fall to low levels along with the rest of the market, with most of these stocks under-performing the broader market averages Because of the under-performance of most of the nifty fifty list, it is often cited as an example of unrealistic investor expectations for growth stocks. However, those who held on until the late 1990s bull market saw many of the stocks return to market valuations.

SUPPLY AND DEMAND A stock's price movement up and down until the end of the trading day is strictly the result of supply and demand. SUPPLY is the no. of shares offered for sale at anyone one moment. The DEMAND is the number of shares investors wish to buy at exactly the same time. What a share of a company is worth on anyone day or at any one minute, is determined by all investors voting with their money. If investors want a stock and are willing to pay more, the price will go up. If investors are selling a stock and there aren't enough buyers, the price will go down.

MARKET CAP
As you become familiar with stock and mutual fund investing, you will encounter the term "Cap", as in SmallCap, Mid-Cap, and Large-Cap. Cap is short for capitalization. As a stock market term, the capitalization of a company is calculated by multiplying the total number of shares by the current price per share. If a company has 500 million shares trading at Rs.20 a share, its market cap is Rs.10 billion (500,000,000 x 20). This is the total value of the company's stock, the value that the world of stock market investors has placed on the company. Much of this perceived value is due to the expectations of a company's future prospects. Market cap is not dictated by how "big" a company is. Today, we define a large-cap company as one whose stock is valued at over $10 billion (some still say over $5 billion), a mid-cap from $1 to $10 billion, a small-cap from $250 million to $1 billion, and a company whose stock value is under $250 million as a micro-cap. Depending on whom you listen to or how old your reference book is, these definitions will vary. A related point - don't think a company is big just because it has a high stock price, or that it is small just because its stock price is low.

DEPOSITORY PARTICIPANT
Depository is an institution or a kind of organization which holds securities with it, in which trading is done among shares, debentures, mutual funds, derivatives, F&O and commodities. The intermediatories perform their actions in variety of securities at Depository on the behalf of their clients. These intermediatories are known as Depositories Participants. Fundamentally, There are two sorts of depositories in India. One is the National Securities Depository Limited (NSDL) and the other is the Central Depository Service (India) Limited (CDSL). Every Depository Participant (DP) needs to be registered under this Depository before it begins its operation or trade in the market.

PLEDGE
Pledge enables you to obtain loans against your dematerialised shares. So you get liquidity without having to sell your shares. A highly simplified procedure may be availed of for pledging of securities in the electronic mode. The pledged securities continue to be reflected in the DP account of the clients (pledgor) but the concerned securities are "blocked" and cannot be used for any transactions. As and when the pledge is to be removed, based on confirmations received from both the pledgor and the pledgee, the blocked securities will be released to "Free Balance" of the account holder.

OUTCRY SYSTEM
The broker has to buy or sell securities for which he has received the orders. For this, the broker or his authorized representatives goes to the stock exchange. This method is called the open outcry system. Basically the brokers shout while buying or selling the securities. The floor of the stock exchange is divided into a number of markets also known as post pit or wing based on particular securities dealt there. In the post pit or wing, the broker using open outcry method makes an offer or bid price. For making the necessary bargain, he quotes his purchase or sale price, also known as offer or bid price. The dealer, to whom the price is quoted, quotes his own price when the quotation of the dealer suits the broker, he may lose the bargain. If he is not satisfied with the quote price, he may turn to some other dealer. On the close of the bargain, the dealer as well as the broker makes a brief note of the particulars of the deal. Such notes are made on some pad and on it the number of shares, the price agreed upon, the name of the party, what membership number etc., are noted.

DEMATERIALISATION
Dematerialisation refers to the substitution of paper-form securities by book-entry securities. This phenomenon is ancient, since in many small firms that cannot afford printing secured paper-form securities; the securities are often held in a book-entry form, under the control of an attorney who acts as a notary to certify the existence of the securities, as well as their authenticity. Today, dematerialization concerns more and more listed companies in the US (where the process has begun in the sixties) and now in the European Union, where dematerialized securities represent often more than 99% of the securities listed on regulated markets.

REMATERIALIZATION
Rematerialization is the process by which a client can get his electronic holdings converted into physical certificates. The client has to submit the rematerialisation request to the DP with whom he has an account along with a Remat request form. The physical shares will be posted by the company directly to the clients.

TYPES OF ORDERS
Buy and sell orders placed with members of the stock exchange by the investors. The orders are of different types. Limit orders: Orders are limited by a fixed price. E.g. buy Reliance Petroleum at Rs.50.Here, the order has clearly indicated the price at which it has to be bought and the investor is not willing to give more than Rs.50.

Best rate order:

Here, the buyer or seller gives the freedom to the broker to execute the order at the best possible rate quoted on the particular date for buying. It may be lowest rate for buying and highest rate for selling. Discretionary order: The investor gives the range of price for purchase and sale. The broker can use his discretion to buy within the specified limit. Generally the approximation price is fixed. The order stands as this buy BRC 100 shares around Rs.40. Stop loss order: The orders are given to limit the loss due to unfavorable price movement in the market. A particular limit is given for waiting. If the price falls below the limit, the broker is authorized to sell the shares to prevent further loss. E.g. Sell BRC limited at Rs.24, stop loss at Rs.22.

CIRCUIT LIMIT
While issuing the shares to the public the company has to fix a particular limit of the rate of per share this limit is called as circuit limit. This circuit limit is generally fixed on the percentage basis. This circuit limit is applied to both the ends of the share. That is to the upper limit also and also to the lower limit actually circuit limit is of two types: 1) Upper limit 2) Lower limit It is compulsory for every company to fix the circuit limit. This limit is beneficial to both. The customer and also to the company generally every company fix below 10%of the rate of per share. Upper Limit While issuing the shares to the public the company has to fix the upper limit this limit is also calculated in percentage the limit is also beyond which the rate of the shares cannot exceed nor that the customer doing the trading can sell above the level. For ex. Customer wants to sell a share which is of Rs10 and its upper limit is fixed at 10% so in this case the person will have to sell it at Rs11 or the rate whichever he wants but the person cannot sell it beyond this Rs 11 because by addition of upper limit to the rate of share the maximum amount of the shares is Rs 11 only and not above. Lower Limit At the time of issuing share the company has to fix the lower limit also. This lower limit is calculated on the basis of the rate of the shares. This limit bears the same percentage, which is mentioned for the upper limit of the share. Like upper limit in this limit also the share minimum rate of the share is fixed the customer who wants to see; the holding shares has to first consider the upper & lower limit of the share he cannot sell the share below the lower limit and not above the upper limit like the upper limit Percentage generally in this limit also the percentage is below 10% of the face value of the shares the percentage is below 10% of the face value of the shares the percentage of the upper &lower limit is equal to every type of share For ex. Suppose the person wants to sell the shares and the rate of the share is Rs. 10/- and the lower limit percentage is 10% of the rate. So in this case the person cannot sell the share at below Rs. 9/-. He will have to sell at above Rs. 9/- or up to the upper limit of the share.