“analytical study of indian stock market”
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A Report on
“Analytical Study of Indian Stock Market”
Contents
1. Executive summary
3. Company Profile
4. Research Methodology
4.1 Title of the Study
4.2 Duration of the Project
4.3 Objective of Study
4.4 Data sources
4.5 Research approach
4.6 Findings and conclusions
4.7 Suggestions and recommendations
5. Core Study
6. SWOT
7. Conclusion 1
8. Bibliography
9. Questionnaire
Executive summary
This project is to study investors’ trading preference with special reference to a Analytical study
of Indian stock market.
This project was done in Prabhat Financial Services Ltd., JAIPUR.
Prabhat Financial Services Ltd is in stock broking service for over 15 years now. It has focused
on strengthening its presence in the rapidly expanding retail broking market. Company has
obtained SEBI registration to act as Portfolio Manager.
The finance sector in India is booming and with the steady rise in the disposable income of
people, there is a heightened cause for investments. With the inflation hitting the roof, one has to
find ways to get returns at least as much as the inflation rate. Depositing the money in banks is
just not the solution anymore. Thus the future of the finance sector in India is indeed bright.
A market is an environment that allows buyers and sellers to trade or exchange goods, services,
and information. These interactions define demand and supply characteristics and are therefore
fundamental to economies.
A market can be defined as a place where any type of trade takes place. Markets are dependent
on two major participants – buyers and sellers. Buyers and sellers typically trade goods, services
and/ or information. Historically, markets were physical meeting places where buyers and sellers
gathered together to trade. Although physical markets are still vital, virtual marketplaces
supported by IT networks such as the internet have become the largest and most liquid.
Some markets are very competitive, with a number of vendors selling the same kinds of products
or services. Conversely, some markets have low or no competition, particularly if the industry is
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protected by government legislation.
The number of buyers and sellers involved will have a direct bearing on the price of the good or
service to be sold, and has become known as the law of supply and demand. Where there are
more sellers than buyers, the availability of supply will push down prices. If there are more
buyers than sellers, the increased demand will push up prices.
Markets can appear spontaneously when there are goods or services to be exchanged, or they can
be planned and regulated.
Free markets operate under ‘laissez-faire’ conditions, in that the government does not intervene
in how the market operates. These markets may be distorted if a seller gains monopoly power by
managing the majority of supply (or indeed if a buyer develops monopsony power by managing
demand). Governments or trade bodies often step in when such distortions undermine the smooth
functioning of free markets.
The currency markets are the largest continuously traded markets in the world. Twenty four
hours a day, seven days a week, governments, banks, investors and consumers are buying and
selling every currency, leading to massive money flows constantly changing hands.
Stock markets have become highly complex markets that allow investors to buy shares in
companies or in funds that aggregate companies or industries together. Most stock markets today
are primarily electronic networks, although they often maintain a physical location for buyers,
sellers and market makers to interact directly.
Markets originally started as marketplaces usually in the center of villages and towns, for the sale
or barter of farm produce, clothing and tools. These kinds of street markets developed into a
whole variety of consumer-oriented markets, such as specialist markets, shopping centers,
supermarkets, or even virtual markets such as eBay.
With the rising price of oil and food, commodity markets are once again under the spotlight.
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Commodities underpin economic activity. Commodity markets include: energy (oil, gas, coal
and increasingly renewable energy sources such as biodiesel) , soft commodities and grains
(wheat, oat, corn, rice, soya beans, coffee, cocoa, sugar, cotton, frozen orange juice, etc), meat,
and financial commodities such as bonds.
Capital goods markets help businesses to buy durable goods to be used in industrial and
manufacturing processes. A number of services can also be associated with these goods.
Transactions tend to be wholesale with large quantities of goods being transacted at low prices.
Did you see the stock market rally on Monday in BSE and NSE? No one can say No! Everyone
has seen it and everyone is wishing if he should have buy stocks before this rally. Albeit it could
have been a gamble buying stocks before declaration of election results, it paid off for those who
bought. Now that's history. Stock markets are going to be volatile for next few days. Today, i.e.
on Tuesday, markets opened in red, went till 3oo points down, then recovered and went up to
500 points up and finally settled for flat closing. So what should a small investor do now? Should
he buy stocks or should be selling stocks that he holds?
This article is a COMPLETE guide to the basics of making money in the stock market! If
you are considering investing in the stock market, you MUST read this article! We have
explained all the concepts and talked about all the "myths" that people have about the
stock market!
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PROFILE OF THE ORGANISATION
Established in the year 1974, the Shriram Group, comprising 750 Branches and Service Centres, is India's premier financial services chain. They are the largest player in Truck Financing and Chit funds in the Indian subcontinent.
Pioneer in developing partners and agents for more than 30 years, Shriram group has created products suited to maximum savings opportunity for retail clients. Thus, its partnership has grown to more than 80,000 agents, handling a wide range of products like fixed deposit, debentures, life insurance and general insurance.
Shriram Insight offers share broking service especially targeted at retail investors. With increasing investment in stock market and growing volume in exchanges, becoming a Shriram Insight partner helps you service your clients and grow your business.
Why Shriram
● Shriram is one of the few financial companies to have survived NBFC debacle
● Group has forged ahead even in adverse times by virtue of its vision, dynamism & innovation
● 100% integrity & transparency
● never defaulted in financial commitments to its clients in maturity & interest payout
Why investment in Shriram is safe
● Its core business is truck finance — profitable with high demand. Over 65% of goods in India are transported in trucks
● They are clear leaders in truck finance as it is highly specialized business with few finance companies having succeeded in setting up organizational capability of managing risk
● They have well diversified business portfolio with wide geographical spread
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Shriram’s Products
Shriram Insight services more than 1,25,000 clients through its network of 460 branches spread across the country. Our offerings include:
● Share trading
● Call & Trade
● Online (Internet) trading, with highly secured payment gateways through leading banks in India
● Trading & demat account at nominal cost
● Trading in cash & derivatives
● Margin funding
● Commodities trading
● Research, daily technical analysis, Intraday and Positional calls, daily market report, company results analysis
PRODUCT FEATURES
● Good returns to investors
● Advance information on forthcoming offers
● Best brokerage & adequate provision of forms
SHRIRAM’S DISTRIBUTION PRODUCTS
● Mutual funds: Equity, Debt, Liquid
● Company deposits: Hudco, HDFC, SAIL, others
● Capital gain bonds: NHAI, REC
● Tax-benefit schemes: 8% RBI, ICICI & IDBI bonds
● Initial public offers (IPOs) & NFOs
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Why Shriram financial products should be part of every distributor’s portfolio:
● Diversified income & remunerative business opportunity
● Attractive incentive schemes announced periodically
Shriram’s Network
NORTH SOUTH
● Punjab ● Tamil Nadu
● Delhi ● Andhra Pradesh
●Rajasthan ● Karnataka
● Uttar Pradesh ● Kerala
EAST WEST
● West Bengal ● Gujarat
● Bihar ● Bihar
● Jharkhand ● Jharkhand
● Orissa ● Orissa
Brokerage Structure:-
Intraday trading : 0.03%
Delivery : 0.3%
Exposure : 4 times of the deposit.
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RESEARCH METHODOLOGY
TITLE OF THE STUDY:-
“Analytical study of Indian stock market”
DURATION OF THE PROJECT:- 45 days
(1)DEFINES THE PROBLEM AND RESEARCH OBJECTIVES
The objective of the study conducted was to study of market potential of online share trading.
Secondary objective of customer survey was to know the customer awareness towards online share
trading. My other objectives were to find out the overall perception about the system and what
motivates the people to think about going for online share trading.
(2)DEVELOPING RESEARCH PLAN
The second stage of marketing research calls for developing a most efficient plan for gathering
needed information. Designing a research plan calls for taking decision on data sources research,
approach, research instrument, sampling plan and contact methods.
DATA Sources
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There are two types of methods used in data collection i.e. primary data & secondary data.
A) Primary Data
B) Secondary Data
A) Primary data
Those data which are collected at first hand by the researcher especially for the purpose of the
study ,are known as primary Data .The data is collected directly from the person in sample
population. In this project research the collection of data is directly interviewing customer. In the
collection of the primary data, I have used survey method and use the questionnaire methods.
There are mainly two methods for the collection of the primary data which are given below,
Observational Method.
Survey Method.
Observation method:-
In the observation method, it requires the observer. The observer will keenly observe the person at
the time of the interview & record his behavior accurately. it is also one of The important method
for the collection of data but it requires good & experienced observer who can observer The
behavior of the respondent properly and record it with great accuracy.
Survey method:-
It is most popular method for the collection of necessary data from the respondents. I have used
survey method for the collection of the necessary data.
Different types of the survey are given below,
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Telephonic survey.
Personal interview.
Mail questionnaires.
Telephonic survey:-
In the telephonic interview, the interviewer will make call to respondents, inform the respondents
about the purpose of the call and then he will ask the related questions to the respondents. This
method is used, when the information to be collected is limited. It is mostly used when
information to be collected is limited.
Personal interview:-
In the personal interview, the interviewer will personally meet the respondent and will take is
interview. The interviewer will ask question in face to face direction to the respondents or group of
respondents.
Mail questionnaire:-
In the mail questioner the interviewer will mail the questionnaire to the respondents and inform
them about the purpose of the survey. Also the time limit for the questionnaire is specified in the
mail. This method is used when the area to be covered is large and the survey has to be conducted
in the specific limit.
In my survey, I have used the personal interview to know customer awareness towards online
share trading. I have visited respondents personally.
B) Secondary data
Any data which had been gathered earlier for other purposes are secondary data in hand of
marketing research. These data has been collected from company dealer like Dealer profile,
industrial profile, company profile are collected from the internet.
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The secondary data are collected from the magazines, internet and web sites. Different web sites
like www.sharekhan.com and GOOGLE search engine help in collecting the detailed information.
RESEARCH APPROACH
Out of 4 ways of research approaches i.e.
1. Observation research.
2. Survey Research
3. Focus Group research
4. Experimental research.
In this project the approach used was survey approach because the main objective of our survey
was to study of the market potential and have an idea about the customer awareness.
Collection of Information:
The information was collected from customer by personally asking them Question and filling the Questionnaire.
Analyze The Information.
The information available is analyzed in the form of tables, graphs and pie chart.
Findings and Conclusions
After the analysis of the data some figures came out and they were tallied and then some inferences were drawn from them so that the recommendations can be given to follow.
Suggestions and Recommendation
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The suggestions given are on the basis of data collected. The recommendations given can help in
designing the portfolio of the client. It can be analyzed that which income group is in the need of
which type of investment option.
Core study
Stock market
A stock market is a public market for the trading of company stock and derivatives at an agreed
price; these are securities listed on a stock exchange as well as those only traded privately.
The size of the world stock market was estimated at about $36.6 trillion US at the beginning of
October 2008 . The total world derivatives market has been estimated at about $791 trillion face
or nominal value, 11 times the size of the entire world economy. The value of the derivatives
market, because it is stated in terms of notional values, cannot be directly compared to a stock or
a fixed income security, which traditionally refers to an actual value. Moreover, the vast majority
of derivatives 'cancel' each other out (i.e., a derivative 'bet' on an event occurring is offset by a
comparable derivative 'bet' on the event not occurring.). Many such relatively illiquid securities
are valued as marked to model, rather than an actual market price.)
The stocks are listed and traded on stock exchanges which are entities a corporation or mutual
organization specialized in the business of bringing buyers and sellers of the organizations to a
listing of stocks and securities together. The stock market in the United States includes the
trading of all securities listed on the NYSE, the NASDAQ, the Amex, as well as on the many
regional exchanges, e.g. OTCBB and Pink Sheets. European examples of stock exchanges
include the London Stock Exchange, the Deutsche Börse and the Paris Bourse, now part of
Euronext.
Function of stock market
The stock market is one of the most important sources for companies to raise money. This
allows businesses to be publicly traded, or raise additional capital for expansion by selling shares
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of ownership of the company in a public market. The liquidity that an exchange provides affords
investors the ability to quickly and easily sell securities. This is an attractive feature of investing
in stocks, compared to other less liquid investments such as real estate.
History has shown that the price of shares and other assets is an important part of the dynamics
of economic activity, and can influence or be an indicator of social mood. An economy where
the stock market is on the rise is considered to be an up and coming economy. In fact, the stock
market is often considered the primary indicator of a country's economic strength and
development. Rising share prices, for instance, tend to be associated with increased business
investment and vice versa. Share prices also affect the wealth of households and their
consumption. Therefore, central banks tend to keep an eye on the control and behavior of the
stock market and, in general, on the smooth operation of financial system functions. Financial
stability is the raison d'être of central banks.
Exchanges also act as the clearinghouse for each transaction, meaning that they collect and
deliver the shares, and guarantee payment to the seller of a security. This eliminates the risk to an
individual buyer or seller that the counterparty could default on the transaction.
The smooth functioning of all these activities facilitates economic growth in that lower costs and
enterprise risks promote the production of goods and services as well as employment. In this way
the financial system contributes to increased prosperity.
The stock market, individual investors, and financial risk
Riskier long-term saving requires that an individual possess the ability to manage the associated
increased risks. Stock prices fluctuate widely, in marked contrast to the stability of (government
insured) bank deposits or bonds. This is something that could affect not only the individual
investor or household, but also the economy on a large scale. The following deals with some of
the risks of the financial sector in general and the stock market in particular. This is certainly
more important now that so many newcomers have entered the stock market, or have acquired
other 'risky' investments (such as 'investment' property, i.e., real estate and collectables).
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With each passing year, the noise level in the stock market rises. Television commentators,
financial writers, analysts, and market strategists are all overtaking each other to get investors'
attention. At the same time, individual investors, immersed in chat rooms and message boards,
are exchanging questionable and often misleading tips. Yet, despite all this available
information, investors find it increasingly difficult to profit. Stock prices skyrocket with little
reason, then plummet just as quickly, and people who have turned to investing for their children's
education and their own retirement become frightened. Sometimes there appears to be no rhyme
or reason to the market, only folly.
This is a quote from the preface to a published biography about the long-term value-oriented
stock investor Warren Buffett.[4] Buffett began his career with $100, and $105,000 from seven
limited partners consisting of Buffett's family and friends. Over the years he has built himself a
multi-billion-dollar fortune. The quote illustrates some of what has been happening in the stock
market during the end of the 20th century and the beginning of the 21st century.
Securities and Exchange Board of India
SEBI Bhavan, Mumbai Headquarters of SEBI
Organization Details
Headquarters Mumbai, Maharashtra, India
Established 1992
Jurisdiction India
Head Chairman
Chairman C B Bhave
Term February 16, 2008 -
Total Staff[1] 525
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Official Website
Website www.sebi.gov.in
SEBI is the Regulator for the Securities Market in India. Originally set up by the Government of
India in 1988, it acquired statutory form in 1992 with SEBI Act 1992 being passed by the Indian
Parliament.Chaired by C B Bhave, SEBI is headquartered in the popular business district of
Bandra-Kurla complex in Mumbai, and has Northern, Eastern, Southern and Western regional
offices in New Delhi, Kolkata, Chennai and Ahmadabad.
Organization Structure
Chandrasekhar Bhaskar Bhave is the sixth chairman of the Securities Market Regulator. Prior to
taking charge as Chairman SEBI, he had been the chairman of NSDL (National Securities
Depository Limited) ushering in paperless securities. Prior to his stint at NSDL, he had served
SEBI as a Senior Executive Director. He is a former Indian Administrative Service officer of the
1975 batch.
The Board comprises[2]
Name Designation As per
Mr CB Bhave Chairman SEBICHAIRMAN (S.4(1)(a) of the SEBI
Act, 1992)
Mr KP Krishnan Joint Secretary, Ministry of FinanceMember (S.4(1)(b) of the SEBI Act,
1992)
Mr Anurag GoelSecretary, Ministry of Corporate
Affairs
Member (S.4(1)(b) of the SEBI Act,
1992)
Dr G Mohan Director, National Judicial Academy, Member (S.4(1)(d) of the SEBI Act, 15
Gopal Bhopal 1992)
Mr MS Sahoo Whole Time Member, SEBIMember (S.4(1)(d) of the SEBI Act,
1992)
Dr KM Abraham Whole Time Member, SEBIMember (S.4(1)(d) of the SEBI Act,
1992)
Mr Mohandas Pai Director, InfosysMember (S.4(1)(d) of the SEBI Act,
1992)
Bombay Stock Exchange
Introduction
Bombay Stock Exchange is the oldest stock exchange in Asia with a rich heritage, now spanning
three centuries in its 133 years of existence. What is now popularly known as BSE was
established as "The Native Share & Stock Brokers' Association" in 1875.
BSE is the first stock exchange in the country which obtained permanent recognition (in 1956)
from the Government of India under the Securities Contracts (Regulation) Act 1956. BSE's
pivotal and pre-eminent role in the development of the Indian capital market is widely
recognized. It migrated from the open outcry system to an online screen-based order driven
trading system in 1995. Earlier an Association Of Persons (AOP), BSE is now a corporatized and
demutualised entity incorporated under the provisions of the Companies Act, 1956, pursuant to
the BSE (Corporatization and Demutualization) Scheme, 2005 notified by the Securities and
Exchange Board of India (SEBI). With demutualization, BSE has two of world's best exchanges,
Deutsche Börse and Singapore Exchange, as its strategic partners.
Over the past 133 years, BSE has facilitated the growth of the Indian corporate sector by
providing it with an efficient access to resources. There is perhaps no major corporate in India
which has not sourced BSE's services in raising resources from the capital market.16
Today, BSE is the world's number 1 exchange in terms of the number of listed companies and
the world's 5th in transaction numbers. The market capitalization as on December 31, 2007 stood
at USD 1.79 trillion. An investor can choose from more than 4,700 listed companies, which for
easy reference, are classified into A, B, S, T and Z groups.
The BSE Index, SENSEX, is India's first stock market index that enjoys an iconic stature, and is
tracked worldwide. It is an index of 30 stocks representing 12 major sectors. The SENSEX is
constructed on a 'free-float' methodology, and is sensitive to market sentiments and market
realities. Apart from the SENSEX, BSE offers 21 indices, including 12 sectoral indices. BSE has
entered into an index cooperation agreement with Deutsche Börse. This agreement has made
SENSEX and other BSE indices available to investors in Europe and America. Moreover,
Barclays Global Investors (BGI), the global leader in ETFs through its shares® brand, has
created the 'iShares® BSE SENSEX India Tracker' which tracks the SENSEX. The ETF
enables investors in Hong Kong to take an exposure to the Indian equity market.
The first Exchange Traded Fund (ETF) on SENSEX, called "SPIcE" is listed on BSE. It brings to
the investors a trading tool that can be easily used for the purposes of investment, trading,
hedging and arbitrage. SPIcE allows small investors to take a long-term view of the market.
BSE provides an efficient and transparent market for trading in equity, debt instruments and
derivatives. It has a nation-wide reach with a presence in more than 359 cities and towns of
India. BSE has always been at par with the international standards. The systems and processes
are designed to safeguard market integrity and enhance transparency in operations. BSE is the
first exchange in India and the second in the world to obtain an ISO 9001:2000 certification. It is
also the first exchange in the country and second in the world to receive Information Security
Management System Standard BS 7799-2-2002 certification for its BSE On-line Trading System
(BOLT).
BSE continues to innovate. In recent times, it has become the first national level stock exchange
17
to launch its website in Gujarati and Hindi to reach out to a larger number of investors. It has
successfully launched a reporting platform for corporate bonds in India christened the ICDM or
Indian Corporate Debt Market and a unique ticker-cum-screen aptly named 'BSE Broadcast'
which enables information dissemination to the common man on the street.
In 2006, BSE launched the Directors Database and ICERS (Indian Corporate Electronic
Reporting System) to facilitate information flow and increase transparency in the Indian capital
market. While the Directors Database provides a single-point access to information on the boards
of directors of listed companies, the ICERS facilitates the corporates in sharing with BSE their
corporate announcements.
BSE also has a wide range of services to empower investors and facilitate smooth transactions:
Investor Services: The Department of Investor Services redresses grievances of investors.
BSE was the first exchange in the country to provide an amount of Rs.1 million towards the
investor protection fund; it is an amount higher than that of any exchange in the country.
BSE launched a nationwide investor awareness programme- 'Safe Investing in the Stock
Market' under which 264 programmes were held in more than 200 cities.
The BSE On-line Trading (BOLT): BSE On-line Trading (BOLT) facilitates on-line
screen based trading in securities. BOLT is currently operating in 25,000 Trader
Workstations located across over 359 cities in India.
BSEWEBX.com: In February 2001, BSE introduced the world's first centralized exchange-
based Internet trading system, BSEWEBX.com. This initiative enables investors anywhere
in the world to trade on the BSE platform.
Surveillance: BSE's On-Line Surveillance System (BOSS) monitors on a real-time basis the
price movements, volume positions and members' positions and real-time measurement of
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default risk, market reconstruction and generation of cross market alerts.
BSE Training Institute: BTI imparts capital market training and certification, in
collaboration with reputed management institutes and universities. It offers over 40 courses
on various aspects of the capital market and financial sector. More than 20,000 people have
attended the BTI programmes
Awards
The World Council of Corporate Governance has awarded the Golden Peacock Global CSR
Award for BSE's initiatives in Corporate Social Responsibility (CSR).
The Annual Reports and Accounts of BSE for the year ended March 31, 2006 and March
31 2007 have been awarded the ICAI awards for excellence in financial reporting.
The Human Resource Management at BSE has won the Asia - Pacific HRM awards for
its efforts in employer branding through talent management at work, health management
at work and excellence in HR through technology
Drawing from its rich past and its equally robust performance in the recent times, BSE will
continue to remain an icon in the Indian capital market.
History
For the premier stock exchange that pioneered the securities transaction business in India, over a
century of experience is a proud achievement. A lot has changed since 1875 when 318 persons
by paying a then princely amount of Re. 1, became members of what today is called Bombay
Stock Exchange Limited (BSE).
Over the decades, the stock market in the country has passed through good and bad periods. The
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journey in the 20th century has not been an easy one. Till the decade of eighties, there was no
measure or scale that could precisely measure the various ups and downs in the Indian stock
market. BSE, in 1986, came out with a Stock Index-SENSEX- that subsequently became the
barometer of the Indian stock market.
The launch of SENSEX in 1986 was later followed up in January 1989 by introduction of BSE
National Index (Base: 1983-84 = 100). It comprised 100 stocks listed at five major stock
exchanges in India - Mumbai, Calcutta, Delhi, Ahmedabad and Madras. The BSE National Index
was renamed BSE-100 Index from October 14, 1996 and since then, it is being calculated taking
into consideration only the prices of stocks listed at BSE. BSE launched the dollar-linked version
of BSE-100 index on May 22, 2006.
With a view to provide a better representation of the increasing number of listed companies,
larger market capitalization and the new industry sectors, BSE launched on 27th May, 1994 two
new index series viz., the 'BSE-200' and the 'DOLLEX-200'. Since then, BSE has come a long
way in attuning itself to the varied needs of investors and market participants. In order to fulfill
the need for still broader, segment-specific and sector-specific indices, BSE has continuously
been increasing the range of its indices. BSE-500 Index and 5 sectoral indices were launched in
1999. In 2001, BSE launched BSE-PSU Index, DOLLEX-30 and the country's first free-float
based index - the BSE TECk Index. Over the years, BSE shifted all its indices to the free-float
methodology
Several Firsts
At par with the international standards, BSE has in fact been a pioneer in several areas. It has several
firsts to its credit even in an intensely competitive environment.
First in India to introduce Equity Derivatives First in India to launch a Free Float Index First in
India to launch US$ version of BSE SENSEX First in India to launch Exchange Enabled Internet
Trading Platform First in India to obtain ISO certification for a stock exchange 'BSE On-Line
Trading System’ (BOLT) has been awarded the globally
recognised the Information Security Management System standard
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BS7799-2:2002. First to have an exclusive facility for financial training First in India in the
financial services sector to launch its website in Hindi and Gujarati Shifted from Open Outcry to
Electronic Trading within just 50 days First bell-ringing ceremony in the history of the Indian
capital markets (listing ceremony of Bharti Televentures Ltd.on February 18,2002)
.
National Stock Exchange of India
National Stock Exchange Limited
Type Stock Exchange
Location Mumbai, India
Coordinates
19°3′37″N
72°51′35″E / 19.06028°N
72.85972°E / 19.06028;
72.85972
Owner National Stock Exchange of India Limited
Key people Mr. Ravi Narain Managing Director
Currency INR
No. of listings 1587
Market Cap US$ 1.46 trillion (2006)
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Indexes
S&P CNX Nifty
CNX Nifty Junior
S&P CNX 500
Website http://www.nse-india.com/
The National Stock Exchange of India Limited (NSE), is a Mumbai-based stock exchange. It
is the largest stock exchange in India in terms of daily turnover and number of trades, for both
equities and derivative trading.[1]. Though a number of other exchanges exist, NSE and the
Bombay Stock Exchange are the two most significant stock exchanges in India, and between
them are responsible for the vast majority of share transactions. The NSE's key index is the S&P
CNX Nifty, known as the Nifty, an index of fifty major stocks weighted by market capitalization.
NSE is mutually-owned by a set of leading financial institutions, banks, insurance companies
and other financial intermediaries in India but its ownership and management operate as separate
entities. There are at least 2 foreign investors NYSE Euronext and Goldman Sachs who have
taken a stake in the NSE. As of 2006[update], the NSE VSAT terminals, 2799 in total, cover
more than 1500 cities across India . In October 2007, the equity market capitalization of the
companies listed on the NSE was US$ 1.46 trillion, making it the second largest stock exchange
in South Asia. NSE is the third largest Stock Exchange in the world in terms of the number of
trades in equities. It is the second fastest growing stock exchange in the world with a recorded
growth of 16.6%.
Origins
NSE building at BKC
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The National Stock Exchange of India was promoted by leading Financial institutions at the
behest of the Government of India, and was incorporated in November 1992 as a tax-paying
company. In April 1993, it was recognized as a stock exchange under the Securities Contracts
(Regulation) Act, 1956. NSE commenced operations in the Wholesale Debt Market (WDM)
segment in June 1994. The Capital Market (Equities) segment of the NSE commenced operations
in November 1994, while operations in the Derivatives segment commenced in June 2000.
Innovations
NSE has remained in the forefront of modernization of India's capital and financial markets, and
its pioneering efforts include:
Being the first national, anonymous, electronic limit order book (LOB) exchange to trade
securities in India. Since the success of the NSE, existent market and new market
structures have followed the "NSE" model.
Setting up the first clearing corporation "National Securities Clearing Corporation Ltd."
in India. NSCCL was a landmark in providing innovation on all spot equity market (and
later, derivatives market) trades in India.
Co-promoting and setting up of National Securities Depository Limited, first depository
in India[2].
Setting up of S&P CNX Nifty.
NSE pioneered commencement of Internet Trading in February 2000, which led to the
wide popularization of the NSE in the broker community.
Being the first exchange that, in 1996, proposed exchange traded derivatives, particularly
on an equity index, in India. After four years of policy and regulatory debate and
formulation, the NSE was permitted to start trading equity derivatives
Being the first and the only exchange to trade GOLD ETFs (exchange traded funds) in
India.
NSE has also launched the NSE-CNBC-TV18 media centre in association with CNBC-
TV18, a
it is the one of the most important stock exchange in the world
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S&P CNX Nifty
S&P CNX Nifty is a well diversified 50 stock index accounting for 21 sectors of the economy. It
is used for a variety of purposes such as benchmarking fund portfolios, index based derivatives
and index funds.
S&P CNX Nifty is owned and managed by India Index Services and Products Ltd. (IISL), which
is a joint venture between NSE and CRISIL. IISL is India's first specialised company focused
upon the index as a core product. IISL has a Marketing and licensing agreement with Standard &
Poor's (S&P), who are world leaders in index services.
The total traded value for the last six months of all Nifty stocks is approximately 65.68%
of the traded value of all stocks on the NSE
Nifty stocks represent about 65.34% of the total market capitalization as on Mar 31,
2009.
Impact cost of the S&P CNX Nifty for a portfolio size of Rs.2 crore is 0.16%
S&P CNX Nifty is professionally maintained and is ideal for derivatives trading
Sensex & the Nifty
The Sensex is an "index". What is an index? An index is basically an indicator. It gives you a general idea
about whether most of the stocks have gone up or most of the stocks have gone down.
The Sensex is an indicator of all the major companies of the BSE.
The Nifty is an indicator of all the major companies of the NSE.
If the Sensex goes up, it means that the prices of the stocks of most of the major companies on the BSE
have gone up. If the Sensex goes down, this tells you that the stock price of most of the major stocks on
24
the BSE have gone down.
Just like the Sensex represents the top stocks of the BSE, the Nifty represents the top stocks of the NSE.
Just in case you are confused, the BSE, is the Bombay Stock Exchange and the NSE is the National Stock
Exchange. The BSE is situated at Bombay and the NSE is situated at Delhi. These are the major stock
exchanges in the country. There are other stock exchanges like the Calcutta Stock Exchange etc. but they
are not as popular as the BSE and the NSE.Most of the stock trading in the country is done though the
BSE & the NSE.
Major Factors That Affect Stock Price in stock market globally
When you wish to invest in the stock market, then you should always make a good survey of the
whole market. As you know that you cannot predict the stock market, so in that case you need to
know the functioning of the market. There are some major factors that affect stock price. So
let us discuss about the different factors affecting the stock price in this article.
Demand AND SUPPLY
One of the major factors affecting stock price is demand and supply. The trend of the stock
market trading directly affects the price. When people are buying more stocks, then the price of
that particular stock increases. On the other hand if people are selling more stocks, then the price
of that stock falls. So, you should be very careful when you decide to invest in the Indian stock
market.
Market Cap
Never try to guess the worth of a company simply by comparing the price of the stock. You
should always keep in mind that it is not the stock but the market capitalization of the company
that determines the worth of the company. So market cap is another factor that affects stock
price.
25
What is "market capitalization"?
You probably think that you have never heard of the term “market capitalization” before. You
have! When you are talking about “mid-cap”, “small-cap” and “large-cap” stocks, you are talking
about market capitalization!
Market cap or market capitalization is simply the worth of a company in terms of it’s shares! To
put it in a simple way, if you were to buy all the shares of a particular company, what is the
amount you would have to pay? That amount is called the “market capitalization”!
To calculate the market cap of a particular company, simply multiply the “current share price” by
the “number of shares issued by the company”! Just to give you an idea, ONGC, has a market
cap of “Rs.170,705.21 Cr” (when this article was written)
Depending on the value of the market cap, the company will either be a “mid-cap” or “large-cap”
or “small-cap” company! Now the question is, how do YOU calculate the market cap of a
particular company? You don’t! Just go to a website like MoneyControl.com and look up the
company whose market cap you are interested in finding out! The figure in front of “Mkt. Cap”
will be the market cap value.
News
When you get positive news about a company then it can increase the buying interest in the
market. On the other hand, when there is a negative press release, it can ruin the prospect of a
stock. In this case you should remember that news should not matter much but the overall
performance of the company matters more. So, news is another factor affecting stock price.
Earning/Price Ratio
Another important factor affecting stock price is the earning/price ratio. This gives you a fair
idea of a company’s share price when it is compared to its earnings. The stock becomes
undervalued if the price of the share is much lower than the earnings of a company. But if this is
26
the case, then it has the potential to rise in the near future. The stock becomes overvalued if the
price is much higher than the actual earning.
So, these are the major factors that affect stock price.
Trading Styles
There are several different styles of day trading, suited to different day trader personalities. The styles
range from short term trading such as scalping where positions are only held for a few seconds or
minutes, to longer term swing and position trading where a position may be held throughout the trading
day. Most day trading systems have a lot of flexibility, and can have open positions for anywhere from a
few minutes to a few hours, depending upon how the trade is doing (whether it is in profit). Some day
traders will trade multiple styles, but most traders will choose a single style and only take that type of
trade.
KEY STATISTICS
YEAR-2009
I. BUSINESS TRANSACTED AT BSE
Turnover, Average Daily Turnover, Turnover for the month,
V-SAT Turnover, No. of Shares Traded, No. of Script
Traded, Deliveries, Market Capitalisation, No. of Trading
Days, Derivatives.
II. LISTING AND CAPITAL RAISED
No. of Companies Listed, No. of Scrips Listed, Newly Listed
securities of existing companies, Capital Listed during the
month, Amount offered/raised through IPO & Rights, Capital
raised through FCCB/Euro Issue.
27
III. INDEX AND RATIOS
BSE Sensitive Index, BSE TECK Index, BSE 100 Index,
BSE 200 Index, Dollex-200, BSE 500 Index, P/E Ratio, Price
to Book Value, Dividend Yield %.
IV. BUSINESS TRANSACTED BY FIIs
No. of Registered FIIs, FIIs transactions in BSE, FIIs
transactions (Equity & Debt) all India.
V. MEMBERSHIP AND TWS
No. of Members, No. of Trader Work Station (TWS), No. of
Cities.
VI. DOLLAR EXCHANGE RATE
Rupee Dollar Rate.
Conversion
Table
1 Billion = 100
Crore, 1 Crore
= 10 Million, 1
million = 10
Lakh, 1Lakh =
100 Thousand.
BSE PRODUCTS
28
Data Products
BSE provides 3 basic types of data products
a) Market data – Equity, Derivatives and debt.
b) Indices – 17.
c) Corporate Data – Results (Quarterly, Half-yearly, Annual),
Announcements, Shareholding Pattern.
These Data Products are provided at two levels viz. Level 1 and Level 2.
1 ) Level 1 Data contains the following information
i. Scrip code
ii. Open, High, low and last traded price
iii. Best Bid / offer with volume
iv. Traded Volume
v. Close and last traded quantity (Only for live feed)
2 ) Level 2 Data contains the following information in addition
to the level 1 data.
i. Weighted average price
ii. Upper Circuit limit and lower circuit limit
iii. Turnover value, number of trades, trend
v. Total Buy quantity and Total sell quantity
CAPITAL INFLOWS
During the April-January period of 2008-09, India attracted total foreign investments of US $ 15,545
million. The foreign direct investment (FDI) stood at US $ 27,426 million, while the portfolio investment
stood at US $ -11,881 million.
Monthly trends in foreign investments
29
($ million)
Months
Foreign
direct
investments
Portfolio
investments
Total
foreign
investment
s
2007-08(P) 2008-09(P) 2007-08(P) 2008-09(P) 2007-08(P) 2008-09(P)
April 1643 3749 1974 -880 3617 2869
May 2120 3932 1852 -288 3972 3644
June 1238 2392 3664 -3010 4902 -618
July 705 2247 6713 -492 7418 1755
August 831 2328 -2875 593 -2044 2921
September 713 2562 7081 -1403 7794 1159
October 2027 1497 9564 -5243 11591 -3746
November 1864 1083 -107 -574 1757 509
30
December 1558 1362 5294 30 6852 1392
January 1767 2733 6739 -614 8506 2119
February 5670 - -8904 - -3234 -
March 4438 - -1600 - 2838 -
April-
January- 27426 - -11881 - 15545
Stock Market Trends
Year /MonthBSE
Sensitiv
e Index
(Base :
1978 -
79 =
100)
BSE -
100
(Base :
1983 -
84 =
100)
S & P
CNX
Nifty *
(Base :
Novemb
er 3,
1995 =
1000)
Average High Low Average High Low Aver- High Low
31
age
1 2 3 4 5 6 7 8 9 10
2005-06 8280.08 11307.0
4 6134.86 4393.54 5904.17 3310.14 2513.44 3418.95 1902.50
2006-07 12277.3
3
14652.0
9 8929.44 6242.73 7413.22 4535.00 3572.44 4224.25 2632.80
2007-0816568.8
9
20873.3
3
12455.3
78691.47
11509.9
66287.69 4896.60 6287.85 3633.60
May-0714156.4
7
14544.4
6
13765.4
6 7244.49 7468.70 7015.37 4184.39 4295.80 4066.80
Jun-0714334.3
0
14650.5
1
14003.0
3 7392.34 7605.37 7188.38 4222.17 4318.30 4113.05
Jul-0715253.4
2
15794.9
2
14664.2
6 7897.30 8155.29 7625.71 4474.18 4620.75 4313.75
Aug-07 14779.0 15318.6 13989.1 7594.81 7897.92 7179.39 4301.36 4464.00 4074.90
32
5 0 1
Sep-0716046.0
2
17291.1
0
15422.0
58292.69 8967.41 7924.29 4659.92 5021.35 4474.75
Oct-0718500.3
1
19977.6
7
17328.6
29587.50
10391.1
98998.60 5456.62 5905.90 5068.95
Nov-0719259.5
5
19976.2
3
18526.3
2
10211.5
0
10531.6
7 9868.75 5748.58 5937.90 5519.35
Dec-0719827.2
8
20375.8
7
19079.6
4
10795.3
0
11154.2
8
10422.1
5 5963.57 6159.30 5742.30
Jan-0819325.6
5
20873.3
3
16729.9
4
10526.5
4
11509.9
6 8895.64 5756.35 6287.85 4899.30
Feb-0817727.5
4
18663.1
6
16608.0
1 9435.60 9969.59 8785.88 5201.56 5483.90 4838.25
Mar-0815838.3
8
16677.8
8
14809.4
9 8363.58 8907.23 7828.01 4769.50 4953.00 4503.10
Apr-08 16290.9 17378.4 15343.1 8627.59 9240.57 8095.02 4901.91 5195.50 4647.00
33
9 6 2
May-0816945.6
5
17600.1
2
16275.5
9 8982.20 9348.64 8621.84 5028.66 5228.20 4835.30
June-0814997.2
8
16063.1
8
13461.6
07909.28 8488.62 7029.74 4463.79 4739.60 4040.55
July-0813716.1
8
14942.2
8
12575.8
07143.71 7760.32 6580.67 4124.60 4476.80 3816.70
Aug-0814722.1
3
15503.9
2
14048.3
47704.75 8101.48 7362.49 4417.12 4620.40 4214.00
Sept-0813942.8
1
15049.8
6
12595.7
57276.35 7860.87 6564.06 4206.69 4504.00 3850.05
Oct-0810549.6
5
13055.6
78509.56 5432.92 6776.87 4343.21 3210.22 3950.75 2524.20
Nov-08 9453.9610631.1
28451.01 4823.36 5396.09 4332.17 2834.79 3148.25 2553.15
Dec-08 9513.58 10099.9 8739.24 4864.55 5181.94 4443.50 2895.80 3077.50 2656.45
34
1
Jan-09 9350.4210335.9
38674.35 4802.01 5328.95 4441.84 2854.36 3121.45 2678.55
Derivatives
Commodities whose value is derived from the price of some underlying asset like securities,
commodities, bullion, currency, interest level, stock market index or anything else are known as
“Derivatives”.
In more simpler form, derivatives are financial security such as an option or future whose value
is derived in part from the value and characteristics of another security, the underlying asset.
It is a generic term for a variety of financial instruments. Essentially, this means you buy a
promise to convey ownership of the asset, rather than the asset itself. The legal terms of a
contract are much more varied and flexible than the terms of property ownership. In fact, it’s this
flexibility that appeals to investors.
When a person invests in derivative, the underlying asset is usually a commodity, bond, stock, or
currency. He bet that the value derived from the underlying asset will increase or decrease by a
certain amount within a certain fixed period of time.
‘Futures’ and ‘options’ are two commodity traded types of derivatives. An ‘options’ contract
gives the owner the right to buy or sell an asset at a set price on or before a given date. On the
other hand, the owner of a ‘futures’ contract is obligated to buy or sell the asset.
The other examples of derivatives are warrants and convertible bonds (similar to shares in that
35
they are assets). But derivatives are usually contracts. Beyond this, the derivatives range is only
limited by the imagination of investment banks. It is likely that any person who has funds
invested, an insurance policy or a pension fund, that they are investing in, and exposed to,
derivatives – wittingly or unwittingly.
Shares or bonds are financial assets where one can claim on another person or corporation; they
will be usually be fairly standardized and governed by the property of securities laws in an
appropriate country.
On the other hand, a contract is merely an agreement between two parties, where the contract
details may not be standardized.
Derivatives securities or derivatives products are in real terms contracts rather than solid as it
fairly sounds.
India Commodity Market
The vast geographical extent of India and her huge population is aptly complemented by the
size of her market. The broadest classification of the Indian Market can be made in terms of the
commodity market and the bond market. Here, we shall deal with the former in a little detail.
The commodity market in India comprises of all palpable markets that we come across in our
daily lives. Such markets are social institutions that facilitate exchange of goods for money. The
cost of goods is estimated in terms of domestic currency . India Commodity Market can be
subdivided into the following two categories:
Wholesale Market
Retail Market
36
Let us now take a look at what the present scenario of each of the above markets is like.
The traditional wholesale market in India dealt with whole sellers who bought goods from the
farmers and manufacturers and then sold them to the retailers after making a profit in the
process. It was the retailers who finally sold the goods to the consumers. With the passage of
time the importance of whole sellers began to fade out for the following reasons:
The whole sellers in most situations, acted as mere parasites who did not add any value to
the product but raised its price which was eventually faced by the consumers.
The improvement in transport facilities made the retailers directly interact with the
producers and hence the need for whole sellers was not felt.
In recent years, the extent of the retail market (both organized and unorganized) has evolved
in leaps and bounds. In fact, the success stories of the commodity market of India in recent
years has mainly centered around the growth generated by the Retail Sector. Almost every
commodity under the sun both agricultural and industrial are now being provided at well
distributed retail outlets throughout the country.
Moreover, the retail outlets belong to both the organized as well as the unorganized sector. The
unorganized retail outlets of the yesteryears consist of small shop owners who are price takers
where consumers face a highly competitive price structure. The organized sector on the other
hand are owned by various business houses like Pantaloons, Reliance, Tata and others. Such
markets are usually sell a wide range of articles both agricultural and manufactured, edible and
inedible, perishable and durable. Modern marketing strategies and other techniques of sales
promotion enable such markets to draw customers from every section of the society. However
the growth of such markets has still centered around the urban areas primarily due to
infrastructural limitations.
Considering the present growth rate, the total valuation of the Indian Retail Market is estimated
to cross Rs. 10,000 billion by the year 2010. Demand for commodities is likely to become four
times by 2010 than what it presently is.
37
Money Market
When the stock prices show a downward trend , then it becomes risky to keep savings there.
Although the stock market is associated with high risks and high returns , many are risk averse
and prefer to invest in the more secure money market .
The money market deals with very short term debt securities that mature in less than a year.
Since the money market is extremely safe, it yields very low returns unlike the bond market.
The money market securities that are issued by the government or financial institutions or large
corporations are very liquid. Since the money market securities trade at very high denominations
it becomes very difficult for the individual investors to have access to it.
The money market is a type of a dealer market where firms purchase securities in their own
account by assuming the risks themselves. Unlike the stock exchanges the money market
securities do not operate in exchanges or through brokers. Transactions take place over phone or
the electronic system.
One may browse through the following links to have a more detailed information about money
market.
Money Market Definition
Money Market Definition is simply meant as the short-term debt market. Treasury Bills and
certificate of deposits are regarded as the instruments in the money market.
World Money Market
World Money Market has been providing origination, trading and the distribution of short-term
debt instruments across different regions over the world. Find detailed on the world money
market.
Money Market Index Money Market Index is a true indicator of the prevailing money market,
which renders a clear-cut idea on making investment.
Money Market Rates
Money Market Rates can be simply defined as the market rates including the broker call loan
rate, federal funds rate, rates on bankers' acceptance etc. Get the method of finding the money
38
market rates.
Market Segments
Overview
The United States Government formally defines Information Security as:
"Protecting information and information systems from unauthorized access, use, disclosure, disruption,
modification, or destruction in order to provide -
integrity, which means guarding against improper information modification or destruction, and
includes ensuring information non-repudiation and authenticity;
confidentiality, which means preserving authorized restrictions on access and disclosure,
including means for protecting personal privacy and proprietary information; and
availability, which means ensuring timely and reliable access to and use of information."
While the business drivers (Risks, Objectives) and challenges (non-homogeneity, organizational size)
may differ considerably across different market sectors, the basic requirements of Information Security
remain the same. Pivot Point Security has worked extensively across market segments and with many of
the worlds largest:
Financial Institutions
State and City Governments
Pharmaceutical Companies
Tele Communications Companies
Advertising / Media Organizations
Health Care Organizations
Non-Profit Organizations
We have broken out a small handful of these market segments into specific sections on our website to
make it easier for someone reviewing our site to determine our understanding of those market sectors that 39
have some level of uniqueness relating to specific drivers and challenges.
Please do not look for client names or precise detail as to the work that we do. As Security Practitioners
we understand the value of seemingly insignificant pieces of information as a basis for malicious action,
and accordingly have a strict policy of non-disclosure of any client data, including names.
The next time you note a Security firm name-dropping in an attempt to gain your trust / business, ask
yourself whose best interest they are really looking out for.
The role of stock exchanges
Stock exchanges have multiple roles in the economy, this may include the following:[1]
Raising capital for businesses
The Stock Exchange provide companies with the facility to raise capital for expansion through selling
shares to the investing public.[2]
Mobilizing savings for investment
When people draw their savings and invest in shares, it leads to a more rational allocation of resources
because funds, which could have been consumed, or kept in idle deposits with banks, are mobilized and
redirected to promote business activity with benefits for several
economic sectors such as agriculture, commerce and industry, resulting in stronger economic growth and
higher productivity levels and firms.
Facilitating company growth
Companies view acquisitions as an opportunity to expand product lines, increase distribution channels,
hedge against volatility, increase its market share, or acquire other necessary business assets. A takeover
bid or a merger agreement through the stock market is one of the simplest and most common ways for a
40
company to grow by acquisition or fusion.
Redistribution of wealth
Stock exchanges do not exist to redistribute wealth. However, both casual and professional stock
investors, through dividends and stock price increases that may result in capital gains, will share in the
wealth of profitable businesses.
Corporate governance
By having a wide and varied scope of owners, companies generally tend to improve on their management
standards and efficiency in order to satisfy the demands of these shareholders and the more stringent rules
for public corporations imposed by public stock exchanges and the government. Consequently, it is
alleged that public companies (companies that are owned by shareholders who are members of the
general public and trade shares on public exchanges) tend to have better management records than
privately-held companies (those companies where shares are not publicly traded, often owned by the
company founders and/or their families and heirs, or otherwise by a small group of investors). However,
some well-documented cases are known where it is alleged that there has been considerable slippage in
corporate governance on the part of some public companies. The dot-com bubble in the early 2000s, and
the subprime mortgage crisis in 2007-08, are classical examples of corporate mismanagement. Companies
like Pets.com (2000), Enron Corporation (2001), One.Tel (2001), Sunbeam (2001), Webvan (2001),
Adelphia (2002), MCI WorldCom (2002), Parmalat (2003), American International Group (2008),
Lehman Brothers (2008), and Satyam Computer Services (2009) were among the most widely scrutinized
by the media.
Creating investment opportunities for small investors
As opposed to other businesses that require huge capital outlay, investing in shares is open to both the
large and small stock investors because a person buys the number of shares they can afford. Therefore the
Stock Exchange provides the opportunity for small investors to own shares of the same companies as
large investors.
41
Government capital-raising for development projects
Governments at various levels may decide to borrow money in order to finance infrastructure projects
such as sewage and water treatment works or housing estates by selling another category of securities
known as bonds. These bonds can be raised through the Stock Exchange whereby members of the public
buy them, thus loaning money to the government. The issuance of such bonds can obviate the need to
directly tax the citizens in order to finance development, although by securing such bonds with the full
faith and credit of the government instead of with collateral, the result is that the government must tax the
citizens or otherwise raise additional funds to make any regular coupon payments and refund the principal
when the bonds mature.
Barometer of the economy
At the stock exchange, share prices rise and fall depending, largely, on market forces. Share prices tend to
rise or remain stable when companies and the economy in general show signs of stability and growth. An
economic recession, depression, or financial crisis could eventually lead to a stock market crash.
Therefore the movement of share prices and in general of the stock indexes can be an indicator of the
general trend in the economy.
Major stock exchanges
Twenty Major Stock Exchanges In The World: Market Capitalization & Year-to-date Turnover at the end
of January 2009
Region Stock Exchange
Market Value
(millions
USD)
Total Share Turnover
(millions USD)
Africa Johannesburg Securities Exchange 432,422.1 17,999.7
Americas NASDAQ 2,203,759.6 2,325,238.3
Americas São Paulo Stock Exchange 611,695.0 30,748.5
42
Americas Toronto Stock Exchange 997,997.4 84,323.0
Americas New York Stock Exchange 9,363,074.0 1,517,615.7
Asia-Pacific Australian Securities Exchange 587,602.7 37,400.1
Asia-Pacific Bombay Stock Exchange 613,187.6 14,425.0
Asia-Pacific Hong Kong Stock Exchange 1,237,999.5 80,696.8
Asia-Pacific Korea Exchange 470,417.3 81,755.0
Asia-Pacific National Stock Exchange of India 572,566.8 39,057.1
Asia-Pacific Shanghai Stock Exchange 1,557,161.3 142,144.2
Asia-Pacific Shenzhen Stock Exchange 389,248.3 75,365.5
Asia-Pacific Tokyo Stock Exchange 2,922,616.3 301,781.5
Europe Euronext 1,862,930.9 146,173.3
Europe Frankfurt Stock Exchange (Deutsche Börse) 937,452.9 264,970.3
Europe London Stock Exchange 1,758,157.7 241,151.1
EuropeMadrid Stock Exchange (Bolsas y Mercados
Españoles)871,061.4 114,994.0
Europe Milan Stock Exchange (Borsa Italiana) 456,206.7 48,094.8
Europe Nordic Stock Exchange Group OMX1 503,725.8 55,299.9
Europe Swiss Exchange 761,896.1 63,435.6
Analysis
Technical analysis is a method of predicting price movements and future market trends by
studying charts of past market action. Technical analysis is concerned with what has actually
43
happened in the market, rather than what should happen and takes into account the price of
instruments and the volume of trading, and creates charts from that data to use as the primary
tool. One major advantage of technical analysis is that experienced analysts can follow many
markets and market instruments simultaneously.
Technical analysis is built on three essential principles:
1. Market action discounts everything! This means that the actual price is a reflection of
everything that is known to the market that could affect it, for example, supply and demand,
political factors and market sentiment. However, the pure technical analyst is only concerned
with price movements, not with the reasons for any changes.
2. Prices move in trends Technical analysis is used to identify patterns of market behavior that
have long been recognized as significant. For many given patterns there is a high probability that
they will produce the expected results. Also, there are recognized patterns that repeat themselves
on a consistent basis.
3. History repeats itself Sensex patterns have been recognized and categorized for over 100
years and the manner in which many patterns are repeated leads to the conclusion that human
psychology changes little over time.
Some major technical analysis tools are described below:
Relative Strength Index (RSI):
The RSI measures the ratio of up-moves to down-moves and normalizes the calculation so that
the index is expressed in a range of 0-100. If the RSI is 70 or greater, then the instrument is
assumed to be overbought (a situation in which prices have risen more than market
expectations). An RSI of 30 or less is taken as a signal that the instrument may be oversold (a
situation in which prices have fallen more than the market expectations).
Stochastic oscillator:
This is used to indicate overbought/oversold conditions on a scale of 0-100%. The indicator is
based on the observation that in a strong up trend, period closing prices tend to concentrate in the
44
higher part of the period's range. Conversely, as prices fall in a strong down trend, closing prices
tend to be near to the extreme low of the period range. Stochastic calculations produce two lines,
%K and %D that are used to indicate overbought/oversold areas of a chart. Divergence between
the stochastic lines and the price action of the underlying instrument gives a powerful trading
signal.
Moving Average Convergence Divergence (MACD):
This indicator involves plotting two momentum lines. The MACD line is the difference between
two exponential moving averages and the signal or trigger line, which is an exponential moving
average of the difference. If the MACD and trigger lines cross, then this is taken as a signal that
a change in the trend is likely.
Number theory:
Fibonacci numbers: The Fibonacci number sequence (1,1,2,3,5,8,13,21,34...) is constructed by
adding the first two numbers to arrive at the third. The ratio of any number to the next larger
number is 62%, which is a popular Fibonacci retracement number. The inverse of 62%, which is
38%, is also used as a Fibonacci retracement number.
Gann numbers:
W.D. Gann was a stock and a commodity trader working in the '50s who reputedly made over
million in the markets. He made his fortune using methods that he developed for trading
instruments based on relationships between price movement and time, known as time/price
equivalents. There is no easy explanation for Gann's methods, but in essence he used angles in
charts to determine support and resistance areas and predict the times of future trend changes. He
also used lines in charts to predict support and resistance areas.
Waves
Elliott wave theory: The Elliott wave theory is an approach to market analysis that is based on
repetitive wave patterns and the Fibonacci number sequence. An ideal Elliott wave patterns
shows a five-wave advance followed by a three-wave decline.
45
Gaps
Gaps are spaces left on the bar chart where no trading has taken place. An up gap is formed when
the lowest price on a trading day is higher than the highest high of the previous day. A down gap
is formed when the highest price of the day is lower than the lowest price of the prior day. An up
gap is usually a sign of market strength, while a down gap is a sign of market weakness. A
breakaway gap is a price gap that forms on the completion of an important price pattern. It
usually signals the beginning of an important price move. A runaway gap is a price gap that
usually occurs around the mid-point of an important market trend. For that reason, it is also
called a measuring gap. An exhaustion gap is a price gap that occurs at the end of an important
trend and signals that the trend is ending.
Trends
A trend refers to the direction of prices. Rising peaks and troughs constitute an uptrend; falling
peaks and troughs constitute a downtrend that determines the steepness of the current trend. The
breaking of a trend line usually signals a trend reversal. Horizontal peaks and troughs
characterize a trading range.
Moving averages are used to smooth price information in order to confirm trends and support
and resistance levels. They are also useful in deciding on a trading strategy, particularly in
futures trading or a market with a strong up or down trend.
The most common technical tools:
Coppock Curve is an investment tool used in technical analysis for predicting bear market lows.
DMI (Directional Movement Indicator) is a popular technical indicator used to determine
whether or not a currency pair is trending.
Unlike the fundamental analyst, the technical analyst is not much concerned with any of the
"bigger picture" factors affecting the market, but concentrates on the activity of that instrument's
market.
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Fundamental analysis
Fundamental analysis is a method of forecasting the future price movements of a financial
instrument based on economic, political, environmental and other relevant factors and statistics
that will affect the basic supply and demand of whatever underlies the financial instrument. In
practice, many market players use technical analysis in conjunction with fundamental analysis to
determine their trading strategy. Fundamental analysis focuses on what ought to happen in a
market. Factors involved in price analysis: Supply and demand, seasonal cycles, weather and
government policy.
Fundamental analysis is a macro or strategic assessment of where a currency should be trading
based on any criteria but the movement of the currency's price itself. These criteria often include
the economic condition of the country that the currency represents, monetary policy, and other
"fundamental" elements.
Many profitable trades are made moments prior to or shortly after major economic
announcements.
Positive Stock market news:
1. Government stability is big positive reason for sensex.
2. Global Telecom Companies are planning to buy 20-25% stake in Reliance Communications.
R-Com stock lost 70% of value in 2008. Anil Ambani family holds 67% stake in the company.
This deal is beneficial for investors as only 12% of shares are available for trading after this
purchase in the secondary market. Promoter will not reduce his holding.
3. Manpower survey: India is the second most optimistic employment market in the world but
there will freezing in hiring in the next 3 months. IT and Hospitality sectors are the worst
affected while Telecom is the most optimistic one.
FCCB shocks: Foreign currency convertible bonds (FCCBs?) of many companies will be due
for repayment in the next 3 years. As stock markets are unlikely to recover in the next 12-15
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months, it is interesting to see how promoters will clear their dues. We may hear some shocking
news on this front in the next 2 years.
NPA shocks:
Many people are underestimating the impact of Non Performing Assets (NPAs). NPAs will
affect in 2 ways. NPAs will not only propel the negative sentiment but increase the banks
reluctance to give loans which will once again destroy the positive aspects of the bailout
packages. Only positive aspect is many PSU banks reported fall in NPAs in 2008 over 2007
except SBI and IOB.
NPA statistics:
NPAs of ICICI Bank in 2007: Rs 5,930 crore.
NPAs of ICICI Bank in 2008: Rs 9,500 crore..
Interesting statistics about Asian and World economies:
1. World Bank estimates:
A. November, 2008: World economy will grow by 2.2% in 2009.
B. December, 2008: World economy will grow by 0.9% in 2009.
2. ADB estimates about Asian economy in 2009:
A. September, 2008: Asian economy will grow by 7.2% in 2009.
B. December, 2008: Asian economy will grow by 5.8% in 2009.
3. ADB estimates about Asian economy in 2008:
A. September, 2008: Asian economy will grow by 7.5% in 2008.
B. December, 2008: Asian economy will grow by 6.9% in 2008.
4. Current P/E of Sensex: 10.
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P/E of Sensex in 2008 economic slowdown: 9.5
This is a much severe crisis than 2001 slowdown.
Recession
A recession is a decline in a country's gross domestic product (GDP) growth for two or more
consecutive quarters of a year. A recession is also preceded by several quarters of slowing down.
Causes of recession
An economy which grows over a period of time tends to slow down the growth as a part of the
normal economic cycle. An economy typically expands for 6-10 years and tends to go into a
recession for about six months to 2 years.
A recession normally takes place when consumers lose confidence in the growth of the economy
and spend less.
This leads to a decreased demand for goods and services, which in turn leads to a decrease in
production, lay-offs and a sharp rise in unemployment.
Investors spend less as they fear stocks values will fall and thus stock markets fall on negative
sentiment.
Stock markets & recession
The economy and the stock market are closely related. The stock markets reflect the buoyancy of
the economy. In the US, a recession is yet to be declared by the Bureau of Economic Analysis,
but investors are a worried lot. The Indian stock markets also crashed due to a slowdown in the
US economy.
49
The Sensex crashed by nearly 13 per cent in just two trading sessions in January. The markets
bounced back after the US Fed cut interest rates. However, stock prices are now at a low ebb in
India with little cheer coming to investors.
When the global economy has been cooling down, and the financial sector in particular has been
heading from one cold shower to the next, it was inevitable that stock markets around the world
would start catching the chill.
The way in which Asian stock prices responded last week to the fall of the Dow Jones and
Nasdaq indices by 4 per cent, hitting a 10-month low, has also punctured a hole in the decoupling
argument (which said Asia would not be hit by an America-based problem) that had become
fashionable in recent weeks.
Investors around the world have taken note of the fact that the broad-based S&P 500 index is at a
16-month low, along with European stocks. And investors seem to have little faith in the Bush
rescue plan's ability to ward off a recession in the US. The Fed will almost certainly respond with
sharp cuts in interest rates towards the end of the month, but the market has already discounted
for that.
Indian markets worst hit
It is interesting that Indian markets were hit the most, among all Asian markets. This may have
been because the correction in the overheated Chinese stock market began some weeks ago.
Investors will also have noticed that the third-quarter corporate numbers show significant
deceleration in both sales and profit growth, when compared to the same quarter a year earlier.
When coupled with the data showing that the export target for the year will be missed by a wide
margin, and that the industrial sector has suffered a sharp slowdown, it was inevitable that stock
prices would have to come off their dizzy highs.
What began with profit-booking and unwinding of long positions cascaded on Friday into a 3.5
per cent decline in the Sensex. Foreign institutional investors had moved to the sidelines in the
secondary markets even earlier, and FIIs have been net sellers to the tune of Rs 2,200 crore (Rs
22 billion) in January. Also relevant was the Reliance Power IPO, which pulled in a record
amount of application money (Rs 1,15,000 crore (Rs 1,150 billion)). Even if a third or a fourth of
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that was being garnered by sale of stocks, it is a large enough sum for the market to go into
correction mode.
There is no doubt that valuations had become expensive. Even after the 10 per cent correction
from the market's peak, the Sensex trades at a trailing P/E multiple of 24.5, which is not cheap in
anyone's book.
Yet, buying may soon begin
A global liquidity surplus had certainly contributed to momentum buying. The question is
whether the correction that has occurred so far is enough for fresh buying to emerge, or whether
a further fall is required before value-based buying starts.
On a forward basis, the Sensex trades at an FY09 estimated P/E of 18. The floor therefore would
probably be a Sensex level of 17,000-odd -- which would mean wiping out the gains of the past
three months, no more. Provided the general economic and corporate news does not get worse
than has already been anticipated, fresh buyingcannot be very far away.
Impact of a US recession on India
A slowdown in the US economy is bad news for India.
Indian companies have major outsourcing deals from the US. India's exports to the US have also
grown substantially over the years. The India economy is likely to lose between 1 to 2 percentage
points in GDP growth in the next fiscal year. Indian companies with big tickets deals in the US
would see their profit margins shrinking.
The worries for exporters will grow as rupee strengthens further against the dollar. But experts
note that the long-term prospects for India are stable. A weak dollar could bring more foreign
money to Indian markets. Oil may get cheaper brining down inflation. A recession could bring
down oil prices to $70.
Between January 2001 and December 2002, the Dow Jones Industrial Average went down by
22.7 per cent, while the Sensex fell by 14.6 per cent. If the fall from the record highs reached is
taken, the DJIA was down 30 per cent in December 2002 from the highs it hit in January 2000.
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In contrast, the Sensex was down 45 per cent.
The whole of Asia would be hit by a recession as it depends on the US economy. Asia is yet to
totally decouple itself (or be independent) from the rest of the world, say experts.
Black Monday saw bloodbath on Dalal Street as the Indian stock markets crashed by over 1430
points in afternoon trade (the market has since then recovered somewhat), reminding investors
that there is no one-way bet on the stock market.
factors.
One, there is a change in the global investment climate. One of the primary triggers is the huge
fear of the United States' economy going into a recession with foreign institutional investors
trying to reallocate their funds from risky emerging markets to stable developed markets.
Analysts are now expecting a cut in US interest rates.
Hedge funds and FIIs could have been the biggest sellers in the Indian markets, booking profits
and making the most of the unprecedented bull run that has dominated the Indian stock market
for a long time now.
The current volatility is also linked to global bourses. There is a big correlation among global
markets. The presence of hedge funds across asset classes, along with increased global
movement of capital, has increased event-related volatility.
Volatility in commodities markets has also significantly affected equity markets.
A combination of global and local factors is affecting this market, said Mihir Vora of HSBC
Mutual Fund, on NDTV Profit. On the global front, other emerging markets were down nearly
20% so India is playing catch-up, he said.
On the local front there has been a huge build-up in derivatives positions and volatility led to
margin calls. Also many IPOs have sucked out liquidity from the primary market into the
secondary market, said Vora. At current levels it would be a buy call and we would not advise
investors to wait to catch the bottom, he added.
Analysts expect the markets to continue to be choppy for a while till global liquidity and
52
commodity prices settle in. With the markets falling, a technical correction in the derivatives
segment has perpetrated a larger fall.
The Sensex can fall another 10-15%, said Adrian Mowat of JP Morgan, on NDTV Profit.
SWOT analysis:
Strength:
High return
Large investment
Acquire capital for expanding the business
Secure the future losses
Weakness:
High risk
Based on the fluctuation. It becomes high loss when market goes down.
Can’t predict future
Based on rumors
Opportunity:
Lot of people wants to invest but don’t invest due to insufficient knowledge.
Market is providing new opportunities and new options to invest.
Threat :
Recession
New government53
Bubble burst
Fluctuates dollar prices
Matrix
STRENGTH
High return
Large investment
Acquire capital for expanding the
business
Secure the future losses
Weakness:
High risk
Based on the fluctuation.
It becomes high loss when
market goes down.
Can’t predict future
Based on rumors
Opportunity
Lot of people wants to invest but
don’t invest due to insufficient
knowledge.
Market is providing new
opportunities and new options to
invest.
Threat
Recession
New government
Bubble burst
Fluctuates dollar prices
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Conclusion:
Through this research we can conclude that:
Stock market fluctuates by the external environment.
Stock market is all about future prediction.
Stock market is very sensitive market.
It is based on”high risk and high return.”
Comparatively stock market is less risky than the other market and generates more
money for the economy
One who have good knowledge in stock market, may survive in the market and generates
profits or good return whether the market is down
Investors should not invest on the basis of rumors they must observe the market condition
or trends Indian economy and than invest If they wanna generate good return.
Investors should invest for a long term purpose. It should not be on the basis of short term
purpose.
As a private investor, you can sometimes get on allocation of newly – issued shares but
the issue will be confined to institutional invertors .
A scrip issue is designed to improve marketability of ordinary shares , and does not
diluteyour ownership.
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Investor should invest on the basis of result of company. That how the company is
performing.
Investor should not invest in C, D,group company . Investor should invest in A group
company.
Investor should not invest in small cap company.
When the market is rising very fastly . make sure that it is going on the basis of
fundamental . if it is not do not invest in stock market.
Investor should not invest on the basis of report.
Stock market are run by the big investor like FII’S , DII’S , MUTUAL FUNDS.
When the market is all time high , do not invest in stock market.
When you are going to invest in stock market get a full information about the company
in which you want to invest .
Stock market always affect by overseas market.
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Bibliography
Text books
The Stock Market-The Stock Market - Rik W.Hafer, Scott E. Hein, R. W.Hafer
work package no. 6,7 & 8
Investment Analysis and portfolio management-M Raghunathan, Madhumati
page no. 23,24,26,28,200,209
Journals and magazines
Capital market 23rd feb to 08 march page no. 16-19
Business world, 11 may 2009 page no. 34-39
Barometer-January 2008 By Alvino-Mario Fantini and Hugo Restall
JARN, Published Feb 2009
Business today
Business standard
Websites:
http://www.openarticlesubmission.com/article.php?id=national-stock-exchange
www.bseindia.com
http://www.nseindia.com/content/equities/eq_listing.htm
http://www.nseindia.com/content/nsccl/nsccl_introduction.htm
http://tecun.cimex.com.cu/tecun/software/Soporte%20Tecnico%20de%20Redes/Cisco/Routers/
7200-7500-7600/nse1_ds.pdf
http://www.slideshare.net/dblacksmith/financial-mkt57
http://moneymantrastock.com/basicofstockmarket/index.php/tag/what-is-the-difference-between-
the-primary-market-and-the-secondary-market/
http://finance.indiamart.com/markets/nse/
www.swing-trade-stocks.com
www.wickypedia.com
http://www.citehr.com/78851-format-details-required-indian-pay-slip.html
http://www.dynemic.com/investor_relations.htm
http://www.traderji.com/beginners-guide/25200-broker-subbroker.html
www.answers.com
http://www.allbusiness.com/north-america/united-states-illinois-metro-areas-chicago/1067227-
1.html
SOME OTHER WEB SITES
www.answers.com
http://business.gov.in/business_financing/capital_market.php#
www.angeltrade.com
http://www.nseindia.com/marketinfo/companyinfo/online/boardmeetlist.
http://www.sebi.gov.in/Index.jsp?contentDisp=Department&dep_id
www.shriraminsight.com
58
QUESTIONNAIRE
NAME:
ADDRESS:
CONTACT NO:
E-MAIL:
Q1. What is your occupation?
a) Business b) Private Service
c) Govt. service d) Housewife
e) Student f) Other________________
Q2. What is your annual income (Rs.)?
a) Less than 200000
b) 200000 – 300000
c) 300000 – 500000
d) More than 500000
Q3. What is your annual saving (in Rs)?
a) Less than 50000
59
b) 50000 – 100000
c) More than 100000
Q4. Where do you invest?
a) Bank b) Mutual fund
c) Share market d) Post office
e) Other_____________
Q5. What factors affect your investment?
a) Return on Investment b) Risk
c) Liquidity d) Safety
Q6. Do you invest in share market?
a) Yes b) No
(If yes then go to 07 otherwise go to 08)
Q7. Through which tool do you invest?
a) Share b) IPO
c) Derivatives d) other_____________
Q8. Are you ready to invest in share market if you get higher return?
60
a) Yes b) No
Q9. Which mediums do you prefer to invest your saving?
a) Individual Advisor
b) Bank Advisor
c) Broker or Agency
d) Other_____________
Q10. Are you satisfied with your medium of investment?
a) Yes b) No
_______________________________________________________
Thank you.
61
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