Glossary Of Financial Terms starting with M

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List of Financial Terms (Alphabet Wise)

M1 A measure of the stock of money in India, which is also referred to as "Narrow Money". M1 is calculated by adding the net demand deposits of banks and 'Other' deposits with the Reserve Bank of India (RBI) to the sum of currency notes and coins held by the public. 'Net demand deposits' comprise current account deposits and a portion of the savings deposits considered as a demand LIABILTY, all held by the public; 'Other' deposits with RBI refers to funds held by certain institutions like the Industrial Development Bank of India and International Monetary Fund, foreign governments and CENTRAL BANKS, (See also REDDY COMMITTEE.)

M2 The sum of M1 and post office savings bank deposits.

M3 A measure of the stock of money in the nation with reference to which monetary targets are set by the Reserve Bank of India. It is the sum of M1 and the net TIME DEPOSITS (together with the portion of savings deposits no included in M1) with banks. It is also called 'Broad Money'. M3 is a function of RESERVE MONEY. (See also CHAKRAVARTY COMMITTEE)

M4 The sum of M3 and total post office deposits.

Malegam Committee A committee set up by the Securities and Exchange Board of India (SEBI) to suggest reforms in the primary market. The committee, headed by Y.H. Malegam, gave its recommendations in the second half of 1995, and these include:
  • Stricter norms of disclosure of financial information in the prospectuses of companies raising capital.
  • Draft prospectus filed with SEBI to be treated as a public document.
  • Permitting companies to undertake BOOK BUILDING, depending on the issue size.
  • Several recommendations of the committee have been accepted by SEBI and implemented through its guidelines.
Malhotra Committee A committee set up to recommend reforms in the insurance sector; headed by the former Reserve Bank of India Governor, R. N. Malhotra, the INSURANCE REFORMS COMMITTEE has made several suggestions in its report submitted in January 1994, that includes the following :
  • To permit the entry of private as well as foreign firms in the insurance business.
  • To reduce government stake in Life Insurance Corporation (LIC) and General Insurance Corporation (GIC) to 50 percent and restructure the two.
  • The delink GIC and its four subsidiaries namely:
    • (a) Oriental Fire and Insurance Co. Ltd.
    • (b) National Insurance Co. Ltd.
    • (c) New India Assurance Co. Ltd., and
    • (d) United India Insurance Co. Ltd.
  • To discard the system of licensing of surveyors by the Controller of Insurance.
  • To restructure the Tariff Advisory Committee.
  • To set up a regulatory authority for the insurance industry.
Marathe Committee (on Urban Co-operative Banks) A committee set up to review the licensing policy for new urban co-operative banks. Headed by S. S. Marathe of the Reserve Bank of India (RBI) Board, the committee's prescriptions submitted in May 1992, favour a liberal entry policy and include :
  • Establishment of new urban co-operative banks on the basis of need and potential, and achievement of revised viability norms. The one-bank-per-district approach is to be discarded.
  • Achieving prescribed viability norms in terms of share capital, initial membership and other parameters within a specified time.
  • Introduction of a monitoring system to generate early warning signals and for the timely detection of sickness.
The committee's recommendations have been accepted by the RBI with certain modifications.

Marginal Cost The cost of production and additional unit of a product. (See VARIABLE COST).

Marginal Tax Rate The rate of tax applicable on additional income. In a progressive tax regime, the marginal tax rate rises as income increase. It is the ratio of the change in total tax to the change in the base on which it is imposed, expressed as a percentage.

Market Capitalization The value of equity shares outstanding at prevailing market prices.

Market capitalization = Number of shares x Market price of each share.

Market capitalization may be determined for a company or for the stock market as a whole. Some stock market players attempt to gauge the price appreciation potential of a stock by relating market capitalization to the company's sales, (See PRICE-SALES RATIO).

Market Portfolio A PORTFOLIR whose composition in terms of securities and their proportions is identical to the composition of all the risky securities in the market. The market portfolio is a theoretical construct and it does not exist in reality. Therefore, the practice is to use a PROXY for the market, which is usually a broad-based index.

Marketing-to-Market A process of monitoring and updating the account positions of different parties to a transaction, as for example in a SHORT SALE. By debiting and crediting the different accounts in tandem with security price changes, a broker is able to quickly determine the LIABILITY resulting or the profit accruing to either side. For instance, if the price of a share sold short were to rise, the broker would reduce the short seller'' account and increase the account of the lender of securities. This provides protection to the latter and helps in determining the actual margin in the former'' account.

Merger The combination of two (or more) companies into one entity, usually through the exchange of shares. Three common forms of mergers are :
  • Horizontal, uniting similar plants and products.
  • Vertical, combining plants in different stages of production.
  • Conglomerate, uniting dissimilar plants and products.
MIBOR An acronym for the Mumbai Inter Bank Offer Rate, which is the weighted average interest rate of the rates at which certain banks/ institutions in Mumbai belonging to a representative panel are prepared to lend CALL MONEY.

Mutual Fund An organization that mobilizes the surpluses of savers and invests the same in different securities. Thus, an individual who owns a share in a mutual fund has a proportionate claim on the PORTFOLIO of investment vehicles held by the fund. In financial nomenclature, the term mutual fund refers to the 'Open-end' type of investment company which has no limit on the number of shares that it can issue. The Unit Trust of India's, Units 1964 scheme is a prime example. However, in common parlance, the term mutual fund refers to both the OPEN-END and CLOSED-END types of investment companies.

Managing an open-end fund however, involves some distinct challenges. The portfolio manager must estimate the maximum possible demand for REDEMPTION and accordingly retain some liquid ASSETS. Moreover, daily calculation of the NAV requires a sophisticated information system.

The SUBJECT-WISE LISTING mentions the different types of mutual funds that are explained elsewhere in this book.