Hello readers, we are happy to announce that our team of MoneyWiseMind.com launched a new section “Investing Insights: Weekly Q&A for Stock Market Newbies”, to spread the basic stock market knowledge to the beginners.
This is your go-to resource for demystifying
the stock market from the scratch. Each day, we will present 10 carefully
curated questions with answers that will cover essential concepts, strategies,
and terminologies. Whether you have just entered into the market, or trying to
starting your stock market journey, or looking to strengthen your foundation,
our weekly post will guide you through the basics and beyond, making investing
accessible and understandable for everyone. Happy reading.
Day 50: Basic Stock Market Concept
What is a Fund
Manager?
A fund manager is a professional
responsible for managing complete investments—such as mutual funds, pension
funds, or hedge funds. Fund managers are responsible for defining investment
strategies, selecting assets, and trading securities to align with the fund’s
objectives and risk profile.
They monitor market trends, perform fundamental and
technical research, and rebalance portfolios to optimize performance. Fund
managers usually earn a fee, which is a percentage of the fund’s assets under
management (AUM). Some funds are managed by individuals, others by teams or
co-managers. Because, they directly influence investment outcomes, their
decisions have a pivotal impact on returns and risk exposure for investors.
What is an NFO (New
Fund Offer)?
A New Fund Offer (NFO) is the
initial subscription phase when a mutual fund launches a new scheme and invites
investors to buy units at the fund’s base NAV—typically ₹10 in India.
Similar to an IPO, an NFO is open for a limited
period (usually 10–15 days) and allows investors to lock in units before the
fund starts operating. Fund houses launch NFOs to raise capital for a specific
investment theme or strategy.
Investors benefit by getting entry at the fund’s starting NAV, but must
evaluate the NFO’s objectives, fees, and fund manager expertise before
investing. Recent NFOs include those from Jio BlackRock and HDFC.
What does
‘Underweight’ mean by Brokerage Firms?
When a brokerage labels a stock as underweight,
it signals that the analyst expects it to underperform compared
to a benchmark or relative to its weight in an index.
This doesn’t mean sell outright, but suggests
allocating a smaller portion of one’s portfolio to that stock.
For example, if a benchmark holds 10% of a company, an underweight
recommendation might be 5%.
An underweight rating indicates caution—analysts
believe better opportunities lie elsewhere.
What is Delisting?
Delisting refers to the
removal of a company's shares from a stock exchange. This can be voluntary (e.g.,
going private or merging) or involuntary due to non-compliance
with exchange rules or bankruptcy.
Post-delisting, shares may still trade
over-the-counter, but liquidity typically drops and prices may fall
sharply.
Investors should exit before delisting, since
opportunities for buying and selling become limited and risk increases. Reasons
include failure to meet minimum price, market cap, or financial reporting
requirements.
What is a Current
Account Deficit?
A current account deficit (CAD) occurs
when a country’s total international spending (on goods, services, income, and
transfers) exceeds its receipts from abroad.
It's financed by foreign investment, borrowing, or
asset sales. A CAD may signal strong domestic demand or reliance on foreign
capital.It isn't inherently bad, provided inflows are sustainable.
However, persistent deficits can weaken currency,
raise indebtedness, and create vulnerabilities. In Q1 2025, the U.S. CAD
hit $450 billion (≈ 6 % of GDP)—a record high, mainly due to
tariff-related import surges.
What is Froth in Markets?
Market froth describes when asset
prices detach from their intrinsic value due to speculative sentiment, overconfidence,
or rapid buying—often leading up to bubbles.
Signs include parabolic price rises, heavy volume,
retail investor frenzy, and ignoring fundamentals. Frothy markets often precede
volatile corrections or crashes without any valid reason.
For example, 2021 meme stock rallies exhibited
typical froth: high sentiment without underlying earnings support.
What are Standalone
Financial Statements?
Standalone financial statements reflect the
financial position (assets, liabilities, equity), performance (income,
expenses), and cash flows of a single legal entity, such as a
parent company—excluding any subsidiaries.
They include balance sheet, income statement, and cash flow statement prepared
under applicable accounting standards. These are useful for analyzing an
entity's independent health.
Key contrast: consolidated statements combine
parent and subsidiaries, eliminating intercompany transactions to show overall
group performance.
What is ‘Gap Up’ in
the Stock Market?
A gap up occurs when a
stock’s opening price exceeds the previous day’s closing
price, creating a visible gap on the chart.
Causes include positive earnings, strong news, or
bullish sentiment. Gaps are classified as:
𝗙ull gap up – opening
price higher than prior day’s high.
Partial gap up – opening
above close but below high.
Traders may use gap trading strategies,
betting on continuation or 𝗴𝗮𝗽 𝗳𝗶𝗹𝗹 patterns.
A gap up signals early demand but requires volume
confirmation for trade decisions.
What is a Contract
Note?
A contract note is a legally
binding document issued by your broker at the end of each trading
day—confirming all the buy and sell trades executed on your behalf on exchanges
like BSE/NSE.
Key Contents
𝗧𝗿𝗮𝗱𝗲 𝗱𝗲𝘁𝗮𝗶𝗹𝘀: Order/ trade
numbers, timestamps, security names, buy/sell indicator, quantity and price per
unit.
Charges: brokerage, Securities Transaction Tax (STT), GST, SEBI fees, stamp
duty, and termination of pay-in/pay-out obligations.
Net obligation: shows the total amount payable or receivable after all charges.
It is important to confirm executed orders correctly and
transparently.
If any disputes arise I future it will act as strong
document.
It is essential for calculating capital gains and filling income tax.
What are DIIs
(Domestic Institutional Investors)?
Domestic Institutional Investors
(DIIs) are Indian-based investment entities—such as mutual
funds, insurance companies, pension funds, and banks—that invest pooled
domestic funds in Indian financial market.
As of March 2025,DIIs held a record 23.6% in the Nifty 50,up 240 basis
points YOY. It indicates their growing confidence and market
participation.
In Q4, they stepped into the market, when there was a huge outflow of
foreign capital from the market, and they help to stabilize the market amid
negative sentiment in the market.
If you have any
other questions in your mind relating to stock market basics or need any
clarification, please put your query into the comment box, We will try our best
to clarify the same
Disclaimer:
The information provided on MoneyWiseMind is for educational and informational
purposes only. It is not intended to be financial advice, and you should not
rely on it as such. Before making any financial decisions, you should consult a
licensed financial advisor.
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