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18 Sep 2008 | 17:09 |
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 of returns obtained in owning "the overall economy".
The BSE 30 Sensex, first compiled in 1986 is a market capitalisation weighted index based on free-float concept 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.
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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.
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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.
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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.
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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. |
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