Investment Terminology Guide

Navigating the world of investments can be complex, especially with the myriad of terms and concepts involved. This Investment Terminology Guide aims to demystify some of the most commonly used terms in the investment landscape, helping both novice and seasoned investors make informed decisions.

Prospectus

Definition: A legal document issued by a company or financial institution to potential investors that provides detailed information about the company, its business operations, financial performance, and the securities being offered for sale, such as stocks or bonds. The prospectus is required by regulatory authorities and serves as a key disclosure document, enabling investors to […]

Anchor Investors

Definition: Institutional investors who are allocated a portion of shares in an initial public offering (IPO) before the offering opens to the public. Anchor investors typically include mutual funds, insurance companies, pension funds, and other institutional investors with significant investment capacity. They provide stability to the IPO process by committing to purchase shares at a […]

IPO Promoter

Definition: An individual or entity that initiates the process of bringing a company to the public market through an initial public offering (IPO). Promoters are often the founders, major shareholders, or key stakeholders of the company seeking to go public. They play a crucial role in the IPO process by driving the company’s strategy, securing […]

IPO Reservation

Definition: A process by which a portion of shares in an initial public offering (IPO) is set aside or reserved for specific categories of investors, such as institutional investors, retail investors, employees, or other eligible groups. IPO reservations aim to ensure equitable access to shares and may provide preferential treatment to certain investor categories based […]

Lot Size

Definition: The minimum quantity or number of shares that investors can buy or sell in a single transaction on a stock exchange. Lot sizes are predetermined by stock exchanges and vary depending on factors such as the price of the security, trading volume, and market regulations. Lot sizes ensure orderly trading and liquidity in the […]

Mainline IPO

Definition: An initial public offering (IPO) of shares by a company that is listed on the main board of a stock exchange. Mainline IPOs are offerings of shares made by established and larger companies seeking to raise capital from the public markets. These IPOs are typically associated with companies that have a significant market presence, […]

SME IPO (Small and Medium Enterprises Initial Public Offering)

Definition: An initial public offering (IPO) specifically designed for small and medium-sized enterprises (SMEs) to raise capital by offering shares to the public. SME IPOs provide smaller companies with access to the capital markets, allowing them to raise funds for expansion, growth, or other business purposes. These offerings are subject to specific regulations and eligibility […]

SEBI (Securities and Exchange Board of India)

Definition: The regulatory body established in 1988 to oversee and regulate the securities market in India. SEBI’s primary functions include protecting the interests of investors, promoting the development of the securities market, regulating stock exchanges and other intermediaries, and ensuring compliance with securities laws and regulations. SEBI plays a crucial role in maintaining transparency, integrity, […]

Cutoff Price

Definition: The price at which shares are allotted in an initial public offering (IPO) or a follow-on public offering (FPO) when the issue is oversubscribed. It is the highest price at which investors who applied for shares in the offering will be eligible to receive allocations. Investors who bid at or above the cutoff price […]

Registrar

Definition: An entity responsible for maintaining records of shareholders and managing administrative tasks related to the issuance, transfer, and ownership of securities. Registrars often work on behalf of companies to ensure accurate and up-to-date records of shareholders, process dividend payments, facilitate corporate actions such as stock splits or mergers, and handle other administrative functions related […]

Listing Date

Definition: The date on which a newly issued security, such as stocks or bonds, is officially admitted for trading on a stock exchange. It marks the beginning of public trading for security, allowing investors to buy and sell it on the open market. The listing date is significant for investors as it provides liquidity and […]

Issue Price

Definition: The price at which a security, such as a stock or bond, is offered to the public during an initial public offering (IPO) or a secondary offering. It represents the price at which investors can purchase the newly issued securities from the issuing company or entity. The issue price is determined based on various […]

Direct Public Offering (DPO)

Definition: A method for a company to raise capital by selling its securities directly to investors without involving intermediaries like investment banks. In a DPO, the company sells its shares directly to the public through methods such as crowdfunding platforms, online platforms, or traditional marketing channels. DPOs offer companies greater control over the offering process […]

Depository Participant

Definition: An entity authorized by a depository, such as the Central Depository Services Limited (CDSL) or the National Securities Depository Limited (NSDL), to offer depository services to investors. Depository Participants act as intermediaries between the depository and investors, providing services such as opening and maintaining Demat accounts, facilitating the settlement of trades, and providing other […]

Demat Account

Definition: Short for “Dematerialized Account,” a Demat account is an electronic account used to hold securities such as stocks, bonds, mutual funds, and exchange-traded funds (ETFs) in electronic form. It eliminates the need for physical share certificates by converting them into electronic records. Demat accounts facilitate safe and convenient trading, investing, and transfer of securities. […]

Capital Gains

Definition: The profit realized from the sale of an asset, such as stocks, bonds, real estate, or mutual funds, which exceeds its purchase price. Capital gains can be short-term (if the asset is held for one year or less) or long-term (if held for more than one year). They are subject to taxation, with the […]

NSE (National Stock Exchange of India)

Definition: The leading stock exchange in India, providing a platform for trading in various financial instruments such as equities, derivatives, currencies, and debt securities. The NSE is known for its advanced electronic trading system and high levels of transparency and efficiency in the Indian financial market. Alternate Term: National Stock Market, Indian Stock Exchange

BSE (Bombay Stock Exchange)

Definition: The oldest stock exchange in Asia and one of the leading exchanges in India. It provides a platform for trading in various financial instruments, including stocks, derivatives, and mutual funds. The BSE plays a crucial role in the Indian financial market and serves as a barometer of the country’s economic health. Alternate Term: Bombay […]

SGB (Sovereign Gold Bond)

Definition: A government-issued bond denominated in grams of gold, which serves as an alternative to holding physical gold. Investors receive a fixed interest rate, and the bonds are redeemable in cash at the prevailing market price of gold upon maturity. Sovereign Gold Bonds aim to reduce the demand for physical gold and offer a secure, […]

Basis of Allotment

Definition: The process and criteria by which shares are distributed among investors in a public offering when the issue is oversubscribed. This mechanism determines the proportion and manner in which the available shares are allocated to applicants, ensuring fair and transparent distribution. Alternate Term: Allocation Basis, Allotment Criteria

Asset Allocation

Definition: The investment strategy of dividing a portfolio among different asset categories, such as stocks, bonds, real estate, and cash, to balance risk and reward according to an investor’s goals, risk tolerance, and investment horizon. The objective is to optimize the portfolio’s performance by diversifying investments to reduce risk. Alternate Term: Investment Distribution, Portfolio Allocation

FPO (Follow-on Public Offering)

Definition: A process where an already public company issues additional shares to investors, typically after its initial public offering (IPO). An FPO is used to raise additional capital for various purposes, such as expanding operations, paying off debt, or funding other business activities. Alternate Term: Secondary Offering, Subsequent Public Offering

IPO (Initial Public Offering)

Definition: The process through which a private company offers shares of its stock to the public for the first time. This transition from a private to a public company allows it to raise capital from public investors. An IPO is often seen as a significant milestone for a company, providing it with access to more […]

SIP (Systematic Investment Plan)

Definition: A financial planning tool that allows individuals to invest a fixed amount of money at regular intervals in mutual funds, rather than making a lump-sum investment. This method promotes disciplined savings and helps to mitigate market volatility by averaging the cost of investment over time. Alternate Term: Regular Savings Plan, Periodic Investment Plan