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Short explanations and the questions a fuller lesson should answer. Story links are labelled as mentioned, illustrated or explained, according to what the article actually covers.
Mentioned means the idea appears briefly. Illustrated means the story gives an example. Explained means the article directly answers the question. Longer lessons will be added as they are written.
A deposit is money the bank owes its customer. The bank may use some of it for loans or investments, while keeping ways to meet withdrawals.
Appears in Why Silicon Valley Bank Collapsed in 2023: Bond Losses and a Bank Run.
What happens to a deposit after it enters a bank?
Why can customers withdraw before the bank's loans or investments are repaid?
An FD pays the agreed rate under its terms. An existing bond can change in market price when new bonds offer different yields.
Appears in Why the RBI Raised Rates Off Cycle in May 2022, Why Silicon Valley Bank Collapsed in 2023: Bond Losses and a Bank Run.
What is fixed for an FD saver, and what can change in a bond's market price?
Why does a higher rate on a new product affect an older FD and bond differently?
illustratedWhy the RBI Raised Rates Off Cycle in May 2022
explainedWhy Silicon Valley Bank Collapsed in 2023: Bond Losses and a Bank Run
A bond has a face value, a purchase price, promised payments and a repayment date. Those parts determine the cash an investor receives.
Appears in Why Silicon Valley Bank Collapsed in 2023: Bond Losses and a Bank Run.
What are a bond's face value, coupon, purchase price and repayment date?
How do a bond's payments work in a simple ₹100 example?
illustratedWhy Silicon Valley Bank Collapsed in 2023: Bond Losses and a Bank Run
When comparable new bonds offer a higher return, an older bond with fixed payments usually sells for less. Price and yield move in opposite directions.
Appears in Why the RBI Raised Rates Off Cycle in May 2022, Why Silicon Valley Bank Collapsed in 2023: Bond Losses and a Bank Run.
Why does an older fixed-rate bond's price fall when comparable new bonds offer a higher yield?
explainedWhy the RBI Raised Rates Off Cycle in May 2022
explainedWhy Silicon Valley Bank Collapsed in 2023: Bond Losses and a Bank Run
How can a bond's price be calculated from its future payments and the market yield?
illustratedWhy Silicon Valley Bank Collapsed in 2023: Bond Losses and a Bank Run
Duration estimates how sensitive a bond's price is to interest-rate changes. It is different from the date when the bond is repaid.
How does duration measure a bond's sensitivity to interest-rate changes?
Why is a 6.2-year duration not the same as a bond maturing in 6.2 years?
The repo rate is the rate at which the RBI lends short-term funds to banks against eligible securities. Changing it signals policy and influences other rates.
Appears in Why the RBI Raised Rates Off Cycle in May 2022, Why Silicon Valley Bank Collapsed in 2023: Bond Losses and a Bank Run, Why Indian Shares Fell on 4 June 2024, the Lok Sabha Results Day.
What is the repo rate and how does the RBI use it?
explainedWhy the RBI Raised Rates Off Cycle in May 2022
mentionedWhy Silicon Valley Bank Collapsed in 2023: Bond Losses and a Bank Run
mentionedWhy Indian Shares Fell on 4 June 2024, the Lok Sabha Results Day
How does a change in the repo rate reach deposit and loan rates?
Central banks set policy rates that influence borrowing costs and market yields, but the rates are not identical.
Appears in Why the RBI Raised Rates Off Cycle in May 2022, Why Silicon Valley Bank Collapsed in 2023: Bond Losses and a Bank Run, How Cheap Borrowing in Japan Made the August 2024 Market Selloff Worse.
How do central-bank policy-rate changes reach borrowing costs and bond yields?
illustratedWhy the RBI Raised Rates Off Cycle in May 2022
mentionedWhy Silicon Valley Bank Collapsed in 2023: Bond Losses and a Bank Run
How does the RBI repo rate differ from the US Fed's target range?
Credit risk is the chance of missed payment. Interest-rate risk is the chance that changing rates lower an asset's market value.
Appears in Why Silicon Valley Bank Collapsed in 2023: Bond Losses and a Bank Run.
How can a bond be unlikely to default yet lose market value?
explainedWhy Silicon Valley Bank Collapsed in 2023: Bond Losses and a Bank Run
What does credit risk measure, and what does interest-rate risk measure?
Mortgage-backed securities pass payments from pools of home loans to investors. Government or agency support can reduce credit risk without removing every risk.
How do mortgage payments reach investors in an agency mortgage-backed security?
Which risks remain even when a government or agency backs a security?
Bonds and similar instruments issued by the government. Banks hold them as relatively safe investments, and rules require banks to hold a share of deposits in them.
Appears in Why the RBI Raised Rates Off Cycle in May 2022, Why Silicon Valley Bank Collapsed in 2023: Bond Losses and a Bank Run.
Why do banks hold government securities?
Why are government securities seen as low in default risk, yet can still lose market value?
illustratedWhy Silicon Valley Bank Collapsed in 2023: Bond Losses and a Bank Run
Compounding is earning returns on earlier returns as well as on the original amount. Over long periods, the same rate produces a much larger total than simple interest on the original sum.
How does ₹1,00,000 grow under simple interest versus yearly compounding at the same rate?
Why does compounding also make a large early loss hard to recover from?
A real interest rate is the stated interest rate minus inflation. It shows roughly how much buying power a deposit gains or loses once rising prices are counted.
What is the difference between a nominal and a real interest rate?
What does it mean if a deposit's real rate is negative?
If a deposit pays 7% and inflation is 5%, what is the real return?
A credit rating is an agency's opinion of how likely a borrower is to repay on time. A downgrade can raise the interest a borrower must pay and can force some investors to sell.
What does a credit rating say, and what is it not?
Why can a rating downgrade raise a borrower's cost of funds?
How can concern about a credit-rating downgrade affect confidence in a borrower?
A fixed deposit holds money at a bank for a set term at an agreed rate. It gives predictable interest, but early withdrawal can reduce interest and inflation can erode what the money buys.
Appears in Why the RBI Raised Rates Off Cycle in May 2022, Why Silicon Valley Bank Collapsed in 2023: Bond Losses and a Bank Run.
How does a fixed deposit earn interest over its term?
illustratedWhy the RBI Raised Rates Off Cycle in May 2022
illustratedWhy Silicon Valley Bank Collapsed in 2023: Bond Losses and a Bank Run
What happens to interest if a fixed deposit is withdrawn early?
Why can a fixed deposit grow in rupees yet lose buying power?
A savings account pays a modest, variable rate of interest and allows money to be withdrawn at any time. It suits money needed soon, but its rate often trails inflation.
How does a savings account earn interest, and how does it differ from a fixed deposit?
Why does a savings account often lose to inflation over many years?
Treasury bills are short-term government debt sold at a discount and repaid at face value. They carry little default risk, but a foreign bill held in rupees still carries currency risk.
What is a Treasury bill and how does it pay a return?
Why can a US Treasury bill lose value for an Indian investor even though the bill is repaid in full?
A spread is a difference between yields or funding costs. A wider spread over a safer benchmark can reflect greater concern about credit risk or liquidity.
What does a widening yield spread mean for a trade that expects yields to converge?
What households and businesses expect about future prices can influence current spending, wage demands and price-setting. Central banks consider the risk that temporary inflation becomes persistent.
Appears in Why the RBI Raised Rates Off Cycle in May 2022.
Why do central banks worry that expectations can make inflation persist?
One basis point is 0.01 percentage points. A change in an interest rate measured in basis points is different from its percentage change relative to the starting rate.
Appears in Why the RBI Raised Rates Off Cycle in May 2022.
How do basis points translate into a change in an interest rate?
A floating-rate loan’s interest rate can change with its benchmark under the contract’s reset rules. A rate increase can change instalments, repayment time or both.
Appears in Why the RBI Raised Rates Off Cycle in May 2022.
How can a benchmark-rate increase change a floating-rate loan’s instalment or term?
The cash reserve ratio is the share of a bank's net demand and time liabilities it must keep as cash with the RBI. Raising it reduces cash available elsewhere in the banking system.
Appears in Why the RBI Raised Rates Off Cycle in May 2022.
What must a bank hold when the RBI raises the cash reserve ratio?
How does raising the cash reserve ratio differ from raising the repo rate?
Liquidity is the ability to get cash when it is needed. A bank can own valuable long-term assets and still struggle to pay withdrawals today.
Appears in Why Silicon Valley Bank Collapsed in 2023: Bond Losses and a Bank Run.
What does having enough ready cash mean for a bank?
Why are valuable long-term assets not always immediately spendable?
explainedWhy Silicon Valley Bank Collapsed in 2023: Bond Losses and a Bank Run
Why can market liquidity vanish when many people try to sell at once?
Why can a fund be unable to cut positions quickly when markets become hard to trade in?
Why can an institution with valuable assets still be unable to pay today?
Why do some investments take days to turn into cash while others take minutes?
A timing mismatch arises when a bank's deposits can leave soon but its loans or bonds repay much later.
Appears in Why Silicon Valley Bank Collapsed in 2023: Bond Losses and a Bank Run.
What goes wrong when deposits can leave today but bonds or loans repay years later?
explainedWhy Silicon Valley Bank Collapsed in 2023: Bond Losses and a Bank Run
How is a timing mismatch different from a loss in asset value?
Liquidity risk concerns cash needed now. Solvency risk concerns whether assets can cover what a bank owes after losses.
When is a bank short of cash, and when are its assets insufficient to cover what it owes?
How can concern about liquidity lead to concern about solvency, or vice versa?
A bank can pledge eligible securities to borrow cash instead of selling them, subject to lender rules and available collateral.
Appears in Why the RBI Raised Rates Off Cycle in May 2022, Why Silicon Valley Bank Collapsed in 2023: Bond Losses and a Bank Run.
How can a bank obtain cash by borrowing against securities instead of selling them?
illustratedWhy the RBI Raised Rates Off Cycle in May 2022
illustratedWhy Silicon Valley Bank Collapsed in 2023: Bond Losses and a Bank Run
Why do collateral eligibility, market value and preparation matter?
Deposit insurance protects eligible deposits up to a stated limit. The limit and rules depend on the country and the bank.
Appears in Why Silicon Valley Bank Collapsed in 2023: Bond Losses and a Bank Run.
What does deposit insurance cover, and where is its limit?
Why might customers with balances above the insurance limit withdraw quickly?
illustratedWhy Silicon Valley Bank Collapsed in 2023: Bond Losses and a Bank Run
How do the current US and Indian deposit-insurance rules compare?
If many depositors depend on the same industry or funding network, they may need cash or react to concern at the same time.
Appears in Why Silicon Valley Bank Collapsed in 2023: Bond Losses and a Bank Run.
Why can a bank be vulnerable when many customers work in one industry or share investors?
explainedWhy Silicon Valley Bank Collapsed in 2023: Bond Losses and a Bank Run
Why is a bank with a few very large depositors more exposed to a run?
A bank run occurs when many customers withdraw quickly and the bank cannot raise enough cash to meet them in time.
Appears in Why Silicon Valley Bank Collapsed in 2023: Bond Losses and a Bank Run.
How can many individually rational withdrawals overwhelm a bank's available cash?
illustratedWhy Silicon Valley Bank Collapsed in 2023: Bond Losses and a Bank Run
How do withdrawals already made differ from withdrawals a bank expects?
illustratedWhy Silicon Valley Bank Collapsed in 2023: Bond Losses and a Bank Run
Contagion is the spread of financial concern or stress from one institution or market to others. Timing alone does not prove causation.
Appears in Why Silicon Valley Bank Collapsed in 2023: Bond Losses and a Bank Run, How Cheap Borrowing in Japan Made the August 2024 Market Selloff Worse.
How can concern about one bank spread to others?
illustratedHow Cheap Borrowing in Japan Made the August 2024 Market Selloff Worse
What evidence is needed before saying one bank's failure caused another event?
illustratedWhy Silicon Valley Bank Collapsed in 2023: Bond Losses and a Bank Run
Can a fall in a foreign market reach Indian shares, and by how much?
Start-ups may hold large cash balances after funding rounds and draw them down as they spend, making deposit flows sensitive to funding conditions.
Appears in Why Silicon Valley Bank Collapsed in 2023: Bond Losses and a Bank Run.
Why might start-ups hold large bank balances and draw them down when funding slows?
illustratedWhy Silicon Valley Bank Collapsed in 2023: Bond Losses and a Bank Run
How can start-ups' shared funding network affect a bank's deposit base?
A borrower may depend on lenders renewing debt when it falls due. If they refuse, cash must be found elsewhere even when the borrower expects its assets to pay later.
What happens when lenders stop renewing short-term loans?
A fall in market value is an unrealised loss while the asset is held. Selling at the lower price makes the loss realised.
Appears in Why Silicon Valley Bank Collapsed in 2023: Bond Losses and a Bank Run.
When is a lower market price a paper loss, and when does a sale make it realised?
explainedWhy Silicon Valley Bank Collapsed in 2023: Bond Losses and a Bank Run
Why can an unrealised loss matter before an asset is sold?
These are different accounting categories for securities. Their recorded values and the treatment of gains or losses differ.
Why do banks classify securities as held to maturity or available for sale?
Which portfolio did SVB sell from on 8 March 2023, and why must it be distinguished from the held-to-maturity portfolio?
Amortised cost follows accounting adjustments from purchase; market value estimates what an asset could fetch now. They can differ when rates move.
Why can a bond's recorded value differ from the price at which it could be sold today?
What does amortised-cost accounting show, and what does it leave out?
A hedge is a position intended to offset some losses from rate changes. It has costs and does not eliminate every risk.
What is an interest-rate hedge intended to offset?
What are the limits and costs of hedging interest-rate risk?
AT1 bonds are bank-issued debt designed to absorb losses before a bank fails. Their terms can let the bank write them down or convert them to shares when a stated trigger occurs.
Why might bondholders and shareholders face different outcomes in a bank rescue?
How can a bank bond absorb losses before the bank formally fails?
Capital is the cushion that absorbs losses for a bank's owners. It is different from the cash used to pay depositors today.
Appears in Why Silicon Valley Bank Collapsed in 2023: Bond Losses and a Bank Run.
What is a bank's capital cushion, and how is it different from cash?
Why might a bank seek new capital after booking a loss?
mentionedWhy Silicon Valley Bank Collapsed in 2023: Bond Losses and a Bank Run
How do unpaid loans erode a bank’s capital?
Capital ratios compare a bank's capital with risk-weighted assets. Bad-loan ratios measure loans with repayment problems; neither alone describes every risk.
What do risk-weighted capital, core capital and gross non-performing assets measure?
Why do system-wide Indian ratios not prove that a particular bank had no exposure?
An unsecured loan has no specific asset behind it that the lender can sell if the borrower does not repay. The lender bears the loss directly.
What happens to a bank if an unsecured loan is not repaid?
Stress testing asks how a portfolio or institution would cope with adverse conditions. Models based on calm periods can understate losses when correlations, liquidity and funding conditions change together.
Why can risk models based on calm periods fail during a market crisis?
Owning an asset held in custody is different from holding a claim on a platform. Whether customer assets are segregated or commingled affects what customers can recover if the platform fails.
What is the difference between owning an asset and having a claim on an exchange?
Why does it matter whether customer assets are segregated or commingled?
A deal where one party sells a security and agrees to buy it back at a fixed price on a set date. In effect it is a short-term loan in the form of a sale and purchase.
What is a ready forward deal?
How can a loan be hidden inside a sale and buyback?
A paper a bank issues saying it holds a security on the buyer's behalf, instead of handing over the security itself. It is only as good as the security behind it.
What is a bank receipt?
Why is a receipt not the same as the security it refers to?
A central institution that holds securities in electronic form and records who owns them. It replaces paper certificates and hand-kept records.
Why is a central depository useful for securities?
The public body that registers and supervises brokers and other market participants. In India this is the Securities and Exchange Board of India (SEBI).
Appears in SEBI's October 2024 Index Derivatives Rules, Explained.
Why are brokers registered with the market regulator?
What does a market regulator do after an allegation is made about a listed company?
Derivatives trade in fixed lots. For an index contract, lot size times the index level gives the contract's notional value, so changing either changes how much exposure one contract carries. The notional value is not the amount paid up front.
Appears in SEBI's October 2024 Index Derivatives Rules, Explained.
Why might a regulator raise the contract size of index derivatives?
explainedSEBI's October 2024 Index Derivatives Rules, Explained
How do lot size and index level together set a contract's value?
illustratedSEBI's October 2024 Index Derivatives Rules, Explained
What is the difference between a contract's notional value and the premium a buyer pays?
An option has a last day, its expiry. Contracts close to expiry can change in price within minutes, which is why exchanges and regulators watch expiry-day trading closely.
Appears in SEBI's October 2024 Index Derivatives Rules, Explained.
Why does expiry-day trading in short-dated options draw regulatory attention?
explainedSEBI's October 2024 Index Derivatives Rules, Explained
Why might a regulator limit how many weekly expiries an exchange offers?
Why can an option's price change sharply in the last hours before expiry?
Margin is money a broker must deposit as a cushion against losses on trades. Regulators and exchanges can raise it when prices swing sharply.
Appears in SEBI's October 2024 Index Derivatives Rules, Explained.
Why might a regulator raise margins during a sharp market fall?
Why might a regulator require brokers to collect margin or premium upfront?
explainedSEBI's October 2024 Index Derivatives Rules, Explained
In rolling settlement, each day's trades are settled after a fixed number of days, with no carrying forward to a later settlement. It leaves less room for obligations to build up.
What is rolling settlement and how does it differ from carry-forward?
A circuit breaker is a rule that pauses trading after a large market fall. The pause gives participants time to settle up and check they can pay.
What is a circuit breaker and why do markets use one?
A short seller takes a position that gains if a price falls, for example by borrowing a security to sell it or by using a derivative. A published claim by a short seller is an allegation, not a finding.
What is a short position, and how can a short seller gain when a price falls?
Why is a short seller's report an allegation rather than proof?
How does a short seller profit when a share price falls, and what is the risk?
A deal between a listed company and a party legally defined as related to it. Listing rules require extra disclosure and approval, so whether a party counts as related depends on the definition in force at the time.
What is a related-party transaction, and why does the legal definition matter?
Why do regulators scrutinise transactions between a company and its related parties?
Insider trading is dealing in a company's shares while holding important non-public information. Securities laws in many countries, including India, prohibit it.
Why do regulators prohibit trading on non-public price-sensitive information?
What kind of information counts as unpublished price-sensitive information?
A follow-on public offer is an offer of shares to the public by an already listed company. Its subscription, completion or withdrawal is separate from movements in its existing shares.
How can a listed company’s follow-on share offer be withdrawn after subscription?
Redemption turns fund units into a cash payment under the scheme’s terms. Limits or suspensions can restrict when or how much an investor can withdraw, independently of the quoted unit value.
Why does a fund need cash to redeem units, and how can exit terms restrict withdrawals?
Reports, complaints and testimony state claims or evidence. A court or regulator’s decision establishes findings within its scope, subject to the status of appeals and later proceedings.
How do a financial allegation, testimony and a formal finding differ?
A market maker stands ready to buy and sell an asset, helping other participants trade. Its funding, inventory and relationship with a trading venue can affect the risks involved.
What does a market maker do on a trading platform?
Licences, tariffs and other entry conditions affect which firms can compete. Lower barriers can give customers more choice while putting established firms under pressure.
How can removing licensing or import barriers change competition?
Disinvestment is the sale of some government ownership in a public-sector enterprise. A partial stake sale is distinct from transferring control or selling the whole enterprise.
What does selling part of the government’s equity in a public-sector company mean?
Depository receipts let investors trade an interest in a company’s shares through another market. Indian companies have used ADRs and GDRs to raise money from investors abroad.
How can an Indian company use ADRs or GDRs to raise money abroad?
Trading between an index’s shares and related futures links their prices. During stress, selling pressure in one market can therefore reach the other.
How can falling index-futures prices transmit selling pressure to shares?
A calendar spread combines opposite positions in related contracts with different expiries. Their gains and losses may partly offset, but an expiring contract can behave differently from a later one.
Appears in SEBI's October 2024 Index Derivatives Rules, Explained.
Why might a calendar spread lose its margin benefit on expiry day?
explainedSEBI's October 2024 Index Derivatives Rules, Explained
Position limits restrict the size of trading exposures. Checks during the trading day can detect positions that would be missed by an end-of-day check.
Appears in SEBI's October 2024 Index Derivatives Rules, Explained.
Why can end-of-day position checks miss trading risk during the day?
explainedSEBI's October 2024 Index Derivatives Rules, Explained
Chapter 11 is a US court process in which a company seeks protection from creditors while a plan decides who is paid what. A creditor's claim is the legal amount fixed by that process; the amount finally paid on it can be different, and depends on the plan and the assets available.
Why can a bankruptcy claim be fixed at the filing-date value rather than a later price?
What is the difference between a creditor's allowed claim and the amount it finally recovers?
When a bank closes, authorities use a resolution process to handle deposits, assets and claims under the rules of that country.
Who closes a bank, what does a receiver do, and what happens to deposits, assets, shareholders and creditors?
How do bank-resolution procedures differ across countries?
Authorities may make a specific exception to ordinary protection limits when they judge a failure to pose wider financial risk.
Appears in Why Silicon Valley Bank Collapsed in 2023: Bond Losses and a Bank Run.
Why were SVB depositors above the ordinary insurance limit protected, and who was not protected?
illustratedWhy Silicon Valley Bank Collapsed in 2023: Bond Losses and a Bank Run
Why does SVB's depositor protection not promise the same outcome for every future failure?
A central bank can offer eligible banks temporary loans against specified collateral to ease a shortage of cash.
Appears in Why Silicon Valley Bank Collapsed in 2023: Bond Losses and a Bank Run.
How can temporary lending against eligible bonds help banks meet withdrawals?
explainedWhy Silicon Valley Bank Collapsed in 2023: Bond Losses and a Bank Run
How did the 2023 US Bank Term Funding Program work as a historical example?
A cooperative bank is owned by its members and serves a local community, with its own rules on whom it may lend to. In India, urban cooperative banks are supervised by the RBI for banking matters.
What went wrong when a cooperative bank lent to share brokers against the rules?
Moral hazard is the tendency to take more risk when someone else bears part of the loss. Deposit insurance and rescues can create it, which is why they come with rules.
How can a promise of rescue encourage a bank to take more risk?
How do rules such as capital requirements and insurance limits reduce moral hazard?
A failure can threaten the wider financial system through shared exposures, disrupted payments, funding withdrawals or forced sales. A large loss at one firm alone does not establish system-wide damage.
How can connections between financial institutions turn one failure into a wider risk?
When a country imports much of its crude oil, a higher dollar price can raise its import bill and feed into domestic costs. The effect depends on volumes, the exchange rate and how prices are passed on.
Appears in June 2025 Iran-Israel Conflict: Why Oil Rose While Tankers Kept Moving, The 2026 Strait of Hormuz Oil Supply Disruption, Explained.
How can a higher global crude-oil price reach India's import bill and domestic prices?
illustratedJune 2025 Iran-Israel Conflict: Why Oil Rose While Tankers Kept Moving
explainedThe 2026 Strait of Hormuz Oil Supply Disruption, Explained
Why can an oil-price rise affect an oil producer and an oil-using business differently?
In a commodity market, a risk premium is the extra price buyers pay today because a supply disruption is feared but has not yet happened. The premium can shrink quickly if the feared event does not occur. The same word is used more broadly for the extra return investors expect for taking on risk.
Appears in June 2025 Iran-Israel Conflict: Why Oil Rose While Tankers Kept Moving, The 2026 Strait of Hormuz Oil Supply Disruption, Explained.
Why can oil rise on a threat to shipping rather than an actual shortage?
explainedJune 2025 Iran-Israel Conflict: Why Oil Rose While Tankers Kept Moving
illustratedThe 2026 Strait of Hormuz Oil Supply Disruption, Explained
Why can a risk premium disappear even if prices stay volatile?
explainedJune 2025 Iran-Israel Conflict: Why Oil Rose While Tankers Kept Moving
A chokepoint is a narrow sea passage that many ships must use. If ships have to avoid it, voyages get longer and freight and insurance costs can rise, which raises the cost of imported goods even when the goods are available.
Appears in Red Sea Shipping Diversions 2024: How a Longer Route Raised Trade Costs, The 2026 Strait of Hormuz Oil Supply Disruption, Explained.
What is a shipping chokepoint, and why does it matter to trade?
explainedRed Sea Shipping Diversions 2024: How a Longer Route Raised Trade Costs
explainedThe 2026 Strait of Hormuz Oil Supply Disruption, Explained
How does a longer sea route change the landed price of an import?
explainedRed Sea Shipping Diversions 2024: How a Longer Route Raised Trade Costs
A customs duty is a tax on imported goods. A high duty makes imports costlier and shields local producers from foreign competition.
Appears in The April 2025 US Reciprocal Tariffs, Explained for India, The August 2025 US Tariff on Indian Goods, Explained.
What is a customs duty and how does it shield local makers?
explainedThe April 2025 US Reciprocal Tariffs, Explained for India
explainedThe August 2025 US Tariff on Indian Goods, Explained
How did the 1991 Budget change customs duty rates?
Who pays an import duty first, and who may ultimately bear it?
explainedThe April 2025 US Reciprocal Tariffs, Explained for India
explainedThe August 2025 US Tariff on Indian Goods, Explained
Why might an importer, exporter and consumer each bear part of a new tariff?
illustratedThe April 2025 US Reciprocal Tariffs, Explained for India
illustratedThe August 2025 US Tariff on Indian Goods, Explained
How are separate percentage import duties combined on a shipment’s customs value?
explainedThe August 2025 US Tariff on Indian Goods, Explained
Why do a shipment’s customs entry date and product exemptions matter for a tariff?
explainedThe April 2025 US Reciprocal Tariffs, Explained for India
explainedThe August 2025 US Tariff on Indian Goods, Explained
Why is the value of exports exposed to tariffs different from the actual loss caused by them?
illustratedThe August 2025 US Tariff on Indian Goods, Explained
A trade deficit arises when a country's imports of goods exceed its exports. It is one part of the current account, which also includes services and transfers.
Appears in The April 2025 US Reciprocal Tariffs, Explained for India.
What is a trade deficit, and how does it differ from the current-account deficit?
Why does a country that imports most of its oil see its trade deficit widen when oil prices rise?
What does a goods trade deficit measure?
explainedThe April 2025 US Reciprocal Tariffs, Explained for India
Prices tend to rise when buyers want more than sellers can supply, and fall when supply exceeds demand. For goods like oil, expectations about future supply can move today's price too.
Appears in Red Sea Shipping Diversions 2024: How a Longer Route Raised Trade Costs, June 2025 Iran-Israel Conflict: Why Oil Rose While Tankers Kept Moving, The August 2025 US Tariff on Indian Goods, Explained, The 2026 Strait of Hormuz Oil Supply Disruption, Explained.
Why does a fall in supply raise the price of a commodity?
explainedRed Sea Shipping Diversions 2024: How a Longer Route Raised Trade Costs
explainedThe 2026 Strait of Hormuz Oil Supply Disruption, Explained
Why can the expected future supply move today's price?
explainedJune 2025 Iran-Israel Conflict: Why Oil Rose While Tankers Kept Moving
explainedThe 2026 Strait of Hormuz Oil Supply Disruption, Explained
Gold pays no interest or dividend, so its return comes only from price changes. Its price often moves differently from shares, which is why some investors hold it alongside them.
How does gold earn a return when it pays no interest or dividend?
Why do some investors hold gold alongside shares?
Why can the price of gold in India differ from the international gold price?
An import bill depends on the amount bought and the price per unit. A change in both compounds; the domestic-currency cost also depends on the exchange rate and other charges.
Appears in June 2025 Iran-Israel Conflict: Why Oil Rose While Tankers Kept Moving.
How do price and quantity changes combine to change an import bill?
illustratedJune 2025 Iran-Israel Conflict: Why Oil Rose While Tankers Kept Moving
A higher input cost can be absorbed in a business’s profit, passed to customers through prices, or shared between them. Contracts, competition and the size of that input affect the result.
Appears in Why the RBI Raised Rates Off Cycle in May 2022, Red Sea Shipping Diversions 2024: How a Longer Route Raised Trade Costs, The April 2025 US Reciprocal Tariffs, Explained for India, June 2025 Iran-Israel Conflict: Why Oil Rose While Tankers Kept Moving, The August 2025 US Tariff on Indian Goods, Explained, The 2026 Strait of Hormuz Oil Supply Disruption, Explained.
How can a higher input cost affect selling prices and business profits?
illustratedWhy the RBI Raised Rates Off Cycle in May 2022
illustratedRed Sea Shipping Diversions 2024: How a Longer Route Raised Trade Costs
explainedThe April 2025 US Reciprocal Tariffs, Explained for India
explainedJune 2025 Iran-Israel Conflict: Why Oil Rose While Tankers Kept Moving
illustratedThe August 2025 US Tariff on Indian Goods, Explained
illustratedThe 2026 Strait of Hormuz Oil Supply Disruption, Explained
A benchmark such as Brent is a reference price. The price paid for a particular cargo can differ because of its grade, delivery location, freight and contract terms.
Appears in June 2025 Iran-Israel Conflict: Why Oil Rose While Tankers Kept Moving, The 2026 Strait of Hormuz Oil Supply Disruption, Explained.
Why can an importer’s actual oil price differ from the Brent benchmark?
explainedThe 2026 Strait of Hormuz Oil Supply Disruption, Explained
Spot prices refer to current physical-market transactions; futures prices refer to standardised contracts for later delivery or settlement. Their dates, maturities and price measures must be distinguished.
Appears in The 2026 Strait of Hormuz Oil Supply Disruption, Explained.
Why must spot and futures prices be distinguished when describing a commodity price shock?
mentionedThe 2026 Strait of Hormuz Oil Supply Disruption, Explained
Businesses need funds while paying for inputs, holding goods and waiting for customers to pay. Longer delivery or collection times can tie up cash and increase financing needs.
Appears in Red Sea Shipping Diversions 2024: How a Longer Route Raised Trade Costs.
Why does a shipping delay tie up a business’s cash and potentially increase interest costs?
explainedRed Sea Shipping Diversions 2024: How a Longer Route Raised Trade Costs
Emergency oil stocks can be released to help bridge a supply interruption. Making stocks available is different from delivering them immediately, and reserves do not remove the disruption itself.
Appears in The 2026 Strait of Hormuz Oil Supply Disruption, Explained.
How can emergency oil reserves help during a supply disruption, and what can they not do?
explainedThe 2026 Strait of Hormuz Oil Supply Disruption, Explained
An index is a single number that tracks the prices of a chosen group of shares. It is used to describe how a market, or part of it, has moved.
Appears in Why Indian Shares Fell on 4 June 2024, the Lok Sabha Results Day, How Cheap Borrowing in Japan Made the August 2024 Market Selloff Worse, The Nifty's September 2024 High: Why Prices Later Fell, SEBI's October 2024 Index Derivatives Rules, Explained, The April 2025 US Reciprocal Tariffs, Explained for India.
What does a stock market index such as the Dow measure?
What is the Sensex?
What does a big fall in an index tell us?
explainedWhy Indian Shares Fell on 4 June 2024, the Lok Sabha Results Day
mentionedHow Cheap Borrowing in Japan Made the August 2024 Market Selloff Worse
explainedThe April 2025 US Reciprocal Tariffs, Explained for India
What does a stock market index like the Sensex show?
How is the percentage fall in an index calculated?
illustratedWhy Indian Shares Fell on 4 June 2024, the Lok Sabha Results Day
What is a stock market index and what does it track?
What is a stock market index?
explainedThe Nifty's September 2024 High: Why Prices Later Fell
Why can two indices move by different amounts over the same months?
Why can an index’s intraday high or low differ from its closing level?
explainedWhy Indian Shares Fell on 4 June 2024, the Lok Sabha Results Day
A bull market is a long period when share prices mostly rise. The term describes a trend and has no single official definition.
What is a bull market?
How long and how large must a rise be before it is called a bull market?
Discounting converts future payments into a value today using a rate of return. A higher rate gives a lower value for the same future payments.
Why does a lower safe interest rate raise what the same profit is worth?
What does a simple profit-divided-by-rate valuation leave out?
A re-rating happens when investors pay a higher or lower price for the same profits because conditions around the business have changed.
Appears in Why Indian Shares Fell on 4 June 2024, the Lok Sabha Results Day, The Nifty's September 2024 High: Why Prices Later Fell.
What is a re-rating of a share?
illustratedThe Nifty's September 2024 High: Why Prices Later Fell
Why can share prices rise before the economy or profits recover?
How can a change in the earnings multiple move a share price even when profit stays unchanged?
illustratedWhy Indian Shares Fell on 4 June 2024, the Lok Sabha Results Day
explainedThe Nifty's September 2024 High: Why Prices Later Fell
The part of a purchase's value that a borrower must put in with their own money. A loan without margin lets the borrower take larger positions with less of their own cash.
Appears in How Cheap Borrowing in Japan Made the August 2024 Market Selloff Worse, SEBI's October 2024 Index Derivatives Rules, Explained.
What is margin in a loan against shares?
How does a margin deposit differ from the price paid for an option?
explainedSEBI's October 2024 Index Derivatives Rules, Explained
How can a demand for extra collateral force a trader to sell investments?
explainedHow Cheap Borrowing in Japan Made the August 2024 Market Selloff Worse
In a carry-forward system, a trader defers settlement of a trade to a later date, with a financier supplying money or shares for a fee. The position depends on lenders being willing to keep funding it.
How did carry-forward (badla) trading work in India?
An index option is a contract whose value depends on a share index. The buyer pays a price, the premium, upfront; the contract's value can change quickly because it has a fixed life.
Appears in SEBI's October 2024 Index Derivatives Rules, Explained.
How does an option buyer's premium work in a simple rupee example?
illustratedSEBI's October 2024 Index Derivatives Rules, Explained
Why can options carry high implicit leverage even when the buyer pays only a premium?
explainedSEBI's October 2024 Index Derivatives Rules, Explained
Stock index futures are contracts based on the future value of a share index. They let investors cut or add market exposure without trading each share.
What are stock index futures and why were they used to cut exposure quickly?
What is an index future, and how does it differ from owning the shares in the index?
A stop-loss order tells a broker to sell a share automatically if its price falls to a set level. When many holders use similar levels, their sales can arrive together.
What is a stop-loss order?
Why can many people holding the same sell rule push prices down together?
The P/E ratio is a share price divided by the company's profit per share. It shows how much investors pay for each rupee of yearly profit, and it is not a payback period.
Appears in Why Indian Shares Fell on 4 June 2024, the Lok Sabha Results Day, The Nifty's September 2024 High: Why Prices Later Fell.
What does a P/E ratio measure?
illustratedWhy Indian Shares Fell on 4 June 2024, the Lok Sabha Results Day
explainedThe Nifty's September 2024 High: Why Prices Later Fell
What does a P/E ratio of about 200 mean compared with 20?
A bubble is a period when prices rise far above what expected profits seem to support, often followed by a large fall. Whether a price is too high is a judgement made with hindsight.
Appears in The Nifty's September 2024 High: Why Prices Later Fell.
Why is a very high price risky when it rests on hoped-for future profit?
mentionedThe Nifty's September 2024 High: Why Prices Later Fell
Can a record index level alone prove that shares were overpriced?
explainedThe Nifty's September 2024 High: Why Prices Later Fell
A foreign portfolio investor (FPI) is a registered overseas investor that buys and sells listed Indian securities such as shares and bonds, without taking control of a company. Its net buying or selling is recorded in rupees and can move prices.
Appears in The Nifty's September 2024 High: Why Prices Later Fell.
What is a foreign portfolio investor, and why can its buying or selling affect Indian share prices?
explainedThe Nifty's September 2024 High: Why Prices Later Fell
How can heavy FPI selling affect both share prices and the rupee?
Investors may buy or sell because others are doing so, rather than because of a company's earnings. Regulators have described such trading as sentiment driven.
How can sentiment, rather than earnings, drive share prices?
Market capitalisation is the total market value of a company's listed shares, or of all shares on an exchange. It changes whenever share prices change.
What is market capitalisation?
How is a company's market capitalisation calculated, and what does a fall in it show?
Share prices usually reflect what investors broadly expect. A known outcome can still move prices if it differs from those expectations, so the surprise often matters more than the news itself.
Appears in Why Indian Shares Fell on 4 June 2024, the Lok Sabha Results Day, How Cheap Borrowing in Japan Made the August 2024 Market Selloff Worse, The April 2025 US Reciprocal Tariffs, Explained for India, June 2025 Iran-Israel Conflict: Why Oil Rose While Tankers Kept Moving.
Why can share prices fall when a widely anticipated outcome actually happens?
explainedWhy Indian Shares Fell on 4 June 2024, the Lok Sabha Results Day
Why can a share fall after a company announces good results?
Why can share prices change before reported business profits change?
illustratedHow Cheap Borrowing in Japan Made the August 2024 Market Selloff Worse
illustratedThe April 2025 US Reciprocal Tariffs, Explained for India
illustratedJune 2025 Iran-Israel Conflict: Why Oil Rose While Tankers Kept Moving
A volatility index, such as NSE's India VIX, is derived from Nifty option prices. It shows how much movement in the Nifty the market expects over the next 30 days; it does not predict direction.
Appears in Why Indian Shares Fell on 4 June 2024, the Lok Sabha Results Day.
What does a rise in India VIX show about expected market movement?
explainedWhy Indian Shares Fell on 4 June 2024, the Lok Sabha Results Day
What does a rise in the India VIX tell an investor, and what does it not tell?
A fall of a given percentage needs a larger percentage rise to return to the starting value. A 50 percent fall needs a 100 percent gain, for example.
Appears in Why Indian Shares Fell on 4 June 2024, the Lok Sabha Results Day, The Nifty's September 2024 High: Why Prices Later Fell.
Why does a 78 percent fall need a gain of more than 300 percent to recover?
illustratedWhy Indian Shares Fell on 4 June 2024, the Lok Sabha Results Day
illustratedThe Nifty's September 2024 High: Why Prices Later Fell
How is the percentage gain needed to recover a loss calculated?
illustratedWhy Indian Shares Fell on 4 June 2024, the Lok Sabha Results Day
illustratedThe Nifty's September 2024 High: Why Prices Later Fell
Diversification means spreading money across different investments so that one disappointing holding does not decide the whole result. It reduces the effect of a single failure but cannot remove the risk of a broad market fall.
Why does holding many different investments reduce the damage from one failure?
Why does diversification not protect against a fall that hits the whole market?
How does mixing Indian stocks, US stocks, gold and deposits spread risk?
Why can a diversified portfolio still lose money?
Why can one investment beat a diversified mix over a period?
Why can diversification weaken when many markets fall together?
A derivative is a contract whose value depends on something else, such as an index, a share or a commodity price. Futures and options are common examples, and they are traded in fixed lots.
Appears in SEBI's October 2024 Index Derivatives Rules, Explained.
What does a derivative's value depend on, and why is it not owning the asset?
explainedSEBI's October 2024 Index Derivatives Rules, Explained
How can the same derivative be used to reduce risk or to take risk?
A call option gives the buyer the right, not the obligation, to buy at a fixed price by a set date; a put gives the right to sell. The buyer pays a premium, and the most the buyer can lose is that premium, while a seller can lose much more.
Appears in SEBI's October 2024 Index Derivatives Rules, Explained.
Why is the buyer's maximum loss on an option limited while the seller's is not?
What is the profit or loss on a call option at expiry for three different index levels?
How do calls and puts differ, and why is getting the direction right not enough for a profit?
illustratedSEBI's October 2024 Index Derivatives Rules, Explained
An IPO is when a company first sells shares to the public and lists on an exchange. The issue price is set by the company and its bankers, and the listing price is then set by the market.
How does a company raise money through an IPO?
Why can a share list far above or below its issue price?
A dividend is a share of a company's profit paid to shareholders. It is decided by the company and is not guaranteed.
Appears in The Nifty's September 2024 High: Why Prices Later Fell.
What is a dividend, and why is it not guaranteed?
explainedThe Nifty's September 2024 High: Why Prices Later Fell
How is dividend yield calculated?
Earnings per share is a company's profit divided by its number of shares. It is the profit measure that the price-to-earnings ratio compares with the share price.
Appears in The Nifty's September 2024 High: Why Prices Later Fell.
How is earnings per share calculated?
How do earnings per share and the share price together give the P/E ratio?
illustratedThe Nifty's September 2024 High: Why Prices Later Fell
Marking to market means valuing a position at today's market price rather than its purchase price. Gains and losses then show up as prices move, even if nothing has been sold.
Appears in Why Silicon Valley Bank Collapsed in 2023: Bond Losses and a Bank Run.
What does valuing a holding at today's market price show that its purchase price does not?
illustratedWhy Silicon Valley Bank Collapsed in 2023: Bond Losses and a Bank Run
Why do futures traders have to settle gains and losses daily?
The S&P 500 tracks about 500 large US companies and is the common benchmark for the US stock market. Its returns for an Indian investor also depend on the rupee-dollar exchange rate.
What does the S&P 500 track?
Why can US and Indian stock markets move differently in the same year?
Implied volatility is inferred from option prices and describes the size of price swings those prices allow for. It is not the actual percentage price change and does not predict direction.
Appears in Why Indian Shares Fell on 4 June 2024, the Lok Sabha Results Day.
How does implied volatility describe expected price swings rather than an actual price change?
explainedWhy Indian Shares Fell on 4 June 2024, the Lok Sabha Results Day
Inflation is the general rise in prices over time, often measured with a consumer price index. It reduces what a rupee can buy.
Appears in Why the RBI Raised Rates Off Cycle in May 2022, Red Sea Shipping Diversions 2024: How a Longer Route Raised Trade Costs.
What is inflation and how is it measured?
explainedWhy the RBI Raised Rates Off Cycle in May 2022
explainedRed Sea Shipping Diversions 2024: How a Longer Route Raised Trade Costs
Why does inflation reduce what a fixed deposit's interest can buy?
How can a rise in oil prices feed into general consumer prices?
How do yearly inflation rates combine over several years?
Why is a national price index only a rough guide to one household’s costs?
Why can wholesale and consumer inflation figures describe different price changes?
A licence is government permission to start, expand or change what a firm makes. Requiring licences limits how many firms can compete in an industry.
What did India's 1991 industrial policy change about licensing?
Why does a licence requirement limit competition?
The fiscal deficit is the amount by which a government's spending exceeds its income in a year, so the gap must be borrowed. It is often stated as a share of GDP.
What is a fiscal deficit?
Monetary policy is how a central bank uses interest rates and the amount of money in the system to influence inflation and growth. In India, the RBI sets the repo rate as its main tool.
Appears in Why the RBI Raised Rates Off Cycle in May 2022.
Why would a central bank raise interest rates when inflation is high?
How does a rate rise reach savers, borrowers and share prices?
Why can higher interest rates restrain spending without directly replacing lost oil or food supply?
What does it mean when a central bank keeps its policy rate unchanged?
GDP is the total value of goods and services produced in a country in a period. Its growth rate is the usual measure of how fast the economy is expanding.
What does GDP measure, and what does it leave out?
How is the growth rate of GDP calculated?
A recession is a period when a country's economic activity falls, usually with rising unemployment. Official dating differs by country.
How is a recession identified, and why do countries date it differently?
Does a falling stock market mean a recession has started?
A stand-by arrangement is a loan agreement in which the International Monetary Fund lends to a member country with a financing programme attached. Amounts can exceed the usual access limits.
What is an IMF stand-by arrangement and which countries used one in 1997?
Portfolio insurance is a rule-based strategy that sells part of a portfolio as the market falls, aiming to limit losses. If many investors follow similar rules, their selling can add to a fall.
How does portfolio insurance tell investors to sell as prices fall?
A hedge fund is a privately run pool of money for wealthy people and large institutions, not sold widely to the public. It can use borrowing and varied strategies that ordinary mutual funds usually do not.
What is a hedge fund, and how does it differ from a mutual fund?
Leverage is using borrowed money to hold more assets than your own capital could buy. It magnifies gains and losses, so a small fall in asset prices can wipe out a large share of capital.
Appears in How Cheap Borrowing in Japan Made the August 2024 Market Selloff Worse, SEBI's October 2024 Index Derivatives Rules, Explained.
What is leverage, and how is it measured as a ratio of assets to capital?
illustratedHow Cheap Borrowing in Japan Made the August 2024 Market Selloff Worse
illustratedSEBI's October 2024 Index Derivatives Rules, Explained
How can a small fall in asset prices wipe out a leveraged investor's own capital?
illustratedHow Cheap Borrowing in Japan Made the August 2024 Market Selloff Worse
If an investor puts in ₹1 lakh and borrows ₹1 lakh, what share of their capital does a 10% asset fall wipe out?
A flight to quality happens when investors avoid risk and move to assets that are safer and easier to sell. Gaps between safe and risky yields often widen as a result.
What is a flight to quality, and what does it do to risk spreads?
Why do investors move money to safer assets during a panic?
A fire sale is a rushed sale of assets at low prices, often by a seller under pressure to raise cash. It can push prices down further and strain other holders of similar assets.
Appears in How Cheap Borrowing in Japan Made the August 2024 Market Selloff Worse.
Why do authorities worry about a fire sale of a failing fund's assets?
How can forced selling push prices down and cause more forced selling?
explainedHow Cheap Borrowing in Japan Made the August 2024 Market Selloff Worse
A carry trade borrows in a currency with low interest rates and invests in assets that pay more. It earns the gap while the exchange rate holds, but a rise in the borrowed currency makes the loan costlier to repay.
Appears in How Cheap Borrowing in Japan Made the August 2024 Market Selloff Worse.
What is a currency carry trade, and where does its profit come from?
explainedHow Cheap Borrowing in Japan Made the August 2024 Market Selloff Worse
What happens to the cost of repaying a yen loan when the yen strengthens?
illustratedHow Cheap Borrowing in Japan Made the August 2024 Market Selloff Worse
How is the net return on a carry trade calculated after borrowing costs?
illustratedHow Cheap Borrowing in Japan Made the August 2024 Market Selloff Worse
Hedging means taking a second position that tends to gain when the first one loses. It reduces one risk, usually at a cost, and can leave other risks unchanged.
Appears in SEBI's October 2024 Index Derivatives Rules, Explained.
How can an importer use a forward contract to fix the rupee cost of a dollar payment?
Why does hedging usually cost something even when nothing goes wrong?
How can an investor hedge currency risk on an overseas holding?
Why does unhedged foreign-currency borrowing expose a borrower to exchange-rate changes?
Counterparty risk is the chance that the other side of a deal fails to pay what it owes. It matters most when many institutions owe each other at once.
Appears in SEBI's October 2024 Index Derivatives Rules, Explained.
What is counterparty risk, and when does it spread beyond one firm?
How does a clearing house reduce counterparty risk on an exchange?
illustratedSEBI's October 2024 Index Derivatives Rules, Explained
Why do a failing trading firm’s lenders and counterparties face losses?
A currency depreciates when it buys less of another currency, so more units are needed to buy one dollar.
Appears in June 2025 Iran-Israel Conflict: Why Oil Rose While Tankers Kept Moving.
What does it mean when the rupee weakens against the dollar?
How does a weaker rupee raise the rupee cost of imported oil?
explainedJune 2025 Iran-Israel Conflict: Why Oil Rose While Tankers Kept Moving
A peg is a promise to keep a currency near a fixed rate against another currency. Small day-to-day movement can encourage borrowing without protection against a later fall.
What is a currency peg and why can it encourage unprotected foreign borrowing?
Debt owed in another country's currency becomes heavier in local terms when the local currency falls. Borrowing without protection against this (unhedged) is riskier when it is short-term.
Appears in How Cheap Borrowing in Japan Made the August 2024 Market Selloff Worse.
Why does a falling local currency make dollar debt harder to repay?
illustratedHow Cheap Borrowing in Japan Made the August 2024 Market Selloff Worse
Reserves are the foreign money a central bank holds. They are often compared with short-term foreign debt to judge how well a country can meet payments due soon.
Why do analysts compare foreign-exchange reserves with short-term foreign debt?
What are foreign-exchange reserves and why does a country hold them?
What happens when a country's foreign-exchange reserves run low?
Why do low foreign-exchange reserves matter for a country's imports?
What can a central bank use foreign-exchange reserves for?
The current account deficit is the gap between what a country spends abroad and what it earns abroad. It is usually compared with the size of the economy (GDP).
What is a current account deficit?
What is a current account deficit?
How is a current-account deficit paid for?
A currency depreciates when it buys fewer units of another currency. It raises the local cost of anything owed in foreign money.
How far did the rupee and other Asian currencies fall in 1997-98?
A government's decision to lower its currency's official value, so each unit of foreign currency costs more of the home currency. It tends to make imports dearer and exports cheaper.
What is a currency devaluation?
Why does a lower currency value make imports dearer and exports cheaper?
The record of a country's payments to and receipts from the rest of the world. A balance of payments crisis means it is short of the foreign money needed to pay what it owes abroad.
What is a balance of payments crisis?
What does the balance of payments record, and why can it come under pressure?
A central bank selling or buying foreign currency from its reserves to influence its own currency's value. It can only be sustained while reserves last.
How does a central bank use its reserves to hold up its currency?
Foreign direct investment is money a foreign investor puts into a business in another country, often for a lasting ownership share. Rules usually set which industries it may enter and how large a stake is allowed.
What foreign investment did India's 1991 industrial policy allow?
An exchange rate is the price of one currency in another, such as rupees per US dollar. When it takes more rupees to buy a dollar, the rupee has weakened against the dollar.
Appears in How Cheap Borrowing in Japan Made the August 2024 Market Selloff Worse, June 2025 Iran-Israel Conflict: Why Oil Rose While Tankers Kept Moving, The 2026 Strait of Hormuz Oil Supply Disruption, Explained.
If the rate moves from ₹83 to ₹85 per dollar, which currency has weakened?
Who gains and who loses when the rupee weakens?
How does the rupee-dollar rate change the rupee value of a dollar asset?
How is a dollar import bill converted into rupees?
illustratedJune 2025 Iran-Israel Conflict: Why Oil Rose While Tankers Kept Moving
mentionedThe 2026 Strait of Hormuz Oil Supply Disruption, Explained
An investor in rupees who holds a dollar asset earns the asset return and the change in the exchange rate. A stronger rupee can cut or erase the gain from a foreign investment.
How do a 10% dollar asset return and a 5% dollar gain combine into a rupee return?
What happens to a dollar holding’s rupee value if the rupee strengthens?
Why does holding US dollar cash earn only the exchange-rate movement?
A fund's net asset value per unit is the value of its assets minus liabilities, divided by the number of units. An administratively set repurchase price can differ from it.
Appears in Why Silicon Valley Bank Collapsed in 2023: Bond Losses and a Bank Run.
How can a fund's repurchase price differ from its net asset value?
How is a mutual fund's NAV calculated each day?
Who pays the difference when units are repurchased above NAV?
An index fund holds the shares in an index, such as the Nifty 50, in similar proportions. Its value rises and falls roughly with the index, less the fund's costs.
Appears in Why Indian Shares Fell on 4 June 2024, the Lok Sabha Results Day, The Nifty's September 2024 High: Why Prices Later Fell.
What does an index fund hold, and why does its value follow the index?
What happens to an index-fund investor's holding when the index falls 6% in a day?
illustratedWhy Indian Shares Fell on 4 June 2024, the Lok Sabha Results Day
illustratedThe Nifty's September 2024 High: Why Prices Later Fell
A systematic investment plan (SIP) invests a fixed amount at regular intervals. Because the same rupees buy more units when prices are low and fewer when high, the average cost per unit can differ from the average price.
Appears in Why Indian Shares Fell on 4 June 2024, the Lok Sabha Results Day, The Nifty's September 2024 High: Why Prices Later Fell.
How many units does a fixed monthly SIP buy as the price changes?
What does a market fall mean for an ongoing SIP, and what does it not guarantee?
illustratedThe Nifty's September 2024 High: Why Prices Later Fell
When does investing monthly beat or trail investing everything at once?
An asset class is a group of investments that behave in broadly similar ways, such as equities, gold, deposits and government bills. Each has its own sources of return and its own risks.
What are the main asset classes, and how does each one earn a return?
Why do equities, gold and deposits carry different kinds of risk?
Asset allocation is how an investor divides money across asset classes. The split often matters more for the overall result than the choice of any single holding.
What does it mean to split ₹1,00,000 across several investments?
Why can the split between asset classes matter more than any single pick?
How do percentage weights and rupee amounts describe the same allocation?
Because holdings grow at different rates, a portfolio drifts away from its target split. Rebalancing sells some of what has grown and buys what has lagged to restore the target, usually at a cost.
Why does a 40% holding no longer stay at 40% after the investments grow at different rates?
What does it mean to restore your initial allocation once a year?
What does rebalancing cost, and when might it not help?
Buy and hold means investing once and leaving the holdings alone, so the weights drift with market moves. It avoids trading costs but lets the mix change on its own.
What does it mean to buy and hold a portfolio?
How do ending weights differ from starting weights under buy and hold?
Concentration risk is the danger of having too much money in one investment, sector or country. A single bad outcome can then dominate the whole portfolio.
What is concentration risk and how does it show up in a portfolio?
What risk comes from holding only one country’s market?
How can lending heavily to one group of borrowers expose a bank to large losses?
Investments with higher possible returns usually come with larger or less predictable losses. A higher past return does not mean lower risk, and a smooth balance does not mean no risk.
Why do investments with higher possible returns usually come with larger possible losses?
Why does a smooth balance not mean an investment is risk-free?
Correlation describes how closely two investments move together. Combining holdings that do not always rise and fall at the same time is what makes diversification work.
What does it mean for two investments to move together or apart?
Why does combining investments that do not move together reduce the swings of the whole?
The investment horizon is how long money stays invested. Over short horizons results vary widely, and the same mix can look very different over 1 year than over 15.
Why can results differ so much over 1 year compared with 15 years?
Why can the same allocation succeed in one period and disappoint in another?
A lump sum invests all the money at the start, while monthly investing adds money over time. Money added later has less time to grow, so the two are not directly comparable.
Appears in The Nifty's September 2024 High: Why Prices Later Fell.
How does investing ₹1 lakh at once differ from adding ₹1,000 every month?
illustratedThe Nifty's September 2024 High: Why Prices Later Fell
Why does money added later earn less of the growth than the starting amount?
Why is a monthly saving modelled from yearly data only an approximation of a real SIP?
Different investments can be turned into cash at different speeds and costs. Quick access is separate from safety, because a fast sale can still be at a loss.
How quickly can different investments be turned into cash, and at what cost?
Why does quick access to money not protect it from loss?
How can redemption restrictions delay access to money in a fund?
Compound annual growth rate is the steady yearly rate that would turn the starting amount into the ending amount. It smooths uneven years into one comparable figure.
What does compound annual growth rate tell you about an investment?
How do you calculate CAGR from a starting amount, an ending amount and the number of years?
Why is CAGR not a fair measure when new savings are added along the way?
XIRR measures the annualised return on money added at different dates. It is used instead of CAGR when contributions arrive over time, because new savings are not growth.
What does XIRR measure that CAGR does not?
Why do the dates of each contribution matter when working out a return?
Gains and losses compound rather than cancel. A 10% gain followed by a 10% loss leaves less than the starting amount, so a simple average of yearly returns can overstate what an investor earned.
Why does ₹1 lakh that gains 10% and then loses 10% end below ₹1 lakh?
Why can the average of yearly returns overstate what an investor earned?
Price return counts only the change in an index or share price. Total return also counts dividends or interest reinvested, so it is higher when payouts are material.
Appears in Why Indian Shares Fell on 4 June 2024, the Lok Sabha Results Day, The Nifty's September 2024 High: Why Prices Later Fell.
What is the difference between price return and total return?
illustratedWhy Indian Shares Fell on 4 June 2024, the Lok Sabha Results Day
illustratedThe Nifty's September 2024 High: Why Prices Later Fell
Why does a price-only index understate an investor’s actual return?
Purchasing power is what a sum of money can buy. Rupees from different years are not comparable until adjusted for the rise in prices between them.
What does it mean that ₹1 lakh today buys less than ₹1 lakh did years ago?
How do you convert a future sum into the rupees of a starting year?
Can an investment grow in rupees and still lose buying power?
A drawdown is the fall from a previous peak to a later low. It shows how deep the losses went and how long recovery to the old peak took.
Appears in The Nifty's September 2024 High: Why Prices Later Fell.
What is a drawdown, and how is it measured from a previous peak?
explainedThe Nifty's September 2024 High: Why Prices Later Fell
How is the time to recover to an old peak measured?
Why do yearly figures understate the real worst fall within a year?
Volatility measures how widely returns swing from year to year, commonly as a standard deviation. A higher figure means a less predictable path, not necessarily a worse outcome.
What does the standard deviation of yearly returns say about an investment?
What do the worst year and the number of losing years show about risk?
Rolling returns measure results over every possible start date for a fixed period, such as all 5-year windows. They show the range of outcomes rather than one lucky or unlucky stretch.
What are rolling returns, and why look at every start year?
What do the lowest, median and highest outcomes across windows show?
Why do overlapping windows not count as independent experiments?
A backtest replays history to see how a strategy would have done. Choosing the period afterwards flatters the result, and past outcomes do not forecast future ones.
Appears in The Nifty's September 2024 High: Why Prices Later Fell.
What is a backtest, and what can it show?
Why does choosing the period yourself make a result look better than it is?
illustratedThe Nifty's September 2024 High: Why Prices Later Fell
Why do past returns not predict future returns?
Buying and selling usually involve brokerage, spreads, taxes and other charges. Small costs repeated over many trades reduce the return an investor actually keeps.
Appears in SEBI's October 2024 Index Derivatives Rules, Explained.
What costs apply when buying or selling an investment?
mentionedSEBI's October 2024 Index Derivatives Rules, Explained
Why can small costs repeated over years noticeably reduce the final amount?
Interest, dividends and capital gains can be taxed differently, so returns before tax are higher than what an investor keeps. The rules depend on the asset, the holding period and the investor.
Appears in SEBI's October 2024 Index Derivatives Rules, Explained.
Why is an investment’s return before tax higher than what the investor keeps?
Why can interest, dividends and capital gains be taxed differently?