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Common fundamental terms used in the Indian stock market

Here are some common fundamental terms used in the Indian stock market, explained in simple language:

📘 Basic Fundamental Terms

  1. EPS (Earnings Per Share)
    → Profit earned per share.
    Formula: Net Profit ÷ Number of Shares

  2. PE Ratio (Price to Earnings Ratio)
    → Shows if a stock is overvalued or undervalued.
    Formula: Share Price ÷ EPS

    • High PE: Expensive or high growth expectation
    • Low PE: Cheap or less growth expectation

  3. Book Value
    → Value of a company per share if it is liquidated.
    Formula: (Assets – Liabilities) ÷ Number of Shares

  4. PB Ratio (Price to Book Ratio)
    → Stock price compared to its book value.
    Formula: Share Price ÷ Book Value

  5. ROE (Return on Equity)
    → How efficiently the company generates profit using shareholders' money.
    Formula: Net Profit ÷ Shareholders' Equity

  6. ROCE (Return on Capital Employed)
    → Measures efficiency of capital use (both equity + debt).
    Formula: EBIT ÷ (Equity + Debt – Current Liabilities)

  7. Debt to Equity Ratio
    → Shows how much debt the company has compared to equity.
    Formula: Total Debt ÷ Shareholders' Equity

    • < 1 is usually considered good.

📈 Growth & Profitability Terms

  1. Revenue / Sales
    → Total income from business operations before expenses.

  2. Net Profit / PAT (Profit After Tax)
    → Final profit after all expenses and taxes are deducted.

  3. Operating Profit / EBITDA
    → Earnings before interest, tax, depreciation, and amortization. Reflects core business strength.

  4. Profit Margin
    → Profit as a percentage of sales.
    Formula: (Net Profit ÷ Sales) × 100

💰 Valuation & Investment Metrics

  1. Market Capitalization (Market Cap)
    → Total value of all outstanding shares.
    Formula: Share Price × Number of Shares
  • Large Cap: ₹20,000+ Cr
  • Mid Cap: ₹5,000–20,000 Cr
  • Small Cap: < ₹5,000 Cr

  1. Dividend Yield
    → Return received from dividend income.
    Formula: (Dividend ÷ Share Price) × 100

  2. Face Value
    → Nominal value of a share (usually ₹1, ₹2, ₹10). Used for accounting and dividend purposes.

  3. Free Cash Flow (FCF)
    → Cash available after expenses and investments, useful for expansion or dividends.

🧾 Other Key Terms

  1. Promoter Holding
    → % of company shares owned by the founders/promoters.

  2. FII/DII Holding
    → Investment percentage by Foreign or Domestic Institutional Investors.

  3. Pledged Shares
    → Shares kept as collateral for loans.

  • High pledge = Risky

  1. Capex (Capital Expenditure)
    → Money spent on assets like land, buildings, machinery.

  2. Operating Margin
    → Profit from core operations as a % of sales.

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