Glossary

Finance, in plain words.

44 terms you meet in the news, explained without jargon.

A

Asset allocation: How you split your money between asset types such as shares, bonds, gold and cash. The mix matters more to long-term results than picking any single investment.

B

Bear market: A long fall in market prices, usually taken to mean a drop of 20% or more from a recent peak, accompanied by gloomy sentiment.
Bond: A loan you give to a government or company in return for regular interest and your money back on a fixed date. Bond prices and yields move in opposite directions. Read: Bonds, explained: why prices fall when yields rise →
Bond yield: The return an investor earns from a bond at its current price. When a bond's price falls, its yield rises, and the other way round. Read: Bonds, explained: why prices fall when yields rise →
Bull market: A long rise in market prices, usually led by confidence in growth and earnings.

C

CAGR: Compound annual growth rate: the steady yearly rate at which an investment would have to grow to reach its end value from its starting value. It smooths out the ups and downs. Read: How a SIP works: compounding, time and rupee-cost averaging →
Capital gain: The profit when you sell an asset for more than you paid for it. Tax on it depends on the asset and how long you held it.
Cash reserve ratio (CRR): The share of a bank's deposits that it must keep as cash with the central bank. Raising it drains money out of the banking system; cutting it releases money.
Compounding: Earning returns on your earlier returns, not just on your original money. Over long periods it makes growth speed up. Read: How a SIP works: compounding, time and rupee-cost averaging →
Consumer Price Index (CPI): A measure of how the prices of a basket of goods and services bought by households change over time. It is the main yardstick for retail inflation. Read: Onions are up 108%. Why India's inflation just jumped to 5.54% →
Credit rating: An agency's opinion on how likely a borrower is to repay its debt. Higher ratings usually mean lower borrowing costs.
Crude oil (Brent): Brent is a global benchmark price for crude oil. India imports most of its oil, so Brent moves affect the import bill, the rupee and fuel-linked prices. Read: Same oil, $24 billion more: what $100 crude does to India →
Current account deficit: When a country pays more to the rest of the world for goods, services and income than it earns from them. It has to be financed by foreign capital.

D

Depreciation (currency): A fall in a currency's value against another currency, such as the rupee weakening against the dollar. It makes imports costlier. Read: The Fed just raised rates. Here's how that pulls money out of India →
DII: Domestic institutional investor: Indian institutions such as mutual funds and insurers that invest in the market. Their buying or selling is reported daily alongside FPI flows. Read: Foreigners sold, Indians bought: who is holding up the market in 2026 →
Dividend: A share of a company's profit paid out to its shareholders, usually in cash.

E

EMI: Equated monthly instalment: the fixed amount you pay each month on a loan. Early EMIs are mostly interest; later ones are mostly principal. Read: What the repo rate actually is, and how it reaches your EMI →
Equity: Ownership in a company, held as shares. It can also mean the ownership value left in an asset after debt is subtracted.
ETF: Exchange-traded fund: a fund that holds a basket of assets, such as an index's shares, and trades on the stock exchange like a single share.

F

FDI: Foreign direct investment: money a foreign investor puts into setting up or buying a lasting stake in a business in another country. Read: Seven states take 94% of India's FDI. Here is who gets what, and why →
Fiscal deficit: The gap between what a government spends and what it earns (excluding borrowing) in a year. It is met by borrowing.
FPI: Foreign portfolio investor: an overseas investor who buys shares or bonds in another country's market without taking control of a business. FPI money can enter and leave quickly. Read: Foreigners sold, Indians bought: who is holding up the market in 2026 →

G

GDP: Gross domestic product: the total value of goods and services produced in a country in a period. Its growth rate is the usual measure of how fast an economy is expanding.

I

Inflation: The rate at which prices in general rise over time, which reduces what each rupee can buy. Read: Onions are up 108%. Why India's inflation just jumped to 5.54% →
IPO: Initial public offering: the first time a company sells its shares to the public so they can trade on a stock exchange. Read: Big IPO coming? How an IPO actually works →

L

Large-cap, mid-cap, small-cap: Labels for companies by market capitalisation. Large caps are the biggest and usually steadier; smaller companies can grow faster but tend to swing more.
Liquidity: How easily and quickly something can be turned into cash without moving its price. In banking, it also means how much money is available in the system.

M

Market capitalisation: A listed company's share price multiplied by the number of its shares. It is the market's valuation of the whole company.
Monetary Policy Committee (MPC): The RBI panel that sets the policy interest rate, with the aim of keeping inflation within the government's target range. Read: Why the RBI raised rates after a year of cutting →
Mutual fund: A pool of money from many investors, run by a professional manager, that is invested in shares, bonds or other assets. You own units of the pool.

N

NAV: Net asset value: the per-unit value of a mutual fund, worked out by dividing the fund's assets, less its liabilities, by its number of units.
Nifty 50 and Sensex: The two best-known Indian stock indices. Each tracks a basket of large companies and is used as a summary of how the market is doing. Read: How the Sensex and Nifty are actually calculated →
NPA: Non-performing asset: a loan on which the borrower has stopped paying interest or principal for a set period, so the bank treats it as at risk.

O

OFS: Offer for sale: when existing shareholders, such as promoters, sell some of their shares to the public. In an IPO, the company gets no money from the OFS portion. Read: Big IPO coming? How an IPO actually works →

P

P/E ratio: Price-to-earnings ratio: a company's share price divided by its earnings per share. It shows how much investors pay for each rupee of profit. Read: P/E ratio: how to tell if a stock is cheap or expensive →

R

Repo rate: The rate at which the RBI lends money to banks for the short term. It is the main lever behind home-loan and other borrowing rates. Read: What the repo rate actually is, and how it reaches your EMI →
Rupee–dollar rate: How many rupees one US dollar costs. A weaker rupee raises the cost of imports such as oil, and a stronger one lowers it. Read: The Fed just raised rates. Here's how that pulls money out of India →

S

SIP: Systematic investment plan: investing a fixed amount in a fund at regular intervals, usually monthly. It spreads your buying across market ups and downs. Read: How a SIP works: compounding, time and rupee-cost averaging →
Stagflation: A mix of weak growth, high unemployment and high inflation at the same time. It is hard to fight because the usual cures for one problem worsen the other.
Statutory liquidity ratio (SLR): The share of a bank's deposits that it must keep in safe, liquid assets such as government securities, on top of the cash reserve ratio.

T

Tariff: A tax a country charges on imported goods. It raises the price of those goods for buyers and is often used as a trade weapon. Read: Smoot-Hawley, 1930: the tariff that made the Great Depression worse →
Trade deficit: When a country's imports of goods are worth more than its exports. A trade surplus is the opposite. Read: China's exports jumped 36% in September. Why India should pay attention →

V

Volatility: How sharply and how often a price moves up and down. Higher volatility means a bumpier ride, not necessarily a worse investment.

Y

Yield curve: A line showing the yields of bonds of the same quality across different maturities. Its shape is often read as a signal of what markets expect for growth and rates. Read: Bonds, explained: why prices fall when yields rise →