NISM Series XV: Research Analyst Certification Examination Flashcards

Comprehensive vocabulary flashcards covering key terms, definitions, regulatory requirements, financial ratios, and analytical models from NISM Series XV: Research Analyst Certification Examination Workbook.

Sell-side Analysts

Analysts who publish research reports in the public domain on securities of companies or industries, offering specific buy, hold, or sell recommendations for clients of investment banking, broking, or advisory firms.

Buy-side Analysts

Analysts employed by asset managers (such as mutual funds, hedge funds, pension funds, or portfolio managers) who generate investment recommendations exclusively for internal consumption by fund managers.

Independent Research Analysts

Analysts working for boutique firms or research originators separate from full-service investment firms who sell customized or subscription-based research reports to investors, institutions, or corporate clients.

Securities

Transferable financial claims or contracts defined under Section 2(h) of the SCRA 1956, including shares, stocks, bonds, debentures, derivatives, mutual fund units, government securities, and security receipts.

Foreign Bonds

Bonds issued by a foreign entity in a domestic market and denominated in the local currency of the country where they are issued.

Euro Bonds

Bonds issued in a foreign country and denominated in a currency different from the local currency of the country in which they are issued.

Masala Bonds

Rupee-denominated Euro bonds issued outside of India, transferring the foreign exchange currency risk from the Indian issuer to foreign investors.

American Depositary Receipts (ADRs)

Negotiable certificates issued and traded in the United States representing underlying equity shares of a non-US company.

Foreign Currency Convertible Bonds (FCCBs)

Foreign currency-denominated debt securities issued by companies in international markets that carry an option for conversion into equity shares of the issuer company.

Initial Public Offer (IPO)

The first sale of a corporate entity's common shares to public investors to raise equity capital for business growth.

Offer for Sale (OFS)

A secondary market transaction executed through the primary market route where existing shareholders sell their existing holdings to the public without increasing total share capital.

Qualified Institutional Placement (QIP)

A private placement of shares made by a listed company exclusively to identified Qualified Institutional Buyers (QIBs).

Intrinsic Value

The present value of expected free cash flows that can be taken out of a business during its remaining life, discounted at an appropriate required rate of return.

Enterprise Value (EV)

A measure of a company's total operating value, computed as Market Value of Common Equity + Preferred Capital + Debt - Cash, Cash Equivalents, and Non-Operating Financial Investments.

Price to Earnings (P/E) Ratio

A valuation multiple calculated as Current Market Price per share divided by Earnings Per Share (EPS), measuring the price market participants pay per rupee of earnings.

Yield to Maturity (YTM)

The annualized internal rate of return earned on a debt security if it is bought at current market price, held until maturity, and all coupon payments are reinvested at the same rate.

Macaulay's Duration

A measure of the weighted average time (in years) required for an investor to recover the present value of all cash flows from a bond.

Modified Duration

A measure of the percentage price sensitivity of a bond to changes in interest rates, calculated as Macaulay's Duration divided by $(1 + y)$.

Active Investing

An investment strategy involving continuous evaluation and selection of individual securities aimed at generating returns superior to a broader market index.

Passive Investing

An indexing investment strategy that replicates the portfolio composition of a benchmark market index to achieve market-matching returns at low expense ratios.

Gross Domestic Product (GDP)

The total market value of all final goods and services produced within the geographic boundaries of a country during a specified financial period.

Gross National Product (GNP)

The total market value of all final goods and services produced by a country's residents regardless of location, calculated as GDP plus Net Factor Income from Abroad (NFIA).

Fiscal Deficit

The budgeted excess of total government expenditure over total revenue receipts (excluding market borrowings) in a given financial year.

Current Account Deficit (CAD)

An economic measurement occurring when a country's total value of imported goods, services, and transfers exceeds the total value of its exports.

Porter's Five Forces Model

An industry structural framework analyzing five competitive forces: threat of new entrants, threat of substitutes, bargaining power of buyers, bargaining power of suppliers, and rivalry among existing competitors.

PESTLE Analysis

A macro-environmental framework evaluating Political, Economic, Socio-cultural, Technological, Legal, and Environmental factors affecting business operations.

BCG Matrix

A portfolio planning framework that categorizes business segments based on market growth rate and relative market share into Stars, Cash Cows, Question Marks, and Dogs.

Standalone Financial Statement

Financial reports presenting the financial position, operational results, and cash flows of an individual legal corporate entity alone.

Consolidated Financial Statement

Financial reports combining the financial results of a parent company and all its controlled subsidiaries into a single unified economic entity.

EBITDA

Earnings Before Interest, Tax, Depreciation, and Amortization; a measure of core operating profitability independent of capital structure, tax rates, and capital recovery policies.

Return on Equity (ROE)

A key profitability metric calculated as Net Profit after Tax divided by Average Shareholders' Net Worth, reflecting efficiency in generating profits from equity capital.

DuPont Analysis

A framework decomposing Return on Equity (ROE) into three financial ratios: Net Profit Margin, Asset Turnover Ratio, and Equity Multiplier (financial leverage).

Corporate Action

An event initiated by a public company that brings material change to its securities, capital structure, or ownership, such as dividends, rights issues, bonus shares, stock splits, or buybacks.

Stock Split

A corporate action reducing the par value of a company's shares in a defined ratio, proportionally increasing the total number of outstanding shares without changing total equity capital.

Dividend Yield

A financial ratio calculated as Dividend per Share (DPS) divided by Current Market Price per share, showing annual dividend return as a percentage of share price.

Capital Asset Pricing Model (CAPM)

A model calculating expected return on equity as $K_e = R_f + \beta \times (R_m - R_f)$, where $R_f$ is the risk-free rate, $\beta$ is systematic risk, and $(R_m - R_f)$ is the market risk premium.

Weighted Average Cost of Capital (WACC)

The overall required rate of return for a business, calculated as $WACC = [K_e \times W_e] + [K_d \times (1 - T) \times W_d]$, weighting the costs of equity and post-tax debt.

Backwardation

A commodity market condition where the spot price of an underlying commodity is higher than its futures price.

Contango

A commodity market condition where the futures price of an underlying commodity is higher than its spot price.

Systematic Risk

Undiversifiable market-wide risk caused by macroeconomic factors affecting all securities, quantified by Beta ($\beta$).

Unsystematic Risk

Diversifiable risk specific to an individual company or sector (such as business risk or credit risk) that can be eliminated through portfolio diversification.

Sharpe Ratio

A risk-adjusted performance measure calculated as (R_p - R_f) / \blank_p, quantifying excess return earned per unit of total risk (standard deviation).

Treynor Ratio

A risk-adjusted performance metric calculated as $(R_p - R_f) / \beta_p$, measuring excess return earned per unit of systematic risk (Beta).

Jensen's Alpha

A risk-adjusted performance metric calculated as $R_p - [R_f + \beta_p \times (R_m - R_f)]$, representing excess return generated by a portfolio above its CAPM expected return.

Unpublished Price Sensitive Information (UPSI)

Non-public information relating to a company or its securities that, if made generally available, is likely to materially affect the market price of those securities.

Chinese Wall

An internal information barrier separating insider areas with access to confidential price-sensitive information from public areas dealing in sales, marketing, or research advisory.

Candlestick Chart

A financial chart type displaying Open, High, Low, and Close (OHLC) prices using a colored real body and wicks to illustrate price action and market sentiment over a period.

Relative Strength Index (RSI)

A momentum oscillator bounded between 0 and 100 measuring the speed and magnitude of recent price changes to identify overbought (above 70) and oversold (below 30) conditions.

Moving Average Convergence Divergence (MACD)

A trend-following momentum indicator calculated as the difference between the 12-period EMA and the 26-period EMA, plotted alongside a 9-period EMA signal line.