Here are the 50 Stock Market terms prepared by Share Gyan Nepal for beginners. These are the basic terms for new investors who are looking for investing in the stock market. I hope these terms may help you to get some idea about the capital market in Nepal.
What is Bear Market?
If the overall index of the stock market goes down for a long period of time, it is called a bear market or bearish market. If the price of the individual company or specific sector goes down the overall index will fall down. This is known as a bear trend.
What is Bull Market?
Bull market is just an opposite of a bear market. When the stock index goes up as the stock price of the individual company goes up. This situation is called a bull market. A bullish market is a period when the overall market index goes up and hence the individual stock price.
What is NEPSE?
NEPSE is a short form of the Nepal Stock Exchange. It is the only stock exchange in Nepal. NEPSE was established under the Companies Act- 2006, operating under the Securities Act- 2007. The objective of NEPSE is to impart free marketability and liquidity to the government and corporate securities by facilitating transactions in its trading floor through members, market intermediaries, such as brokers, market makers, etc. NEPSE opened its trading floor on13th January 1994.SEBON – Securities Board of Nepal
What is CDSC?
CDS & Clearing Limited is a company established under the company act and is promoted by Nepal Stock Exchange Limited in 2010. It was established with aim of providing centralized depository, clearing, and settlement services in Nepal. The company is inaugurated on 31st March 2011. The main objective of the company is to act as a central depository for various instruments (Equity, Bonds, and Warrants, etc) especially to handle securities in dematerialized form.
What is Stock Broker?
Stock brokers are individual companies that are established under the company act with the objective of providing securities trading for customers. The stockbrokers are licensed companies approved by the Securities Board of Nepal (SEBON). As of 2021, there are 50 stock broker companies in Nepal.
What is a DEMAT Account?
Demat account is an account used to deposit and withdraw shares of the companies in electronic form. Individuals can open a demat account in the Depository Participants (DP). DP can be either bank and a financial institution or a stockbroker.
What is DEMAT & REMAT?
The process of converting physical shares to electronic form is called dematerialization (DEMAT) and the process of converting electronic shares to physical shares is called rematerialization (REMAT).
What is CRN – C-ASBA Registration Number?
The unique number linking Demat account and bank account is CRN i.e. C-ASBA Registration Number. It should be taken to the concerned bank.
What is IPO – Initial Public Offerings?
If a company raises money by issuing shares for the first time, it is called IPO (Initial Public Offering). At present, primary shares are issued in Nepal at the rate of Rs. 100 per share.
What is FPO – Follow on Public Offering?
If the company, which is already trading in the secondary market by issuing IPO, issues shares to the public for the second time, it is called Follow on Public Offer. FPO is also called further public Offerings.
What is Primary Market?
The market where securities are traded for the first time is called Primary Market. IPOs are bought in the primary market.
What is a Secondary Market?
The market in which the shares are bought and sold among investors through stockbrokers is called the secondary market.
What is Share Allotment?
An allotment is a process of distributing shares to each applicant after issuing shares (IPO, FPO, Right Share) in the primary market.
What is Bond / Debenture?
The company and the government collect the required money as a loan from the public by paying fixed interest annually, semi-annually, or quarterly and repaying the principal and interest after a certain period of time. This is called a bond/debenture. A bond issued by a company is called a corporate bond whereas a bond issued by the government is called a government bond.
What is a Dividend (Stock/Cash)?
Within a financial year, the company distributes a certain portion of its profits to its shareholders. This is called the dividend. If the company distributes the shares as dividends, it is called Stock Dividend i.e. bonus share and if it distributes cash as a dividend, it is called Cash Dividend.
What is ASBA – CASBA – Centralized Application Supported by Blocked Amount?
C-ASBA i.e. Centralized Application Supported by Block Amount is the system that blocks the applicant’s money in the bank account of the applicant till the share is disbursed while applying for IPO, FPO, Right Share in the primary market.
What is TMS – Trade Management System?
TMS (Trade Management System) is a system designed to buy and sell shares online. After creating a TMS account, you do not have to call the broker or go to the broker’s office to buy and sell shares.
What is Mero Share (App/Website)?
Mero Share is a system created by the Central Depository System (CDS & Clearing) to transfer IPS to a person who buys shares in a Demat account. It can be run from a mobile app and website.
What is the Opening Price Range?
The Opening Price Range is the price range set by Nepse for the first transaction after the IPO issued by the company is listed in Nepse. But the opening price of a stock is the first trading price of the trading day.
What is KYC (Know Your Customer)?
The process of getting all the details of your customer in banks and financial institutions is called KYC – know your customer.
What is Collateral?
Before buying shares, the person buying the shares has to deposit a certain amount in the broker’s account for security. That amount is called Collateral. Know more about collateral in TMS.
What is a Merchant Banker or Issue Manager?
Merchant Banker is an organization that offers advice on securities issuance, management, securities guarantee. The company can issue any type of securities only through a merchant bank licensed by the Securities and Exchange Board.
What is Nepse Index?
The Nepse Index is the ratio between the total market price of all the companies listed in Nepse on the day of trading and the total market price of the base year. This indicator increases when the price of listed securities increases and also decreases when the price decreases.
What is the Sensitive Index?
The Sensitive Index is a sensitive index calculated by including only the companies in category A. These companies are taken if they fulfill the following criteria:
- Minimum paid-up capital of Rs 2 crore
- More than 1000 ordinary shareholders
- At least three consecutive years of profitability
- Book value of share higher than its par values
- Publication of annual report within 6 months of completion of the fiscal year
What is Float Index?
The float index is an index calculated by including only the shares issued by the listed companies to the public.
What is a Pre-Open Session?
The market is open from 11 am to 3 pm on regular trading hours, i.e. Sunday to Thursday. This is called Pre-Open Session.
What is a Special Pre-Open Session?
The special pre-open session is the system created for the first time after the company has been listed in Nepse by issuing an IPO. The order can be placed between 10:30 am and 10:45 am within the price limit set by Nepse. Only after the transaction is done in the Special Pre-Open Session, the trading of the company start in the Continuous Session.
What is T + 2?
T + 2 is the rule for settling the shares bought or sold within the next two trading days except for the trading day. This means (Trading Day + Extra 2 Days).
What is LTP & LTV – Last Transaction Price & Last Transaction Volume?
LTP is the total number of shares traded at the last minute and LTV is the number of shares traded at the last.
What is Turnover?
Turnover is the total value of a stock traded within a certain period of time.
What is Portfolio/Portfolio Diversification?
The portfolio is the overall form of the investor’s total shares. Investing in different areas to reduce risk without investing in just one area is called portfolio diversification.
What is Ordinary Share/Common Share?
Ordinary shares are securities that a company issues to raise funds. It grants voting rights and distributes dividends from the remaining funds after paying preferred shareholders dividends from profits made.
What is Promoter Share?
The shares/capital invested by the person or organization establishing the company is called the founder share or promoter share.
What is Lock-in Period?
The founding shareholders of banks and financial institutions and insurance companies are not allowed to sell the shares for 5 years and other companies for 3 years. Also, the company cannot sell the shares allotted for the employees for 3 years. The time when such shares cannot be sold is called Lock-in Period.
What is DIS / EDIS – Debit Instruction Slip / Electronic Debit Instruction Slip?
The process of transferring shares to the demat of the buyer after selling the shares is called DIS-Debit Instruction Slip. Earlier you had to fill in the details in the check and now you can do EDIS from the mero share app.
What is BOID (Beneficiary Owner Identification)?
BOID is the beneficiary account number of 16 digits including 8 digit deposit member ID and 8 digit client ID. This is also called a Demat account number. The shares of all the investors are managed on the basis of this BOID.
What is DP (Depository Participant)?
Depository Member or DP-Depository Participant is a securities dealer or organized entity with a certificate of registration from the Securities and Exchange Board.
What is Authorized Capital?
Authorized Capital means the maximum limit that a company can increase its issued capital. There is a legal provision that such a maximum limit can be increased by amending the management letter of the company.
What is Issued Capital?
Issued Capital means the capital that the company aims to collect from the shareholders. The shareholders have expressed their commitment to raising capital accordingly.
What is Paid-Up Capital?
Paid Up Capital means the total capital paid up by the shareholders out of the capital pledged by the shareholders. For example, if the shareholders pay only Rs. 50 per share for a share issued at the rate of Rs. 100 per share, the paid-up price is Rs. 50 per share.
What is Capital Gain Tax?
Capital Gain Tax is the tax to be paid to the government from the profit made in share trading. According to the current rules, the seller has to pay 5% tax if he makes a profit.
What is Circuit Breaker?
The stock exchange sets limits on the price fluctuations that can occur when securities are traded. This is called a circuit breaker. It is done to control unnatural fluctuations in the price of securities. The stock exchange has made such arrangements for market stability, safe and easy trading.
What is Investment & Trading?
An investment is made for a long period of time based on the basic aspect of the company while in trading, the objective is to make a profit in a short period of time based on the technical aspect.
What is Right Share?
If the company listed in the stock exchange issues shares again, the existing shareholders get the first right to purchase them. Such shares are called right shares. Existing shareholders are free to decide whether or not to purchase rights shares.
What is Preference Share?
The shares issued to distribute dividends at a fixed rate from the profits earned by the company are called preference shares. As the dividend distributed to such shareholders is higher than that of ordinary shareholders, it is called preference shares.
What is Stock Split?
The process of increasing the number of shares by splitting the existing shares is called Stock Split. When the stock splits, the number of shares increases, and the price decreases.
What is Blue Chip Share?
Shares of a company that has been making a profit for a long time and has been providing high returns (dividends) to investors are called blue-chip shares. Such companies are relatively more accountable to investors than other companies.
What is Face Value?
Face value is the price per share which is determined before the issue of shares. In Nepal, it is usually Rs 100 per share.
What is Fundamental Analysis?
Fundamental Analysis is a method of analyzing the company’s competitive advantage, strategy, and market environment by analyzing the company’s annual report and financial statements.
What is Technical Analysis?
Technical Analysis is the use of various technical tools to analyze the demand and supply in the market yesterday and the supply and demand in today’s market.