Thursday, June 12, 2008

Basic Terms to know when Investing

Sensex : It is an index that represents the direction of the companies that are traded on the Bombay Stock Exchange, BSE. The word Sensex comes from sensitive index.

click here to get the list of 30 sensex stocks which comes from the sectors like ACC (cement), Bajaj Auto, Tata Motors, Maruti (automobile), Infosys, Wipro, TCS (information technology), ONGC, Reliance (oil & gas), ITC, HLL (fast moving consumer goods) etc.

Nifty : It is the Sensex's counterpart on the National Stock Exchnage, NSE.
The only difference between the two indices (the Sensex and Nifty) is that the Nifty comprises of 50 companies and hence is more broad-based than the Sensex.
Sensex is the benchmark that represents Indian equity markets globally.
The Nifty 50 or the S&P CNX Nifty as the index is officially called has all the 30 Sensex stocks.

Bull : A bull buys a company's share at Rs 100, s/he would prefer selling the same stock at Rs 120 or any price higher than Rs 100 to make a profit. Bulls are always said to be active during a market rally.

Bear :Bears in the market that sell shares first without actually owning them unlike in the above example. Such selling is called naked short selling or going short on a stock.
Bears are happy in a falling market.

Squaring off: A process whereby investors/traders buy or sell shares and later reverse their trade to complete a transaction is called squaring off of a trade.

Bonus shares: These are the free shares that a listed company gives its shareholders.
A bonus is usually declared as a ratio.5:1 bonus issue will give you five free shares for every one share that you own.

It is again a way of rewarding a company's shareholders. A dividend is generally issued as a percentage of the face value of a share. Face value is the nominal price of a company's share.


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