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PRABATH FINANCIAL SERVICES LIMITED
“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
“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 )
it is necessary to invest consciously in the market whatever it is. 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. Contents 4 . 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. 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.In the present situation where stock market is going up and down. since it is difficult to assess certainty about future earnings and dividends. this is the study about the last two year fluctuation in stock market which enables the investor in taking decision regarding investment. so they will be less volatile than stock prices. 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. Companies tend to smooth dividends.
Conclusion 6.1 Title of the Study 2.5 Scope of Study 2.3 Objective of Study 2.2 Duration of the Project 2. Bibliography Executive summary 5 .1. Abstract 2.4 Type of Research 2.6 Limitation of Study 3. Core Study 4. SWOT 5. Research Methodology 2.
Markets originally started as marketplaces usually in the center of villages and towns. the availability of supply will push down prices. Conversely. banks. Buyers and sellers typically trade goods. sellers and market makers to interact directly. investors and consumers are buying and selling every currency. Stock markets have become highly complex markets that allow investors to buy shares in companies or in funds that aggregate companies or industries together. Some markets are very competitive.A market is an environment that allows buyers and sellers to trade or exchange goods. With the rising price of oil and food. Markets can appear spontaneously when there are goods or services to be exchanged. particularly if the industry is protected by government legislation. If there are more buyers than sellers. or even virtual markets such as eBay. such as specialist markets. governments. supermarkets. and has become known as the law of supply and demand. or they can be planned and regulated . 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. services and/ or information. shopping centers. the increased demand will push up prices. leading to massive money flows constantly changing hands. although they often maintain a physical location for buyers. 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). clothing and tools. The currency markets are the largest continuously traded markets in the world. services.Free markets operate under ‘laissez-fare’ conditions. A market can be defined as a place where any type of trade takes place. Where there are more sellers than buyers. seven days a week. Although physical markets are still vital. virtual marketplaces supported by IT networks such as the internet have become the largest and most liquid. Markets are dependent on two major participants – buyers and sellers. in that the government does not intervene in how the market operates. markets were physical meeting places where buyers and sellers gathered together to trade. Most stock markets today are primarily electronic networks. 6 . Twenty four hours a day. for the sale or barter of farm produce. Historically. with a number of vendors selling the same kinds of products or services. These kinds of street markets developed into a whole variety of consumer-oriented markets. some markets have low or no competition. Governments or trade bodies often step in when such distortions undermine the smooth functioning of free markets.
A number of services can also be associated with these goods. corn. Everyone has seen it and everyone is wishing if he should have buy stocks before this rally. meat. Commodity markets include: energy (oil. it paid off for those who bought. gas. i.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. etc). on Tuesday. soft commodities and grains (wheat. Albeit it could have been a gamble buying stocks before declaration of election results. Now that's history. 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 .e. went till 3oo points down. Commodities underpin economic activity. Stock markets are going to be volatile for next few days. frozen orange juice.commodity markets are once again under the spotlight. cotton. So what should a small investor do now? Should he buy stocks or should be selling stocks that he holds. coffee. coal and increasingly renewable energy sources such as biodiesel). Transactions tend to be wholesale with large quantities of goods being transacted at low prices. oat. cocoa. and financial commodities such as bonds. markets opened in red. soya beans. Today. Capital goods markets help businesses to buy durable goods to be used in industrial and manufacturing processes. sugar. rice. then recovered and went up to 500 points up and finally settled for flat closing.
RESEARCH METHODOLOGY TITLE OF THE STUDY:8 .
To get the knowledge of other markets such as commodity market and derivatives. Scientific research can be subdivided into different classifications according to their academic and application disciplines. Research can use the scientific method. The primary purpose for applied research is discovering.“Study of fluctuations of Indian stock market” DURATION OF THE PROJECT:. Scientific research is funded by public authorities. To know the effect of these fluctuation on the Indian economy. including many companies. It makes practical applications possible. 9 . To make the investor aware about the factors which may affect their investment.45 days OBJECTIVE OF STUDY To know the basic terminology of stock market. by charitable organizations and by private groups. a harnessing of curiosity. To know the ups and downs of stock market of last two years. but need not do so. 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. TYPE OF RESEARCH Research Research is defined as human activity based on intellectual application in the investigation of matter. This research provides scientific information and theories for the explanation of the nature and the properties of the world around us. interpreting. To forecast or predict the future trend of stock market which helps in investment. Scientific research relies on the application of the scientific method.
to developmental studies which seek to determine changes over time. Qualitative descriptive research also emphasizes on what is. if the research is to return useful results. whether a company’s market share differs between geographical regions or to discover how many competitors a company has in their marketplace. For instance. 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.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. record. the correlation study which investigates the relationship between variables. Descriptive research can be of two types: i. whoever is conducting the research must comply with strict research requirements in order to obtain the most accurate figures/results possible. The methods involved range from the survey which describes the status quo. this research could be used in order to find out what age group is buying a particular brand of cola. Quantitative descriptive research emphasizes on what is. However. and makes use of quantitative methods to describe. analyze and interpret the present conditions. 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.
for doing descriptive research time needed to be more. So. they refer to the data which have already been collected and analysed by someone else. So.e. 11 . 4. 3. it was not possible to cover it in a short span of time. Secondary data means data that are already available i. some of them are as under: 1. 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. which a very important factor of this study as conclusion has been derived from this secondary data only. 2. 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. secondary data was collected. Data Collection: The most important constraint in this study was data collection as Secondary data was selected for study. In this research study also their were some limiting factors. Accuracy: The facts and findings of the data cannot be accepted as accurate to some extent as firstly. Secondly. this puts a question mark on the reliability of this data. Reliability: The data collected in research work was secondary data.
cannot be directly compared to a stock or a fixed income security. because it is stated in terms of notional values. This is an attractive feature of investing in stocks.) 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.Core study Stock market A stock market is a public market for the trading of company stock and derivatives at an agreed price. the Amex. The value of the derivatives market.e. The size of the world stock market was estimated at about $36. This allows businesses to be publicly traded. The liquidity that an exchange provides affords investors the ability to quickly and easily sell securities. these are securities listed on a stock exchange as well as those only traded privately.g. 11 times the size of the entire world economy. compared to other less liquid investments such as real estate. as well as on the many regional exchanges. the Deutsche Börse and the Paris Bourse. which traditionally refers to an actual value.. or raise additional capital for expansion by selling shares of ownership of the company in a public market. The stock market in the United States includes the trading of all securities listed on the NYSE. the vast majority of derivatives 'cancel' each other out (i. now part of Euronext. the NASDAQ. The total world derivatives market has been estimated at about $791 trillion face or nominal value. rather than an actual market price. e. European examples of stock exchanges include the London Stock Exchange. 12 . Many such relatively illiquid securities are valued as marked to model. Moreover. Function and purpose The stock market is one of the most important sources for companies to raise money.6 trillion US at the beginning of October 2008 .). a derivative 'bet' on an event occurring is offset by a comparable derivative 'bet' on the event not occurring. OTCBB and Pink Sheets.
Financial stability is the raison d'être of central banks. This eliminates the risk to an individual buyer or seller that the counterparty could default on the transaction. Exchanges also act as the clearinghouse for each transaction. in Sweden. In fact.g. insurance investment of premiums. 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. on the smooth operation of financial system functions. either directly or through mutual funds. hedge funds. in general. meaning that they collect and deliver the shares. and guarantee payment to the seller of a security. mutual funds. e. Share prices also affect the wealth of households and their consumption. tend to be associated with increased business investment and vice versa. central banks tend to keep an eye on the control and behavior of the stock market and. Relation of the stock market to the modern financial system The financial system in most western countries has undergone a remarkable transformation. An economy where the stock market is on the rise is considered to be an up and coming economy. and can influence or be an indicator of social mood. etc. deposit accounts and other very liquid assets with little risk made up almost 60 percent of households' financial wealth. for instance. 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. 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. permitting a 13 . In the 1970s. The general public's heightened interest in investing in the stock market. the stock market is often considered the primary indicator of a country's economic strength and development. compared to less than 20 percent in the 2000s. Statistics show that in recent decades shares have made up an increasingly large proportion of households' financial assets in many countries. Rising share prices.. One feature of this development is disintermediation. Therefore.History has shown that the price of shares and other assets is an important part of the dynamics of economic activity. 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. pension funds. has been an important component of this process.
individual investors. real estate and collectables). 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. The following deals with some of the risks of the financial sector in general and the stock market in particular. and people who have turned to investing for their children's education and their own retirement become frightened. The stock market. despite all this available information.higher proportion of shares to bonds. In all developed economic systems. Television commentators. Yet. but also the economy on a large scale. the United States. or have acquired other 'risky' investments (such as 'investment' property. in marked contrast to the stability of (government insured) bank deposits or bonds. Sometimes there appears to be no rhyme or reason to the market. Buffett began his career with $100. At the same time. and $105. the noise level in the stock market rises. This is certainly more important now that so many newcomers have entered the stock market. investors find it increasingly difficult to profit. This is something that could affect not only the individual investor or household. analysts. individual investors. With each passing year. 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. Stock prices fluctuate widely. are exchanging questionable and often misleading tips. Japan and other developed nations. 14 . i. then plummet just as quickly. and financial risk Riskier long-term saving requires that an individual possess the ability to manage the associated increased risks. Similar tendencies are to be found in other industrialized countries. such as the European Union.000 from seven limited partners consisting of Buffett's family and friends.. only folly. 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.e. Stock prices skyrocket with little reason. Over the years he has built himself a multi-billion-dollar fortune. financial writers.
Prior to his stint at NSDL. SEBI is headquartered in the popular business district of Bandra-Kurla complex in Mumbai. Chennai and Ahmedabad. Maharashtra.sebi. Prior to taking charge as Chairman SEBI. The Board comprises Name Mr CB Bhave Designation Chairman SEBI 15 As per CHAIRMAN (S.in SEBI is the Regulator for the Securities Market in India. Originally set up by the Government of India in 1988. it acquired statutory form in 1992 with SEBI Act 1992 being passed by the Indian Parliament.4(1)(a) of the SEBI Act.Chaired by C B Bhave. He is a former Indian Administrative Service officer of the 1975 batch. 2008 - Total Staff 525 Official Website Website www. Mumbai Headquarters of SEBI Organization Details Headquarters Established Jurisdiction Head Chairman Term Mumbai. Southern and Western regional offices in New Delhi. Kolkata. he had been the chairman of NSDL (National Securities Depository Limited) ushering in paperless securities. and has Northern. Eastern. he had served SEBI as a Senior Executive Director. India 1992 India Chairman C B Bhave February 16.gov. . Organization Structure Chandrasekhar Bhaskar Bhave is the sixth chairman of the Securities Market Regulator.Securities and Exchange Board of India SEBI Bhavan.
Infosys Functions and Responsibilities SEBI has to be responsive to the needs of three groups. it conducts investigation and enforcement action in its executive function and it passes rulings and orders in its judicial capacity. 1992) Member (S. 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 .4(1)(b) of the SEBI Act. 1992) Mr Anurag Goel Dr G Mohan Gopal Mr MS Sahoo Director. Though this makes it very powerful. SEBI 1992) Member (S.4(1)(d) of the SEBI Act.4(1)(b) of the SEBI Act.1992) Mr KP Krishnan Joint Secretary. which constitute the market: • • • the issuers of securities the investors the market intermediaries. there is an appeals process to create accountability.4(1)(d) of the SEBI Act. National Judicial Academy. Bhopal Whole Time Member. quasi-judicial and quasiexecutive.4(1)(d) of the SEBI Act. A second appeal lies directly to the Supreme Court. 1992) Member (S. Member (S. Ministry of Corporate Affairs Member (S. Ministry of Finance Secretary. SEBI has three functions rolled into one body quasi-legislative. 16 . 1992) Dr KM Abraham Whole Time Member.Mr. SEBI Mr Mohandas Pai Director. 1992) Member (S. Justice NK Sodhi.4(1)(d) of the SEBI Act. It drafts regulations in its legislative capacity.
SEBI has been active in setting up the regulations as required under law. pooled investment products and bonds. 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. Raising capital for businesses 17 . affect the price of stocks (see stock valuation).SEBI has enjoyed success as a regulator by pushing systemic reforms aggressively and successively (e. derivatives. the quick movement towards making the markets electronic and paperless rolling settlement on T+2 basis). (formerly a securities exchange) is a corporation or mutual organization which provides "trading" facilities for stock brokers and traders. Trade on an exchange is by members only. as in all free markets. to trade stocks and other securities. The role of stock exchanges Stock exchanges have multiple roles in the economy. 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. Increasingly.g. unit trusts. To be able to trade a security on a certain stock exchange. nor must stock be subsequently traded on the exchange. There is usually no compulsion to issue stock via the stock exchange itself. it has to be listed there. this may include the following: 1. as modern markets are electronic networks. but trade is less and less linked to such a physical place. Stock exchange A stock exchange. A stock exchange is often the most important component of a stock market. The securities traded on a stock exchange include: shares issued by companies. Usually there is a central location at least for recordkeeping. Such trading is said to be off exchange or over-the-counter. which gives them advantages of speed and cost of transactions. This is the usual way that derivatives and bonds are traded. stock exchanges are part of a global market for securities.
3. increase distribution channels. However.Corporate governance By having a wide and varied scope of owners. which could have been consumed.Redistribution of wealth Stock exchanges do not exist to redistribute wealth. resulting in stronger economic growth and higher productivity levels and firms. 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. 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.Facilitating company growth Companies view acquisitions as an opportunity to expand product lines. it leads to a more rational allocation of resources because funds. both casual and professional stock investors.The Stock Exchange provide companies with the facility to raise capital for expansion through selling shares to the investing public. commerce and industry. 2. Consequently.Mobilizing savings for investment When people draw their savings and invest in shares. 5. 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. will share in the wealth of profitable businesses. through dividends and stock price increases that may result in capital gains. often owned by the company founders and/or their families and 18 . are mobilized and redirected to promote business activity with benefits for several economic sectors such as agriculture. increase its market share. 4. or acquire other necessary business assets. hedge against volatility. or kept in idle deposits with banks.
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. Therefore the Stock Exchange provides the opportunity for small investors to own shares of the same companies as large investors. One. although by securing such bonds with the full faith and credit of the government instead of with collateral. American International Group (2008). Webvan (2001). largely.Tel (2001). and Satyam Computer Services (2009) were among the most widely scrutinized by the media. 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. Parmalat (2003). Enron Corporation (2001). depression.com (2000). share prices rise and fall depending. thus loaning money to the government. An economic recession. The issuance of such bonds can obviate the need to directly tax the citizens in order to finance development.Barometer of the economy At the stock exchange. or financial crisis could eventually lead to a stock market crash.heirs. Therefore the movement of share prices and in general of the stock indexes can be an indicator of the general trend in the economy. 9. The dot-com bubble in the early 2000s. are classical examples of corporate mismanagement. Companies like Pets. Sunbeam (2001). and the subprime mortgage crisis in 2007-08. or otherwise by a small group of investors). Lehman Brothers (2008). Share prices tend to rise or remain stable when companies and the economy in general show signs of stability and growth. 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. However. Adelphia (2002). 19 . 7. These bonds can be raised through the Stock Exchange whereby members of the public buy them. on market forces. MCI WorldCom (2002). 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.Creating investment opportunities for small investors As opposed to other businesses that require huge capital outlay.
T and Z groups. pursuant to the BSE (Corporatisation and Demutualisation) Scheme. and is tracked worldwide. 2007 stood at USD 1. and is sensitive to market sentiments and market realities. which for easy reference. as its strategic partners. is India's first stock market index that enjoys an iconic stature . It is an index of 30 stocks representing 12 major sectors. The market capitalization as on December 31. SENSEX. The SENSEX is constructed on a 'free-float' methodology. An investor can choose from more than 4. Apart from the SENSEX. What is now popularly known as BSE was established as "The Native Share & Stock Brokers' Association" in 1875. B. 2005 notified by the Securities and Exchange Board of India (SEBI).700 listed companies. 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. The BSE Index. Deutsche Börse and Singapore Exchange. Today. BSE has entered into an index cooperation agreement with Deutsche Börse. It migrated from the open outcry system to an online screen-based order driven trading system in 1995. BSE offers 21 indices.79 trillion . including 12 sectoral indices. There is perhaps no major corporate in India which has not sourced BSE's services in raising resources from the capital market. With demutualisation. Over the past 133 years. Earlier an Association Of Persons (AOP). BSE has facilitated the growth of the Indian corporate sector by providing it with an efficient access to resources. 1956. BSE is the world's number 1 exchange in terms of the number of listed companies and the world's 5th in transaction numbers. S. This agreement has made 20 . are classified into A.Bombay Stock Exchange Introduction Bombay Stock Exchange is the oldest stock exchange in Asia with a rich heritage. BSE is now a corporatised and demutualised entity incorporated under the provisions of the Companies Act. BSE's pivotal and pre-eminent role in the development of the Indian capital market is widely recognized. BSE has two of world's best exchanges.
BSE provides an efficient and transparent market for trading in equity. Barclays Global Investors (BGI). has created the 'iSharesÂ® BSE SENSEX India Tracker' which tracks the SENSEX. the ICERS facilitates the corporates in sharing with BSE their corporate announcements. While the Directors Database provides a single-point access to information on the boards of directors of listed companies. 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). In 2006. The first Exchange Traded Fund (ETF) on SENSEX. It brings to the investors a trading tool that can be easily used for the purposes of investment. BSE launched the Directors Database and ICERS (Indian Corporate Electronic Reporting System) to facilitate information flow and increase transparency in the Indian capital market. BSE is the first exchange in India and the second in the world to obtain an ISO 9001:2000 certification. trading.SENSEX and other BSE indices available to investors in Europe and America. Moreover. SPIcE allows small investors to take a long-term view of the market. debt instruments and derivatives. In recent times. called "SPIcE" is listed on BSE. 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. The ETF enables investors in Hong Kong to take an exposure to the Indian equity market. 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. BSE continues to innovate. BSE has always been at par with the international standards. It has a nation-wide reach with a presence in more than 359 cities and towns of India. BSE also has a wide range of services to empower investors and facilitate smooth transactions: 21 . hedging and arbitrage. The systems and processes are designed to safeguard market integrity and enhance transparency in operations. the global leader in ETFs through its iSharesÂ® brand.
The BSE On-line Trading (BOLT): BSE On-line Trading (BOLT) facilitates on-line screen based trading in securities. BSEWEBX. it is an amount higher than that of any exchange in the country. 22 . Surveillance: BSE's On-Line Surveillance System (BOSS) monitors on a real-time basis the price movements.com: In February 2001. BSEWEBX. This initiative enables investors anywhere in the world to trade on the BSE platform. It offers over 40 courses on various aspects of the capital market and financial sector.Investor Services: The Department of Investor Services redresses grievances of investors. BSE was the first exchange in the country to provide an amount of Rs.'Safe Investing in the Stock Market' under which 264 programmes were held in more than 200 cities. volume positions and members' positions and real-time measurement of default risk.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).000 Trader Workstations located across over 359 cities in India.1 million towards the investor protection fund. BSE launched a nationwide investor awareness programme. BSE introduced the world's first centralized exchangebased Internet trading system. More than 20.com. 2006 and March 31 2007 have been awarded the ICAI awards for excellence in financial reporting. BOLT is currently operating in 25. market reconstruction and generation of cross market alerts. in collaboration with reputed management institutes and universities. BSE Training Institute: BTI imparts capital market training and certification. • The Annual Reports and Accounts of BSE for the year ended March 31.
With a view to provide a better representation of the increasing number of listed companies.Mumbai. came out with a Stock Index-SENSEX. became members of what today is called Bombay Stock Exchange Limited (BSE). over a century of experience is a proud achievement. Calcutta. It comprised 100 stocks listed at five major stock exchanges in India . BSE has continuously 23 . A lot has changed since 1875 when 318 persons by paying a then princely amount of Re.. 2006. it is being calculated taking into consideration only the prices of stocks listed at BSE. Delhi. The launch of SENSEX in 1986 was later followed up in January 1989 by introduction of BSE National Index (Base: 1983-84 = 100). The journey in the 20th century has not been an easy one. there was no measure or scale that could precisely measure the various ups and downs in the Indian stock market. in 1986. the stock market in the country has passed through good and bad periods.that subsequently became the barometer of the Indian stock market. Ahmedabad and Madras. In order to fulfill the need for still broader. BSE launched on 27th May. 1. Since then. The BSE National Index was renamed BSE-100 Index from October 14. the 'BSE-200' and the 'DOLLEX-200'.• The Human Resource Management at BSE has won the Asia . Till the decade of eighties. 1996 and since then. BSE. health management at work and excellence in HR through technology Drawing from its rich past and its equally robust performance in the recent times. 1994 two new index series viz.Pacific HRM awards for its efforts in employer branding through talent management at work. 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. Over the decades. larger market capitalization and the new industry sectors. BSE has come a long way in attuning itself to the varied needs of investors and market participants. segment-specific and sector-specific indices. BSE will continue to remain an icon in the Indian capital market.
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
Stock Exchange Mumbai, India 19°3′37″N 72°51′35″E/19.06028°N 72.85972°E/19.06028; 72.85972
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
CNX Nifty Junior S&P CNX 500
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.. 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
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. 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
16% S&P CNX Nifty is professionally maintained and is ideal for derivatives trading • • • Sensex & the Nifty The Sensex is an "index". What is an index? An index is basically an indicator. . If the Sensex goes up. • The total traded value for the last six months of all Nifty stocks is approximately 65. Impact cost of the S&P CNX Nifty for a portfolio size of Rs. There are other stock exchanges like the Calcutta Stock Exchange etc.2 crore is 0. 2009. 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. it means that the prices of the stocks of most of the major companies on the BSE have gone up.34% of the total market capitalization as on Mar 31. Just in case you are confused. the Nifty represents the top stocks of the NSE. the BSE. is the Bombay Stock Exchange and the NSE is the National Stock Exchange. It gives you a general idea about whether most of the stocks have gone up or most of the stocks have gone down. who are world leaders in index services. If the Sensex goes down. Just like the Sensex represents the top stocks of the BSE.is a joint venture between NSE and CRISIL. this tells you that the stock price of most of the major stocks on the BSE have gone down. The BSE is situated at Bombay and the NSE is situated at Delhi. These are the major stock exchanges in the country. IISL is India's first specialised company focused upon the index as a core product.Most of the stock trading in the country is done 27 though the BSE & the NSE. NSE.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. IISL has a Marketing and licensing agreement with Standard & Poor's (S&P).
then the price moves up! Conversely. . Public companies are required to report their earnings four times a year (once each quarter).Besides Sensex and the Nifty there are many other indexes. the price jumps up. If a company never makes money. Dalal Street watches with great attention at these times. it isn't going to stay in business. if more people wanted to sell a stock than buy it. If you understand this. If a company's results are better than expected. The most important factor that affects the value of a company is its earnings. If more people want to buy a stock (demand) than sell it (supply). What is difficult to understand is what makes people like a particular stock and dislike another stock. Earnings are the profit a company makes. and in the long run no company can survive without them. This is called the “BSE Mid-cap Index”. The reasons for stock prices going "up" and "down" Stock prices change every day because of market forces. you will know what people are buying and what people are selling. which are referred to as earnings seasons. and the price would fall. 28 then the price will fall. There is an index that gives you an idea about whether the mid-cap stocks go up and down. 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. It makes sense when you think about it. By this we mean that stock prices change because of “supply and demand”. there would be greater supply than 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. (Basics of economics!) Understanding supply and demand is easy. The reason behind this is that analysts base their future value of a company on their earnings projection. If a company's results disappoint and are worse than expected.
issuing stock is called “equity financing”. Still. which is issued by the private company itself. and most internet companies saw their values shrink to a fraction of their highs. Both methods come under "debt financing". It is important that you understand the distinction between a company financing through 29 .Of course. Some believe that it isn't possible to predict how stock prices will change. it's not just earnings that can change the feeling people have about a stock. 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. for example. this fact demonstrates that there are factors other than current earnings that influence stocks. A company can borrow by taking a loan from a bank or by issuing bonds. is called the initial public offering (IPO). the stock price of dozens of internet companies rose without ever making even the smallest profit. which is known as issuing stock. The first sale of a stock. So. what are "all the factors" that affect the stocks price? The best answer is that nobody really knows for sure. To do this. It would be a rather simple world if this were the case! During the “dotcom bubble”. 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. On the other hand. companies can either borrow it from somebody or raise it by selling part of the company. The only thing we do know is that stocks are volatile and can change in price very very rapidly. you can determine when to buy and sell. As we all know. while others think that by drawing charts and looking at past price movements. 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". these high stock prices did not hold.
Stock Picking –Having understood all the basics of the stock market and the risk involved. fundamental analysis looks at the actual company and tries to figure out what the company price is going to be like in the future. There are two major types of analysis: 1.just as a small business owner isn't guaranteed a return. technical analysis is the study of prices and volume. neither is a shareholder. peoples buying behavior etc. you assume the risk of the company not being successful . but they also stand to lose their entire investment if the company isn't successful. In this article we will go into the basics of “fundamental analysis”. to try and figure out what the stock price is going to be like in the future. By becoming an owner. Fundamental Analysis 2. 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. It is much more of an "art" than a science.debt and financing through equity. for forecasting of future stock price or financial price movements. On the other hand. It depends more on experience and involves some statistics and mathematics. This isn't the case with an equity investment. Before picking the right stock you need to do some analysis. you are guaranteed the return of your money (the principal) along with promised interest payments. so explaining technical analysis is out of the scope of this article. Calculation of BSE SENSEX… 30 . Technical analysis is a little more complicated. now we will go into stock picking and how to pick the right stock. When you buy a debt investment such as a bond. Shareholders earn a lot if a company is successful. Simply put. On the other hand technical analysis look at the stocks chart.
you can find this out by reading our “How to make money in the stock market?” article. is almost always a complete disaster. The Sensex has a very important function.This article explains how the value of the “BSE Sensex” or “sensitive index” is calculated. The Sensex is supposed to be an indicator of the stocks in the BSE. the stock price will crash and they will walk off to promote another stock. Always use your own brain: It's extremely important. This is done to make the Sensex an accurate index and so that it represents the BSE stocks properly. It is calculated using the “free-float market capitalization” method. Relying on the advice of others. the Sensex is calculated taking into consideration stock prices of 30 different BSE listed companies. the stock market can be a VERY dangerous place. Make sure you dig in and really examine the "facts about the companies" 31 . : Don't even consider "tips" that tell you about "hot stocks". They do this because they have their money invested in those stocks. For people who are not “on the inside”. or generally going down. 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. You must always use your own brain. To show this accurately. If they can get enough people to buy the stock and they can get the stock price to rise. they will sell the stock for a huge price. This is a world wide accepted method as one of the best methods for calculating a stock market index. The stock market is a field dominated by savvy investors who know the ins-and-outs of the market. Consider the source: There are many people in the market who put in all their time and effort in promoting certain stocks. no matter how well intentioned it may be. It is supposed to show whether the stocks are generally going up. If you are not sure what we mean by the Sensex or what the Sensex is all about. 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 underlying asset. By following these rules. commodities. But then again. And finally the most important tip!!! Only invest money you can afford to lose!! Sure this is a basic point. (Especially if you are new to investing in the stock market!) Please understand that the above tips are tips for beginners. Essentially. Ignore press releases which have very little substance. bullion. you will basically not loose too much! Derivatives Commodities whose value is derived from the price of some underlying asset like securities.before you invest. derivatives are financial security such as an option or future whose value is derived in part from the value and characteristics of another security. But if you are a new investor. nothing comes free. Once you really get into the stock market you do not need to follow these rules anymore. rather than the asset itself. but many many people miss it. They are for your own safety. interest level. In fact. make some bad decisions and then only will you really understand the market. In more simpler form. You should only invest money that you can honestly afford to lose!! Everyone enters into investments with the idea of earning big profits. stock market index or anything else are known as “Derivatives”. Everything has a price. The legal terms of a contract are much more varied and flexible than the terms of property ownership. currency. and rely on "hype" to tell the company's story. You cannot understand the market by just looking at it from far. You will have to loose some money. It is a generic term for a variety of financial instruments. you MUST follow these rules. this never works. it’s this flexibility that appeals to investors 32 . this means you buy a promise to convey ownership of the asset. but in many cases.
stock. the owner of a ‘futures’ contract is obligated to buy or sell the asset. a contract is merely an agreement between two parties. The other examples of derivatives are warrants and convertible bonds (similar to shares in that they are assets). an insurance policy or a pension fund. India Commodity Market 33 . the derivatives range is only limited by the imagination of investment banks. Shares or bonds are financial assets where one can claim on another person or corporation. derivatives – wittingly or unwittingly. An ‘options’ contract gives the owner the right to buy or sell an asset at a set price on or before a given date. the underlying asset is usually a commodity. But derivatives are usually contracts. When a person invests in derivative. that they are investing in. 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. It is likely that any person who has funds invested. bond. Beyond this. where the contract details may not be standardized. On the other hand. Derivatives securities or derivatives products are in real terms contracts rather than solid as it fairly sounds. or currency. and exposed to. On the other hand. ‘Futures’ and ‘options’ are two commodity traded types of derivatives.
It was the retailers who finally sold the goods to the consumers. 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.The vast geographical extent of India and her huge population is aptly complemented by the size of her market. The improvement in transport facilities made the retailers directly interact with the producers and hence the need for whole sellers was not felt. The cost of goods is estimated in terms of domestic currency . In fact. Almost every commodity under the sun both agricultural and industrial are now being provided at well distributed retail outlets throughout the country. 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 extent of the retail market (both organized and unorganized) has evolved in leaps and bounds. 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 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. Such markets are social institutions that facilitate exchange of goods for money. Tata and others. Here. the retail outlets belong to both the organized as well as the unorganized sector. The commodity market in India comprises of all palpable markets that we come across in our daily lives. Reliance. The organized sector on the other hand are owned by various business houses like Pantaloons. we shall deal with the former in a little detail. • In recent years. the success stories of the commodity market of India in recent years has mainly centered around the growth generated by the Retail Sector. Moreover. The broadest classification of the Indian Market can be made in terms of the commodity market and the bond market. With the passage of time the importance of whole sellers began to fade out for the following reasons: • The whole sellers in most situations. Such 34 .
Treasury Bills and 35 . Modern marketing strategies and other techniques of sales promotion enable such markets to draw customers from every section of the society. Considering the present growth rate. Money Market When the stock prices show a downward trend . Although the stock market is associated with high risks and high returns . edible and inedible. Since the money market is extremely safe. then it becomes risky to keep savings there. Money Market Definition Money Market Definition is simply meant as the short-term debt market. it yields very low returns unlike the bond market. Transactions take place over phone or the electronic system.000 billion by the year 2010. Unlike the stock exchanges the money market securities do not operate in exchanges or through brokers. Demand for commodities is likely to become four times by 2010 than what it presently is. 10. Since the money market securities trade at very high denominations it becomes very difficult for the individual investors to have access to it.markets are usually sell a wide range of articles both agricultural and manufactured. The money market securities that are issued by the government or financial institutions or large corporations are very liquid. perishable and durable. The money market deals with very short term debt securities that mature in less than a year. One may browse through the following links to have a more detailed information about money market. The money market is a type of a dealer market where firms purchase securities in their own account by assuming the risks themselves. However the growth of such markets has still centered around the urban areas primarily due to infrastructural limitations. many are risk averse and prefer to invest in the more secure money market . the total valuation of the Indian Retail Market is estimated to cross Rs.
As you know that you cannot predict the stock market. Get the method of finding the money market rates. which renders a clear-cut idea on making investment. federal funds rate.certificate of deposits are regarded as the instruments in the money market. Money Market Rates Money Market Rates can be simply defined as the market rates including the broker call loan rate. so in that case you need to know the functioning of the market. When people are buying more stocks. So let us discuss about the different factors affecting the stock price in this article. There are some major factors that affect stock price. On the other hand if people are selling more stocks. rates on bankers' acceptance etc. trading and the distribution of short-term debt instruments across different regions over the world. The trend of the stock market trading directly affects the price. Demand AND SUPPLY One of the major factors affecting stock price is demand and supply. you should be very careful when you decide to invest in the Indian stock market. Find detailed on the world money market. Market Cap 36 . World Money Market World Money Market has been providing origination. then the price of that particular stock increases. then the price of that stock falls. 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. So. then you should always make a good survey of the whole market.
“small-cap” and “large-cap” stocks. So. has a market cap of “Rs. You have! When you are talking about “mid-cap”.170. "Market Capitalization"? You probably think that you have never heard of the term “market capitalization” before. In this case you should remember that news should not matter much but the overall performance of the company matters more. 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. news is another factor affecting stock price. 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. simply multiply the “current share price” by the “number of shares issued by the company”! Just to give you an idea. when there is a negative press release. You should always keep in mind that it is not the stock but the market capitalization of the company that determines the worth of the company. So market cap is another factor that affects stock price.705. how do YOU calculate the market cap of a particular company? You don’t! Just go to a website like MoneyControl. 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. News When you get positive news about a company then it can increase the buying interest in the market. On the other hand. if you were to buy all the shares of a particular company.com and look up the company whose market cap you are interested in finding out! The figure in front of “Mkt.21 Cr” (when this article was written) Depending on the value of the market cap. it can ruin the prospect of a stock. Earning/Price Ratio 37 . ONGC. Cap” will be the market cap value.
The styles range from short term trading such as scalping where positions are only held for a few seconds or minutes. then it has the potential to rise in the near future. because only they had access to the exchanges and market data. and stocks. But if this is the case. suited to different day trader personalities. Some day traders will trade multiple styles. Day Trading Day trading (and trading in general) is the buying and selling of various financial instruments. Most day trading systems have a lot of flexibility. individual traders now have direct access to the same exchanges and market data. But with recent technology such as the Internet. 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. with the goal of making a profit from the difference between the buying price and the selling price. these are the major factors that affect stock price. depending upon how the trade is doing (whether it is in profit). currencies. to longer term swing and position trading where a position may be held throughout the trading day. such as futures. and can make the same trades at very low cost. but most traders will choose a single style and only take that type of trade. This gives you a fair idea of a company’s share price when it is compared to its earnings. Trading Styles There are several different styles of day trading. options. The stock becomes undervalued if the price of the share is much lower than the earnings of a company. Day trading was originally only available to financial companies (such as banks). So.Another important factor affecting stock price is the earning/price ratio. and can have open positions for anywhere from a few minutes to a few hours. The stock becomes overvalued if the price is much higher than the actual earning. 38 .
selling if the price is moving up). and counter-trend trades are trades against the direction of the current price movement (i.545 million. India attracted total foreign investments of US $ 15.e. and perhaps only make one trade per day. while the portfolio investment stood at US $ -11.Day trading also has different types of trade. Ranging trades are trades that go back and forth between two prices. and the desired goal of making a profit. while others prefer to wait for what they consider the best conditions for their trade. However many trades are made. there are other variances between day traders. Most day traders will choose a single type of trade. and choose which one to trade depending upon the current condition of the market. such as trend trades.e. and ranging trades. buying if the price is moving up). the trading process that is used. 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 . Trend trades are trades in the direction of the current price movement (i. Current State of the Indian Economy: Capital Inflows During the April-January period of 2008-09. are the same. counter-trend trades. and are used when the market is moving sideways.881 million.426 million. but some traders will take different types. In addition to the style and type of day trading. The foreign direct investment (FDI) stood at US $ 27. Some day traders like to make many trades throughout the trading day.
100 S & P CNX Nifty * (Base : 1978 .84 = 100) Average High Low (Base : November 3. 1995 = 1000) Aver. i.50.79 = 100) AveragHigh e 1 2 3 4 5 6 40 (Base : 1983 .High age 7 8 9 10 Low Low .. Nifty has been rechristened as ' S & P CNX Nifty with effect BSE Sensitive Index BSE .e.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 .
34 7704.1 15503.80 3816.1 14942.20 5 Nov-089453.75 7276.92 6776.50 4647.57 8095.96 8895.60 4040.50 2895.80 3077.28 8488.45 2678.09 4332.45 Jan-09 9350.85 4899.75 8101.35 7860.40 4214.32 6580.58 10099.70 08 8 Aug-0814722.79 4739.91 8739.62 7029.01 4823.10 08 8 Apr-0816290.55 41 .56 5432.60 7909.59 8785.3 16677.75 2524.24 4864.42 10335.35 4802.91 5195.22 3950.13716.14997.25 2553.48 7362.12 8627.8 15049.56 5483.06 4206.46 15343.35 6287.30 08 5 June.92 14048.5 18663.6 20873.12 8451.12 4620.90 4838.49 8363.79 3148.2 16063.30 5 Feb-08 17727.Jan-08 19325.87 6564.18 13461.16 16608.66 5228.60 4476.00 3 Sept.74 4463.13942.84 2854.60 9969.6 13055.02 4901.87 4343.23 7828.88 5201.05 08 1 Oct-08 10549.17 2834.80 7143.86 12595.50 2656.95 4441.20 4835.50 4953.69 4504.6 17600.67 8509.33 16729.00 9 May.84 5028.00 3850.00 4503.58 8907.16945.88 14809.64 5756.21 3210.36 3121.01 5328.93 8674.36 5396.71 7760.59 9240.49 4417.15838.55 5181.25 4 Mar.12 16275.54 11509.01 4769.01 9435.20 9348.28 12575.55 08 8 July.15 Dec-08 9513.59 8982.96 10631.94 4443.9 17378.64 8621.94 10526.67 4124.
05 13.569.607.58 407.60 4.32 4.528.79 4.897.673.888.28 Full Market Capitalisation % to (Rs.13 3.16 2.77 7.547.40 48.65 906.62 7.93 2.697.330.692.127.41 3.853.27 2.802.472.31 184.24 13.683.251.367.70 202.744.59 86.803.77 660.20 95.46 9.82 42 137.45 1.77 65.17 31.875.38 3.18 4.71 807.490.208.28 1.001.64 Turnover % to Total Turnover 31.95 12.36 182.39 272.990.20 3.36 10.86 3.505.60 8.53 2.398.54 2.866.38 .38 1.019.74 5.54 4.18 1.69 82.874.52 Week INDICES Close SENSEX MIDCAP SMLCAP BSE-100 BSE-200 BSE-500 14.90 2.919.77 533.27 284.450.274.602.77 5.75 2.809.90 2.23 2.88 0.917.060. crore) Total Mkt Cap 2.161.13 921.925.297.96 9.24 3.85 4.06 2.864.746.688.18 7.806.60 128.99 7.65 8.30 17.741.57 8.86 1.01 2.19 7.516.262.853.53 373.68 5.15 4.408.186. crore) 2.312.93 8.112.393.04 104.907.12 BSE Sectoral Indices AUTO BANKEX CD CG FMCG HC IT METAL OIL&GAS POWER PSU REALTY 4.081.98 2.85 29.34 7.53 2.042.66 3.516.85 11.28 6.45 123.293.63 7.60 11.361.92 1.54 211.75 5.890.120.59 17.987.04 0.24 7.69 76.37 3.25 1.81 3.94 12.549.346.91 1.427.46 47.52 94.863.43 5.18 9.598.622.14 11.94 11.88 3.06 9.485.285.157.805.02 6.64 8.74 1.162.774.99 253.70 High 17.43 4.66 4.08 623.42 8.899.428.38 668.638.60 2.10 3.39 2.02 735.411.102.949.91 2.86 977.29 (Rs.56 663.750.240.27 6.62 8.77 756.08 Low 7.748.
72 3.227.58 841.82 0.638.00 -- -- -- -- Note : The market capitalisation of all the indices is free float market capitalisation except for BSEPSU.00 0.59 0.64 1.41 1.32 3.91 2.423.99 12.00 --- --- --- --- 591.472. Trends in Inflation 43 .TECk BSE Dollex Indices DOLLEX-30 DOLLEX100 DOLLEX200 2.67 750.618.13 2.15 8.328.664.77 570.582.
00 173.75 191.76 211.80 177.28 204.00 August 205.08 44 .83 September 207.63 320. Light & Lubricants Manufactured Products 2006 January 196.76 326.50 171.93 328.08 175.73 175.30 July 204.84 317.72 330.02 202.30 200.10 171.30 194.32 179.05 324.28 February 196.05 June 203.90 April 199.76 May 201.80 171.78 310.10 205.(1) Index Numbers Of Wholesale Prices in India ( Monthly Averages) (Base: 1993-94 = 100) Year Month All Commodities Primary Articles Fuel.94 177.02 195.90 315.88 314.40 March 196.43 192. Power.
70 U. the exchange rate of EUR/USD on Aug 26th.S. dollars. typically via brokers. An enormous liquid market making it easy to trade most currencies. the Forex rate was 1. Volatile markets offering profit opportunities. which means that the value of the euro (the numerator of the EUR/USD ratio) increased in relation to the U.S. Foreign exchange market conditions can change at any time in response to real-time events.Forex An overview of the Forex market The Forex market is a non-stop cash market where currencies of nations are traded. Standard instruments for controlling risk exposure. he would have paid 1085. 5 days a week with non-stop access to global Forex dealers. Forex trading or currency trading is always done in currency pairs. Many options for zero commission trading. This number is also referred to as a "Forex rate" or just "rate" for short. For example. If the investor had bought 1000 euros on that date. 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. dollar. Leveraged trading with low margin requirements.2083. One year later. The ability to profit in rising or falling markets. 2003 was 1. The main enticements of currency dealing to private investors and attractions for short-term Forex trading are: 24-hour trading. The 45 .0857.
Forex-Forecasting This article provides insight into the two major methods of analysis used to forecast the behavior of the Forex market. However. However. the return on investment (ROI) should be compared to the return on a "risk-free" investment.to predict a price or movement. 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. government bonds since there is practically no chance for a default. Analysis Technical analysis is a method of predicting price movements and future market trends by studying charts of past market action. i. you must sell back the other currency in order to lock in a profit. At the very minimum. the investor would have USD 122.S. rather.investor could now sell the 1000 euros in order to receive 1208. 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. the U. They have the same goal . one needs to compare this investment option to alternative investments. to know if the investor made a good investment. 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.e. Many successful traders combine a mixture of both approaches for superior results. In other words. When trading currencies. If the currency you are buying does increase in value. they were solely speculating on the movement of that particular currency.60 more than what he had started one year earlier. the person or institution that bought or sold the currency has no plan to actually take delivery of the currency in the end. Technical analysis and fundamental analysis differ greatly. but both can be useful forecast tools for the Forex trader. One example of a risk-free investment is long-term U.S.30 dollars. Technical analysis is concerned with what has actually 46 .
not with the reasons for any changes. 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. e. One major advantage of technical analysis is that experienced analysts can follow many markets and market instruments simultaneously. However. Technical analysis is built on three essential principles: 1. the pure technical analyst is only concerned with price movements. open-closing) Trends (following moving average). Forex charts are based on market action involving price. 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. and creates charts from that data to use as the primary tool. for example. Prices move in trends Technical analysis is used to identify patterns of market behavior that have long been recognized as significant. For many given patterns there is a high probability that they will produce the expected results. supply and demand. There are five categories in Forex technical analysis theory: Indicators (oscillators. Gann numbers) Waves (Elliott wave theory) Gaps (high-low. there are recognized patterns that repeat themselves on a consistent basis. 3. 2. Also. political factors and market sentiment.g. Some major technical analysis tools are described below: Relative Strength Index (RSI): 47 .: Relative Strength Index (RSI) Number theory (Fibonacci numbers.happened in the market. rather than what should happen and takes into account the price of instruments and the volume of trading.
period closing prices tend to concentrate in the higher part of the period's range. Divergence between the stochastic lines and the price action of the underlying instrument gives a powerful trading signal.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. Stochastic oscillator: This is used to indicate overbought/oversold conditions on a scale of 0-100%.2.. If the RSI is 70 or greater. %K and %D that are used to indicate overbought/oversold areas of a chart. as prices fall in a strong down trend. The ratio of any number to the next larger number is 62%. Stochastic calculations produce two lines. Number theory: Fibonacci numbers: The Fibonacci number sequence (1.1. Moving Average Convergence Divergence (MACD): This indicator involves plotting two momentum lines. The inverse of 62%. The indicator is based on the observation that in a strong up trend. then the instrument is assumed to be overbought (a situation in which prices have risen more than market expectations). The MACD line is the difference between two exponential moving averages and the signal or trigger line. then this is taken as a signal that a change in the trend is likely. closing prices tend to be near to the extreme low of the period range. which is an exponential moving average of the difference.5.34.. If the MACD and trigger lines cross.3.21. 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).) is constructed by adding the first two numbers to arrive at the third. which is a popular Fibonacci retracement number. Conversely. which is 38%. 48 .8.13. is also used as a Fibonacci retracement number.
He made his fortune using methods that he developed for trading instruments based on relationships between price movement and time. They are also useful in deciding on a trading strategy. 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. For that reason.Gann numbers: W. known as time/price equivalents. Horizontal peaks and troughs characterize a trading range. 49 . It usually signals the beginning of an important price move. An ideal Elliott wave patterns shows a five-wave advance followed by a three-wave decline. An exhaustion gap is a price gap that occurs at the end of an important trend and signals that the trend is ending. Moving averages are used to smooth price information in order to confirm trends and support and resistance levels. The breaking of a trend line usually signals a trend reversal. An up gap is formed when the lowest price on a trading day is higher than the highest high of the previous day. There is no easy explanation for Gann's methods. Trends A trend refers to the direction of prices. Gaps Gaps are spaces left on the bar chart where no trading has taken place. while a down gap is a sign of market weakness. 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. falling peaks and troughs constitute a downtrend that determines the steepness of the current trend. but in essence he used angles in charts to determine support and resistance areas and predict the times of future trend changes. 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. He also used lines in charts to predict support and resistance areas. An up gap is usually a sign of market strength. A breakaway gap is a price gap that forms on the completion of an important price pattern. it is also called a measuring gap. A down gap is formed when the highest price of the day is lower than the lowest price of the prior day.
The most common technical tools: Coppock Curve is an investment tool used in technical analysis for predicting bear market lows. Fundamental analysis Fundamental analysis is a method of forecasting the future price movements of a financial instrument based on economic. 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. seasonal cycles. DMI (Directional Movement Indicator) is a popular technical indicator used to determine whether or not a currency pair is trending. many market players use technical analysis in conjunction with fundamental analysis to determine their trading strategy. political. weather and government policy. monetary policy. Fundamental analysis focuses on what ought to happen in a market. These criteria often include the economic condition of the country that the currency represents. environmental and other relevant factors and statistics that will affect the basic supply and demand of whatever underlies the financial instrument. but concentrates on the activity of that instrument's market. the technical analyst is not much concerned with any of the "bigger picture" factors affecting the market. Unlike the fundamental analyst. Many profitable trades are made moments prior to or shortly after major economic announcements. Factors involved in price analysis: Supply and demand. 50 . In practice.
3.800 in October. 2. 7. Experts are now talking about $30 per barrel in 20094. Companies are now shutting down plants and are removing employees due to lack of demand and piling up of inventories. 6. Experts are now talking about 55 against dollar in 2009.000 levels in January and analysts predicted 25.000 targets in 2009. Investment banking is the most sought after industry in early 2008. Commodities traded around all time high levels in June. 2008. 5. They are actually now talking about deflation. Inflation moved to 13% and analysts talked about 15% but inflation fell to 8% in December. 51 . But todays it has been touch the point 14000 due to government stability. Experts are now talking about 7. They are now either disappeared or merged with banks. Crude Oil prices touched $147 per barrel and Goldman Sachs talked about $200 per barrel but crude oil in now trading around $45 levels. 2008 but they collapsed to 2003 levels in December. Rupee strengthened to 39 against dollar and analysts like ICICI Kamat predicted 35 levels but rupee fell to 50 levels. Experts are now talking about 7% GDP growth in 2008-09 and 5% GDP growth in 2009-10.000 levels but Sensex fell to 7. Experts are now talking about 4% levels in 2009.What happened in 2008? Sensex was crossed 21. Indian GDP grew at 9% in 2007-08 and analysts predicted about 10% growth in 2009.
2008. If real economy will suffer in early 2009. the impact on India is also turning out to be stronger than we had earlier expected. 3. If economic conditions will improve by early 2010. Stock market investors will never react normally – they will either overreact or under react to the economic or political events. RBI Governor: “The global economic crisis is turning out to be deeper and longer than we had earlier expected. 80% of price variations occur in 20% of days – time of maximum profits and losses. 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. They are now announcing bonuses and free offers to attract buyers. Unlike in past. 7. One should take into consideration this psychological aspect along with business fundamentals in arriving at price target. Many real estate stocks were corrected by 70-90% in this year alone. Significant statements: 1. As I said in my previous posts. Investment lessons from 2008: 1. stock markets always move much ahead of real economy. stock markets now become more dynamic. Significant falls or rises do not occur in slow motion. 6. DLF and Unitech will cut prices by 30% in 2009. Biggest investment lesson: When investors are in panic mood. more volatile and more unpredictable due to more global integration of economy and money flows. Just see what happened to investors in Reliance Power IPO.” This is the frank statement from Subbarao. stocks will rise by late 2009. 4. They are steep and severe. We will hear some bankruptcies in 2009 in this sector. How long Government will deceive people on this unmanageable issue? Biggest problem with this crisis is no one in the world 52 . Believe in your research and gut feeling.8. Never follow herds. 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. stocks fell by October. 2. even good companies with strong growth prospects also fall along with bad overvalued stocks. Timing: It is very difficult to time the stock market investments.
How India’s leaders respond to the Mumbai attacks will tell the business world what it wants and needs to know. 5% in 2009-10 and will be around 7% in 2010-11. including pension and insurance funds. World Bank: “The financial crisis is now likely to result in the most serious recession since the 1930s.Reuters poll: India's economy is expected to grow at its slowest pace in six years in the fiscal year to March 2009. Not just whether to pull back from India but how risky pushing forward will be. Agriculture and Construction are the priority sectors for Government in the next package. According to World Bank. This is the perception of foreigners about India. Many investors will be thinking about tilting the balance to China. Indian GDP growth will be around 6. 53 .knows about magnitude and duration of financial crisis. International Energy Agency (IEA): for the first time in 25 years. Jack Welch (former GE Chairman): “The terror strike in Mumbai could well tilt the focus of foreign investors towards neighboring China. Textiles. Significant statistics: 1.” 6. Commerce Minister: “Government will announce second stimulus package in the next week. According to RBI Governor. It estimates for Indian GDP: 6. Rakesh Jhunjhunwala: “India will see the mother of all bull runs in the next 4 or 5 years. 2. This is the first drop for crude oil demand since 1983. Indian economy never grew less than 7.8% in 2009.8% in 2008-09 and 6.” 4. boosted by double-digit economic growth and increased investment by domestic investors. 2009-10 may be a more difficult year.” 5.5% in the last 5 years.” 3. India will grow by 5.2% in 2008-09. demand for crude falls.2% in 2009-10.
3. Positive Stock market news: 1. Goldman Sachs: China GDP growth for 2009 is around 6%. Asian Development Bank (ADB): Growth rates of China and India will be at 8.9% in 2009 and inflows to developing countries will fall by 50%. New claims for unemployment benefits reached their highest level (5. 7.5% respectively in 2009. DLF and Unitech may lower property prices by 30% in mid-2009 to stimulate buyers. More than 20 lakh Americans will lose jobs in 2009 and unemployment rate will touch 9% level in 2009. 5. McKinsey report: United States credit losses may top $3 trillion. IT and Hospitality sectors are the worst affected while Telecom is the most optimistic one. Anil Ambani family holds 67% stake in the company. These losses will increase if another major asset class will collapse 4. R-Com stock lost 70% of value in 2008. 8.2% in November. China: Exports fell by 2. 6. Government stability is big positive reason for sensex.the largest yearover-year monthly decline since April 1999. World economy will grow by 0. Manpower survey: India is the second most optimistic employment market in the world but there will freezing in hiring in the next 3 months. This deal is beneficial for investors as only 12% of shares are available for trading after this purchase in the secondary market. Global Telecom Companies are planning to buy 20-25% stake in Reliance Communications.73. 2. 3. India needs particular attention. Promoter will not reduce his holding. World Bank: Global trade will fall for the first time since 1982. India will be in election mood when we need these measures. These job losses will have cascading effect on real economy.2% and 6.000) in 26 years in USA.2. given its weaker fiscal position. Shocking! China will grow at 9% in 2010 if Government takes proper simulative decisions. 54 . the first decline since June 2001 .
B. December. We may hear some shocking news on this front in the next 2 years. it is interesting to see how promoters will clear their dues. 2008: World economy will grow by 2. ADB estimates about Asian economy in 2008: A. 2008: Asian economy will grow by 6. B. NPA shocks: Many people are underestimating the impact of Non Performing Assets (NPAs). December. NPAs will affect in 2 ways. 2008: Asian economy will grow by 7. December. World Bank estimates: A.2% in 2009. 2008: World economy will grow by 0.930 crore. Interesting statistics about Asian and World economies: 1. September. As stock markets are unlikely to recover in the next 12-15 months. 2008: Asian economy will grow by 5.FCCB shocks: Foreign currency convertible bonds (FCCBs?) of many companies will be due for repayment in the next 3 years.8% in 2009. 2008: Asian economy will grow by 7.9% in 2009. 3. 55 . Only positive aspect is many PSU banks reported fall in NPAs in 2008 over 2007 except SBI and IOB.2% in 2009. September. 2. B.9% in 2008.5% in 2008. NPA statistics: NPAs of ICICI Bank in 2007: Rs 5. November.500 crore. NPAs of ICICI Bank in 2008: Rs 9.. ADB estimates about Asian economy in 2009: A. 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.
5 This is a much severe crisis than 2001 slowdown. Effect of fluctuation on Indian stock market Nothing actually. It is not invested with a long term mindset. The hot money is that kind of money which is invested only for a short time to make some quick buck. this concept of allowing anonymous investors in the market broaden the reach of the market. the regulatory body for stocks in India. Yet. The economy is as sound as it was in the boom time. P/E of Sensex in 2008 economic slowdown: 9. The companies are as profitable as they were a few days ago.4. Since the continuous inflow of dollar into Indian economy is making the Indian currency (Rupee) stronger and thus making the export costlier. Making the availability of Participatory Notes some difficult for foreign investors was one step Government thought would help control the inflow of dollars. can not directly deal in buying/selling of sticks. Current P/E of Sensex: 10. 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. it also ensure free entry of dollars into Indian economy as well as increase the percentage of hot money in the market. which ultimately allows them trade in the market. So they took a sort of permission from registered FIIs by buying Participatory Notes (PN) from them in exchange of dollars. the Government was looking for someway to curb this inflow of dollars. The cause of concern for the Government was that in this major share of FIIs. the market crashed because the Government tried to instill some sort of regulation in it. All those foreign investors who are not registered with the SEBI (Stock Exchange Board of India). So a few days ago the SEBI contemplated on a draft policy to make the issuing of PN difficult for FIIs. Though. 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). 56 .
there is only a remote possibility of that as of now. The word crorepati (multimillionaire) can soon become a common thing in India all thanks to share market. soon the richest person in the world will be an Indian. the chairman of Reliance group was earning Rs 40 Lakhs ($ 100000) per minute. they started exiting form the market by selling their stock. Once they find a place which offer better return on their investment than India. However. 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. As this boom is being driven by FIIs (Foreign Institutional Investors). you never know what can happen in future. $100000 per minute ! Though it has much to do with his huge and expanding empire of Reliance industries. there is a word of caution here. it will continue itâ€™s upward swing despite such momentary crash. they will immediately shift there. 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. With the above note. I think that in all probability. However.the market fell more than a 1000 point in a few hours and had to shut down for some time. are going to become really rich. As people found that it would be difficult to trade in the market in future owing to non-availability of PN. 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. Though. Yes you read it write. Result. This news will from the Business standard give you some detail of this exercise done by the Government. who are in the market for quite sometime. 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. As of now the market is still fluctuating and is yet to be stabilized.This was the step which gave a jolt to the buying spree of FIIs. Secondly most investors. That’s why most expert 57 . On the last count (as per a leading newspaper report) Mukesh Ambani.
can put a break on this boom. There is a pressure on Government to mange the appreciation of rupee to favour exporters. The profits margin of these industries have reduced as it mostly depend on current value of dollar. 58 . All these things. The RBI is facing difficultly in managing this continuous inflow of dollars as their huge supply and easy availability has resulted into dollarâ€™s depreciation vis-Ã -vis Rupee. Owing to stock market boom. However. Some experts have opined that market is trading at 22 to 23 times of actual earning and no one can justify these valuations. As I explained in my earlier article. 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. Or we may see emergence of a new market with great potential on some other place on earth. the continued depreciation of dollar is also a cause of deep concern which needs to be addressed.are advising people to stick to their long-term investment plan and don’t make any move in haste. a increase in interest rate in US may reverse this flow of FIIs. In nutshell if I am to summarize this boom of stock market. (it actually happened some days ago as I described above) Government certainly donâ€™t want to spoil the party that is going on in the stock market. if happen. Some of our major export oriented industries such as Softwares and textiles are feeling the heat every day. 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. The last but not the least is the overvaluation of many stocks in the market.) The investment being made by FIIs in Indian share market has resulted in to a huge inflow of dollars into the economy. Recession A recession is a decline in a country's gross domestic product (GDP) growth for two or more consecutive quarters of a year. A recession is also preceded by several quarters of slowing down. 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 Rupee is becoming stronger to dollar thus making imports cheaper and export costlier. Ironically.
but the market has already 59 .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. lay-offs and a sharp rise in unemployment. The Fed will almost certainly respond with sharp cuts in interest rates towards the end of the month. An economy typically expands for 6-10 years and tends to go into a recession for about six months to 2 years. along with European stocks. And investors seem to have little faith in the Bush rescue plan's ability to ward off a recession in the US. and the financial sector in particular has been heading from one cold shower to the next. The Indian stock markets also crashed due to a slowdown in the US economy. stock prices are now at a low ebb in India with little cheer coming to investors. The way in which Asian stock prices responded last week to the fall of the Dow Jones and Nasdaq indices by 4 per cent. Investors around the world have taken note of the fact that the broad-based S&P 500 index is at a 16-month low. When the global economy has been cooling down. In the US. 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. Stock markets & recession The economy and the stock market are closely related. but investors are a worried lot. The markets bounced back after the US Fed cut interest rates. a recession is yet to be declared by the Bureau of Economic Analysis. This leads to a decreased demand for goods and services. However. The stock markets reflect the buoyancy of the economy. The Sensex crashed by nearly 13 per cent in just two trading sessions in January. which in turn leads to a decrease in production. hitting a 10-month low. 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. A recession normally takes place when consumers lose confidence in the growth of the economy and spend less.
60 . it is a large enough sum for the market to go into correction mode. Foreign institutional investors had moved to the sidelines in the secondary markets even earlier. The floor therefore would probably be a Sensex level of 17. Yet. which pulled in a record amount of application money (Rs 1. The question is whether the correction that has occurred so far is enough for fresh buying to emerge.discounted for that. Even after the 10 per cent correction from the market's peak.000 crore (Rs 1. There is no doubt that valuations had become expensive.000-odd -. Indian markets worst hit It is interesting that Indian markets were hit the most.5.15. Impact of a US recession on India A slowdown in the US economy is bad news for India. and that the industrial sector has suffered a sharp slowdown.200 crore (Rs 22 billion) in January. when compared to the same quarter a year earlier. the Sensex trades at an FY09 estimated P/E of 18. This may have been because the correction in the overheated Chinese stock market began some weeks ago. What began with profit-booking and unwinding of long positions cascaded on Friday into a 3. Provided the general economic and corporate news does not get worse than has already been anticipated. it was inevitable that stock prices would have to come off their dizzy highs. Even if a third or a fourth of that was being garnered by sale of stocks. no more. Investors will also have noticed that the third-quarter corporate numbers show significant deceleration in both sales and profit growth. among all Asian markets.which would mean wiping out the gains of the past three months.5 per cent decline in the Sensex. and FIIs have been net sellers to the tune of Rs 2. When coupled with the data showing that the export target for the year will be missed by a wide margin. buying may soon begin A global liquidity surplus had certainly contributed to momentum buying. which is not cheap in anyone's book. the Sensex trades at a trailing P/E multiple of 24. or whether a further fall is required before value-based buying starts. fresh buyingcannot be very far away. On a forward basis.150 billion)). Also relevant was the Reliance Power IPO.
Indian companies with big tickets deals in the US would see their profit margins shrinking. 61 . while the Sensex fell by 14. the DJIA was down 30 per cent in December 2002 from the highs it hit in January 2000. If the fall from the record highs reached is taken. Asia is yet to totally decouple itself (or be independent) from the rest of the world.Indian companies have major outsourcing deals from the US. along with increased global movement of capital. In contrast. There is a big correlation among global markets. India's exports to the US have also grown substantially over the years. The whole of Asia would be hit by a recession as it depends on the US economy. say experts. Analysts are now expecting a cut in US interest rates. A recession could bring down oil prices to $70. Hedge funds and FIIs could have been the biggest sellers in the Indian markets. the Sensex was down 45 per cent. The presence of hedge funds across asset classes. reminding investors that there is no one-way bet on the stock market. the Dow Jones Industrial Average went down by 22. A weak dollar could bring more foreign money to Indian markets.7 per cent. But experts note that the long-term prospects for India are stable. The worries for exporters will grow as rupee strengthens further against the dollar. 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).6 per cent. 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. has increased event-related volatility. booking profits and making the most of the unprecedented bull run that has dominated the Indian stock market for a long time now. Oil may get cheaper brining down inflation. One. factors. Between January 2001 and December 2002. The India economy is likely to lose between 1 to 2 percentage points in GDP growth in the next fiscal year. there is a change in the global investment climate. The current volatility is also linked to global bourses.
With the markets falling. on NDTV Profit. a technical correction in the derivatives segment has perpetrated a larger fall. said Mihir Vora of HSBC Mutual Fund.Volatility in commodities markets has also significantly affected equity markets. On the global front. said Vora. 62 . said Adrian Mowat of JP Morgan. On the local front there has been a huge build-up in derivatives positions and volatility led to margin calls. This could be seen as a buying opportunity and we will revisit market valuations after the correction. he added. Also many IPOs have sucked out liquidity from the primary market into the secondary market. he added. other emerging markets were down nearly 20% so India is playing catch-up. The Sensex can fall another 10-15%. Analysts expect the markets to continue to be choppy for a while till global liquidity and commodity prices settle in. India is trading at 65% premium to emerging markets and India is playing catchup with other declining global markets. There is no need to get very pessimistic that this is the end of equity investing in India. he said. At current levels it would be a buy call and we would not advise investors to wait to catch the bottom. A combination of global and local factors is affecting this market. he added. he said. on NDTV Profit.
prices 63 s: al si O S T n a y . It becomes high loss when market goes down. Threat : Recession New government Bubble burst Fluctuates dollar Market is providing new opportunities and new options to invest. Can’t predict future W Opportunity: Lot of people wants to invest but don’t invest due to insufficient knowledge.Strength: High return Large investment Acquire capital for expanding the business Secure the future losses Weakness: High risk Based on the fluctuation.
” 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 . 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. Stock market is all about future prediction.Conclusion: Through this research we can conclude that: Stock market fluctuates by the external environment. Stock market is very sensitive market. It is based on “high risk and high return.
Hein.icai.stockmarkets.org • www. 23.Hafer work package no.com • http://econ.24.bseindia.org • www. Madhumati page no.Rik W.tdd.worldbank. Published Feb 2009 • Business today • Business standard Websites: www. Scott E.com • www.200.com • The economics times - 65 .Hafer.Bibliography Text books • The Stock Market-The Stock Market .7 & 8 Investment Analysis and portfolio management-M Raghunathan.htm www. R.28.org • http://en.wikipedia.tradingstock.ltslnewsStock_ExchangesStock. 6.209 Journals and magazines JARN.26. W.
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