Float
Fundamental analysisPremiums an insurer holds between collecting them and paying out claims, invested in the meantime.
In plain terms
Where most general insurers actually earn their money, since underwriting itself frequently loses.
1492 terms
Glossary
Every term is defined twice: once the way a filing would put it, and once the way somebody would explain it to you across a table. The second one is usually the one that sticks.
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Investable weight factor
Market basicsAlso called: IWF, Free-float factor
The proportion of a company’s shares an index treats as publicly available, used to scale its contribution to a free-float weighted index.
In plain terms
In a market with large promoter holdings this can be a small fraction, so a company’s index weight is often far below what its market capitalisation suggests. The company is big; the part the index counts is not.
Managed float
Market basicsAlso called: Managed floating exchange rate
An exchange rate regime in which the rate is set by the market but the central bank operates in it — the Reserve Bank’s stated position being that it does not target a level and acts to contain excessive volatility.
In plain terms
For a chart reader the consequence matters more than the intent: a stretch of unusually small ranges is not by itself evidence that the next move will be small, so volatility measured over a quiet window understates what a stop has to survive.
Free float
Market basicsThe portion of shares actually available for public trading, excluding promoter and locked-in holdings.
In plain terms
The shares that genuinely trade. It determines liquidity and index weight.
External benchmark lending rate
Market basicsAlso called: EBLR
A floating loan rate expressed as a published external benchmark plus a spread fixed at sanction.
In plain terms
The benchmark moves for everybody; your spread was set the day you signed. Lenders compete by cutting the spread on new loans, which is why the bank next door quotes less than your own bank charges you.
Index
Market basicsA single number summarising a basket of stocks, in India generally weighted by free-float market capitalisation.
In plain terms
A weighted average is not the typical stock. The NIFTY can close green on a day when most of its constituents fell, because a handful of heavyweights outvote everything else.
Market cap weighting
Market basicsWeighting index constituents by their free-float market capitalisation.
In plain terms
An unlabelled momentum strategy — it automatically holds more of whatever has risen.
NIFTY 50
Market basicsAn index of 50 large NSE-listed companies, weighted by free-float market capitalisation.
In plain terms
The default measure of "the Indian market". A weighted average, so the biggest names dominate it.
Combined ratio
Fundamental analysisClaims plus expenses divided by premiums, for a general insurer — below 100% means the underwriting itself is profitable.
In plain terms
Most general insurers run above 100 and earn their profit on the float instead, which quietly makes them part investment business and sensitive to interest rates.
Market wide position limit
DerivativesAlso called: MWPL
A cap set by the exchange on the aggregate derivatives open interest permitted in a single stock, expressed as a number of shares.
In plain terms
It stops the derivatives tail growing large enough to wag the cash market. The basis on which it is computed has been revised, so read the current circular for the formula — what has not changed is that the names reaching the ceiling are overwhelmingly midcaps with concentrated promoter holdings and thin deliverable float.
Rolling settlement
Market basicsSettlement of each day’s trades a fixed number of days later, replacing settlement at the end of a weekly or fortnightly account period.
In plain terms
Every shortening of the cycle narrows the window in which a counterparty can fail, and so the margin the system must collect. It also removes float somebody was earning on, which is why each change is resisted.
Volatility targeting
Risk & psychologySizing positions so each contributes a similar amount of risk.
In plain terms
Hold risk per position constant and let the rupee value float — the opposite of equal amounts.