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Finance GlossaryWeighting
Weighting
Definition of Weighting
Weighting refers to the proportion of an asset or security within a portfolio or index. For example, in a market index where one stock has a 10% weighting, its price movement has a greater impact on the index’s overall performance compared to stocks with smaller weightings.
Related Terms
Leverage In Stock Market
Leverage is a loan that a broker offers to allow traders to take up bigger positions by paying lesser capital. This feature is known as Margin Trading Facility (MTF) or simply margin funding. Leverage is often represented as a multiple like 2X, 3X, 4X, 5X and so on. For example, getting 5X leverage on a trade worth ₹1,00,000 means you’ll pay ₹20,000 and the broker will cover the rest of the ₹80,000.
Averaging Down
Averaging down means buying more shares when the price drops, thereby bringing down your overall average cost of investing. For example:
Day 1 (Normal price)
Day 1 (Normal price)
- Shares bought of XYZ: 10
- Price of each share: Rs. 1000
- Total cost of investing: Rs. 10,000
- Average investment cost: Rs. 1000
Day 2 (Lower price)
- Shares bought of XYZ: 10
- Price of each share: Rs. 900
- Total cost of investing: Rs. 9,000
- Average investment cost: Rs. 900
Averaging Down
- Initial average cost of investing (Day 1): Rs. 1000
- New average cost of investing (Day 1 & Day 2): Rs. 950
Accumulation/Distribution Indicator (A/D)
An Accumulation/Distribution Indicator is used to figure out the trend of a stock based on the relationship between the price and volume. There are two parts to the name Accumulation Distribution Indicator:
- Accumulation: Denotes demand or the buying levels of a particular stock
- Distribution: Denotes the supply or the selling levels of a particular stock
Long story short, A/D tells you whether a stock is facing buying or selling pressure. A rising A/D depicts an upward trend while a falling A/D depicts a downward trend.
Dividend Stripping
Dividend stripping is a strategy of buying a company’s stock days before it announces a dividend and then selling the same stock at a lower price once the current holder is entitled to get the dividend previously announced.
The resulting loss in capital gains is generally offset by the profits from dividends. Dividend stripping was once non-taxable, which made the strategy lucrative for smart investors. However, dividends in India are now subject to tax.
The resulting loss in capital gains is generally offset by the profits from dividends. Dividend stripping was once non-taxable, which made the strategy lucrative for smart investors. However, dividends in India are now subject to tax.
Arbitrage
Arbitrage is a strategy where a security is bought in one market and sold in another market to generate profits due to the difference in price. This difference is known to be minor.
Say for example a share trades at Rs. 1000 on NSE and Rs. 1002 on BSE. The share can be arbitraged by buying it on BSE and selling it on BSE for a profit of Rs. 2.
Say for example a share trades at Rs. 1000 on NSE and Rs. 1002 on BSE. The share can be arbitraged by buying it on BSE and selling it on BSE for a profit of Rs. 2.
Operating Cash Flow (OCF)
Operating Cash Flow (OCF) measures the amount of cash generated by a company from its normal, day-to-day business activities. It is a key element in a company's cash flow statement. OCF indicates the company's ability to generate enough cash internally to sustain and expand its operations without access to external financing. A consistently positive and growing OCF is a sign of strong financial health and operational efficiency.
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