Bull market – It is a period when prices keep rising steadily in the equity market. Further, traders/investors show a greater sense of optimism and confidence in the market as well as in the overall Indian economy, believing that it has better growth prospects. The important features of a Bull market are that the stock prices rise over the time and buying activity will be more. Further, there will be positive economic indicators such as increasing Gross Domestic Product (GDP), lower unemployment rate, increasing consumer spending, strong corporate earnings and more investors show interest in buying. This is a classic case of a Bull market. Bulls attack its opponent prey by thrusting their horns upward. The upward movement of the bulls’ horns is related to the increasing stock prices and so the name.
Bullish – If one expects that the market and its inclusive benchmark indices such as Nifty50, Sensex30 and others will go up, he/she is bullish on the price or on the overall market.
Bear market – It is a period in the stock market where stock prices undergo a continuous or sustained decline, say by 20% or more from their recent high. In this phase, traders and investors have a sense of fear, pessimism and overall, they have a negative sentiment about the market. During the Bearish phase, traders and investors become more risk averse and they end up in a self-reinforcing cycle of falling prices. That is, in a bear market, when prices keep falling, investors and traders are taken over by fear and panic, forcing them to be caught in a vicious cycle wherein the falling prices trigger more selling, which pulls the prices even more down, creating a loop. More fear or panic leads to more selling, which leads to more drops in prices. Just as bears swipe their paws downward while attacking its prey, prices go downward symbolising the fall of the market and thus the name “Bear market.”
Bearish – If one expects that the market and its inclusive benchmark indices such as Nifty50, Sensex30 and others will fall, he/she is bearish on the price or on the overall market.
Stock – Stocks refer to general ownership in one/more company/companies and is always represented by shares. That is, if you own a company stock, you become the owner the company, only to the extent of the shares you have purchased. Stock denotes the collective ownership in one or more companies, without specifying exactly how much you own. For instance, when one says, he/she owns Maruti stock, it means that he/she has ownership/stake in Maruti. However, the value of ownership or how much he/she owns in Maruti is not known. He/she might own just one share or even 2,000 shares. Though both have ownership/stake in Maruti, value of ownership is not specific in the term stock.
Share – A share is just a single unit of ownership (stock) in a company and represents a portion of equity. That is, when you purchase shares, you are ideally purchasing that much portion of the company, and you become owner of the company to that extent. In the ladder of stock, shares are like each step. Unlike stock, shares are very specific in numbers. You cannot say “I have 100 stocks in Maruti,” instead, you must say that you have 100 shares (units) of Maruti. If you purchase 100 shares in Maruti, you own Maruti to the extent of those 100 shares.
Equity – While shares and stocks are seen from the perspective of individual traders/investors, we must see the term ‘Equity’ from the perspective of the company and all shareholders put together as one unit. It represents the value of ownership in an asset of the company after deducting all debts and liabilities. That is, Equity = Assets – Liabilities. Equity refers to the ownership value or net worth of the company. This is the exact value that all shareholders put together own in a company. The equity value of shares will keep changing as the company grows or incur losses.
Ticker symbol - A ticker symbol is a unique code/identification tag assigned to each stock that has been listed in National Stock Exchange (NSE) or Bombay Stock Exchange (BSE). Not just India, across the globe, all securities markets have specific ticker symbol for each share. The ticker symbol allows traders/investors to quickly track the stock they want to trade in. In India, ticker symbols generally consist of three to eight letters, in NSE and BSE, but it is not compulsory that the symbol must be within eight letters. For instance, State Bank of India’s ticker symbol is SBIN, Tata Consultancy Services is TCS, Infosys is INFY, Larsen & Toubro is LT and Mahindra & Mahindra is M_M.
Trend/Uptrend/Downtrend/Sideways – The term ‘trend’ refers to the overall market direction and the momentum in the market. It refers to the general direction of the price of a stock or an index and the whole market, in a particular period. If traders/investors want to take a decision regarding the buy/hold/sell a stock, then they need to understand the trend in the market. In any market, there are typically three types of trends – upward trend, downward trend and sideways trend.
In an upward trend, prices keep increasing over time and new higher highs and higher lows are formed on technical price charts. The upward trend indicates positive economic indicators, which we discussed earlier in Bullish market. In short, in an upward trend, market will be in Bullish phase.
In a downward trend, prices generally keep falling throughout the trend. New lower highs and lower lows are formed on technical price charts. Further, during the period, there will be economic slowdown, traders/investors show pessimism, higher selling pressure, like the one I discussed in the Bear market scenario. In short, in a downward trend, market will be in Bearish phase.
In a sideways trend, prices will be range-bound, and they are not too high and not too low. The stock prices as well as the index move within the range. This is the phase, where market is clearly consolidating or indecisive. Mostly, markets will be sideways, before a major price movement or a breakout. For instance, if a price of a stock oscillates between ₹200 and ₹210 for several weeks, this means that the stock is in sideways direction.
Up-moves/down-moves – These moves are seen within the trends, be it upward, downward or sideways trend. That is, let’s assume that during on uptrend (Bullish market), you are observing the price chart of a stock. The market as well as the stock is clearly Bullish on that day. However, it does not mean that on a trading day, the price will only keep on rising without any drop in the price. That is, never in the history, prices will fall or rise in one straight line continuously. Prices will move only in zigzags and not in a straight line. There will be a fall in price even during the Bullish market and there will be a rise in price even during the Bearish market. These small navigation or changes in prices within the trends are called moves. If price rises, it’s an up-move; if price drops, it’s a down-move.
Correction - A correction refers to the drop/decline in the price of a stock/index or the overall market, say between 10% and 20% from the recent high. The correction may be for the short-term to a medium-term period. Imagine the situation. What would you do if you run at a high speed continuously for 10 minutes? You would rest and take a deep breath for some time and would then proceed right, same is the case with correction. In the correction phase, the market catches its breath after a long run. Financial experts see correction phase as a healthy sign and say that this phase is natural part of a rising market but not a Bear market or a crash.
Stock market is an ocean. There are lots of technical terms and jargons in this vast financial ocean and it’s humanely impossible to cover all in one go. Further, these herbs of knowledge would be easily digestible only if given in small doses in a capsule form. Readers can now chew the cud and reflect carefully before taking the next step in their trading/investing journey.
Cheers! Catch you later with the second part of the jargon series. Until then...