Terms Used In The Share Market

Are you planning to invest in the share market ? If Yes, Are you familiar with the terms used in the share market ?

The profit you will make from investment will completely depend upon the knowledge you have about the share market. After you enter into the share market, you will come across several terminologies that are used by different individuals, companies, online portals and brokers.

These terminologies are used to understand and track the market. So, In order to help you get familiarize with terms used in the share market. Here, we have listed out some of the basic terminologies used in the share market :

Basic Terms Used in the Share Market

Share Market: It’s where you can buy and sell shares of a company.

Nepal Stock Exchange ( NEPSE ): Its where stocks or shares of companies are listed for trading.

Securities Board Of Nepal ( SEBON ): It is the regulator of Nepalese Share Market and the one who approves companies proposals to issue IPO, Mutual Fund, Debentures and Right Shares.

CDSC Nepal: CDS and Clearing Limited, a company promoted by NEPSE to provide centralized depository, clearing and settlement service in Nepal.

Share: Ownership of the company. For example : Company sells its ownership to the general public to raise funds. And you buy a certain portion of that ownership which is Known as Share.

Shareholder: Investor who owns a portion of the company or shares is known as a shareholder. For example: If you have purchased 100 unit shares of Nabil Bank, then you are the shareholder of Nabil Bank.

Primary Market: It’s the platform where companies issue or sell shares to the investor to raise funds. Raised funds are used for the expansion of a company or for paying debts.

Secondary Market: It’s the platform where shares purchased in the primary market are bought and sold. It is where investors trade their shares with other investors.

Initial Public Offering ( IPO ): If companies issue ownership or shares of the firm for the first time to investors, it is known as IPO. In Nepal, Companies can issue an IPO after their proposal is approved by SEBON. Investors can invest in an IPO which can then be traded in the secondary market.

Follow-on Public Offering ( FPO ): IPO issued for the second time is known as FPO.

Mutual Fund: Mutual Fund is a professional managed and diversified investment fund. It is raised by companies from investors to invest in shares, debentures and short term debt. Mutual Funds are of two types: open ended and closed ended mutual fund. They are issued at par value of Rs 10 per unit.

Debentures: Debenture is a marketable securities issued by a company or organizations to raise funds in the form of debt by agreeing to pay fixed rate of interest at the end of maturity. They can also be traded in the secondary market. They are issued at Rs 1000 par value at the time of offering.

Right Shares: Shares offered to existing shareholders at discounted price is known as Right Shares.

Par Value: It is also known as face value. Face value is the amount at which shares, mutual fund and debentures are issued for the first time. Par value of mutual funds is Rs 10, share is usually Rs 100 and debentures is Rs 1000.

Bull Market: It is the market condition where the price of shares are continuously rising.

Bear Market: It is the market condition where the price of shares are continuously decreasing.

Market Capitalization: It’s the total value of all the shares of a company put together. For example: Market Capitalization of Nepal Telecom as on 4th May 2022 is 173.70 Billion NPR.

Portfolio: The total collection of all the ownership and investment, an investor has.

Dividends: Return given by the company from its profit to the shareholders. It is of two types cash dividend and bonus shares.

Capital Gain: Capital gain is known as the increase in the value of investment. For example: You purchased Nabil Bank at Rs 900 per share and sold at Rs 1400. Then your capital gain is Rs 500.

Broker: Firm or company that acts a mediator between investor and stock exchange. These are licensed by stock exchange and charges commission on the service they provide.

Conclusion

So these are the basic terms used in the share market. You must be well aware with these before you start your investment journey. Investment involves risk, so you must do your research well before you start investing.