Account Statement
A document issued by the mutual fund, giving details of transactions and holdings of an investor.

Adjusted NAV (Total Return)
The net asset value of a unit assuming reinvestment of distributions made to the investors in any form.

Age Of Fund
The time elapsed since the launch of the fund. more...  

Back End Load
The difference between the NAV of the units of a scheme and the price at which they are redeemed. The difference is charged by the fund.

Badla
Badla is closer to being a facility for borrowing and lending of shares and funds. Borrowing and lending of shares is a functionality which is part of the cash market. The borrower of shares pays a fee for the borrowing. When badla works without a strong margining system, it generates counter party risk, the evidence of which is the numerous payments crises which were seen in India. Options are obviously not at all like badla. Futures, in contrast, may seem to be like badla to some. Some of the key differences may be summarised here: -Futures markets avoid variability of badla financing charges. Futures markets trade distinctly from the cash market so that each futures prices and cash prices are different things (in contrast with badla, where the cash market and all futures prices are mixed up in one price). -Futures markets lack counterparty risk through the institution of the clearinghouse which guarantees the trade coupled with margining, and this elimination of risk eliminates the risk premium that is embedded inside badla financing charges, thus reducing the financing cost implicit inside a futures price. Badla financing have been banned since last few year in India

Balance Maturity Tenure Of A Scheme
In the case of close-ended schemes, the balance period till the redemption of the scheme more...  

Capital Gains
The gains made on sale of securities and certain other assets (including units of mutual funds) are called capital gains. The gains can be long-term or short-term depending on the period of holding of the asset and are charged to tax at different rates. Gains on mutual fund units held for a period of 12 months or more are long-term gains.

Channel Stuffing
A deceptive business practice used by a company to inflate its sales and earnings figures by deliberately sending retailers along its distribution channel more products than they are able to sale to the public. By channel stuffing, distributors temorarily beef up their accounts receivables. However, unable to sell the excess products, retailers will send the excess items instead of cash back to the distributor, who must readjust its accounts receivable and ultimately its bottom line. In other words, stuffing always catches up with the company, because it cannot maintain sales at the rate it is stuffing. This is usually done fraudulently to raise the value of the stock. Channel stuffing is illegal.

Close-ended schemes
Schemes, which have a fixed date of redemption. more...  

Date Of Redemption
The date specified for the redemption of a scheme. No such date is specified for an open-ended scheme.

Debt /Income Funds
Funds that invest in income bearing instruments such as corporate debentures, PSU bonds, gilts, treasury bills, certificates of deposit and commercial papers. Although these funds are less volatile, the underlying investments carry a credit risk. Comparatively, these funds are the least risky and are preferred by risk-averse investors.

Derivatives
Derivatives, such as options or futures, are financial contracts which derive their value off a spot price, which is called the under-lying. For examples, wheat farmers may wish to contract to sell their harvest at a future date to eliminate the risk of a change in prices by that date. Such a transaction would take place through a forward or futures market. This market is the derivative market, and the prices on this market would be driven by the spot market price of wheat which is the underlying. The terms "contracts or products" are often applied to denote the specific traded instrument. In other word, derivatives in finance, a security whose price is dependent upon or derived from one or more underlying assets. The derivative itself is merely a contract between two or more parties. Its value is determined by fluctuations in the underlying asset. The world over, derivatives are a key part of the financial system. The most common underlying assets include stocks, bonds, commodities, currencies, real estate, foreign exchange, interest rates and market indexes. Most derivatives are characterized by high leverage. Futures contracts, forward contracts, options and swaps are the most common types of derivatives. Because derivatives are just contracts, just about anything can be used as an underlying asset. There are even derivatives based on weather data, such as the amount of rain or the number of sunny days in a particular region. Derivatives are generally used to hedge risk, but can also be used for speculative purposes. For example, a European investor purchasing shares of an American company off of an American exchange (using American dollars to do so) would be exposed to exchange-rate risk while holding that stock. To hedge this risk, the investor could purchase currency futures to lock in a specified exchange rate for the future stock sale and currency conversion back into euros. more...  

Entry Load
A kind of sales charge that is paid before any amount gets invested into the mutual fund.

Equity Linked Savings Scheme
A special product offered by mutual funds. The basic features of ELSS schemes are: Tax rebate of 20% under section 88 of the Income Tax Act on an investment of Rs.10,000/-

Equity Schemes
Schemes where more than 50% of the investments are done in equity shares of various companies. The objective is to provide capital appreciation over a period of time. more...  

Face Value
The original issue price of one unit of a scheme

FIMMDA-NSE MIBOR
A reference rate is an accurate measure of the market price. In the fixed income market, it is an interest rate that the market respects and closely watches. It plays a useful role in a variety of situations.

Fixed Income Securities
Fixed-income securities are investments where the cash flows are according to a predetermined amount of interest, paid on a fixed schedule. The different types of fixed income securities include government securities, corporate bonds, commercial paper, treasury bills, strips etc. Holders of fixed-income securities are creditors of the issuer, not owners. Equity represents a share in the ownership of the issuer. Fixed interest rate securities are those in which the interest payable is fixed beforehand. Floating interest rate securities are those in which the interest payable is reset from at pre-determined intervals according to a pre-determined benchmark. more...  

GDR and ADR
Global Depository Receipts (GDRs) means any instrument in the form of a depository receipt or certificate (by whatever name it is called) created by the Overseas Depository Bank outside India and issued to non-resident investors against the issue of ordinary shares or Foreign Currency Convertible Bonds of issuing company. It is issued across countries except for America. A GDR issued in America is an American Depository Receipt (ADR). Among the Indian Companies Reliance Industries Limited was the first company to raise funds through a GDR issue. ICICI Bank was the first Indian Bank to issue ADR. The holder of a GDR does not have voting rights. The proceeds are collected in foreign currency thus enabling the issuer to utilize the same for meeting the foreign exchange component of project cost, repayment of foreign currency loans, meeting overseas commitments and for similar other purposes. It has less exchange risk as compared to foreign currency borrowings or foreign currency bonds. The GDR's are usually listed at the Luxembourg Stock Exchange. Whereas, ADRs are listed on NYSE or Nasdaq Exchange in U.S.A. The advantages of GDRs are twofold. For the foreign investor, GDRs/ADRs are an easy and cost effective way to buy shares in a foreign company. They save considerable money by reducing administration costs and avoiding foreign taxes on each transaction. For the domestic company GDRs/ADRs is attractive because they get more exposure in International capital market and allows them to tap into the wealthy European/North American equity markets. In return, the domestic company must provide detailed financial information to the sponsor bank at the foreign country.

Gilt funds
Funds, which invest only in government securities of different maturities. With virtually no default risk, they are very secure. While returns are steady and secure, they are lower than those from other debt funds

Growth scheme
A scheme where investments are made in equity and convertible debentures. The objective is to provide capital appreciation over a period of time. more...  

Hedge Fund
An aggressively managed portfolio of investments that uses advanced investment strategies such as leverage, long, short and derivative positions in both domestic and international markets with the goal of generating high returns (either in an absolute sense, or over a specified market benchmark). Legally, hedge funds are most often set up as private investment partnerships that are open to a limited number of investors and require a very large initial minimum investment. Investments in hedge funds are illiquid as they often require investors keep their money in the fund for a minimum period of at least one year. For the most part, hedge funds (unlike mutual funds) are unregulated because they cater to sophisticated investors. In the U.S., laws require that the majority of investors in the fund be accredited. That is, they must earn a minimum amount of money annually and have a net worth of over $1 million, along with a significant amount of investment knowledge. You can think of hedge funds as mutual funds for the super-rich. They are similar to mutual funds in that investments are pooled and professionally managed, but differ in that the fund has far more flexibility in its investment strategies. It is important to note that hedging is actually the practice of attempting to reduce risk, but the goal of most hedge funds is to maximize return on investment. The name is mostly historical, as the first hedge funds tried to hedge against the downside risk of a bear market with their ability to short the market (mutual funds generally can't enter into short positions as one of their primary goals). Nowadays, hedge funds use dozens of different strategies, so it isn't accurate to say that hedge funds just "hedge risk". In fact, because hedge fund managers make speculative investments, these funds can carry more risk than the overall market.

Hot Money
Money that flows regularly between financial markets in search for the highest short term interest rates possible. CDs are an example of 'hot money'. Should a borrower offer the lender a higher rate of interest than that offered by the current borrower, the current borrower stands to loose their loan.

Impact Cost
Impact cost represents the cost of executing a transaction in a given stock, for a specific predefined order size, at any given point of time. Impact cost is a practical and realistic measure of market liquidity; it is closer to the true cost of execution faced by a trader in comparison to the bid-ask spread. As is the case in all areas of finance, in the context of index derivatives, there is a direct mapping between transactions costs and market effciency. Index futures and options based on Nifty will benefit from a high degree of market effciency because arbitrageurs will face low transactions costs when they eliminate mispricings. This high degree of market effciency on the index derivatives market will make it more attractive to pure users of the derivatives, such as hedgers, speculators and in vestors. High liquidity also immediately implies that the index.

Income / Debt Funds
A fund whose primary objective is current income in the form of interest or dividends. Mutual funds that invest primarily in fixed income securities are called income funds.

Index derivatives v/s security derivatives
Why have index derivatives proved to be more important than security derivatives? Security options are of limited interest because the pool of people who would be interested (say) in options on ACC is limited. In contrast, every single person in the financial area is affected by index fluctuations. Hence risk-management using index derivatives is of far more importance than risk management using individual security options. This goes back to a basic principle of financial economics. Portfolio risk is dominated by the market index, regardless of the composition of the portfolio. In other words, all portfolios of around ten stocks or more have a pattern of risk where 80% or more of their volatility is index-related. In such a world, investors would be more interested in using index based derivative products rather than security-based derivative products. The actual experience of derivatives markets worldwide is completely in line with this expectations. more...  

Jenson's Alpha
It refers to the difference between a fund's actual return and the possible return that a benchmark portfolio could have generated with the same risk .i.e beta.It measures the ability of active management to increase returns above those that are purely a reward for bearing market risk.It will only produce meaningful results if it is used to compare two portfolios which have similar betas. Alpha = Actual Portfolio Return - Expected Return Expected Return = Riskfree Return + Portfolio Beta(Benchmark Returns - Riskfree Return)

Launch Date
The date on which a scheme is first made open to the public for subscription

Limit orders
Spot-futures arbitrage increases the flow of market orders to the cash market. This increases the revenues obtained by day traders who place limit orders, and induces an increased supply of limit orders. Limit orders are the ultimate source of liquidity on the market (indeed, low impact cost is synonymous with a thick limit order book which is highly populated with limit orders). Hence the introduction of spot-futures arbitrage will improve the liquidity on the cash market.

Liquid Funds /Money Market Funds
Funds investing only in short-term money market instruments including treasury bills, commercial paper and certificates of deposit. The objective is to provide liquidity and preserve the capital more...  

Management Expense Ratio
The ratio of management expenses to the total funds under management.

Management Fee/Expense
The charge made to a mutual fund for supervision of its portfolio, usually expressed as percentage of assets.

Margin - Initial/ Daily
At the end of every trading day, brokers are required to collect margin payable against open positions either on the buy side or on the sell side form its clients. Daily margins are collected to safeguard against eventualities that might occur between two trading days.In the derivative segment, both the buyer and the seller have to deposit initial margin before the opening of the day of the futures transaction . more...  

Net asset value (NAV)
The value of fund's portfolio at market value less current liabilities divided by the number of units outstanding. Net asset value is normally computed daily or weekly and can be found in the financial section of the daily newspaper.

Nifty
An index of prices of a group of fifty stocks listed on the NSE.

No-Load Mutual Fund or No-Load Scheme
The one which charges no fee or commission to sell or buy back its unit. more...  

Objective Of Investment
The purpose statement consisting of the goal and the avenues of investment released by the fund.

Offer Document or Prospectus
The official document issued by mutual funds prior to the launch of a fund describing the characteristics of the proposed fund to all its prospective investors. It contains information required by the Securities and Exchange Board of India, such as investment objective and policies, services, and fees. Individual investors are encouraged to read and understand the fund's prospectus.

Offering period
The period during which the initial offer to subscribe for the units of a scheme is open. more...  

P.E.G. Ratio
Price/earnings to growth (PEG), is ratio used to determine a stock's value while taking into account earnings growth. The calculation is - PE Ratio PEG Ratio = P.E Ratio / Annual EPS growth expected . PEG is a widely used indicator of a stock's potential value. It is favored by many over the price/earnings ratio because it also accounts for growth. Normally, stock with PEG of less than 1 indicates stock is less expensive, PEG at 1 indicates stock is fairly valued and PEG greater than 1 indicates they are fairly expensive. E.g. If ICICI Bank earning is expected to grow at 30%, then PEG Ratio will be 17.3 / 30 = 0.57.

P.E.Ratio
It is common practice for investors to use the price-to-earnings ratio (P/E ratio) to determine if a company is over or undervalued. There are, however, many extreme cases of stocks trading at 10,000 or more times their earnings - these kinds of situations affect the ratio's accuracy for assessing a company. The companies with a high P/E ratio are typically startup companies with little or no revenues; however, a high P/E does not necessarily mean the stock isn't a good buy for the long term. P.E. Ratio = Market Value per Share / Earnings per Share (EPS). E.g. As on 21-NOV-2005, ICICI Bank Share is trading at INR 522.70. With a EPS of INR 30.21, the P/E works out to 17.3. If share price moved to INR 550, the P/E would be 18.2.

Performance
Performance of an investment indicates the returns from an investment. The returns can come by way of income distributions as well as appreciation in the value of the investment. more...  

Rating
An evaluation of a scheme in relation to a parameter. The rating could be done in respect of the creditworthiness of debt instruments, risk of loss in an investment or the performance of an investment.

Record Date
The date by which mutual fund holders are registered as unit owners to receive any future dividend or capital gains distribution.

Redemption Of Units
Buying back/cancellation of the units by a fund on an on-going basis or on maturity of a scheme. The investor is paid a consideration linked to the NAV of the scheme. more...  

Sale price
The price at which a fund offers to sell one unit of its scheme to investors. This NAV is grossed up with the entry load applicable, if any.

Scheme
A mutual fund can launch more than one scheme. With different schemes, in spite of there being a common trust, the assets contributed by the unit holders of a particular scheme are maintained and managed separately from other schemes and any profit/loss from the assets accrue only to the unit holders of that scheme

Scheme Objective
The purpose statement consisting of the goal and the avenues of investment released by the fund. more...  

Total Assets Under Management
The market value of the total investments of a fund as on a particular date

Total Returns
Returns from an investment calculated taking into account income distribution and capital appreciation.

Treynor Ratio:Return to Volatility
This Ratio is similar to the Sharpe Ratio except for the fact that it used beta instead of standard deviation.It is also known as the Reward to Volatility Ratio, it is the ratio of a fund's avrage excess return to the fund's beta.It measures the returns earned in excess of those that could have been earned on a riskfree investment per unit of assumes market risk.The formula is used in ranking mutual funds with similar objectives. Treynor Ratio(T) = Portfolio Return-Riskfree Rate of Return / Portfolio Beta The absoulute risk adjusted return is the TREYNOR plus the riskfree rate of return. more...  

Underwriter
The organisation that acts as the distributor of an initial offer share to broker/dealers and investors and undertakes to subscribe to any under-subscription of the offer.

Unit
The interest of the investors in either of the Schemes, which consists of each Unit representing one undivided share in the assets of the Schemes.

Unit Holder
A person who holds Unit(s) under a Mutual Fund

Valuation
Calculation of the market value of the assets of a mutual fund scheme at any point of time.

Yield
Distributions form investment income, usually expressed as a percentage of net asset value or market price. Unlike total return, yield has the single component of investment income and does not include capital gains distributions or capital appreciation of underlying shares.