Terms You Should Know Pt: 2
Updated: Jan 26
Refer to our Part 1 terminologies for more basic terms!
Here are some more terms you might come across in finance talks.
1) Large-cap, mid-cap and small-cap companies
The top 100 companies listed on the stock exchanges based on market cap. These businesses often have an excellent track record. They have a market capitalization of Rs.20000 crores or more and a considerable market presence. Also known as 'blue-chip stocks.'
Companies ranked from 101 to 250 on stock indices based on market cap. These companies have a good track record as well, but the gap is noticeable when compared to large-cap companies. Market cap ranges from Rs.5000 to Rs.20000 crores. May or may not be included in wide market exchanges due to limited market presence.
Companies ranked from the 251st position onwards on stock exchanges based on market cap. These companies don’t have a long track record. For example, a start-up company or a company that is under development can fall under the small-cap sector. Market cap is usually below Rs.5000 crores. These firms are often absent from broad market indices.
2) Market Mood Index (MMI)
An investor's overall attitude toward particular securities or financial markets is referred to as market mood.
It refers to a market's mood or tone, as well as the psychology of its traders, as reflected in the interaction and price fluctuation of the assets traded there. MMI studies the market's dynamics and estimates the current state of the market. The market mood index, or MMI, determines whether the market is in a bullish or bearish trend. Rising prices show an optimistic market sentiment while falling prices show a pessimistic market mood.
3) Market Capitalization
The market value of a publicly-traded company's outstanding shares is known as market capitalization or market cap. The share price multiplied by the number of outstanding shares equals market capitalization.
Market capitalization helps investors to assess a company's worth based on public perception. The “larger” the company is, the greater the value. There are 3 types of market cap: large, mid and small. The size and worth of a company can help you determine the level of risk you'll face when trading in its stock, and how much revenue you'll make over time. The SEBI regulations of 2017 classified companies according to their market cap.
An exchange-traded fund (ETF) is a collective investment that functions similarly to a mutual fund. But, unlike mutual funds, we can trade ETFs on a stock exchange in the same way that a typical stock can. ETFs can include any sort of investment, such as stocks, commodities, or bonds.
It’s marketable security, so someone may readily trade its share price on exchanges over the course of the day. ETFs offer a host of benefits and can help you automate your wealth creation process swiftly and without a hitch.
5) The Bombay Stock Exchange (BSE) and The National Stock Exchange (NSE).
BSE is Asia’s oldest stock exchange, whereas NSE is the biggest stock market in India. The total volume traded in NSE is way more than BSE. BSE promotes trading in equity, debt instruments, mutual funds, currencies, derivatives, while NSE promotes trading equity, equity derivatives, debt and currency derivatives segments.
If you're looking for new enterprises to invest in, BSE is the ideal place to start. But for a day trader, the NSE is a better choice. A beginner and still learning? Always wise to invest in the BSE; the NSE is better for more seasoned investors.
An Asset Management Company (AMC) is a firm that pools client funds and invests them in various investments such as stocks, bonds, real estate, and others.
These firms take all risk elements into account in order to make sound investment decisions and construct a robust investment portfolio.
They are subject to a fiduciary standard, and their sole goal is to maximize returns for investors in exchange for a standard commission, fee, or charge.