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Basic Stock Market Terms | Common Terms in Stock Exchange

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The Securities Contract and Regulation Act defines a stock exchange as, “An organisation or body of individuals, whether incorporated or not established for the purpose of assisting, regulating, and controlling of business in buying, selling, and dealing in securities.” There are many jargons that are specifically used in the world of the stock market but are difficult to understand for common public. Here are some Basic Stock Market Terms that are commonly used in the field of stock market.

Basic Stock Market Terms

1. Stock Market Index

The index that reflects market conditions and indicates day-to-day fluctuations in the price of the stock is known as the Stock Market Index. This index measures the overall sentiment of the market through a set of stocks representing the market. In India, the important Stock Market Indices are Sensex of BSE(Bombay Stock Exchange) and Nifty of NSE(National Stock Exchange). 

2. Sensex

The benchmark index of the Bombay Stock Exchange (BSE) is known as the Sensex. Sensex is useful for investors in the stock market. If the Sensex rises, it means that the market is performing well and the investors in the market are optimistic about the economy’s future performance. Sensex consists of the shares of 30 companies (most actively traded in). 

3. Listed Securities

The securities which are traded on the stock exchange are known as Listed Securities. Every company has to take permission from the stock exchange before it deals with its shares on the stock exchange. They get permission only when the stock exchange is satisfied with the applicant company’s credentials. 

4. Share Certificate

When a specified number of shares are allocated to an individual, he/she is issued a Share Certificate. A share certificate entitles the individual named in the certificate, to be the owner of the specified number of shares.

5. Bourses

It is another word for the stock market.

6. Badla

A facility that carries forward the transaction from one settlement period to another is known as Badla. If a speculator fails to meet the commitment, then he/she can ask the other party to postpone the said settlement till the next settlement period. The other party postponing the settlement till the next settlement period charges a premium called Badla Charges for the commission given to the former party.

7. Bull

A speculator of the stock exchange market who takes an optimistic view of the share market and expects the price to rise is known as a Bull. Therefore, a Bull purchases securities to sell them in the future at a higher price and earns a profit. In India, a Bull is known as a Teziwala.

8. Bear

A speculator of the stock exchange market who takes a pessimistic view of the share market and expects the price to fall is known as a Bear. Therefore, a Bear sells securities for future delivery with the hope of buying those securities at a lower price before the delivery date. The securities sold by the Bear at present are not possessed by them. In India, a Bear is known as a Mandiwala. 

9. Odd Lot Trading

Trading in the multiples of 100 stocks or less is known as Odd Lot Trading.

10. Penny Stocks

The securities that do not have a value on the stock exchange are known as Penny Stocks. However, trading in Penny Stocks contributes to speculation. 

11. Price Rigging

Manipulating the primary motive of inflating or depressing the market price of securities is known as Price Rigging. SEBI aims at prohibiting these kinds of practices as they can be used to cheat or defraud investors.

12. Insider Trading

Any person who is expected to have some price sensitive information about a company’s securities is known as an Insider. The information with the Insider is not available to the public at large. Hence, Insider Trading is a practice in which an Insider uses price sensitive information about a company’s securities to make personal profits by trading in those securities accordingly. To protect the interest of other investors and the company, SEBI keeps a check on the sale or purchase of securities of the insiders.

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Last Updated : 23 Aug, 2023
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