FAQ

A stock (or share) represents partial ownership in a company. When you buy a share, you own a small slice of that business and have a claim on a proportional part of its assets and future earnings. Share prices move with the company's performance and overall market sentiment.

The Price-to-Earnings (P/E) ratio equals the share price divided by earnings per share (EPS). It shows how much investors pay for each unit of profit. A high P/E can signal high growth expectations (or overvaluation); a low P/E can signal value (or weak prospects). Always compare P/E within the same sector.

Typically you: (1) open a brokerage/demat account, (2) decide your goals and risk tolerance, (3) start with diversified, well-understood companies or low-cost index funds/ETFs, (4) invest amounts you can leave invested for years, and (5) review periodically. This is general education, not personal advice.

There is no single 'good' number — it depends on sector and growth. Mature, slow-growth companies often trade at lower P/Es (e.g. 8–15), while fast-growing firms carry higher P/Es. The useful check is relative: compare a company's P/E to its own history and to sector peers, paired with growth (see PEG).

Market capitalization ('market cap') is the total value of a company's shares: share price × shares outstanding. It groups companies into large-, mid- and small-cap. Larger caps tend to be more stable; smaller caps can grow faster but are usually more volatile.

A dividend is a share of profits a company pays to shareholders, usually in cash. Dividend yield = annual dividend per share ÷ share price, as a percentage. A higher yield returns more income per unit invested, but a very high yield can also signal a falling share price or an unsustainable payout.

Fundamental analysis studies the business — revenue, earnings, margins, debt, growth and valuation — to estimate intrinsic value. Technical analysis studies price and volume patterns (trends, support/resistance, RSI, moving averages) to gauge timing and momentum. Many investors combine both.

An ETF (Exchange-Traded Fund) or index fund holds a basket of securities and trades like a stock. Index funds aim to track an index (e.g. the NIFTY 50), giving instant diversification at low cost — a common starting point because they spread risk across many companies.

RSI is a momentum oscillator from 0 to 100 measuring the speed and size of recent price moves. Readings above ~70 are often 'overbought' and below ~30 'oversold'. RSI signals momentum, not certainty — strong trends can stay overbought or oversold for a while.

A moving average smooths price over a window to reveal the trend. An SMA weights all days equally; an EMA weights recent days more. Traders watch crossovers (e.g. 50-day crossing the 200-day) and whether price is above or below a key average.

EPS is net profit divided by shares outstanding — the profit attributable to each share. Rising EPS over time signals growing profitability and is a key input to the P/E ratio.

Return on Equity (ROE) = net income ÷ shareholders' equity; it shows how efficiently equity becomes profit. Return on Capital Employed (ROCE) = operating profit ÷ capital employed, covering equity and debt. Consistently high ROE/ROCE often indicates quality.

A bull market is a sustained period of rising prices and optimism; a bear market is a sustained decline (commonly 20%+ off recent highs) with pessimism. Markets cycle between the two; time horizon and diversification help investors ride through both.

Beta measures how much a stock tends to move relative to the market. Beta of 1 moves with the market; above 1 is more volatile, below 1 less. High-beta stocks can rise and fall faster than the index.

Volatility is the degree of variation in a price over time — how sharply it swings. Higher volatility means larger, faster moves and generally higher risk. It is often estimated from standard deviation of returns or implied by option prices.

A stop-loss is a preset order to sell if the price falls to a chosen level, capping the loss on a position. It enforces discipline, though in fast markets the fill price can differ from the stop level.

Diversification means spreading investments across many companies, sectors and asset types so no single holding can sink the portfolio. It reduces company-specific risk — the classic 'don't put all your eggs in one basket'.

The Price-to-Book (P/B) ratio compares share price to book value per share (assets minus liabilities). It is used especially for banks and asset-heavy businesses. A P/B under 1 can indicate a stock trading below its accounting net worth — value or a warning sign.

Debt-to-Equity (D/E) = total debt ÷ shareholders' equity. It shows how much a company relies on borrowing versus its own capital. Higher D/E means more leverage — potentially higher returns but also higher risk, especially when rates rise.

A candlestick chart shows each period's open, high, low and close. The body spans open-to-close and the wicks show the extremes. Candle patterns (engulfing, doji, hammer) are used to read shifts in buying and selling pressure.

PEG = P/E ÷ expected earnings growth rate. It adjusts the P/E for growth, so a high-P/E fast grower and a low-P/E slow grower can be compared fairly. A PEG near 1 is often seen as reasonably priced for its growth.

The 52-week high and low are the highest and lowest prices a stock traded over the past year. Where the current price sits in that range is a quick gauge of momentum and how much a stock has run or fallen.