The basis of allotment is the criteria to allocate shares to investors, most commonly during IPOs. Criteria or basis for allotment lays out the following information:

The difference between the spot and futures prices forms the “basis” for the trading strategy. Hence the name basis trading. These are the two ways in which a trader may use the basis:

• Share allocation ratio
• Bids
• Demand
• Final price

The basis of allotment can vary based on the type of investor in question. Bidders during an IPO for whom a different basis of allotment applies include:

• Retail Individual Investors (RII)
• Qualified Institutional Buyer (QIB)
• Non-Institutional Buyers (NIBs)
• High Net-worth Individuals (HNIs)
• Anchor Investors

The Equity Market is a place where shares are traded, money is raised, and stock is offered to investors. That's why it is divided into two categories:

• Primary Market: An equity market where shares are offered to investors for the first time through IPOs while fundraising also happens through private placements.
• Secondary Market: An equity market where shares, bonds, futures, options, more are traded

The primary market is typically over the counter but may be regulated in the case of exchange traded IPOs. The secondary market is often well-regulated as most securities listed are exchange traded.

Bonds are fixed income securities issued in exchange for a loan, generally by governments and corporations. A bond will generate a fixed interest rate on top of the principal across a fixed time period. A bond market is a place where bonds are issued, bought, and sold. Bonds are issued in exchange for a loan generally by governments and corporations.

The quality of a bond can be understood by its credit rating, which is nothing but the creditworthiness of the company issuing it. The best bonds in India are known to have the following credit rating:

• SOV: Only for government bonds
• AAA: Highest
• AA+: High-medium
• A+: Upper-medium
• BBB+: Lower-medium
• BB+: Speculative
• B+: Highlight speculative
• CCC+: Risky
• CC: Extremely risky

A benchmark is a standard used by investors to compare the performance of a stock, commodity, or other securities.

Stock indices like Nifty 50, Sensex, Nifty Bank, and others are often used as benchmarks to evaluate the performance of one or more stocks.

The onset of a bear market is generally in tandem with poor economic conditions.

Benchmarks are not just used for evaluating markets or securities, they can also be used to assess the performance of an investor or wealth manager. Here are some outcomes if the returns are:

• Greater than benchmark: the asset is doing considerably well (great)
• Same as benchmark: the asset is moving with the market (okay)
• Less than benchmark: the asset is performing poorly (bad)