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NISM Certifications · NISM-Series-XV: Research Analyst

Terminology in Equity and Debt Markets for NISM Research Analyst

This chapter covers the basic vocabulary of equity and debt markets: shares, valuation ratios, trading terms, bonds, yields, ratings and spreads. To solve questions, learn each definition precisely, know the direction of key relationships such as bond price and yield, and practise telling similar terms apart.

What this chapter covers

This chapter is the vocabulary base of NISM-Series-XV. It defines the terms you will meet again and again: equity shares, preference shares, market capitalisation, P/E, order types, settlement, bonds, coupon, yield, credit rating and spread. It does not ask you to do deep analysis. It asks you to know what each term means and how it differs from a close neighbour.

The chapter has two halves. The equity half starts with instruments, moves to valuation ratios, then to trading and market mechanics. The debt half starts with instruments, moves to bond features, yields and pricing, then ends with ratings, spreads and interest rate concepts.

The terms here feed later chapters. Valuation Principles, Company Analysis - Financial Analysis, Fundamentals of Risk and Return and Technical Analysis all assume you already know these words. If a term is shaky here, a later question that uses it will cost you marks twice: once for the term and once for the concept built on it.

This chapter is small in marks compared with the analysis chapters, with a modest weightage of 2 marks, but the content is mostly definitions that you can learn fully in a short time. Since the exam has negative marking of 25% of the marks assigned to a question, a clean, confident answer here is cheap marks, and the same terms also make the larger chapters on valuation, financial analysis and risk easier to follow. Strong vocabulary also speeds you up in the 2-hour paper.

Terminology in Equity and Debt Markets: topics in the order to study them

  1. 1Basics of Equity Markets and InstrumentsStart with what equity instruments are, since every ratio and trading term refers back to them.
  2. 2Equity Valuation Ratios and TermsOnce you know the instruments, learn the ratios that measure them, such as P/E, P/B and dividend yield.
  3. 3Equity Trading and Market Mechanics TerminologyNext, learn how shares are actually bought and sold, including order types, settlement and market terms.
  4. 4Debt Market Basics and InstrumentsMove to debt only after equity is settled, so you can compare lenders with owners and keep the two sets of terms separate.
  5. 5Bond Features, Yields and Pricing TermsFeatures such as coupon, face value and maturity must be clear before yield and price relationships make sense.
  6. 6Credit Ratings, Spreads and Interest Rate ConceptsFinish with ratings and spreads, which build on yields and bond pricing.

How to prepare Terminology in Equity and Debt Markets

Treat this chapter as a glossary you learn by contrast. Most wrong answers come from mixing up two similar terms, not from not knowing a term at all.

  1. Read the six topics in the order given, one sitting per topic, and write each term with a one-line meaning in your own words.
  2. For every ratio, write its formula in plain text and note what goes on top and what goes on the bottom. Check the unit of the answer.
  3. Make pairs of look-alike terms and write the one difference between them, for example coupon rate and yield, or face value and market price.
  4. Learn the direction rules for debt, such as how bond price moves when yield rises, and test yourself by stating them without looking.
  5. After each topic, answer practice MCQs and note why each wrong option is wrong. Wrong options show you the usual traps.
  6. Do a short mixed set covering equity and debt terms together, since the exam will not group questions by topic.
  7. On the last day, read only your pairs list and direction rules, and re-check any term you got wrong twice.

Common mistakes in Terminology in Equity and Debt Markets

  • Mixing up coupon rate and yield.

    Fix: Remember that coupon is fixed on face value, while yield depends on the price you pay and changes with the market.

  • Getting the direction of bond price and yield wrong.

    Fix: Learn it as a rule: when market yields rise, existing bond prices fall, and when yields fall, prices rise.

  • Reversing the numerator and denominator in valuation ratios.

    Fix: Write each formula in words, such as price ÷ earnings, and say it aloud while practising.

  • Confusing similar equity terms such as face value, book value and market price.

    Fix: Keep a three-line note: face value is the nominal value, book value comes from the balance sheet, market price comes from trading.

  • Guessing on unfamiliar terms.

    Fix: Remember the 25% negative marking. If you cannot remove at least two options by logic, consider skipping and returning later.

Last-day revision: Terminology in Equity and Debt Markets

  • Equity shares represent ownership; debt instruments represent a loan to the issuer.
  • Market capitalisation = share price × number of shares outstanding.
  • P/E = market price per share ÷ earnings per share.
  • Dividend yield = dividend per share ÷ market price per share.
  • Book value per share = net worth ÷ number of shares outstanding.
  • Bond price and bond yield move in opposite directions.
  • Coupon rate is fixed on face value; yield changes with the market price paid.
  • A bond trading below face value is at a discount; above face value is at a premium.
  • A credit spread is the extra yield over a benchmark such as a government security, paid for credit risk.
  • Zero coupon bonds pay no periodic interest and are issued at a discount to face value.
  • Check whether the question asks for a rate on face value or on market price before choosing an option.

Terminology in Equity and Debt Markets practice questions

Terminology in Equity and Debt Markets in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Terminology in Equity and Debt Markets: frequently asked questions

How many marks does this chapter carry in NISM-Series-XV?

The chapter weightage is 2 marks in the revised exam. It is a small chapter, but the terms are used throughout the paper, so learning them well helps elsewhere.

Is this chapter calculation-based or definition-based?

It is mostly definition-based, with a few simple formulas such as P/E, dividend yield and market capitalisation. Learn the formulas and the direction of relationships such as price and yield.

Which topics in this chapter should I study first?

Start with equity instruments, then valuation ratios and trading terms. After that, study debt instruments, then bond features, yields and pricing, and finish with ratings, spreads and interest rate concepts.

Is there negative marking in NISM-Series-XV?

Yes. A wrong answer costs 25% of the marks assigned to that question. The exam has 100 marks, takes 2 hours, and the pass mark is 60%.