Frequently Asked Questions (FAQs)
Welcome to our FAQ section. Here we answer the most common questions about savings, investments, and the stock market in India.
Beginner FAQs
What is the difference between shares and stocks?
Shares represent ownership in a specific company. Stock is a general term for ownership in companies.
What is a Demat account?
A Demat account is an electronic account that stores your shares, just like a bank account stores money. It is mandatory for buying and selling shares in India.
What is the difference between NSE and BSE?
- NSE (National Stock Exchange): India’s largest exchange, known for NIFTY 50.
- BSE (Bombay Stock Exchange): Asia’s oldest exchange, known for Sensex.
Both are regulated by SEBI.
What is an IPO?
An Initial Public Offering (IPO) is the first time a company sells shares to the public.
What is Cut-Off Price in IPOs?
The final price decided after bids. Retail investors can apply at “cut-off” to ensure allotment.
What is Grey Market Premium (GMP)?
Informal premium at which IPO shares trade before listing.
Example: IPO issue price = ₹500, GMP = ₹100 → Expected listing = ₹600.
What is a Dividend?
A dividend is profit shared by a company with shareholders.
Example: If Infosys declares ₹20 dividend per share and you own 100 shares, you receive ₹2,000.
What is Bonus Issue?
Free shares given to shareholders in proportion to holdings.
Example: 1:1 bonus → If you own 100 shares, you get 100 more free.
What is Record Date and Ex-Date?
- Record Date: Company checks shareholder list to decide dividend/bonus eligibility.
- Ex-Date: Buy before this date to qualify.
Example: Record Date = 25 Jan, Ex-Date = 24 Jan. Buy before 24 Jan to get dividend.
What is SIP in Mutual Funds?
Systematic Investment Plan (SIP) allows you to invest a fixed amount regularly in mutual funds.
What is NAV in Mutual Funds?
Net Asset Value (NAV) is the price per unit of a mutual fund.
Example: If NAV = ₹20, and you invest ₹2,000 → You get 100 units.
What is the difference between Primary Market and Secondary Market?
- Primary Market: Where companies issue shares (IPO).
- Secondary Market: Where investors trade shares (NSE/BSE).
What is STT (Securities Transaction Tax)?
Tax charged on buying/selling shares in India.
Example: Buy shares worth ₹10,000 → STT = 0.1% = ₹10.
What is T+1 Settlement?
Trades are settled one day after transaction date.
Example: Buy shares on Monday → Shares credited on Tuesday.
What is the difference between Investor and Trader?
- Investor: Buys shares for long-term wealth creation.
- Trader: Buys/sells frequently for short-term profit.
Intermediate FAQs
What is Debt-to-Equity Ratio (D/E)?
Shows leverage. Formula: Debt ÷ Equity.
Example: ₹50 crore debt ÷ ₹100 crore equity = 0.5.
What is Face Value of a share?
Nominal value printed on the share certificate (often ₹1, ₹10).
What is Market Capitalization?
Value of company = share price × number of shares.
What is Rights Issue?
Company offers additional shares to existing shareholders at a discount.
What is Rights Entitlement (RE)?
Tradable instrument given during rights issue.
Example: 1 RE for every 10 shares held.
What is ASBA (Application Supported by Blocked Amount)?
IPO application method where money is blocked in your bank until allotment.
What is Rolling Settlement?
System where trades are settled daily (India follows T+1).
What is Upper/Lower Circuit?
Daily price limits set by SEBI to prevent extreme volatility.
What is Promoter Holding?
Percentage of shares held by company founders/promoters.
What is Free Float Market Cap?
Market cap excluding promoter holdings.
What is REIT (Real Estate Investment Trust)?
Company that owns and manages income-producing real estate.
What is InvIT (Infrastructure Investment Trust)?
Investment vehicle for infrastructure projects (roads, power).
What is Mutual Fund Expense Ratio?
Annual fee charged by fund managers, expressed as % of assets.
What is CAGR (Compound Annual Growth Rate)?
Average annual growth rate over time.
Example: ₹1 lakh → ₹2 lakh in 5 years ≈ 14.87% CAGR.
What is Portfolio Diversification?
Spreading investments across sectors/assets to reduce risk