So here comes a basic understanding of daily use terms in money issues. The idea is to give an insight into the different technical terms that one comes across while going for online trading, in a layman’s language.

SENSEX: Sensex is the short form of Sensitivity Index, and like any other index, it is nothing but a measure of the average change in the share price of a group of selected companies over two different situations, generally the closing price of previous day and current price of the day.

In India, the index of Bombay Stock Exchange (BSE), which is compiled on the basis of 30 selected stocks, is called Sensex whereas that of National Stock Exchange (NSE), based on 50 selected stocks, is called NIFTY.

BULL: An investor who believes that a particular share or group of shares, or the overall stock market, is about to rise. When the Sensex, for instance, rises regularly it’s said to be a bull market.

BEAR: Opposite of bull, consistent declining trend of the Sensex. Bear believes in that the market will go down and down and down constantly.

MUTUAL FUND: Fund operated by an investment company, which raises money from the public and invests in a group of assets.

DEMAT: Demat means De-Materialize, something which is non-material. In share market, Demat means possession of share, but in non-paper form. Demat is the instrument which has replaced the earlier concept of holding of shares in physical form, i.e. in paper. Your Demat account will give you the details of share you possess at that point of time.

LTP: Last Traded Price (LTP) is that price on which the last transaction has taken place pertaining to that specified stock. From LTP, you get the idea, in what price you may get to buy/sell your stock.

Offer Price: Offer price is the price at what the seller is ready to sell the stocks. When you are going to buy the shares, this price is very important to you, because ultimately your deed will be executed only when your buying price will match the offer price.

Offer Quantity: The number of shares available at the Offer price.

Bid Price: It’s nothing but the buying price at which buyer is ready to buy.

Bid Quantity: The number of shares available at a certain Bid Price.

LIMIT: During online trading, Limit price gives one the facility of bargaining. The system (software for trading) needs to know the top or bottom price you are ready to afford while buying and selling respectively. There comes the concept of Limit price. While buying, Limit is the price on or below of which you are ready to buy. The same way, while selling, Limit is the price, on or above of which you are ready to sell.

MARKET PRICE: The current price of a stock at a certain point of time during the trading hour.

You need to sell/buy either in Market price or in Limit price. When you don’t have time to bargain, you can still do the trading in the Market price, where your deed is executed then and there.

MARGIN: Margin is a kind of leverage. Leverage, comes from the term Lever, is nothing but a tool to multiply effort to accomplish a bigger task easily. Margin, a kind of leverage, gives one the facility to trade bigger amount with less amount of money.

There are other kinds of leverages too in share market, like Derivatives, Future, Options etc., which we are not going to discuss in this article.

P-E RATIO: Price to Earning (PE) ratio of a company is the market price of the company’s share divided by its earning per share.

                         P-E Ratio= Market price per share/Earning per share

The range of P-E ratio varies from industry to industry. However within one industry group, a share with less P-E ratio is considered a better stock to invest.

New IRDA rules for ULIP, effective from Sep 1, 2010

IRDA announced new rules for ULIP to highlight the insurance side of it.

So from now on, ULIPs will have a lock-in period minimum of 5 years than that of exisiting 3 years. Also, the PPT (Payment paying Term) would also be 5 years.

As per IRDA, these are required to lighten the burdon of customers coz in initial years ULIPs have more changes compared to later years. ULIPs are always a long term investment (or rather call it insurance) and this change will boost this fact more.

Also, the sum insured would be 10 times of the first premium instead of current 5 times. So it looks like a good 80C tool if you are looking for insurance actually than investment.

One good thing included here is the facility to avail loan on ULIP. Its to ensure if insurer is in need on money, he can take benefit of this new ULIP feature.

New Base landing rate for all Loans

The RBI mandated new Base Rate lending system for all banks which facilitates a fixed minimum base rate system for loans instead of the old PLR system. The base rate will be the new reference rate for determining lending rates for banks, and will be implemented three months later than earlier planned.

"It will start from July 1. After the RBI met with heads of state-run banks, Usha Thorat, Deputy Governor of Reserve Bank of India" told reporters that banks wanted some time.

Banks in India tend to charge their biggest corporate borrowers less than published prime rates, which they would no longer be able to do on new loans from July 1. The RBI has expressed concern over banks offering short-term loans well below their prime rates to companies and mortgage borrowers as the banking system is flush with liquidity. The actual lending rate charged to borrowers would be the base rate plus borrower-specific charges including operating costs, according to draft guidelines on the RBI website.

After the implementation of the new loan pricing system, existing borrowers would continue to pay at existing rates, while the base rate would apply to new customers. The new base rate system is intended to allow cuts in interest rates by banks to be passed on to all customers rather than a few large corporate clients.

The move ultimately will have a good impact over loan markets & retail customers as now they can also enjoy minimum rates instead of paying higher than what banks offer to large corporates.

Direct Tax Code : second draft

So here comes the another draft of Direct tax code as mentioned in the Budget-2010 by Pranav dada. Its applicable on every tax payer but here I am just putting highlights how it'll affect a service man.

- As of now, 80c includes pension funds, ULIPS, FD, ELSS and other means. But in Direct tax code, FDs and ELSS wouldn't help in reducing tax burdon.

- The first bracket is proposed to be upto 10Lakhs and is subject to a flat applicable tax of 10%(or 20%, to be decided in monsoon session later).

- Another important thing, now tax exemption would be raised upto 3Lakhs and that includes everything from your 80C investments to your home loan interest of 1.5Lakhs.

will keep posting about any updation/addition as it comes.

While switching job..

So, you are looking for a job change or recently switched?? Then read on..

Negotiating your Cost to Company (CTC): Even if the actual CTC is the same as your previous job, structure your CTC so that your cash in hand can be higher than what it might have been at the previous job. This might be particularly important given the new rules announced in the Budget in July 2009 under which fringe benefits offered to you are now going to be taxable in your hands as perquisites. Understand how you can maximize your take home pay, because that is what matters at the end of the day. :)


Form 16 and tax issues: At the end of the financial year take your Form 16 from your previous employer and share that with your new employer, so that the right amount of tax is being deducted and that you are not getting more deductions than you are entitled to. Remember to also take a no dues certificate, relieving letter, salary slips for the duration you have stayed.

Shifting your PF balance and Superannuation: This can be a big administrative issue for you if you have not moved over your retiral accounts to your new firm. Take care of the necessary paperwork to facilitate a smooth transition of your account to your new employer. Form 16 is being used for transfer of PF account. Withdrwal may be another option but remember, its taxable if it has not being maintaioned at least for 5 years.

ESOPs: Don't leave a lot of value on the table if you have worked hard to earn incentives. If your current employer gave you ESOPs, understand if you are eligible to encash these at all. If you are giving up a lot of value because not all your shares have vested, you might want to ask your new employer to offer you similar upside as an incentive to move to the new job.

Insurance: If your current employer was offering you and your family life and health insurance coveragerecognize that you might need this from your new employer as well. Do not remain uninsured during the transition period from one job to another. Accidents and emergencies come unannounced and don't put yourself or your family at risk by not having appropriate insurance coverage. Additionally, understand what are the insurance benefits you will be eligible for at your new job and whether you will have to serve for a minimum few months before your coverage kicks in.