DAX Index: Stock market index of 30 leading German shares.
Daily Margin: An amount, to be decided by the stock exchange, to be deposited by a member, on a daily basis, for the purchase or sale of securities. The amount is to be deposited at the stock exchange. The margin is imposed to curb excessive speculation.
Dabba Trading: Trading of securities outside the stock exchanges. The broker instead of routing the trade of his clients in the system of stock exchanges matches or executes the trades of his clients in a system provided by him outside the stock exchange.
Daisy Chain: A kind of fictitious trading, or wash selling, whereby a group of unscrupulous investors artificially inflate the price of security so that they sell it at a profit. As a stock price rises due to increased volume, investors who didn’t do all their homework may be attracted to the stock in order to participate in the rising price. These investors are typically caught owning a stock that continues to depreciate long after the daisy chain sells out its positions for a profit.
Daily Chain: Stock market manipulators buy and sell among themselves to give the impression that the share is being vigorously traded and that the price is rising. At a certain point in the rise, the manipulators unload their shares to unwary investors, who then discover that there is no one to sell them to.
Dalal Street: Street on which The Stock Exchange, Mumbai is situated. Used synonymously for The Stock Exchange, Mumbai
Day Trading: Buying and selling the same share during a single day, hoping to make a profit from price fluctuations.
Day Order: An order that is placed for execution if possible, during only one trading session. If the order cannot be executed that day it is automatically canceled.
Dealer: A firm that enters into transactions as a counterparty on both sides of the market in one or more products.
Debentures: Bonds issued by a company bearing a fixed rate of interest usually payable half-yearly on specific dates and principal amount repayable on a particular date on redemption of the debentures.
Debt/Equity Ratio: Company’s borrowings divided by its issued share capital. It is a measure of the amount of gearing (leverage) of a company and an indicator of financial strength. A company with a higher debt/equity ratio can offer greater returns to shareholders, but these will be more volatile than if the gearing were lower.
Decile: Relative ranking (in tenths) of a particular portfolio (or manager) in a league table of returns. For example, a decile ranking of 1 (or “top decile”) indicates performance in the top 10% of portfolios surveyed, and a decile ranking of 2 (or “second decile”) indicates performance in the next 10%, and so on.
Deep Discount Bond: Bond priced significantly below face value, typically a zero-coupon bond or a distressed bond.
Delisting Exchange: The exchange from which securities of a company are proposed to be delisted in accordance with SEBI Delisting Guidelines.
Delisting of Securities: Permanent removal of securities of a listed company from a stock exchange. As a consequence of delisting, the securities of that company would no longer be traded at that stock exchange
Bear Money: Also called Right Money, obtained with difficulty as a result of the government’s stringent policy regarding loans, and at a high rate of interest. Discourages economic activity by increasing the cost of borrowing and investment.
Debt-Equity Ratio: Also called the financial leverage ratio in the U.S. There are three methods of calculating this ratio, the last being more common, 1) The total liabilities of a company divided by the shareholder's equity, 2) The total long term debt divided by shareholders equity, 3) The total long term debt plus the par value of preference shares divided by the par value of equity shares. All three ratios measure a company’s solvency.
Default: (1) Failure to pay interest or principal promptly when due. (2) Failure to make margin payments on a futures contract. (3) Failure to comply with other conditions of an obligation or agreement.
Defensive Stock: Stock that is expected to be less volatile than the overall market — for example, utility stocks.
Deferred Annuity: Annuity whose payments commence from a future date. Deferred annuities can be bought from an insurance company to secure a pension in the future.
Deflation: Opposite of inflation. It is a reduction in national income and output, accompanied by a general fall in prices. During a deflationary period, the stock market usually suffers from depression.
Delta Hedging: Strategy for combining derivatives with holdings in the underlying assets in such a way that the price of the overall portfolio does not change with small instantaneous changes in the price of the underlying asset. Used by investment banks, for example, to control risks in their derivative positions.
Delivery: Order An output given to each member of the Stock Exchange at the end of a settlement period containing particulars such as a number of shares, the value of shares, names of the receiving members, etc. to enable him to deliver such shares in time.
Delivery Price: The price fixed by the Stock Exchange at which deliveries on futures are invoiced. Also, the price at which the futures contract is settled when deliveries are made.
Dematerialise: The process of transforming securities holdings in physical form to those in electronic form through a Depository Participant.
Degearing: Replacing fixed interest loans by issuing equity shares of a comparable value.
Delisting: Striking off a company’s name from the official list of a stock exchange so that the company’s shares are not traded. It becomes an unlisted company.
Delta Stocks: The least liquid stocks in a stock exchange.
Demutualization: Process of transition from a “mutually-owned” association to a company “owned by shareholders”. In other words, the transformation of the legal structure from a mutual form to a business corporation form and privatization of the corporations so constituted, is referred to as demutualization.
Depository: A system of organization, which keeps records of securities, deposited by its depositors. The records may be physical or simply electronic records.
Depository participant (DP): An agent of the depository through which it interfaces with the investor. A DP can offer depository services only after it gets proper registration from SEBI.
Depreciation: A fall in the value of a security or security index or a currency in terms of others or its purchasing power.
Depth of Market: The number of shares of a security that can be bought or sold at the best bid or offer price.
Deregulation: The process of removing the legal or quasi-legal restriction on the type of business done or on the prices charged, within a particular industry. The aim of most deregulations is to increase competition by increasing the freedom of players in the industry.
Derivative Market: Markets such as futures and options markets that are developed to satisfy specific needs arising in traditional markets. These markets provide the same basic functions as forward markets, but trading usually takes place on standardized contracts.
Derivative: Financial instrument whose value is dependent on the value of an underlying index, currency, commodity, or other assets. Examples include options, futures, forwards, and swaps. Alt. (1) A security derived from a debt instrument, share, loan whether secured or unsecured, risk instrument or contract for differences or any other form of security; (2) A contract that derives its value from the prices, or index or prices, of underlying securities.
Devaluation: Lowering the value of one country’s currency against the exchange rate of another counter’s currency.
Development Capital: Capital investment into companies that are generally profitable but which require further equity finance to expand.
Dilution: Reduction in earnings per share and book value per share due to an increase in the number of shares issued. This can occur if convertible securities are converted, if warrants or stock options are exercised, or if a rights issue or scrip issue takes place.
Disclosure: Full and material information given by a company that may allow an investor to take an informed investment decision
Discount: When security is quoted at a price below its nominal or face value, it is said to be at a discount.
Discount Broker: A stockbroker who charges lower commission rates than a full-service stockbroker but usually provides a more limited service.
Discount Rate: Rate of interest used to convert a cash amount occurring in the future into a present value.
Discounted Cash Flow (DCF): Process by which future cash flows (for example, dividends or interest payments) are adjusted to allow for the time value of money to arrive at a value in today’s terms. Discounted cash flow models are used to determine the fair value of securities, capital projects, and corporate entities. (See also net present value.)
Discretionary Mandate: Instruction given to an investment manager, giving the manager total decision-making authority to manage the assets against a specified benchmark.
Distressed Debt: Corporate debt where the originator of the debt (the borrowing company) is currently in or approaching financial distress, such that default on the debt has either occurred or is imminent. (See also junk bond.)
Diversified Growth Fund: Actively managed fund designed to generate investment return by investing in a range of growth-seeking asset classes, such as equities, property, commodities, private equity, corporate bonds, etc.
Disintermediation: A situation where some intervention usually by government agencies for the purpose of controlling or regulating the growth of financial intermediaries lessens their advantage in the provision of financial services and drives financial transfers and businesses into other channels.
Distribution (TA): A situation that occurs when the demand for security is less than the supply.
Distribution: Return to investors of the accumulated income of a trust or mutual fund and distribution of capital gains.
Distribution Analysis: A statement showing the pattern of holding security on a given date.
Distribution Dates: The dates on which income is paid to unitholders as in a trust, or mutual fund.
Distribution Period: The period over which the income of a unit trust or mutual fund is accumulated before its distribution to investors.
Divergence (TA): Divergence is the opposite of confirmation. It occurs when one indicator points in one direction (such as up) and another indicator points in another direction (such as down).
Diversification: Spreading the risk by constructing a portfolio that contains many different investments whose returns are relatively uncorrelated. Thus, risk levels can be reduced without a corresponding reduction in returns
Dividend: Payment made to shareholders, usually once or twice a year out of a company’s profits after tax. A dividend is declared on the face value or par value of a share.
Dividend Yield: Return to investors represented by a company’s dividend per share divided by its current share price
Dirty Float: A floating security whose value is not solely determined by free-market supply and demand pressures but also by interventions of the concerned authorities
Dollar-cost Averaging: Rather than buying a large number of shares all at once, at one price, the strategy of dividing the investable amounts into a number of equal parts and buying at different intervals to take advantage of lower prices.
Double Bottom: Chart pattern in Technical Analysis, which shows a drop in price, subsequent recovery, and another drop and recovery. The double bottom level is regarded as the support level. If the price falls again and penetrates this level it is likely to fall further.
Dow Jones index (DJIA): The Dow Jones Industrial Average index. It is the most frequently quoted measure of the performance of industrial stocks on the New York Stock Exchange. It covers a relatively small number of leading shares, but nonetheless, its movements can influence other stock markets.
Downgrade: When a bond’s credit rating is lowered. Usually caused by an event such as a negative trading statement by the issuer, which in turn increases the risk that it might be unable to meet its future payment obligations.
Draw Down (private equity): Call on part or all of an investor’s outstanding commitment to a private equity fund.
Due Diligence: Investigation and verification of material facts regarding a proposed transaction. For example, the potential purchaser of a company would undertake due diligence before completing the deal, requesting access from the target company to information that is not publicly available.
Double Taxation: Taxation of a company’s profits and further taxation of a company’s post-tax distributed profits, i.e., dividends in the shareholder’s hand.
Dotcom: Stocks Companies whose products or services are in some way dependent on the Internet and which have the suffix “.com” (dot.com) as part of their registered name.
Downtrend (TA): A situation in which the price of a security or the overall market is declining.
Downside Risk: An estimate of the amount of loss the holder of security might suffer if there is a fall in its value.
Downtick: A sale of stock price below that of the previous sale.
Dull Market: Market in which little trading takes place and where there is often a large difference between the buying and selling prices of shares. Buying in the bulk of financial institutions, Mutual Funds, etc. in such conditions may activate the market, just as selling in bulk may further depress it.
Dumping: Offering for sale, large numbers of shares all at once without bothering about the effect of such an action on the market. In international mode, swelling goods at a very low price, often below cost, to get rid of surplus or outdated production or to gain an advantage over competitors.
Duration: Average term (in years) of the payments from a bond, taking into account the present value of each payment. The longer the duration, the more sensitive the price of the stock to changes in interest rates. (See also modified duration, convexity.)
Dynamic Asset Allocation (DAA): Any portfolio investment strategy where the proportion of the portfolio invested in a given asset class is varied over time.
Dutch Auction: An auction in which the auctioneer’s prices fall rather than rise. In such an auction, the first person to bid wins whatever it is that the auctioneer is selling. The system is used in the Dutch flower markets and also, occasionally, as a method of selling securities.
Stock Market Reference (A-Z)