Financial Market Terms Explained
| Stock Market Index Definition : A Stock Market Index is a basket of representative scrips which accurately reflects the trends of the market movement faithfully and is an approximation to returns obtained in owning “the overall economy”. The BSE 30 Sensex, first compiled in 1986 is a market capitalisation weighted index that represents thirty large well-established and financially sound companies .The Sensex also has the largest social recall attached with it –it was the first index to be launched by any Stock Exchange in India. The Nifty S&P CNX Nifty is a more recent index based on market capitalisation of fifty large companies listed on the National Stock Exchange . |
| Derivatives Definition : A derivative is a product whose value is derived from the value of underlying asset, index, or reference rate. The underlying asset may be equity, forex, commodity, or any other asset. |
| Beta value of a stock Definition : The beta of a stock is the average impact of a 1 per cent move in the index that is reflected upon the stock. The National Stock Exchange tracks and updates betas of stocks and this data are readily available on the internet site http//www.nseindia.com or NSE newsletter. Betas of stocks are calculated by using advanced financial formulae which in essence follow the afore-mentioned principle. In absence of a beta value of a stock it is generally safe to assume the beta of a stock equivalent to 1,which denotes the same volatility as that of the entire market. |
| Basis Definition : The difference between the spot price and the futures price is called the basis. In a normal market, the basis is negative. The basis reduces as the date of expiration of the contract comes closer, since there is a convergence of the futures price towards the spot price. On the date of expiration, the basis equals zero. |
| Daily settlement price Definition : Daily Settlement price is the closing price of the futures contracts for the trading day. The closing price is calculated as the last half an hour weighted average price or such other price as may be decided by the relevant authority from time to time. |
| Final Settlement Price Definition : Final settlement price is the closing price of the Underlying Securities on the last trading day of the futures contracts or such other price, as may be decided by the relevant authority from time to time. |