RupeeCase Learn/Glossary
91 terms, in plain words.
The vocabulary of systematic investing in Indian markets, from alpha to volatility, each defined in two or three sentences with the modules that use it.
- 91terms
- 20letters
- 70modules linked
91 terms, A to Z
- AIF
Alternative Investment Fund. SEBI regulated category for pooled investments in non-traditional assets. Minimum ₹1 crore.
- alpha
Return above what a benchmark would deliver. A strategy returning 20 percent when Nifty returned 12 percent has 8 percent alpha. Alpha is the measure of skill or systematic edge.
- AMC
Asset Management Company. The entity that manages mutual funds (e.g., HDFC AMC, SBI Funds Management).
- AUM
Assets Under Management. Total value of money a fund or manager is investing.
- autocorrelation
Correlation of a time series with a lagged version of itself. Strong autocorrelation in returns is the statistical signature of momentum.
- backtest
Simulation of a strategy on historical data to estimate past performance. Useful for validation but does not guarantee future results.
- basis pointalso bps
One hundredth of one percent. 50 basis points is 0.5 percent. Commonly used for interest rates and fees.
- beta
Sensitivity of a portfolio to the market. Beta of 1.0 moves with the market. Beta of 1.5 moves 1.5x as much in both directions. Beta below 1 is defensive.
- CAGR
Compound Annual Growth Rate. The yearly rate at which an investment would have grown if it compounded at a constant rate. A ₹1L investment becoming ₹2L over 5 years is roughly 14.9 percent CAGR.
- CASA
Current Account Savings Account. Low-cost deposits in banks. A high CASA ratio means cheaper funding, which feeds into structurally higher net interest margins.
Used in 9.1
- correlation
Statistical measure of how two assets move together. 1.0 is perfect positive, -1.0 is perfect negative, 0 is unrelated.
- CPI
Consumer Price Index. Measures consumer-level inflation. RBI targets CPI at 4 percent within a 2 to 6 percent band under the inflation targeting framework.
- DCA
Dollar Cost Averaging. Same concept as SIP in international terminology. Buying fixed amount at intervals.
- delta
First-order Greek. How much an option price changes per ₹1 move in the underlying. Also approximate probability of finishing in the money.
- DII
Domestic Institutional Investor. Indian mutual funds, insurance companies, and pension funds.
- discretionary investing
Approach where each decision is made case by case based on judgement. Opposite of systematic.
Used in 2.1
- diversification
Spreading capital across assets that do not move together. Reduces portfolio risk without proportionally reducing expected return.
- drawdown
The peak-to-trough decline during a specific period. If a portfolio falls from ₹10L to ₹8L, the drawdown is 20 percent. Maximum drawdown measures the worst such drop in the backtest period.
- duration
Bond price sensitivity to interest rate changes. Modified duration approximates the percent price change for a 1 percent yield move.
- EBITDA
Earnings Before Interest, Taxes, Depreciation, Amortisation. Proxy for operating cash flow.
- ELSS
Equity Linked Savings Scheme. Tax-saving mutual fund category under Section 80C. Three year lock-in.
- equity curve
Chart of portfolio value over time. The shape reveals consistency of returns and the depth of drawdowns.
- ETF
Exchange Traded Fund. Like an index fund but trades on exchange like a stock. Can be bought and sold intraday.
- expense ratioalso TER
Annual fee charged by a mutual fund as a percentage of AUM. Deducted from NAV so you never see the charge directly.
- F&O
Futures and Options. Derivative contracts used for hedging or speculation. High risk instruments for retail users.
- factor investing
Systematic approach targeting specific characteristics (momentum, value, quality, low volatility, size) shown to generate excess returns historically.
- FII
Foreign Institutional Investor. Overseas funds investing in Indian markets. Their daily net buying or selling is a market sentiment indicator.
- free cash flow
Operating cash flow minus capital expenditure. The cash available to pay debt, dividends, buybacks or reinvestment after the business has funded itself.
- free float
Shares available for public trading, excluding promoter and strategic holdings. Used in index weighting.
- gamma
Second-order Greek. Rate of change of an option delta. High gamma means option sensitivity changes quickly as underlying moves.
- GMP
Grey Market Premium. Unofficial pre-listing premium quoted by traders before an IPO lists. Often misleads as a guide to listing day moves.
Used in 6.2
- high water mark
Peak value against which performance fees are calculated. Ensures fees are only charged on new gains, not recovery from losses.
- hurdle rate
Minimum return above which a performance fee is charged. Typically 10 percent for Indian PMS structures.
Used in 11.1
- IA
Investment Adviser. SEBI registration category for providing personalised investment advice. Stricter obligations than RA.
- IIP
Index of Industrial Production. Monthly indicator of manufacturing, mining and electricity output. Released by MoSPI. RBI uses it in monetary policy decisions.
- index fund
Mutual fund that replicates an index. Low cost, no active management.
- IV
Implied Volatility. Market expectation of future volatility priced into option contracts. Rises before major events.
Used in 9.3
- large cap
Companies ranked 1 to 100 by market cap in SEBI classification. Typically the most liquid and stable names.
- lookahead bias
Mistake of using data in a backtest that would not have been available at the time of the decision. Common source of inflated backtest results.
- low volatility factor
Counterintuitive finding that lower-volatility stocks often outperform higher-volatility ones on risk-adjusted basis.
Used in 1.2
- LTCG
Long Term Capital Gains. Profit on equity held for more than 12 months. Taxed at 10 percent above ₹1,25,000 per year (FY25 onwards).
- lump sum
Investing the entire amount at once, opposite of SIP. Mathematically has higher expected return in rising markets but higher timing risk.
- mid cap
Companies ranked 101 to 250 by market cap per SEBI. Growth exposure with moderate liquidity.
- Midcap 150
NSE index of the 150 stocks ranked 101 to 250 by free-float market cap. Classic definition of mid-cap universe in India.
- momentum factor
Tendency of stocks that have performed well recently to continue performing well in the near future. A well-documented anomaly used in systematic strategies.
- Nifty 50
Index of 50 large-cap Indian stocks representing about 65 percent of NSE free-float market cap. The most widely tracked Indian equity benchmark.
- Nifty 500
Broader index of 500 Indian stocks covering roughly 95 percent of free-float market cap. Includes large, mid, and small cap names.
- NISM
National Institute of Securities Markets. SEBI-owned body that conducts certification exams for market professionals.
- NPA
Non-Performing Asset. A loan where interest or principal has been overdue beyond 90 days. Gross NPA is before provisions; net NPA is after.
- OI
Open Interest. Total number of outstanding derivative contracts. Changes in OI reveal positioning and flow.
Used in 6.6
- P/B ratio
Price-to-Book ratio. Stock price divided by book value per share. Used to identify value stocks.
Used in 3.2
- P/E ratio
Price-to-Earnings ratio. Stock price divided by earnings per share. Lower is cheaper but context dependent.
Used in 1.2
- PCR
Put-Call Ratio. Ratio of put OI to call OI. Often used as a contrarian sentiment gauge.
Used in 6.6
- PMI
Purchasing Managers Index. Survey-based diffusion index of business activity. Above 50 means expansion, below 50 means contraction. Earliest read on activity.
- PMS
Portfolio Management Service. SEBI regulated. Minimum ticket ₹50,00,000. Higher fees but more customisation than mutual funds.
- quality factor
Tendency of stocks with strong fundamentals (high ROE, low debt, stable earnings) to outperform risk-adjusted.
- rebalancing
Periodic reset of portfolio holdings back to target weights or a new selection. Monthly, fortnightly, or weekly in most systematic strategies.
- ROCE
Return on Capital Employed. Operating profit divided by total capital employed. Measures efficiency of all capital including debt.
- ROE
Return on Equity. Net income divided by shareholder equity. Measures profitability per rupee of owner capital.
- ROIC
Return on Invested Capital. Net operating profit after tax divided by total invested capital (debt plus equity). Sustained ROIC above WACC is the strongest quantitative signal of an economic moat.
- SEBI
Securities and Exchange Board of India. The regulator overseeing capital markets.
- Sharpe ratioalso Sharpe
Risk-adjusted return. Excess return per unit of volatility. Higher is better. A Sharpe above 1.0 is considered good for equity strategies, above 1.5 is strong.
- SIP
Systematic Investment Plan. Investing a fixed amount at regular intervals. Reduces timing risk through rupee cost averaging.
- slippage
Difference between expected trade price and actual execution price. Real-world trading always has some slippage.
- small cap
Companies ranked 251 and below by market cap per SEBI. Higher growth potential, higher volatility, lower liquidity.
- Smallcap 250
NSE index of stocks ranked 251 to 500 by market cap. Higher volatility and higher long-term return than large cap historically.
- Sortino ratioalso Sortino
Like Sharpe but only penalises downside volatility. Better measure because investors care about losses, not upside swings.
Used in 2.3
- standard deviation
Statistical measure of dispersion. In finance, the standard deviation of returns is the canonical measure of volatility.
- stationarity
Property of a time series whose mean, variance and autocorrelation structure remain constant over time. Most time series models require stationary inputs.
- STCG
Short-term capital gains. Listed equity held under 12 months. Taxed at 20 percent flat post July 2024.
- straddle
Buying both a call and put at the same strike. Profits if the underlying moves significantly in either direction.
- STT
Securities Transaction Tax. Levied on equity and equity-derivative trades on Indian exchanges. Cannot be set off against other taxes.
- survivorship bias
Only testing on stocks that still exist today, ignoring delisted companies. Inflates apparent returns of backtests.
- systematic investing
Approach where selection, weighting, rebalancing, and exit rules are defined upfront and followed mechanically. Removes emotional and cognitive bias from execution.
- T+1
Settlement cycle in Indian equity markets. Trades settle one trading day after execution. India moved to T+1 in January 2023, the fastest among major global markets.
- TER
Total Expense Ratio. Same as expense ratio. Includes management fee plus all operational costs.
- theta
Time decay. How much an option loses value each day, assuming no price change. Always negative for option buyers.
- tracking error
Difference between a portfolio return and its benchmark return. Lower tracking error means tighter index replication for ETFs and index funds.
- transaction cost
All costs of trading including brokerage, STT, exchange charges, GST, and slippage. Typically 0.3 to 0.5 percent round trip in Indian equity.
Used in 5.4
- turnover
Percentage of portfolio that changes in a rebalance. 30 percent turnover means 30 percent of holdings were sold and replaced with new names.
- value factor
Tendency of stocks with low price-to-earnings or price-to-book ratios to outperform over long horizons.
- vega
Sensitivity of option price to volatility. High vega means option value swings with IV changes.
- VIX
India VIX. Volatility index calculated from Nifty option prices. Reflects 30-day expected volatility of Nifty 50.
Used in 3.1
- volatility
How much returns fluctuate. Standard deviation of returns. High volatility means larger swings both up and down.
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Education only, not investment advice. RupeeCase is a technology platform operated by QC Alpha Technologies Pvt Ltd; it is not a fund, a PMS or a SEBI registered investment adviser. Model returns are back tested and not a promise of future returns. Figures carry the date they were checked.