Top 10 Stock Market Terms Every Beginner Must Know (2025)
When beginners step into the Indian stock market, they often get confused by financial jargon like P/E, EPS, IPO, and Index. Without knowing these basic terms, it is difficult to understand market updates or make smart investments.
This guide explains the 10 most important stock market terms in simple India-English with examples, so you can build a strong foundation for your trading and investing journey.
📊 1. Earnings Per Share (EPS)
EPS tells how much profit a company makes per share. It is calculated as:
EPS = Net Profit ÷ Total Number of Shares
Example: If Infosys earns ₹10,000 crore profit and has 100 crore shares, then EPS = ₹100.
Why it matters? Higher EPS shows stronger profitability → useful for long-term investors.
💡 2. Price-to-Earnings (P/E) Ratio
The P/E ratio shows how much investors are willing to pay for each rupee of a company’s earnings.
P/E = Current Share Price ÷ EPS
Example: If a stock price is ₹500 and EPS = ₹25, then P/E = 20.
Why it matters? High P/E = growth expectations; Low P/E = undervalued or weak growth.
🏦 3. Market Capitalization (Market Cap)
Market Cap means the total value of a company’s shares in the market.
Market Cap = Share Price × Number of Shares
Example: Reliance share price = ₹2,500; shares = 67 crore → Market Cap = ₹1.67 lakh crore.
Why it matters? It helps classify companies into Large Cap, Mid Cap, Small Cap, guiding investment strategy.
💰 4. Dividend
A Dividend is a portion of a company’s profit distributed to its shareholders. Not all companies pay dividends — many reinvest profits for growth.
Example: If TCS declares ₹20 dividend per share and you own 100 shares, you will receive ₹2,000 as income.
Why it matters? Dividends provide regular income and show a company’s financial stability.
🐂🐻 5. Bull & Bear Market
The terms Bull Market and Bear Market describe the overall market trend:
- Bull Market: Prices rise consistently, investors are confident, and buying dominates.
- Bear Market: Prices fall sharply, investor confidence is low, and selling dominates.
Example: 2020 crash due to COVID-19 was a bear market, while 2021 rally was a bull market.
Why it matters? Helps investors decide when to enter or exit the market.
🏁 6. IPO (Initial Public Offering)
An IPO is the process when a private company sells its shares to the public for the first time.
Example: In 2021, Zomato launched its IPO and raised funds from investors by listing on NSE & BSE.
Why it matters? IPOs allow investors to buy shares at an early stage of a company’s public journey. Some IPOs give huge returns, while others disappoint.
Tip: Always check the company’s financials, promoters, and market position before applying for an IPO.
📈 7. Stock Market Index
A Stock Market Index is a group of selected stocks that represent the performance of the market or a sector.
- Nifty 50: Tracks 50 large companies on NSE.
- Sensex: Tracks 30 top companies on BSE.
Example: If Nifty rises by 1%, it means most of the 50 companies performed well that day.
Why it matters? Index helps investors measure market trends and compare portfolio performance.
📊 8. Volume
Volume means the total number of shares traded in a stock or the market in a given time (like 1 day).
Example: If 10 lakh shares of Infosys were bought and sold in a day, its daily volume = 10 lakh.
Why it matters? High volume = strong interest by traders. Low volume = weak participation. Volume often confirms whether a price trend is reliable.
💧 9. Liquidity
Liquidity shows how easily you can buy or sell a stock without affecting its price much.
Example: Reliance shares are highly liquid — lakhs of shares are traded daily. But a small-cap stock may be illiquid with only a few trades.
Why it matters? Liquid stocks are safer for beginners because you can enter or exit anytime without big price impact.
⚡ 10. Volatility
Volatility means how much and how quickly stock prices move up or down in the market.
Example: If a stock jumps 5% up in the morning and falls 3% by evening, it is highly volatile.
Why it matters? High volatility = more risk but more trading opportunities. Low volatility = stable but slower gains. Beginners should start with less volatile large-cap stocks.
📊 Stock Market Tools Hub
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❓ Frequently Asked Questions
1) Which is the most important stock market term for beginners?
EPS and P/E ratio are most essential for beginners as they show profitability and valuation of a company.
2) Why should I know stock market terms?
Understanding terms helps you follow market news, make informed decisions, and avoid beginner mistakes.
3) Can I start trading without knowing these terms?
Yes, but it is risky. Learning these terms first will make you a confident trader or investor.
4) Do these terms apply only in India?
No, these are global financial terms used in every stock market, including NSE, BSE, NYSE, NASDAQ.
5) Where can I practice stock trading safely?
You can start with virtual trading apps or paper trading before using real money.
🔗 Related Evergreen Guides
- Day 31: Stock Market Basics for Beginners
- Day 32: Fundamental vs Technical Analysis
- Day 34: 10 Candlestick Patterns Explained
Disclaimer: This article is for educational purposes only. Stock market investments are subject to risks. Please consult a SEBI-registered advisor before investing.
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