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  • Whom should I contact for my Stock Market related transactions?

    You can contact a broker or a sub broker registered with SEBI for carrying out your transactions pertaining to the capital market.
  • Is grading optional?

    No, IPO grading is not optional. A company which has filed the draft offer document for its IPO with SEBI, on or after 1st May, 2007, is required to obtain a grade for the IPO from at least one CRA.
  • What are Risk Factors?

    Here, the issuers management gives its view on the Internal and external risks faced by the company. Here, the company also makes a note on the forward-looking statements. This information is disclosed in the initial pages of the document and it is also clearly disclosed in the abridged prospectus. It is generally advised that the investors should go through all the risk factors of the company before making an investment decision.
  • What details are required to be mentioned on the Contract note issued by the Stock Broker?

    A broker has to issue a contract note to clients for all transactions in the form specified by the stock exchange. The contract note inter-alia should have following:

    Name, address and SEBI Registration number of the Member broker.
    Name of partner /proprietor /Authorised Signatory.
    Dealing Office Address/Tel No/Fax no, Code number of the member given by the Exchange.
    Unique Identification Number
    Contract number, date of issue of contract note, settlement number and time period for settlement.
    Constituent (Client) name/Code Number.
    Order number and order time corresponding to the trades.
    Trade number and Trade time.
    Quantity and Kind of Security brought/sold by the client.
    Brokerage and Purchase /Sale rate are given separately.
    Service tax rates and any other charges levied by the broker.
    Securities Transaction Tax (STT) as applicable.
    Appropriate stamps have to be affixed on the original contract note or it is mentioned that the consolidated stamp duty is paid.
    Signature of the Stock broker/Authorized Signatory.

    Contract note provides for the recourse to the system of arbitrators for settlement of disputes arising out of transactions. Only the broker can issue contract notes.
  • What is dividend payout ratio?

    Dividend Payout ratio, or simply payout ratio, is the percentage of a companys earnings paid as dividends to the shareholders. It indicates how well the companys earnings support the dividend payment.

    Dividend Payout ratio = Dividend per equity share X 100

    Earnings per share (EPS)

    E.g.: For FY10, a company had EPS of Rs. 10. It paid dividend of 20% (Rs. 2 per equity share of Rs. 10 each) for the year.

    Dividend payout ratio = Rs. 2 X 100

    Rs. 10

    Dividend payout ratio = 20%

  • What is ASBA, with respect to IPOs?

    ASBA stands for Application Supported by Blocked Amount. The facility was introduced by SEBI in July 2008 to help retail investors apply in IPOs, FPOs and rights issue of companies, with ease.

    Earlier while making an application in an IPO, an investor had to pay full application money at the time of submission of the application form. In ASBA, one can make an application for shares without actually parting with the money immediately.

    The amount for application money is only blocked in the account of the applicant. The money is debited from the bank account only when the basis of allotment is finalised and also only for number of shares that are finally allotted to the investor. Money blocked under ASBA is unblocked fully or partly as and when the shares are allotted or the issue is withdrawn.

    Thus ASBA eliminates problems associated with delay or non-receipt of refunds. Moreover, banks continue to give interest on account as also the money blocked in the account is considered for calculating the average daily / quarterly balances. Thus, investors are saved of hassles on refund deposits while continuing to earn interest on the application money.

  • Who is eligible for reservation and how much? (QIBs, NIIs, etc.,)?

    In a book built issue allocation to Retail Individual Investors (RIIs), Non Institutional Investors (NIIs) and Qualified Institutional Buyers (QIBs) is in the ratio of 35: 15: 50 respectively. In case the book built issues are made pursuant to the requirement of mandatory allocation of 60% to QIBs in terms of Rule 19(2)(b) of SCRR, the respective figures are 30% for RIIs and 10% for NIIs. This is a transitory provision pending harmonization of the QIB allocation in terms of the aforesaid Rule with that specified in the guidelines.
  • What is a Rights Issue?

    Rights Issue (RI) is when a listed company which proposes to issue fresh securities to its existing shareholders as on a record date. The rights are normally offered in a particular ratio to the number of securities held prior to the issue. This route is best suited for companies who would like to raise capital without diluting stake of its existing shareholders unless they do not intend to subscribe to their entitlements.
  • What is enterprise value?

    Enterprise value (EV) is the total value of the firm, reflecting the market value of the entire business. EV is calculated as under:

    Market Capitalisation

    Add: Debt (secured and unsecured)

    Add: Minority Interest

    Add: Preference share capital

    Less: Cash and cash equivalents

    E.g.: If the market cap of company is Rs. 100 crore, it had debt of Rs. 40 crore and cash and bank balance of Rs. 10 crore, then the enterprise value is calculated as:

    EV = 100 + 40 10 crore

    = Rs. 130 crore

  • What is the role of a registrar?

    The Registrar finalizes the list of eligible allottees after deleting the invalid applications and ensures that the corporate action for crediting of shares to the demat accounts of the applicants is done and the dispatch of refund orders to those applicable are sent. The Lead manager coordinates with the Registrar to ensure follow up so that that the flow of applications from collecting bank branches, processing of the applications and other matters till the basis of allotment is finalized, dispatch security certificates and refund orders completed and securities listed.

stocks glossary

  • Acid Test Ratio

    It is the ratio indicated by dividing a company\'s current assets by current liabilities. It reflects the financial strength of a company and hence called Acid test ratio.
  • Alpha

    Alpha measures the difference between a fund\'s actual returns and its expected performance, given its level of risk (as measured by beta). A positive alpha figure indicates the fund has performed better than its beta would predict. In contrast, a negative alpha indicates a fund has underperformed, given the expectations established by the fund\'s beta. Some investors see alpha as a measurement of the value added or subtracted by a fund\'s manager. There are limitations to alpha\'s ability to accurately depict a manager\'s added or subtracted value. In some cases, a negative alpha can result from the expenses that are present in the fund figures but are not present in the figures of the comparison index. Alpha is dependent on the accuracy of beta: If the investor accepts beta as a conclusive definition of risk, a positive alpha would be a conclusive indicator of good fund performance. Of course, the value of beta is dependent on another statistic, known as R-squared.
  • Annual Fund Operating Expenses

    The expenses incurred, during a particular year, by Asset Management Company for managing the funds.
  • Asset Allocation

    The process of diversifying the investments in different kinds of assets such as stocks, bonds, real estate, cash in order to optimize risk.
  • Asset Allocation Fund

    A fund that spreads its portfolio among a wide variety of investments, including domestic and foreign stocks and bonds, government securities, gold bullion and real estate stocks. Some of these funds keep the proportions allocated between different sectors relatively constant, while others alter the mix as market conditions change.
  • Asset Management Company (AMC)

    A Company registered with SEBI, which takes investment/divestment decisions for the mutual fund, and manages the assets of the mutual fund.
  • Automatic Investment Plan

    A plan offered by most mutual funds where a small fixed amount is automatically deducted monthly from an investor\'s bank account and invested in the mutual fund of their choice.
  • Automatic Reinvestment

    An investment option for mutual fund unit holders in which the proceeds from either the fund\'s dividends or capital gains, or both, are automatically used to buy more units of the funds.