SUMMER TRAINING PROJECT REPORT

UNDER

PRABATH FINANCIAL SERVICES LIMITED
ON

“Study of Fluctuations of Indian Stock Market”

SUBMITTED IN PARTIAL FULLFILMENT OF THE REQUIRMENT FOR THE AWARD OF THE DEGREE OF MASTER OF BUSINESS ADMINISTRATION OF THE RAJASTHAN TECHNICAL UNIVERSITY, KOTA.

SUPERVISED BY:Mr. S. P. Kabra

SUBMITTED BY :Rahul Jajoo

FACITLITY SUPERVISOR:Ms. Shilpi Kuntal

SUBMITTED TO :DEPARTMENT OF MANAGENENT STUDIES, SWAMI KESHVANAND INSTITUTE OF TECHNOLOGY, MANAGEMENT & GRAMOTHAN. JAIPUR

2008-2010

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Certificate

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Acknowledgement

“The completion of any project depends upon the co-operation, coordination and combined efforts of several resources of knowledge, inspiration & energy.” Words fall short acknowledging immense support lent to me yet I will try to give full credit to the deserver's. My sincere thanks goes to Mr. Vikas Shrotriya (HOD DMS) giving me an opportunity to discover more knowledge. I am also thankful to Mr. S. P. Kabra (Director,Prabhat financial services) for his support, guidance and cooperation throughout to accomplish this project also expressing deep sense of gratitude to my Project guide, Ms. Shilpi Kuntal (Lecturer) for her valuable guidance, continuous encouragement and tremendous patience in discussing my problems, have been of the greatest help in bringing out my task in present shape. I am equally grateful to all my other teachers for their complete support. It would be unfair on my part if I do not thank my colleagues for their continuous help without which this work could never have been accomplished. They made me realize the importance of teamwork and also the leadership skills. I am grateful to all of them standing with me and supporting me in this project.

( Rahul Jajoo )

Preface
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since it is difficult to assess certainty about future earnings and dividends. so they will be less volatile than stock prices. The study of fluctuations of stock market makes the investor aquatinted with the factor affecting the investment and Stock prices can be volatile and some analysts argue that this volatility is excessive.In the present situation where stock market is going up and down. This study tells the factor which directly or indirectly affects the market and some basic information not only share market but also other market such as derivatives or commodity market for the new investors or the students who have some interest in stock market. This is not easy to prove. Volatile stock prices do not have a major impact on consumption and capital spending since there is a good chance that price movements in one direction may be reversed. The objective of selecting the topic is to know about the market trends of the stock market and the information related to the investment for the future investor. it is necessary to invest consciously in the market whatever it is. Companies tend to smooth dividends. Contents 4 . this is the study about the last two year fluctuation in stock market which enables the investor in taking decision regarding investment.

1 Title of the Study 2. Research Methodology 2.2 Duration of the Project 2.5 Scope of Study 2. Conclusion 6.3 Objective of Study 2. SWOT 5.6 Limitation of Study 3. Core Study 4. Bibliography Executive summary 5 .4 Type of Research 2. Abstract 2.1.

Governments or trade bodies often step in when such distortions undermine the smooth functioning of free markets. in that the government does not intervene in how the market operates. or even virtual markets such as eBay. virtual marketplaces supported by IT networks such as the internet have become the largest and most liquid. and has become known as the law of supply and demand. Where there are more sellers than buyers. such as specialist markets. The currency markets are the largest continuously traded markets in the world. the availability of supply will push down prices. With the rising price of oil and food. investors and consumers are buying and selling every currency. and information. The number of buyers and sellers involved will have a direct bearing on the price of the good or service to be sold. These interactions define demand and supply characteristics and are therefore fundamental to economies. Conversely. Historically. for the sale or barter of farm produce. Markets originally started as marketplaces usually in the center of villages and towns. leading to massive money flows constantly changing hands. supermarkets. seven days a week. Buyers and sellers typically trade goods. Stock markets have become highly complex markets that allow investors to buy shares in companies or in funds that aggregate companies or industries together. the increased demand will push up prices. services and/ or information. governments. sellers and market makers to interact directly. particularly if the industry is protected by government legislation. services. some markets have low or no competition. If there are more buyers than sellers.Free markets operate under ‘laissez-fare’ conditions. Although physical markets are still vital. or they can be planned and regulated . markets were physical meeting places where buyers and sellers gathered together to trade. shopping centers. Some markets are very competitive. clothing and tools. banks. These kinds of street markets developed into a whole variety of consumer-oriented markets. Markets can appear spontaneously when there are goods or services to be exchanged. These markets may be distorted if a seller gains monopoly power by managing the majority of supply (or indeed if a buyer develops monophony power by managing demand). A market can be defined as a place where any type of trade takes place. with a number of vendors selling the same kinds of products or services.A market is an environment that allows buyers and sellers to trade or exchange goods. although they often maintain a physical location for buyers. Twenty four hours a day. Most stock markets today are primarily electronic networks. Markets are dependent on two major participants – buyers and sellers. 6 .

sugar. Today. Capital goods markets help businesses to buy durable goods to be used in industrial and manufacturing processes. coal and increasingly renewable energy sources such as biodiesel). etc). markets opened in red. meat. it paid off for those who bought. soft commodities and grains (wheat.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. oat. you MUST read this article! We have explained all the concepts and talked about all the "myths" that people have about the stock market! INTRODUCTION TO THE ORGANIZATION 7 . rice. on Tuesday. corn. cotton. gas.e. Albeit it could have been a gamble buying stocks before declaration of election results. frozen orange juice. then recovered and went up to 500 points up and finally settled for flat closing. 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. coffee. Now that's history. So what should a small investor do now? Should he buy stocks or should be selling stocks that he holds. Everyone has seen it and everyone is wishing if he should have buy stocks before this rally. i. Commodity markets include: energy (oil. and financial commodities such as bonds.commodity markets are once again under the spotlight. cocoa. soya beans. Stock markets are going to be volatile for next few days. Commodities underpin economic activity. went till 3oo points down.

RESEARCH METHODOLOGY TITLE OF THE STUDY:8 .

and the development of methods and systems for the advancement of human knowledge on a wide variety of scientific matters of our world and the universe. Scientific research relies on the application of the scientific method. This research provides scientific information and theories for the explanation of the nature and the properties of the world around us.  To know the effect of these fluctuation on the Indian economy. including many companies. Scientific research can be subdivided into different classifications according to their academic and application disciplines. a harnessing of curiosity. interpreting. TYPE OF RESEARCH Research Research is defined as human activity based on intellectual application in the investigation of matter.  To get the knowledge of other markets such as commodity market and derivatives.“Study of fluctuations of Indian stock market” DURATION OF THE PROJECT:.  To forecast or predict the future trend of stock market which helps in investment. 9 . but need not do so.  To know the ups and downs of stock market of last two years. The primary purpose for applied research is discovering. Research can use the scientific method. Scientific research is funded by public authorities. by charitable organizations and by private groups. It makes practical applications possible.45 days OBJECTIVE OF STUDY  To know the basic terminology of stock market.  To make the investor aware about the factors which may affect their investment.

analyze and interpret the present conditions. to developmental studies which seek to determine changes over time. SCOPE OF STUDY  Derivatives  Sebi  Stock exchange  Commodity market  Stock market 10 . but makes use of non-quantitative research methods in describing the conditions of the present. this research could be used in order to find out what age group is buying a particular brand of cola.In this project the research type used is descriptive because this research is the most commonly used and the basic reason for carrying out descriptive research is to identify the cause of something that is happening. For instance. the correlation study which investigates the relationship between variables. whoever is conducting the research must comply with strict research requirements in order to obtain the most accurate figures/results possible. and makes use of quantitative methods to describe. DESCRIPTIVE RESEARCH Descriptive research is used to obtain information concerning the current status of the phenomena to describe "what exists" with respect to variables or conditions in a situation. whether a company’s market share differs between geographical regions or to discover how many competitors a company has in their marketplace. record. if the research is to return useful results. Descriptive research can be of two types: i. The methods involved range from the survey which describes the status quo. Quantitative descriptive research emphasizes on what is. However. Qualitative descriptive research also emphasizes on what is.

3. they refer to the data which have already been collected and analysed by someone else. this puts a question mark on the reliability of this data. secondary data was collected. In this research study also their were some limiting factors. Secondary data means data that are already available i.e. for doing descriptive research time needed to be more. 11 . which a very important factor of this study as conclusion has been derived from this secondary data only. Reliability: The data collected in research work was secondary data. 4. some of them are as under: 1. Accuracy: The facts and findings of the data cannot be accepted as accurate to some extent as firstly. because in short period you cannot cover each point accurately. Time Period: Time period was one of the main factor as only one month was allotted and the topic covered in research has a wide scope. 2. Secondly. Data Collection: The most important constraint in this study was data collection as Secondary data was selected for study. it was not possible to cover it in a short span of time. So. Securities  Day trading  Factor affecting Indian stock market  Effect on Indian economy LIMITATIONS Limitations are the limiting lines that restrict the work in some way or other. So.

The size of the world stock market was estimated at about $36. The total world derivatives market has been estimated at about $791 trillion face or nominal value. now part of Euronext. cannot be directly compared to a stock or a fixed income security. a derivative 'bet' on an event occurring is offset by a comparable derivative 'bet' on the event not occurring. the vast majority of derivatives 'cancel' each other out (i. because it is stated in terms of notional values. the Amex.) 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.e.6 trillion US at the beginning of October 2008 . Many such relatively illiquid securities are valued as marked to model. 11 times the size of the entire world economy. Moreover. or raise additional capital for expansion by selling shares of ownership of the company in a public market. OTCBB and Pink Sheets. these are securities listed on a stock exchange as well as those only traded privately. This allows businesses to be publicly traded. Function and purpose The stock market is one of the most important sources for companies to raise money. compared to other less liquid investments such as real estate. which traditionally refers to an actual value. European examples of stock exchanges include the London Stock Exchange. The value of the derivatives market. 12 . The stock market in the United States includes the trading of all securities listed on the NYSE. the NASDAQ. This is an attractive feature of investing in stocks.. e. as well as on the many regional exchanges.g. the Deutsche Börse and the Paris Bourse. The liquidity that an exchange provides affords investors the ability to quickly and easily sell securities.Core study Stock market A stock market is a public market for the trading of company stock and derivatives at an agreed price. rather than an actual market price.).

Rising share prices. In the 1970s.. hedge funds. etc. and guarantee payment to the seller of a security. Therefore. The general public's heightened interest in investing in the stock market. 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. tend to be associated with increased business investment and vice versa. has been an important component of this process.History has shown that the price of shares and other assets is an important part of the dynamics of economic activity. the stock market is often considered the primary indicator of a country's economic strength and development. Share prices also affect the wealth of households and their consumption. Statistics show that in recent decades shares have made up an increasingly large proportion of households' financial assets in many countries. meaning that they collect and deliver the shares. deposit accounts and other very liquid assets with little risk made up almost 60 percent of households' financial wealth.g. insurance investment of premiums. e. permitting a 13 . One feature of this development is disintermediation. Exchanges also act as the clearinghouse for each transaction. in Sweden. Relation of the stock market to the modern financial system The financial system in most western countries has undergone a remarkable transformation. in general. mutual funds. either directly or through mutual funds. for instance. This eliminates the risk to an individual buyer or seller that the counterparty could default on the transaction. on the smooth operation of financial system functions. Financial stability is the raison d'être of central banks. pension funds. A portion of the funds involved in saving and financing flows directly to the financial markets instead of being routed via the traditional bank lending and deposit operations. In fact. An economy where the stock market is on the rise is considered to be an up and coming economy. central banks tend to keep an eye on the control and behavior of the stock market and. and can influence or be an indicator of social mood. compared to less than 20 percent in the 2000s. The major part of this adjustment in financial portfolios has gone directly to shares but a good deal now takes the form of various kinds of institutional investment for groups of individuals. In this way the financial system contributes to increased prosperity. The trend towards forms of saving with a higher risk has been accentuated by new rules for most funds and insurance.

then plummet just as quickly. This is something that could affect not only the individual investor or household. are exchanging questionable and often misleading tips. Sometimes there appears to be no rhyme or reason to the market. Stock prices fluctuate widely. analysts. the noise level in the stock market rises. In all developed economic systems. the trend has been the same: saving has moved away from traditional (government insured) bank deposits to more risky securities of one sort or another. Similar tendencies are to be found in other industrialized countries. financial writers.000 from seven limited partners consisting of Buffett's family and friends. such as the European Union. and people who have turned to investing for their children's education and their own retirement become frightened. Over the years he has built himself a multi-billion-dollar fortune. This is certainly more important now that so many newcomers have entered the stock market.higher proportion of shares to bonds. The stock market. With each passing year. investors find it increasingly difficult to profit. and market strategists are all overtaking each other to get investors' attention. This is a quote from the preface to a published biography about the long-term value-oriented stock investor Warren Buffett. At the same time.e.[4] Buffett began his career with $100. only folly. i. individual investors. the United States. real estate and collectables). Television commentators. or have acquired other 'risky' investments (such as 'investment' property. 14 . individual investors. in marked contrast to the stability of (government insured) bank deposits or bonds. and financial risk Riskier long-term saving requires that an individual possess the ability to manage the associated increased risks. despite all this available information. Yet. The following deals with some of the risks of the financial sector in general and the stock market in particular. 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. immersed in chat rooms and message boards. Japan and other developed nations. Stock prices skyrocket with little reason. and $105.. but also the economy on a large scale.

in SEBI is the Regulator for the Securities Market in India. it acquired statutory form in 1992 with SEBI Act 1992 being passed by the Indian Parliament. he had served SEBI as a Senior Executive Director. Mumbai Headquarters of SEBI Organization Details Headquarters Established Jurisdiction Head Chairman Term Mumbai. Prior to his stint at NSDL. Eastern. SEBI is headquartered in the popular business district of Bandra-Kurla complex in Mumbai. 2008 - Total Staff[1] 525 Official Website Website www. Maharashtra.Chaired by C B Bhave.sebi. The Board comprises[2] Name Mr CB Bhave Designation Chairman SEBI 15 As per CHAIRMAN (S. Southern and Western regional offices in New Delhi. Prior to taking charge as Chairman SEBI. Organization Structure Chandrasekhar Bhaskar Bhave is the sixth chairman of the Securities Market Regulator.gov. Chennai and Ahmedabad. Originally set up by the Government of India in 1988.4(1)(a) of the SEBI Act. India 1992 India Chairman C B Bhave February 16. . and has Northern. Kolkata. he had been the chairman of NSDL (National Securities Depository Limited) ushering in paperless securities. He is a former Indian Administrative Service officer of the 1975 batch.Securities and Exchange Board of India SEBI Bhavan.

A second appeal lies directly to the Supreme Court. 1992) Member (S.4(1)(d) of the SEBI Act.1992) Mr KP Krishnan Joint Secretary. quasi-judicial and quasiexecutive. which constitute the market: • • • the issuers of securities the investors the market intermediaries. Though this makes it very powerful.4(1)(d) of the SEBI Act. 16 .Mr. It drafts regulations in its legislative capacity. there is an appeals process to create accountability. Justice NK Sodhi. SEBI Mr Mohandas Pai Director.4(1)(b) of the SEBI Act. National Judicial Academy. Ministry of Finance Secretary. SEBI 1992) Member (S.4(1)(d) of the SEBI Act. Infosys Functions and Responsibilities SEBI has to be responsive to the needs of three groups. SEBI has three functions rolled into one body quasi-legislative. 1992) Member (S. Member (S. 1992) Member (S.4(1)(b) of the SEBI Act. Bhopal Whole Time Member. Ministry of Corporate Affairs Member (S.4(1)(d) of the SEBI Act. There is a Securities Appellate Tribunal which is a three member tribunal and is presently headed by a former Chief Justice of a High court . 1992) Mr Anurag Goel Dr G Mohan Gopal Mr MS Sahoo Director. 1992) Dr KM Abraham Whole Time Member. it conducts investigation and enforcement action in its executive function and it passes rulings and orders in its judicial capacity.

it has to be listed there. stock exchanges are part of a global market for securities. The securities traded on a stock exchange include: shares issued by companies. unit trusts. There is usually no compulsion to issue stock via the stock exchange itself. nor must stock be subsequently traded on the exchange. affect the price of stocks (see stock valuation). Stock exchange A stock exchange. which gives them advantages of speed and cost of transactions. (formerly a securities exchange) is a corporation or mutual organization which provides "trading" facilities for stock brokers and traders. Raising capital for businesses 17 .g. A stock exchange is often the most important component of a stock market. but trade is less and less linked to such a physical place. pooled investment products and bonds. SEBI has been active in setting up the regulations as required under law. Trade on an exchange is by members only. This is the usual way that derivatives and bonds are traded. derivatives. this may include the following: 1. Such trading is said to be off exchange or over-the-counter. To be able to trade a security on a certain stock exchange. as modern markets are electronic networks. The role of stock exchanges Stock exchanges have multiple roles in the economy. the quick movement towards making the markets electronic and paperless rolling settlement on T+2 basis). to trade stocks and other securities. Increasingly. Supply and demand in stock markets is driven by various factors which. Stock exchanges also provide facilities for the issue and redemption of securities as well as other financial instruments and capital events including the payment of income and dividends. The initial offering of stocks and bonds to investors is by definition done in the primary market and subsequent trading is done in the secondary market.SEBI has enjoyed success as a regulator by pushing systemic reforms aggressively and successively (e. Usually there is a central location at least for recordkeeping. as in all free markets.

hedge against volatility. or acquire other necessary business assets. 3. often owned by the company founders and/or their families and 18 . increase its market share. commerce and industry. A takeover bid or a merger agreement through the stock market is one of the simplest and most common ways for a company to grow by acquisition or fusion.The Stock Exchange provide companies with the facility to raise capital for expansion through selling shares to the investing public. or kept in idle deposits with banks. Consequently. 5. increase distribution channels. resulting in stronger economic growth and higher productivity levels and firms. through dividends and stock price increases that may result in capital gains. which could have been consumed. will share in the wealth of profitable businesses.Redistribution of wealth Stock exchanges do not exist to redistribute wealth. 2. it leads to a more rational allocation of resources because funds. both casual and professional stock investors. are mobilized and redirected to promote business activity with benefits for several economic sectors such as agriculture. 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. However. 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.Facilitating company growth Companies view acquisitions as an opportunity to expand product lines.Mobilizing savings for investment When people draw their savings and invest in shares.Corporate governance By having a wide and varied scope of owners. 4.

or otherwise by a small group of investors).Creating investment opportunities for small investors As opposed to other businesses that require huge capital outlay. Parmalat (2003).Barometer of the economy At the stock exchange.Tel (2001). 19 . 7. An economic recession. share prices rise and fall depending. Therefore the movement of share prices and in general of the stock indexes can be an indicator of the general trend in the economy. although by securing such bonds with the full faith and credit of the government instead of with collateral. The issuance of such bonds can obviate the need to directly tax the citizens in order to finance development.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. depression. Therefore the Stock Exchange provides the opportunity for small investors to own shares of the same companies as large investors. or financial crisis could eventually lead to a stock market crash. are classical examples of corporate mismanagement. largely. 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. Adelphia (2002). Sunbeam (2001). These bonds can be raised through the Stock Exchange whereby members of the public buy them. and the subprime mortgage crisis in 2007-08. Lehman Brothers (2008). The dot-com bubble in the early 2000s.com (2000). 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. One. 8. investing in shares is open to both the large and small stock investors because a person buys the number of shares they can afford.heirs. thus loaning money to the government. Share prices tend to rise or remain stable when companies and the economy in general show signs of stability and growth. American International Group (2008). However. Webvan (2001). Companies like Pets. 9. Enron Corporation (2001). and Satyam Computer Services (2009) were among the most widely scrutinized by the media. on market forces. MCI WorldCom (2002).

2005 notified by the Securities and Exchange Board of India (SEBI). BSE has facilitated the growth of the Indian corporate sector by providing it with an efficient access to resources. T and Z groups. pursuant to the BSE (Corporatisation and Demutualisation) Scheme. BSE has two of world's best exchanges. as its strategic partners. The SENSEX is constructed on a 'free-float' methodology. An investor can choose from more than 4. BSE has entered into an index cooperation agreement with Deutsche Börse. With demutualisation. and is tracked worldwide. which for easy reference.Bombay Stock Exchange Introduction Bombay Stock Exchange is the oldest stock exchange in Asia with a rich heritage. B. including 12 sectoral indices.700 listed companies.79 trillion . is India's first stock market index that enjoys an iconic stature . Deutsche Börse and Singapore Exchange. It migrated from the open outcry system to an online screen-based order driven trading system in 1995. Apart from the SENSEX. and is sensitive to market sentiments and market realities. BSE is now a corporatised and demutualised entity incorporated under the provisions of the Companies Act. There is perhaps no major corporate in India which has not sourced BSE's services in raising resources from the capital market. What is now popularly known as BSE was established as "The Native Share & Stock Brokers' Association" in 1875. BSE is the world's number 1 exchange in terms of the number of listed companies and the world's 5th in transaction numbers. This agreement has made 20 . Over the past 133 years. It is an index of 30 stocks representing 12 major sectors. 1956. S. The BSE Index. The market capitalization as on December 31. are classified into A. Today. SENSEX. BSE's pivotal and pre-eminent role in the development of the Indian capital market is widely recognized. 2007 stood at USD 1. 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. now spanning three centuries in its 133 years of existence. Earlier an Association Of Persons (AOP). BSE offers 21 indices.

SPIcE allows small investors to take a long-term view of the market. called "SPIcE" is listed on BSE. The systems and processes are designed to safeguard market integrity and enhance transparency in operations. In 2006. Barclays Global Investors (BGI). hedging and arbitrage. the global leader in ETFs through its iShares® brand. BSE launched the Directors Database and ICERS (Indian Corporate Electronic Reporting System) to facilitate information flow and increase transparency in the Indian capital market. has created the 'iShares® BSE SENSEX India Tracker' which tracks the SENSEX. In recent times. It has a nation-wide reach with a presence in more than 359 cities and towns of India. it has become the first national level stock exchange to launch its website in Gujarati and Hindi to reach out to a larger number of investors. BSE continues to innovate.SENSEX and other BSE indices available to investors in Europe and America. The ETF enables investors in Hong Kong to take an exposure to the Indian equity market. BSE has always been at par with the international standards. It brings to the investors a trading tool that can be easily used for the purposes of investment. 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). The first Exchange Traded Fund (ETF) on SENSEX. 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. While the Directors Database provides a single-point access to information on the boards of directors of listed companies. BSE is the first exchange in India and the second in the world to obtain an ISO 9001:2000 certification. 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: 21 . Moreover. debt instruments and derivatives. trading. BSE provides an efficient and transparent market for trading in equity.

BOLT is currently operating in 25.'Safe Investing in the Stock Market' under which 264 programmes were held in more than 200 cities. It offers over 40 courses on various aspects of the capital market and financial sector. 22 .com.1 million towards the investor protection fund. in collaboration with reputed management institutes and universities. BSE Training Institute: BTI imparts capital market training and certification. This initiative enables investors anywhere in the world to trade on the BSE platform.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). 2006 and March 31 2007 have been awarded the ICAI awards for excellence in financial reporting. • The Annual Reports and Accounts of BSE for the year ended March 31.Investor Services: The Department of Investor Services redresses grievances of investors. BSEWEBX.com: In February 2001. More than 20. BSE introduced the world's first centralized exchangebased Internet trading system. The BSE On-line Trading (BOLT): BSE On-line Trading (BOLT) facilitates on-line screen based trading in securities. BSE launched a nationwide investor awareness programme. Surveillance: BSE's On-Line Surveillance System (BOSS) monitors on a real-time basis the price movements. BSE was the first exchange in the country to provide an amount of Rs. volume positions and members' positions and real-time measurement of default risk. it is an amount higher than that of any exchange in the country.000 Trader Workstations located across over 359 cities in India. market reconstruction and generation of cross market alerts. BSEWEBX.

Mumbai. 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 .• The Human Resource Management at BSE has won the Asia . Delhi.. BSE launched on 27th May. 2006. Till the decade of eighties. With a view to provide a better representation of the increasing number of listed companies. became members of what today is called Bombay Stock Exchange Limited (BSE). The journey in the 20th century has not been an easy one. Since then. segment-specific and sector-specific indices. 1996 and since then. A lot has changed since 1875 when 318 persons by paying a then princely amount of Re. health management at work and excellence in HR through technology Drawing from its rich past and its equally robust performance in the recent times. Calcutta. the 'BSE-200' and the 'DOLLEX-200'. In order to fulfill the need for still broader. BSE. there was no measure or scale that could precisely measure the various ups and downs in the Indian stock market. the stock market in the country has passed through good and bad periods. larger market capitalization and the new industry sectors. BSE launched the dollar-linked version of BSE-100 index on May 22. History For the premier stock exchange that pioneered the securities transaction business in India.that subsequently became the barometer of the Indian stock market. 1. 1994 two new index series viz.Pacific HRM awards for its efforts in employer branding through talent management at work. it is being calculated taking into consideration only the prices of stocks listed at BSE. Over the decades. BSE has come a long way in attuning itself to the varied needs of investors and market participants. came out with a Stock Index-SENSEX. in 1986. The BSE National Index was renamed BSE-100 Index from October 14. BSE will continue to remain an icon in the Indian capital market. over a century of experience is a proud achievement. Ahmedabad and Madras. BSE has continuously 23 .

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

National Stock Exchange of India
National Stock Exchange Limited

Type Location

Stock Exchange Mumbai, India 19°3′37″N 72°51′35″E/19.06028°N 72.85972°E/19.06028; 72.85972

Coordinates

Owner Key people Currency No. of listings MarketCap

National Stock Exchange of India Limited Mr. Ravi Narain (Managing Director & CEO) INR 1587 US$ 1.46 trillion (2006) S&P CNX Nifty

Indexes

CNX Nifty Junior S&P CNX 500

Website

http://www.nse-india.com/

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NSE is mutually-owned by a set of leading financial institutions, banks, insurance companies and 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 capitalisation. 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 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

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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 CNBCTV18, it is the one of the most important stock exchange in the world.

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
26

IISL has a Marketing and licensing agreement with Standard & Poor's (S&P). it means that the prices of the stocks of most of the major companies on the BSE have gone up. It gives you a general idea about whether most of the stocks have gone up or most of the stocks have gone down. The The Sensex Nifty is is an an indicator indicator of of all all the the major major companies companies of of the the BSE. These are the major stock exchanges in the country. There are other stock exchanges like the Calcutta Stock Exchange etc. is the Bombay Stock Exchange and the NSE is the National Stock Exchange.Most of the stock trading in the country is done 27 though the BSE & the NSE. If the Sensex goes down. Just like the Sensex represents the top stocks of the BSE.is a joint venture between NSE and CRISIL. Just in case you are confused.68% of the traded value of all stocks on the NSE Nifty stocks represent about 65. but they are not as popular as the BSE and the NSE. NSE. What is an index? An index is basically an indicator. this tells you that the stock price of most of the major stocks on the BSE have gone down.34% of the total market capitalization as on Mar 31.2 crore is 0. If the Sensex goes up. Impact cost of the S&P CNX Nifty for a portfolio size of Rs. who are world leaders in index services.16% S&P CNX Nifty is professionally maintained and is ideal for derivatives trading • • • Sensex & the Nifty The Sensex is an "index". IISL is India's first specialised company focused upon the index as a core product. • The total traded value for the last six months of all Nifty stocks is approximately 65. . 2009. the BSE. the Nifty represents the top stocks of the NSE. The BSE is situated at Bombay and the NSE is situated at Delhi.

and in the long run no company can survive without them. Dalal Street watches with great attention at these times. the price jumps up. If a company never makes money. Earnings are the profit a company makes. (Basics of economics!) Understanding supply and demand is easy. it isn't going to stay in business. The reasons for stock prices going "up" and "down" Stock prices change every day because of market forces. If a company's results are better than expected. It makes sense when you think about it. The reason behind this is that analysts base their future value of a company on their earnings projection. If you know this you will know what prices go up and what prices go down! To figure out the likes and dislikes of people. if more people wanted to sell a stock than buy it. What is difficult to understand is what makes people like a particular stock and dislike another stock. which are referred to as earnings seasons. there would be greater supply than demand. If a company's results disappoint and are worse than expected.Besides Sensex and the Nifty there are many other indexes. If you understand this. By this we mean that stock prices change because of “supply and demand”. you have to figure out what news is positive for a company and what news is negative and how any news about a company will be interpreted by the people. then the price moves up! Conversely. you will know what people are buying and what people are selling. . If more people want to buy a stock (demand) than sell it (supply). This is called the “BSE Mid-cap Index”. and the price would fall. There is an index that gives you an idea about whether the mid-cap stocks go up and down. Public companies are required to report their earnings four times a year (once each quarter). The most important factor that affects the value of a company is its earnings. 28 then the price will fall.

while others think that by drawing charts and looking at past price movements. the stock price of dozens of internet companies rose without ever making even the smallest profit. is called the initial public offering (IPO). As we all know.Of course. Issuing stock is advantageous for the company because it does not require the company to pay back the money or make interest payments along the way. this fact demonstrates that there are factors other than current earnings that influence stocks. Still. Some believe that it isn't possible to predict how stock prices will change. A company can borrow by taking a loan from a bank or by issuing bonds. which is issued by the private company itself. Both methods come under "debt financing". So. To do this. companies can either borrow it from somebody or raise it by selling part of the company. for example. it's not just earnings that can change the feeling people have about a stock. which is known as issuing stock. what are "all the factors" that affect the stocks price? The best answer is that nobody really knows for sure. It would be a rather simple world if this were the case! During the “dotcom bubble”. and most internet companies saw their values shrink to a fraction of their highs. these high stock prices did not hold. issuing stock is called “equity financing”. The first sale of a stock. you can determine when to buy and sell. On the other hand. All that the shareholders get in return for their money is the hope that the shares will someday be worth more than what they paid for them. The reasons for which companies issue stocks Why would the founders share the profits with thousands of people when they could keep profits to themselves? The reason is that at some point every company needs to "raise money". The only thing we do know is that stocks are volatile and can change in price very very rapidly. It is important that you understand the distinction between a company financing through 29 .

By becoming an owner. now we will go into stock picking and how to pick the right stock. but they also stand to lose their entire investment if the company isn't successful. Calculation of BSE SENSEX… 30 .debt and financing through equity.just as a small business owner isn't guaranteed a return. Fundamental Analysis 2. On the other hand. for forecasting of future stock price or financial price movements. Technical analysis is a little more complicated. Before picking the right stock you need to do some analysis. Technical Analysis Fundamental analysis is the analysis of a stock on the basis of core financial and economic analysis to predict the movement of stocks price. When you buy a debt investment such as a bond. This isn't the case with an equity investment. It is much more of an "art" than a science. technical analysis is the study of prices and volume. It depends more on experience and involves some statistics and mathematics. On the other hand technical analysis look at the stocks chart. fundamental analysis looks at the actual company and tries to figure out what the company price is going to be like in the future. In this article we will go into the basics of “fundamental analysis”. peoples buying behavior etc. Stock Picking –Having understood all the basics of the stock market and the risk involved. so explaining technical analysis is out of the scope of this article. There are two major types of analysis: 1. to try and figure out what the stock price is going to be like in the future. Shareholders earn a lot if a company is successful. neither is a shareholder. Simply put. you assume the risk of the company not being successful . you are guaranteed the return of your money (the principal) along with promised interest payments.

you can find this out by reading our “How to make money in the stock market?” article. Please note: The method used for calculating the Sensex and the 30 companies that are taken into consideration are changed from time to time. The stock market is a field dominated by savvy investors who know the ins-and-outs of the market. the Sensex is calculated taking into consideration stock prices of 30 different BSE listed companies. To show this accurately. Always use your own brain: It's extremely important. Consider the source: There are many people in the market who put in all their time and effort in promoting certain stocks. Make sure you dig in and really examine the "facts about the companies" 31 . For people who are not “on the inside”. This is a world wide accepted method as one of the best methods for calculating a stock market index. no matter how well intentioned it may be. is almost always a complete disaster. It is supposed to show whether the stocks are generally going up. The Sensex has a very important function. They do this because they have their money invested in those stocks. This is done to make the Sensex an accurate index and so that it represents the BSE stocks properly. The Sensex is supposed to be an indicator of the stocks in the BSE. or generally going down. If they can get enough people to buy the stock and they can get the stock price to rise. : Don't even consider "tips" that tell you about "hot stocks". the stock market can be a VERY dangerous place. the stock price will crash and they will walk off to promote another stock. Relying on the advice of others. they will sell the stock for a huge price. If you are not sure what we mean by the Sensex or what the Sensex is all about. It is calculated using the “free-float market capitalization” method. You must always use your own brain.This article explains how the value of the “BSE Sensex” or “sensitive index” is calculated. 3 important things you must know and follow as an new investor! You need to KNOW some “unforgettable basics” before you enter the world of investing in stocks.

currency. You will have to loose some money. But if you are a new investor. commodities. It is a generic term for a variety of financial instruments. it’s this flexibility that appeals to investors 32 . make some bad decisions and then only will you really understand the market. nothing comes free. In more simpler form. the underlying asset. you MUST follow these rules. derivatives are financial security such as an option or future whose value is derived in part from the value and characteristics of another security. bullion. you will basically not loose too much! Derivatives Commodities whose value is derived from the price of some underlying asset like securities. Everything has a price. and rely on "hype" to tell the company's story. Ignore press releases which have very little substance. You cannot understand the market by just looking at it from far. Once you really get into the stock market you do not need to follow these rules anymore. stock market index or anything else are known as “Derivatives”. rather than the asset itself.before you invest. The legal terms of a contract are much more varied and flexible than the terms of property ownership. And finally the most important tip!!! Only invest money you can afford to lose!! Sure this is a basic point. this means you buy a promise to convey ownership of the asset. They are for your own safety. but in many cases. Essentially. this never works. You should only invest money that you can honestly afford to lose!! Everyone enters into investments with the idea of earning big profits. interest level. In fact. (Especially if you are new to investing in the stock market!) Please understand that the above tips are tips for beginners. By following these rules. But then again. but many many people miss it.

the underlying asset is usually a commodity. bond. Beyond this. The other examples of derivatives are warrants and convertible bonds (similar to shares in that they are assets). stock. An ‘options’ contract gives the owner the right to buy or sell an asset at a set price on or before a given date. It is likely that any person who has funds invested. Shares or bonds are financial assets where one can claim on another person or corporation. and exposed to. a contract is merely an agreement between two parties. On the other hand. Derivatives securities or derivatives products are in real terms contracts rather than solid as it fairly sounds. an insurance policy or a pension fund. On the other hand. or currency. where the contract details may not be standardized.. ‘Futures’ and ‘options’ are two commodity traded types of derivatives. derivatives – wittingly or unwittingly. 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. they will be usually be fairly standardised and governed by the property of securities laws in an appropriate country. When a person invests in derivative. the derivatives range is only limited by the imagination of investment banks. But derivatives are usually contracts. India Commodity Market 33 . the owner of a ‘futures’ contract is obligated to buy or sell the asset. that they are investing in.

we shall deal with the former in a little detail. 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 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 extent of the retail market (both organized and unorganized) has evolved in leaps and bounds. In fact. With the passage of time the importance of whole sellers began to fade out for the following reasons: • The whole sellers in most situations. It was the retailers who finally sold the goods to 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. 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. India Commodity Market can be subdivided into the following two categories: • • Wholesale Market Retail Market Let us now take a look at what the present scenario of each of the above markets is like. Reliance. the success stories of the commodity market of India in recent years has mainly centered around the growth generated by the Retail Sector. The cost of goods is estimated in terms of domestic currency . 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 organized sector on the other hand are owned by various business houses like Pantaloons. Such 34 . Almost every commodity under the sun both agricultural and industrial are now being provided at well distributed retail outlets throughout the country. The broadest classification of the Indian Market can be made in terms of the commodity market and the bond market. Tata and others.The vast geographical extent of India and her huge population is aptly complemented by the size of her market. • In recent years. Moreover. Here. the retail outlets belong to both the organized as well as the unorganized sector.

it yields very low returns unlike the bond market. However the growth of such markets has still centered around the urban areas primarily due to infrastructural limitations. Considering the present growth rate. Demand for commodities is likely to become four times by 2010 than what it presently is. Money Market Definition Money Market Definition is simply meant as the short-term debt market. Although the stock market is associated with high risks and high returns .000 billion by the year 2010. edible and inedible. the total valuation of the Indian Retail Market is estimated to cross Rs. Money Market When the stock prices show a downward trend . Since the money market is extremely safe. Treasury Bills and 35 . One may browse through the following links to have a more detailed information about money market. 10. The money market is a type of a dealer market where firms purchase securities in their own account by assuming the risks themselves. 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. Transactions take place over phone or the electronic system.markets are usually sell a wide range of articles both agricultural and manufactured. Unlike the stock exchanges the money market securities do not operate in exchanges or through brokers. Modern marketing strategies and other techniques of sales promotion enable such markets to draw customers from every section of the society. The money market deals with very short term debt securities that mature in less than a year. many are risk averse and prefer to invest in the more secure money market . perishable and durable. then it becomes risky to keep savings there.

Money Market Rates Money Market Rates can be simply defined as the market rates including the broker call loan rate.certificate of deposits are regarded as the instruments in the money market. World Money Market World Money Market has been providing origination. you should be very careful when you decide to invest in the Indian stock market. rates on bankers' acceptance etc. federal funds rate. then you should always make a good survey of the whole market. trading and the distribution of short-term debt instruments across different regions over the world. As you know that you cannot predict the stock market. When people are buying more stocks. So. Money Market Index Money Market Index is a true indicator of the prevailing money market. Major Factors That Affect Stock Price in stock market globally When you wish to invest in the stock market. then the price of that stock falls. Demand AND SUPPLY One of the major factors affecting stock price is demand and supply. On the other hand if people are selling more stocks. Market Cap 36 . Find detailed on the world money market. So let us discuss about the different factors affecting the stock price in this article. so in that case you need to know the functioning of the market. which renders a clear-cut idea on making investment. Get the method of finding the money market rates. then the price of that particular stock increases. There are some major factors that affect stock price. The trend of the stock market trading directly affects the price.

170. ONGC. 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. So. if you were to buy all the shares 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. 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.21 Cr” (when this article was written) Depending on the value of the market cap. You have! When you are talking about “mid-cap”. So market cap is another factor that affects stock price. News When you get positive news about a company then it can increase the buying interest in the market.705. “small-cap” and “large-cap” stocks. it can ruin the prospect of a stock. "Market Capitalization"? You probably think that you have never heard of the term “market capitalization” before. news is another factor affecting stock price. Cap” will be the market cap value. the company will either be a “mid-cap” or “largecap” or “small-cap” company! Now the question is.Never try to guess the worth of a company simply by comparing the price of the stock. In this case you should remember that news should not matter much but the overall performance of the company matters more. 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. when there is a negative press release. On the other hand. 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. has a market cap of “Rs. Earning/Price Ratio 37 .

depending upon how the trade is doing (whether it is in profit). But if this is the case. with the goal of making a profit from the difference between the buying price and the selling price. Day Trading Day trading (and trading in general) is the buying and selling of various financial instruments. The styles range from short term trading such as scalping where positions are only held for a few seconds or minutes.Another important factor affecting stock price is the earning/price ratio. and stocks. individual traders now have direct access to the same exchanges and market data. currencies. This gives you a fair idea of a company’s share price when it is compared to its earnings. But with recent technology such as the Internet. suited to different day trader personalities. options. 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. 38 . Day trading was originally only available to financial companies (such as banks). Trading Styles There are several different styles of day trading. these are the major factors that affect stock price. So. such as futures. but most traders will choose a single style and only take that type of trade. to longer term swing and position trading where a position may be held throughout the trading day. and can make the same trades at very low cost. The stock becomes undervalued if the price of the share is much lower than the earnings of a company. Some day traders will trade multiple styles. Day trading differs slightly from other styles of trading in that positions are rarely (if ever) held overnight or when the market being traded is closed. and can have open positions for anywhere from a few minutes to a few hours. because only they had access to the exchanges and market data. Most day trading systems have a lot of flexibility.

881 million. and choose which one to trade depending upon the current condition of the market. Trend trades are trades in the direction of the current price movement (i. buying if the price is moving up). and perhaps only make one trade per day.426 million. However many trades are made.545 million. but some traders will take different types. and ranging trades. and the desired goal of making a profit. Ranging trades are trades that go back and forth between two prices. while others prefer to wait for what they consider the best conditions for their trade. and counter-trend trades are trades against the direction of the current price movement (i. and are used when the market is moving sideways. are the same. while the portfolio investment stood at US $ -11. Monthly trends in foreign investments ($ million) Total foreign investments 200708(P) 3617 3972 Months Foreign direct investments Portfolio investments 2007-08(P) 2008-09(P) 2007-08(P) 2008-09(P) 2008-09(P) April May 1643 2120 3749 3932 39 1974 1852 -880 -288 2869 3644 . Some day traders like to make many trades throughout the trading day. such as trend trades.e. The foreign direct investment (FDI) stood at US $ 27.e. selling if the price is moving up). India attracted total foreign investments of US $ 15. the trading process that is used. Current State of the Indian Economy: Capital Inflows During the April-January period of 2008-09. Most day traders will choose a single type of trade. there are other variances between day traders.Day trading also has different types of trade. In addition to the style and type of day trading. counter-trend trades.

High age 7 8 9 10 Low Low . 1995 = 1000) Aver.79 = 100) AveragHigh e 1 2 3 4 5 6 40 (Base : 1983 . Nifty has been rechristened as ' S & P CNX Nifty with effect BSE Sensitive Index BSE ..June July August September October November December January February March AprilJanuary 1238 705 831 713 2027 1864 1558 1767 5670 4438 2392 2247 2328 2562 1497 1083 1362 2733 - 3664 6713 -2875 7081 9564 -107 5294 6739 -8904 -1600 -3010 -492 593 -1403 -5243 -574 30 -614 - 4902 7418 -2044 7794 11591 1757 6852 8506 -3234 2838 -618 1755 2921 1159 -3746 509 1392 2119 - - 27426 - -11881 - 15545 Source: Reserve Bank of India (RBI) Stock Market Trends * NSE . i.84 = 100) Average High Low (Base : November 3.100 S & P CNX Nifty * (Base : 1978 .50.e.

56 5432.70 08 8 Aug-0814722.20 4835.35 6287.42 10335.16945.67 4124.01 4823.09 4332.1 14942.87 6564.22 3950.12 16275.28 8488.64 5756.30 08 5 June.96 10631.71 7760.23 7828.01 4769.57 8095.21 3210.87 4343.25 2553.06 4206.74 4463.15 Dec-08 9513.80 3077.25 4 Mar.60 4476.58 8907.93 8674.33 16729.50 4647.60 9969.Jan-08 19325.18 13461.49 4417.95 4441.6 17600.88 14809.32 6580.56 5483.40 4214.59 9240.6 13055.75 2524.35 4802.90 4838.75 8101.59 8982.15838.45 2678.91 5195.6 20873.64 8621.79 3148.00 3850.9 17378.94 10526.60 7909.67 8509.16 16608.14997.80 7143.92 14048.17 2834.59 8785.50 2656.48 7362.88 5201.45 Jan-09 9350.85 4899.69 4504.05 08 1 Oct-08 10549.20 9348.75 7276.01 9435.12 8627.58 10099.1 15503.10 08 8 Apr-0816290.20 5 Nov-089453.28 12575.55 5181.50 4953.84 2854.36 5396.02 4901.50 2895.13942.66 5228.36 3121.2 16063.92 6776.13716.62 7029.91 8739.34 7704.94 4443.3 16677.54 11509.35 7860.12 4620.55 41 .00 9 May.00 3 Sept.00 4503.30 5 Feb-08 17727.46 15343.96 8895.80 3816.24 4864.5 18663.84 5028.49 8363.8 15049.12 8451.01 5328.55 08 8 July.79 4739.60 4040.86 12595.

36 182.297.019.31 184.688.692.899.60 8.774.66 4.874.18 1.919.741.547.91 1.28 Full Market Capitalisation % to (Rs.162.77 7.32 4.54 4.30 17.746.01 2.81 3.853.411.56 663.485.398.25 1.65 8.490.46 9.75 5.516.748.949.36 10.29 (Rs.20 95.62 7.46 47.58 407.04 0.803.94 12.622.79 4.428.59 86.77 5.697.60 2.70 High 17.69 82.60 4.86 3.93 2.99 7.102.45 1.96 9.987.77 756.361.39 272.528.99 253.161.19 7.98 2.408.805.13 3.74 1.598.866.505.91 2.24 3.081. crore) Total Mkt Cap 2.65 906.20 3.274.94 11.917.38 668.907.18 4.53 373.12 BSE Sectoral Indices AUTO BANKEX CD CG FMCG HC IT METAL OIL&GAS POWER PSU REALTY 4.60 128.08 623.549.86 977.95 12.88 3.925.127.472.120.92 1.427.864.70 202.806.24 13.809.330.90 2.27 6.64 8.85 4.06 9.607.28 1.516.38 .88 0.15 4.02 6.02 735.10 3.24 7.001.802.262.312.66 3.54 211.39 2.853.890.82 42 137.54 2.346.18 9.45 123.28 6.77 533.875.27 284.602.38 1.863.62 8.85 11.186.673.41 3.750.888.64 Turnover % to Total Turnover 31.04 104.060.85 29.08 Low 7.43 5.75 2.240.285.251.60 11.990.367.16 2.68 5.40 48.638.53 2.683.23 2.34 7.208.42 8.52 94.744.53 2.157.43 4.897.293.05 13.27 2.17 31.93 8.86 1.569. crore) 2.90 2.52 Week INDICES Close SENSEX MIDCAP SMLCAP BSE-100 BSE-200 BSE-500 14.112.69 76.14 11.13 921.18 7.38 3.74 5.63 7.77 660.042.393.57 8.37 3.71 807.450.59 17.06 2.77 65.

77 570.TECk BSE Dollex Indices DOLLEX-30 DOLLEX100 DOLLEX200 2.72 3.15 8. Trends in Inflation 43 .82 0.472.423.32 3.00 0.64 1.13 2.00 -- -- -- -- Note : The market capitalisation of all the indices is free float market capitalisation except for BSEPSU.59 0.99 12.41 1.91 2.638.618.67 750.328.582.227.58 841.664.00 --- --- --- --- 591.

75 191.28 February 196.00 August 205.02 202.40 March 196.10 205.84 317.02 195.30 194.73 175.80 177.08 175.50 171.72 330.76 326.30 July 204.05 324.76 May 201.93 328.32 179.30 200.78 310.43 192.63 320.08 44 .00 173.28 204.90 315.80 171.10 171.(1) Index Numbers Of Wholesale Prices in India ( Monthly Averages) (Base: 1993-94 = 100) Year Month All Commodities Primary Articles Fuel.83 September 207.76 211. Power.88 314.05 June 203.94 177.90 April 199. Light & Lubricants Manufactured Products 2006 January 196.

which means that the value of the euro (the numerator of the EUR/USD ratio) increased in relation to the U. the Forex rate was 1.S. dollars. An enormous liquid market making it easy to trade most currencies. If the investor had bought 1000 euros on that date.70 U. This number is also referred to as a "Forex rate" or just "rate" for short.0857. Foreign currencies are constantly and simultaneously bought and sold across local and global markets and traders' investments increase or decrease in value based upon currency movements. Forex trading The investor's goal in Forex trading is to profit from foreign currency movements. Leveraged trading with low margin requirements. The main enticements of currency dealing to private investors and attractions for short-term Forex trading are:        24-hour trading. The ability to profit in rising or falling markets. Foreign exchange market conditions can change at any time in response to real-time events. Standard instruments for controlling risk exposure. the exchange rate of EUR/USD on Aug 26th. 5 days a week with non-stop access to global Forex dealers. Forex trading or currency trading is always done in currency pairs. he would have paid 1085. 2003 was 1. The 45 . Many options for zero commission trading.2083.Forex An overview of the Forex market The Forex market is a non-stop cash market where currencies of nations are traded.S. Volatile markets offering profit opportunities. typically via brokers. One year later. dollar. For example.

to know if the investor made a good investment. If the currency you are buying does increase in value. Therefore. An open trade (also called an open position) is a trade in which a trader has bought or sold a particular currency pair and has not yet sold or bought back the equivalent amount to close the position.60 more than what he had started one year earlier. government going bankrupt or being unable or unwilling to pay its debt obligation. trade only when you expect the currency you are buying to increase in value relative to the currency you are selling. One example of a risk-free investment is long-term U. the person or institution that bought or sold the currency has no plan to actually take delivery of the currency in the end. they were solely speculating on the movement of that particular currency. the U. government bonds since there is practically no chance for a default. The technician studies the effect while the fundamentalist studies the cause of market movement. it is estimated that anywhere from 70%-90% of the FX market is speculative. At the very minimum. In other words.S. Analysis Technical analysis is a method of predicting price movements and future market trends by studying charts of past market action. the investor would have USD 122. However. you must sell back the other currency in order to lock in a profit. When trading currencies. However. They have the same goal . Many successful traders combine a mixture of both approaches for superior results.S. the return on investment (ROI) should be compared to the return on a "risk-free" investment. one needs to compare this investment option to alternative investments.e. Technical analysis is concerned with what has actually 46 .to predict a price or movement. Technical analysis and fundamental analysis differ greatly.investor could now sell the 1000 euros in order to receive 1208. Forex-Forecasting This article provides insight into the two major methods of analysis used to forecast the behavior of the Forex market.30 dollars. rather. i. but both can be useful forecast tools for the Forex trader.

e. Also. open-closing) Trends (following moving average).g. Forex charts are based on market action involving price. Prices move in trends Technical analysis is used to identify patterns of market behavior that have long been recognized as significant. there are recognized patterns that repeat themselves on a consistent basis. for example. One major advantage of technical analysis is that experienced analysts can follow many markets and market instruments simultaneously.happened in the market. 3. political factors and market sentiment. 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. Some major technical analysis tools are described below: Relative Strength Index (RSI): 47 . History repeats itself Forex chart 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. Technical analysis is built on three essential principles: 1. 2. and creates charts from that data to use as the primary tool. There are five categories in Forex technical analysis theory:      Indicators (oscillators. For many given patterns there is a high probability that they will produce the expected results. the pure technical analyst is only concerned with price movements.: Relative Strength Index (RSI) Number theory (Fibonacci numbers. However. rather than what should happen and takes into account the price of instruments and the volume of trading. supply and demand. not with the reasons for any changes. Gann numbers) Waves (Elliott wave theory) Gaps (high-low.

1. Number theory: Fibonacci numbers: The Fibonacci number sequence (1. closing prices tend to be near to the extreme low of the period range. then this is taken as a signal that a change in the trend is likely.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. Conversely. %K and %D that are used to indicate overbought/oversold areas of a chart. 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). The MACD line is the difference between two exponential moving averages and the signal or trigger line. as prices fall in a strong down trend. If the MACD and trigger lines cross. then the instrument is assumed to be overbought (a situation in which prices have risen more than market expectations). The ratio of any number to the next larger number is 62%.8.13. which is a popular Fibonacci retracement number.34.. If the RSI is 70 or greater.. Divergence between the stochastic lines and the price action of the underlying instrument gives a powerful trading signal. The inverse of 62%.5. 48 . which is an exponential moving average of the difference. Moving Average Convergence Divergence (MACD): This indicator involves plotting two momentum lines.21. is also used as a Fibonacci retracement number. Stochastic calculations produce two lines. The indicator is based on the observation that in a strong up trend. which is 38%.) is constructed by adding the first two numbers to arrive at the third.3. period closing prices tend to concentrate in the higher part of the period's range.2. Stochastic oscillator: This is used to indicate overbought/oversold conditions on a scale of 0-100%.

He also used lines in charts to predict support and resistance areas. An ideal Elliott wave patterns shows a five-wave advance followed by a three-wave decline. There is no easy explanation for Gann's methods. Moving averages are used to smooth price information in order to confirm trends and support and resistance levels. falling peaks and troughs constitute a downtrend that determines the steepness of the current trend. 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.D. Trends A trend refers to the direction of prices. 49 . Gaps Gaps are spaces left on the bar chart where no trading has taken place. They are also useful in deciding on a trading strategy. but in essence he used angles in charts to determine support and resistance areas and predict the times of future trend changes. A breakaway gap is a price gap that forms on the completion of an important price pattern. An up gap is formed when the lowest price on a trading day is higher than the highest high of the previous day. It usually signals the beginning of an important price move. For that reason.Gann numbers: W. known as time/price equivalents. He made his fortune using methods that he developed for trading instruments based on relationships between price movement and time. An up gap is usually a sign of market strength. A down gap is formed when the highest price of the day is lower than the lowest price of the prior day. Gann was a stock and a commodity trader working in the '50s who reputedly made over million in the markets. Rising peaks and troughs constitute an up trend. The breaking of a trend line usually signals a trend reversal. Horizontal peaks and troughs characterize a trading range. An exhaustion gap is a price gap that occurs at the end of an important trend and signals that the trend is ending. A runaway gap is a price gap that usually occurs around the mid-point of an important market trend. particularly in futures trading or a market with a strong up or down trend. while a down gap is a sign of market weakness. it is also called a measuring gap.

political. 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. and other "fundamental" elements.The most common technical tools: Coppock Curve is an investment tool used in technical analysis for predicting bear market lows. Fundamental analysis focuses on what ought to happen in a market. environmental and other relevant factors and statistics that will affect the basic supply and demand of whatever underlies the financial instrument. the technical analyst is not much concerned with any of the "bigger picture" factors affecting the market. DMI (Directional Movement Indicator) is a popular technical indicator used to determine whether or not a currency pair is trending. weather and government policy. Factors involved in price analysis: Supply and demand. Fundamental analysis Fundamental analysis is a method of forecasting the future price movements of a financial instrument based on economic. seasonal cycles. many market players use technical analysis in conjunction with fundamental analysis to determine their trading strategy. 50 . but concentrates on the activity of that instrument's market. These criteria often include the economic condition of the country that the currency represents. monetary policy. Many profitable trades are made moments prior to or shortly after major economic announcements. Unlike the fundamental analyst. In practice.

But todays it has been touch the point 14000 due to government stability. Experts are now talking about 7% GDP growth in 2008-09 and 5% GDP growth in 2009-10.800 in October.000 levels but Sensex fell to 7. 5. Experts are now talking about 4% levels in 2009.000 levels in January and analysts predicted 25. 3. 2008 but they collapsed to 2003 levels in December. 6. 51 . They are actually now talking about deflation. 2008. Experts are now talking about $30 per barrel in 20094. Experts are now talking about 7. 7. They are now either disappeared or merged with banks. Inflation moved to 13% and analysts talked about 15% but inflation fell to 8% in December. Commodities traded around all time high levels in June. Companies are now shutting down plants and are removing employees due to lack of demand and piling up of inventories. Experts are now talking about 55 against dollar in 2009. Investment banking is the most sought after industry in early 2008.000 targets in 2009.What happened in 2008? Sensex was crossed 21. Crude Oil prices touched $147 per barrel and Goldman Sachs talked about $200 per barrel but crude oil in now trading around $45 levels. Indian GDP grew at 9% in 2007-08 and analysts predicted about 10% growth in 2009. 2. Rupee strengthened to 39 against dollar and analysts like ICICI Kamat predicted 35 levels but rupee fell to 50 levels.

They are now announcing bonuses and free offers to attract buyers. 4. They are steep and severe. Believe in your research and gut feeling. 2. the impact on India is also turning out to be stronger than we had earlier expected. 6. stock markets always move much ahead of real economy. even good companies with strong growth prospects also fall along with bad overvalued stocks. stocks fell by October. Never follow herds. Significant falls or rises do not occur in slow motion. Biggest investment lesson: When investors are in panic mood. Real Estate prices reached stratospheric levels in early 2008 but investors bought them as if there will be no land available for purchase in 2009. 3. stock markets now become more dynamic.” This is the frank statement from Subbarao. Unlike in past. RBI Governor: “The global economic crisis is turning out to be deeper and longer than we had earlier expected. stocks will rise by late 2009. On 18 May we have been seen more variation in recession time market has been touched the level of 14000 with growth of 2100 points 5. 80% of price variations occur in 20% of days – time of maximum profits and losses. Many real estate stocks were corrected by 70-90% in this year alone. DLF and Unitech will cut prices by 30% in 2009. Investment lessons from 2008: 1. One should take into consideration this psychological aspect along with business fundamentals in arriving at price target. If real economy will suffer in early 2009. 7. more volatile and more unpredictable due to more global integration of economy and money flows. We will hear some bankruptcies in 2009 in this sector. As I said in my previous posts. How long Government will deceive people on this unmanageable issue? Biggest problem with this crisis is no one in the world 52 .8. If economic conditions will improve by early 2010. Significant statements: 1. Just see what happened to investors in Reliance Power IPO. Timing: It is very difficult to time the stock market investments. 2008. Stock market investors will never react normally – they will either overreact or under react to the economic or political events.

2% in 2008-09.knows about magnitude and duration of financial crisis.” 4. Indian GDP growth will be around 6. boosted by double-digit economic growth and increased investment by domestic investors. Significant statistics: 1. Commerce Minister: “Government will announce second stimulus package in the next week. including pension and insurance funds.Reuters poll: India's economy is expected to grow at its slowest pace in six years in the fiscal year to March 2009. 2. Indian economy never grew less than 7. Not just whether to pull back from India but how risky pushing forward will be. Many investors will be thinking about tilting the balance to China. This is the perception of foreigners about India.8% in 2009. It estimates for Indian GDP: 6. 5% in 2009-10 and will be around 7% in 2010-11.” 6. This is the first drop for crude oil demand since 1983. Agriculture and Construction are the priority sectors for Government in the next package. Jack Welch (former GE Chairman): “The terror strike in Mumbai could well tilt the focus of foreign investors towards neighboring China.8% in 2008-09 and 6. International Energy Agency (IEA): for the first time in 25 years. Textiles. 53 . World Bank: “The financial crisis is now likely to result in the most serious recession since the 1930s. Rakesh Jhunjhunwala: “India will see the mother of all bull runs in the next 4 or 5 years.” 3.2% in 2009-10. According to RBI Governor. How India’s leaders respond to the Mumbai attacks will tell the business world what it wants and needs to know. 2009-10 may be a more difficult year.” 5.5% in the last 5 years. India will grow by 5. demand for crude falls. According to World Bank.

Global Telecom Companies are planning to buy 20-25% stake in Reliance Communications. 2. China: Exports fell by 2. Promoter will not reduce his holding.2% in November. 6. Manpower survey: India is the second most optimistic employment market in the world but there will freezing in hiring in the next 3 months.000) in 26 years in USA. India will be in election mood when we need these measures. These job losses will have cascading effect on real economy. This deal is beneficial for investors as only 12% of shares are available for trading after this purchase in the secondary market. India needs particular attention. Anil Ambani family holds 67% stake in the company. R-Com stock lost 70% of value in 2008. 8. 5.the largest yearover-year monthly decline since April 1999. the first decline since June 2001 .73. DLF and Unitech may lower property prices by 30% in mid-2009 to stimulate buyers. 3.5% respectively in 2009. Positive Stock market news: 1.2. Asian Development Bank (ADB): Growth rates of China and India will be at 8. Goldman Sachs: China GDP growth for 2009 is around 6%. World economy will grow by 0. McKinsey report: United States credit losses may top $3 trillion. New claims for unemployment benefits reached their highest level (5. 3. given its weaker fiscal position. World Bank: Global trade will fall for the first time since 1982. 7.2% and 6. IT and Hospitality sectors are the worst affected while Telecom is the most optimistic one. Government stability is big positive reason for sensex.9% in 2009 and inflows to developing countries will fall by 50%. 54 . Shocking! China will grow at 9% in 2010 if Government takes proper simulative decisions. More than 20 lakh Americans will lose jobs in 2009 and unemployment rate will touch 9% level in 2009. These losses will increase if another major asset class will collapse 4.

FCCB shocks: Foreign currency convertible bonds (FCCBs?) of many companies will be due for repayment in the next 3 years.500 crore. September. 2008: Asian economy will grow by 7. NPAs will affect in 2 ways. B. 2008: World economy will grow by 0. December. 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. December. ADB estimates about Asian economy in 2008: A. 2.930 crore.2% in 2009. September. 2008: Asian economy will grow by 6. B. NPA shocks: Many people are underestimating the impact of Non Performing Assets (NPAs). B. Only positive aspect is many PSU banks reported fall in NPAs in 2008 over 2007 except SBI and IOB. ADB estimates about Asian economy in 2009: A.9% in 2009. 2008: Asian economy will grow by 5.5% in 2008. We may hear some shocking news on this front in the next 2 years. November. World Bank estimates: A. NPAs of ICICI Bank in 2008: Rs 9. 2008: Asian economy will grow by 7.8% in 2009. 2008: World economy will grow by 2. NPA statistics: NPAs of ICICI Bank in 2007: Rs 5.9% in 2008..2% in 2009. it is interesting to see how promoters will clear their dues. December. 55 . As stock markets are unlikely to recover in the next 12-15 months. Interesting statistics about Asian and World economies: 1. 3.

The cause of concern for the Government was that in this major share of FIIs. Let me explain it a bit : As I wrote in my last article that a major portion of the money being invested into the share market is coming from FIIs (Foreign Institutional Investors).4. 56 . Since the continuous inflow of dollar into Indian economy is making the Indian currency (Rupee) stronger and thus making the export costlier.5 This is a much severe crisis than 2001 slowdown. the Government was looking for someway to curb this inflow of dollars. All those foreign investors who are not registered with the SEBI (Stock Exchange Board of India). which ultimately allows them trade in the market. The economy is as sound as it was in the boom time. can not directly deal in buying/selling of sticks. the regulatory body for stocks in India. P/E of Sensex in 2008 economic slowdown: 9. more than half was in the form of hot money being invested into the market by anonymous investors who pump money into the market by utilizing the Participatory Note (PN) facility. Though. Making the availability of Participatory Notes some difficult for foreign investors was one step Government thought would help control the inflow of dollars. this concept of allowing anonymous investors in the market broaden the reach of the market. It is not invested with a long term mindset. it also ensure free entry of dollars into Indian economy as well as increase the percentage of hot money in the market. The companies are as profitable as they were a few days ago. The hot money is that kind of money which is invested only for a short time to make some quick buck. So they took a sort of permission from registered FIIs by buying Participatory Notes (PN) from them in exchange of dollars. Yet. the market crashed because the Government tried to instill some sort of regulation in it. So a few days ago the SEBI contemplated on a draft policy to make the issuing of PN difficult for FIIs. Current P/E of Sensex: 10. Effect of fluctuation on Indian stock market Nothing actually.

there is a word of caution here.the market fell more than a 1000 point in a few hours and had to shut down for some time. they started exiting form the market by selling their stock. the chairman of Reliance group was earning Rs 40 Lakhs ($ 100000) per minute. Ultimately the Government had to rush in to alleviate the growing concern of Investors by stating that it would not control the issuing of PN to investors. However. there is only a remote possibility of that as of now. As of now the market is still fluctuating and is yet to be stabilized. However. we must not forget that these people are here only till they find a new market more profitable than India. it is also because of the appreciation in the price of the shares of Reliance industries. On the last count (as per a leading newspaper report) Mukesh Ambani. $100000 per minute ! Though it has much to do with his huge and expanding empire of Reliance industries. Secondly most investors. it will continue it’s upward swing despite such momentary crash. As people found that it would be difficult to trade in the market in future owing to non-availability of PN. The main reason of my belief is that the Indian economy as a whole is performing very well Same is the case with most Indian companies listed in the market. Result. As this boom is being driven by FIIs (Foreign Institutional Investors). Once they find a place which offer better return on their investment than India. With the above note. you never know what can happen in future. are going to become really rich. The word crorepati (multimillionaire) can soon become a common thing in India all thanks to share market.This was the step which gave a jolt to the buying spree of FIIs. they will immediately shift there. This news will from the Business standard give you some detail of this exercise done by the Government. That’s why most expert 57 . Yes you read it write. here are some of my observations on what can happen if the stock market boom continues for lone in India: First some positive one First of all if this boom continues for long. Though. I think that in all probability. who are in the market for quite sometime. soon the richest person in the world will be an Indian.

(it actually happened some days ago as I described above) Government certainly don’t want to spoil the party that is going on in the stock market. Or we may see emergence of a new market with great potential on some other place on earth. if happen. The RBI is facing difficultly in managing this continuous inflow of dollars as their huge supply and easy availability has resulted into dollar’s depreciation vis-à -vis Rupee. can put a break on this boom. Some experts have opined that market is trading at 22 to 23 times of actual earning and no one can justify these valuations. the continued depreciation of dollar is also a cause of deep concern which needs to be addressed. Ironically.) The investment being made by FIIs in Indian share market has resulted in to a huge inflow of dollars into the economy. A recession is also preceded by several quarters of slowing down. The Rupee is becoming stronger to dollar thus making imports cheaper and export costlier. All these things. Owing to stock market boom.are advising people to stick to their long-term investment plan and don’t make any move in haste. As I explained in my earlier article. there is another very interesting situation being faced by Reserve Bank of India(RBI) (the leading central bank which decides various economic policies here just like the Federal Reserve Bank of US. The profits margin of these industries have reduced as it mostly depend on current value of dollar. The last but not the least is the overvaluation of many stocks in the market. this can only be done if Government put some break on the inflow of dollars by FIIs which will actually mean putting a break on stock market boom. a increase in interest rate in US may reverse this flow of FIIs. Some of our major export oriented industries such as Softwares and textiles are feeling the heat every day. Recession A recession is a decline in a country's gross domestic product (GDP) growth for two or more consecutive quarters of a year. However. 58 . There is a pressure on Government to mange the appreciation of rupee to favour exporters. I must say that this boom is not going to last forever as it is dependent on some very volatile factors that may change in the times to come. In nutshell if I am to summarize this boom of stock market.

stock prices are now at a low ebb in India with little cheer coming to investors. and the financial sector in particular has been heading from one cold shower to the next. In the US. However. The stock markets reflect the buoyancy of the economy. which in turn leads to a decrease in production. but investors are a worried lot. but the market has already 59 . The way in which Asian stock prices responded last week to the fall of the Dow Jones and Nasdaq indices by 4 per cent. The Sensex crashed by nearly 13 per cent in just two trading sessions in January. 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. The markets bounced back after the US Fed cut interest rates. The Indian stock markets also crashed due to a slowdown in the US economy. 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. a recession is yet to be declared by the Bureau of Economic Analysis. When the global economy has been cooling 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. Stock markets & recession The economy and the stock market are closely related. An economy typically expands for 6-10 years and tends to go into a recession for about six months to 2 years. hitting a 10-month low. This leads to a decreased demand for goods and services. A recession normally takes place when consumers lose confidence in the growth of the economy and spend less. along with European stocks. it was inevitable that stock markets around the world would start catching the chill. Investors spend less as they fear stocks values will fall and thus stock markets fall on negative sentiment. lay-offs and a sharp rise in unemployment.

the Sensex trades at a trailing P/E multiple of 24. What began with profit-booking and unwinding of long positions cascaded on Friday into a 3. 60 . Provided the general economic and corporate news does not get worse than has already been anticipated. Investors will also have noticed that the third-quarter corporate numbers show significant deceleration in both sales and profit growth. Impact of a US recession on India A slowdown in the US economy is bad news for India.150 billion)). The floor therefore would probably be a Sensex level of 17.000 crore (Rs 1. which pulled in a record amount of application money (Rs 1. buying may soon begin A global liquidity surplus had certainly contributed to momentum buying. and that the industrial sector has suffered a sharp slowdown. it is a large enough sum for the market to go into correction mode. The question is whether the correction that has occurred so far is enough for fresh buying to emerge.which would mean wiping out the gains of the past three months.discounted for that. Indian markets worst hit It is interesting that Indian markets were hit the most. On a forward basis. Yet. When coupled with the data showing that the export target for the year will be missed by a wide margin. Also relevant was the Reliance Power IPO. and FIIs have been net sellers to the tune of Rs 2.200 crore (Rs 22 billion) in January. it was inevitable that stock prices would have to come off their dizzy highs.000-odd -. which is not cheap in anyone's book. fresh buyingcannot be very far away. This may have been because the correction in the overheated Chinese stock market began some weeks ago. Even if a third or a fourth of that was being garnered by sale of stocks. no more. or whether a further fall is required before value-based buying starts. the Sensex trades at an FY09 estimated P/E of 18. Even after the 10 per cent correction from the market's peak. Foreign institutional investors had moved to the sidelines in the secondary markets even earlier. when compared to the same quarter a year earlier.5.5 per cent decline in the Sensex.15. There is no doubt that valuations had become expensive. among all Asian markets.

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). while the Sensex fell by 14. 61 . The whole of Asia would be hit by a recession as it depends on the US economy. The presence of hedge funds across asset classes. the Dow Jones Industrial Average went down by 22. there is a change in the global investment climate. In contrast. 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. A recession could bring down oil prices to $70. Between January 2001 and December 2002. But experts note that the long-term prospects for India are stable. The India economy is likely to lose between 1 to 2 percentage points in GDP growth in the next fiscal year. the DJIA was down 30 per cent in December 2002 from the highs it hit in January 2000. India's exports to the US have also grown substantially over the years.Indian companies have major outsourcing deals from the US. There is a big correlation among global markets.7 per cent. along with increased global movement of capital. The current volatility is also linked to global bourses. One. reminding investors that there is no one-way bet on the stock market. The worries for exporters will grow as rupee strengthens further against the dollar. Hedge funds and FIIs could have been the biggest sellers in the Indian markets. Asia is yet to totally decouple itself (or be independent) from the rest of the world. Oil may get cheaper brining down inflation. If the fall from the record highs reached is taken. has increased event-related volatility. say experts.6 per cent. booking profits and making the most of the unprecedented bull run that has dominated the Indian stock market for a long time now. Indian companies with big tickets deals in the US would see their profit margins shrinking. factors. A weak dollar could bring more foreign money to Indian markets. the Sensex was down 45 per cent.

said Adrian Mowat of JP Morgan. There is no need to get very pessimistic that this is the end of equity investing in India.Volatility in commodities markets has also significantly affected equity markets. This could be seen as a buying opportunity and we will revisit market valuations after the correction. Also many IPOs have sucked out liquidity from the primary market into the secondary market. At current levels it would be a buy call and we would not advise investors to wait to catch the bottom. said Vora. he added. he said. Analysts expect the markets to continue to be choppy for a while till global liquidity and commodity prices settle in. The Sensex can fall another 10-15%. With the markets falling. he added. said Mihir Vora of HSBC Mutual Fund. a technical correction in the derivatives segment has perpetrated a larger fall. On the local front there has been a huge build-up in derivatives positions and volatility led to margin calls. other emerging markets were down nearly 20% so India is playing catch-up. he added. on NDTV Profit. 62 . on NDTV Profit. he said. India is trading at 65% premium to emerging markets and India is playing catchup with other declining global markets. On the global front. A combination of global and local factors is affecting this market.

Threat :  Recession  New government  Bubble burst  Fluctuates dollar  Market is providing new opportunities and new options to invest.Strength:  High return  Large investment  Acquire capital for expanding the business  Secure the future losses Weakness:  High risk  Based on the fluctuation.  Can’t predict future W Opportunity:  Lot of people wants to invest but don’t invest due to insufficient knowledge. It becomes high loss when market goes down. prices 63 s: al si O S T n a y .

Conclusion: Through this research we can conclude that:  Stock market fluctuates by the external environment. 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.  It is based on “high risk and high return.  Stock market is very sensitive market.  Stock market is all about future prediction.”  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. 64 .

23.Hafer work package no. Scott E.worldbank.26.org • www.org • www.org • http://en.tradingstock.209 Journals and magazines JARN.200.com • http://econ.com • www.htm www.com • The economics times - 65 .Hafer.Rik W. Hein. R.tdd.Bibliography Text books • The Stock Market-The Stock Market .ltslnewsStock_ExchangesStock. Published Feb 2009 • Business today • Business standard Websites: www.28. 6. W.bseindia.icai.24.stockmarkets.wikipedia.7 & 8 Investment Analysis and portfolio management-M Raghunathan. Madhumati page no.

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