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Summer Internship Project Report


On
‘Stock Market Development and Economic Growth’
At
ICICI Prudential Mutual Fund Pvt. Ltd.

Submitted to
Institute Code: 705
Institute Name: S. R. Luthra Institute of Management

Under the Guidance of


Ms.JyshreeSiddhapuria
Asst. Professor

In partial Fulfillment of the Requirement of the award of the degree of


Master of Business Administration (MBA)
Offered By
Gujarat Technological University
Ahmadabad

Prepared by:
HemantMa,kwana
Enrollment No.177500592034
MBA (Semester – 3)
July 2018
Student Declaration

I hereby declare that the Summer Internship Project Report titled “Stock Market
Development and Economic Growth” in (ICICI Prudential Mutual Fund Pvt.
Ltd.) is a result of my own work and my indebtedness to other workpublications,
references, if any, have been duly acknowledged. If I am found guilty of copying from
any other report or published information and showing as my original work, or extending
plagiarism limit, I understand that I shall be liable and punishable by the university,
which may include ‘Fail’ in examination or any other punishment that university may
decide.

Enrollment no. Name Signature

17500592034 Hemant V. Makwana

Place:________________ Date:_________________
Date:__/__/____

Institute Certificate

“This is to certify that this Summer Internship Project Report Titled “Stock Market
Development and Economic Growth” is the work ofHemant V. Makwana
(177500592034), who has carried out his project under my supervision. I alsocertify
further, that to the best of my knowledge the work reported here in does not form part of
any other project report or dissertation on the basis of which a degree or award was
conferred on an earlier occasion on this or any other candidate. I have also checkedthe
plagiarism extent of this report which is … % and it is below the prescribed limit of
30%. The separate plagiarism report in the form of pdf/Word file is enclosed with
this.

Rating of Project Report: ______

___________________
Ms.JayshreeSiddhapuria
Asst. Professor

___________________
Dr. Jimmy M. Kapadia
Director
S. R. Luthra Institute of Management
Acknowledgement

No good task can be completed without the help of others. After the completion of this
project, I feel it is necessary to think who helped me and co-operated with me during the
project.

First of all, I would like to thanks Gujarat Technological University that gave me a
chance to brighten my academic qualification that provide that opportunity to have
practical knowledge about the relevant field.

I am very much thankful to Dr. Jimmy Kapadia, Director of S. R. Luthra Institute of


Management for extending to me in all consideration and co-operation, which a student
can wish.

I express my sincere gratitude to my project guide Asst. Prof. Ms.JayshreeSiddhapuria


of S. R. Luthra Institute of Management for providing his valuable guidance during
project work.

I am very much thankful to Mr.MehulModi, Manager of ICICI Prudential Mutual Fund


Pvt. Ltd. for giving me an opportunity to take training from his firm and giving me
knowledge about my topic and other also.

I would like to thank especially to my Friends and students in colleges for supporting
me and encouraging me all throughout the course of my project.

Finally, I would like to thank all those people who are directly or indirectly contributed to
my project work. My heart goes out to my parents who bear with me all the trouble I
caused then with smile during the entire study period and beyond.
INTRODUCTION
The main objective behind promoting the development of stock markets in Indiawas to
contribute to raising capital and assisting its allocation process in order tostrengthen the Indian
economy. Consequently, in order to investigate whether the IndianStock Markets achieves its
objective in enhancing the economic growth of the country,this research proposes a simple
plausible framework for studying some elements ofgrowth that relate to the main aspects of the
functions of financial, stock market and economic growth. The thread of the theoretical argument
is that thedegree to which financial markets, particularly stock markets, influence real
economicgrowth depends on how effectively they improve capital accumulation, facilitate
capitalmobilization and increase the productivity of capital investment. The stock
marketdevelopment indicators are dealt in the third part.An empirical attempthas been made to
examine the link between stock market development and economicgrowth of India. Thus the
particular questions that we are trying to answer in this chapterare the following: does the
development of the stock market have any influence onIndia's real economic growth? If it does,
have the level of stock market developmentinfluenced India's economic growth?It was important
to answer the increasing number of the critical questions regarding stock market performance
and economic growth, for instance, do the stock exchanges of the countries effect on the
economic growth of a country, if yes then how? This study highlights certain factors that can be
used to measure the stock market development and its effect on the country’s economic growth.
Besides this, it was important to study the effect of increasing market capitalization of INDIA on
their economic growth.
This study analyses the effect of India stock market development on their respective GDP and Inflation by
considering three of the stock market indicators, that is, market capitalization, total value of stocks traded,
stock turnover ratio. By creating some null hypothesis and check it after the analysis will help in research
to know impact of stock market development and economic growth.
Industry Profile of
Stock Market Industry
What is the 'Stock Market?
The stock market refers to the collection of markets and exchanges where the issuing and trading
of equities or stocks of publicly held companies, bonds, and other classes of securities take place.
This trade is either through formal exchanges or over-the-counter (OTC) marketplaces.

Also known as the equity market, the stock market is one of the most vital components of a free-
market economy. It provides companies with access to capital in exchange for giving investors a
slice of ownership.

2.1 Global Level:

BREAKING DOWN 'Stock Market':

The stock market consists of two main sections, the primary market, and the secondary
market. The primary market is where new issues are first sold through initial public offerings
(IPOs). Institutional investors typically purchase most of these shares from investment banks.

The worth of the company going public and the number of shares issued will determine the
opening price of the IPO stock. All subsequent trading happens in the secondary market, where
participants include both institutional and individual investors. A company uses the money raised
from its IPO to grow, but once its stock starts trading, it does not receive funds from the buying
and selling of its shares.

Stocks of larger companies are usually traded through exchanges. Such exchanges exist in major
cities all over the world, including London and Tokyo. Exchanges are entities that bring together
buyers and sellers in an organized manner. On exchanges, stocks are listed and traded. Today,
the execution of most transactions is by electronic means. Even the stocks themselves are mostly
held in an electronic format, not as physical certificates.

Regarding market capitalization, the two most prominent stock exchanges in the United States
are the New York Stock Exchange (NYSE), founded in 1792 and located on Wall Street, which
colloquially is often the synonym for the NYSE, and the Nasdaq, founded in 1971. The Nasdaq
originally featured over-the-counter (OTC) securities, but today it lists all types of stocks. Stocks
may be listed on either exchange if they meet the listing criteria of the exchange. However, in
general technology, firms tend to be listed on the Nasdaq.

The NYSE is still the largest and, arguably, most powerful stock exchange in the world. The
Nasdaq has more companies listed, but the NYSE has a market capitalization that is larger than
Tokyo, London, and the Nasdaq combined.

The Securities and Exchange Commission (SEC) is the regulatory body charged with overseeing
the U.S. stock markets. The SEC is a federal agency, which is independent of the political party
in power. Explicitly, the mission of the SEC states it is "to protect investors, maintain fair,
orderly, and efficient markets, and facilitate capital formation." Shortly after the stock market
crash of 1929, the birth of the Securities and Exchange Commission (SEC) set a goal to restore
investor faith in the financial sector.

Stock Trading:

Over-the-counter (OTC) and listed securities are the two primary types of
securities transacted on stock markets. Listed securities are those stocks traded on exchanges.
These securities need to meet reporting regulations of the SEC as well as the requirements of the
exchanges where they trade.

Over-the-counter securities are exchanged directly between parties, usually via a dealer network.
These securities do not list on any stock market exchange but will show on the pink sheets. Pink
sheet security often will not meet the requirements to list on an exchange and tend to have a low
float, such as closely held companies or thinly-traded stocks. Also, companies in bankruptcy are
typically listed on the pink sheets, as are penny stocks, which are loosely defined as stocks that
trade below $5 a share.

OTC securities do not need to comply with SEC reporting requirements, so finding credible
information on them can be difficult. This lack of data makes investing in pink sheet securities
similar to investing in private companies.
Who Works in the Stock Market?

There are many different players associated with the stock market, including stockbrokers,
traders, stock analysts, portfolio managers and investment bankers. Each has a unique role, but
many of the roles are intertwined and depend on each other to make the market run effectively.

 Stockbrokers, also known as registered representatives in the U.S., are the licensed
professionals who buy and sell securities on behalf of investors. The brokers act as
intermediaries between the stock exchanges and the investors by buying and selling
stocks on the investors' behalf.
 Stock analysts perform research and rate the securities as buy, sell, or hold. This research
gets disseminated to clients and interested parties who decide whether to buy or sell the
stock.
 Portfolio managers are professionals who invest portfolios, or collections of securities,
for clients. These managers get recommendations from analysts and make the buy or sell
decisions for the portfolio. Mutual fund companies, hedge funds, and pension plans use
portfolio managers to make decisions and set the investment strategies for the money
they hold.

 Investment bankers represent companies in various capacities, such as private companies


that want to go public via an IPO or companies that are involved in pending mergers and
acquisitions.

The Stock Market Performance Indicators

If you want to know how the stock market is performing, you can consult an index of stocks for
that whole market or that segment of the market. Indexes are used to measure changes in the
overall stock market.

There are many different indexes, with each made up of a different pool of stocks. Some indexes
may overlap in the stocks they represent. In the United States, examples of indexes include the
Dow Jones Industrial Average, NASDAQ Composite Index, Russell 2000, and Standard and
Poor’s 500 (S&P 500), but there are many more.

The Dow Jones Industrial Average (DJIA) is perhaps the best-known of the indexes. The Dow is
made up of the 30 largest companies in the U.S., and the daily Dow shows how their stocks
perform on a given day. The Dow average is a price-weighted average. Price-weighted means the
value has a basis on the price of the included stocks.

The S&P 500 is comprised of the 500 largest capitalization stocks traded in the U.S.
These two indexes are the most followed measurements of the U.S. stock market. As such, they
are the most accepted representatives of the overall American economy. However, there are
many other indexes which represent mid- and small-sized U.S. companies, such as the Russell
2000.

In the U.S., the indexes that measure the value of stocks are widely followed. As a financial
barometer, the stock market has become an integral and influential part of decision-making for
everyone from the average family to the wealthiest executive.

Why is the Stock Market Important?

The stock market allows companies to raise money by offering stock shares and corporate bonds.
It lets investors participate in the financial achievements of the companies, making money
through dividends. Dividends are cuts of the company's profits as they may payouts. Investors
also make a profit by selling appreciated stocks. This is known as a capital gain. Of course, the
downside is that investors can lose money as well if the share price falls or if the investor must
sell the shares at a loss.

One of the whole points of open exchange is to provide transparency and opportunity for all
investors. Furthermore, laws and governing bodies, such as the SEC, exist to "level the playing
field" for investors. However, there are undeniable advantages that institutional investors and
professional money managers have over the individual investor.

Advantages of large institutional investors include the timely access to privileged information,
full-time research departments, vast amounts of capital to invest, discounts on
commissions, transaction fees, and even share prices based on the large dollar amount they
invest, political influence, and more significant experience.

While the Internet has been somewhat of an equalizing factor, the reality is that many
institutional clients get news and analysis before the public does and can act on information more
quickly.

History of the Stock Market:


It can be difficult for investors to imagine a time when the stock market and the NYSE, in
particular, wasn't synonymous with investing. Of course, it wasn't always this way. There were
many steps along the road to our current system of exchange. In fact, the first stock exchange
thrived for decades without a single stock being traded.

Belgium boasted a stock exchange as far back as 1531 in Antwerp. Brokers and moneylenders
would meet there to deal with business, government, and even individual debt issues. It is odd to
think of a stock exchange that traded exclusively in promissory notes and bonds, but in the
1500's, there were no real stocks. There were financier partnerships that produced income as
stocks do, but there was no official share that changed hands.

In the 1600's, the Dutch, British, and French governments all gave charters to companies with
East India in their names. On the cusp of imperialism's high point, it seems like everyone had a
stake in the profits from the East Indies and Asia except the people living there. Sea voyages that
brought back goods from the East were perilous with threats of Barbary pirates, risks of bad
weather, and poor navigation.

To lessen the risk of a lost ship ruining their fortunes, ship owners had long been in the practice
of seeking investors who would put up money for the voyage. The investors fund the outfitting
of the ship and crew in return for a percentage of the proceeds if the voyage was successful.
These early limited liability companies often lasted for only a single voyage.

When the East India companies formed, they changed the way business was done. These
companies had stocks that would pay dividends on all the proceeds from all the voyages, rather
than journey by journey. These were the first modern joint stock companies. This allowed the
companies to demand more for their shares and build larger fleets. The size of the companies,
combined with royal charters forbidding competition, meant huge profits for the investors.

Because the shares in the various East India companies were issued on paper, investors could sell
their holdings to other investors. Unfortunately, there was no stock exchange in existence, so the
investor would have to track down a broker to carry out a trade. In England, most brokers and
investors did their business in various coffee shops around London. Debt issues and shares for
sale were written up and posted on the shops' doors or mailed as a newsletter.

The British East India Company had one of the biggest competitive advantages in financial
history as a government-backed monopoly. When the investors began to receive huge dividends
and sell their shares for fortunes, other investors were hungry for a piece of the action. The
budding financial boom in England came so quickly that were no rules or regulations for the
issuing of shares. The South Seas Company (SSC) emerged with a similar charter from the king
and its shares, and the numerous re-issues, sold as soon as they were listed. Before the first ship
ever left the harbor, the SSC had used its newfound investor fortune to open posh offices in the
best parts of London.

Encouraged by the success of the SSC and realizing that the company hadn't done a thing except
for issue shares, other "businessmen" rushed in to offer new shares in their own ventures. Some
of these were as ludicrous as reclaiming the sunshine from vegetables or, better yet, a company
promising investors shares in an undertaking of such vast importance that they couldn't revealed
the details, something known today as a blind pool.
Inevitably, the bubble burst when the SSC failed to pay any dividends off its meager profits,
highlighting the difference between these new share issues and the British East India Company.
The subsequent crash caused the government to outlaw the issuing of shares and the ban held
until 1825.

2.2 National Level:


The BSE and NSE

Most of the trading in the Indian stock market takes place on its two stock exchanges:
the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). The BSE has been
in existence since 1875. The NSE, on the other hand, was founded in 1992 and started trading in
1994. However, both exchanges follow the same trading mechanism, trading hours, settlement
process, etc. At the last count, the BSE had about 4,700 listed firms, whereas the rival NSE had
about 1,200. Out of all the listed firms on the BSE, only about 500 firms constitute more than
90% of its market capitalization; the rest of the crowd consists of highly illiquid shares.

Almost all the significant firms of India are listed on both the exchanges. NSE enjoys a dominant
share in spot trading, with about 70% of the market share, as of 2009, and almost a complete
monopoly in derivatives trading, with about a 98% share in this market, also as of 2009. Both
exchanges compete for the order flow that leads to reduced costs, market efficiency and
innovation. The presence of arbitrageurs keeps the prices on the two stock exchanges within a
very tight range.

Trading Mechanism

Trading at both the exchanges takes place through an open electronic limit order book, in which
order matching is done by the trading computer. There are no market makers or specialists and
the entire process is order-driven, which means that market orders placed by investors are
automatically matched with the best limit orders. As a result, buyers and sellers remain
anonymous. The advantage of an order driven market is that it brings more transparency, by
displaying all buy and sell orders in the trading system. However, in the absence of market
makers, there is no guarantee that orders will be executed.

All orders in the trading system need to be placed through brokers, many of which
provide online trading facility to retail customers. Institutional investors can also take advantage
of the direct market access (DMA) option, in which they use trading terminals provided by
brokers for placing orders directly into the stock market trading system.
Settlement Cycle and Trading Hours

Equity spot markets follow a T+2 rolling settlement. This means that any trade taking place on
Monday, gets settled by Wednesday. All trading on stock exchanges takes place between 9:55
am and 3:30 pm, Indian Standard Time (+ 5.5 hours GMT), Monday through Friday. Delivery of
shares must be made in dematerialized form, and each exchange has its own clearing house,
which assumes all settlement risk, by serving as a central counterparty.

Market Indexes
The two prominent Indian market indexes are Sensex and Nifty. Sensex is the oldest market
index for equities; it includes shares of 30 firms listed on the BSE, which represent about 45% of
the index's free-float market capitalization. It was created in 1986 and provides time series data
from April 1979, onward.
Another index is the S&P CNX Nifty; it includes 50 shares listed on the NSE, which represent
about 62% of its free-float market capitalization. It was created in 1996 and provides time series
data from July 1990, onward

Market Regulation

The overall responsibility of development, regulation and supervision of the stock market rests
with the Securities & Exchange Board of India (SEBI), which was formed in 1992 as an
independent authority. Since then, SEBI has consistently tried to lay down market rules in line
with the best market practices. It enjoys vast powers of imposing penalties on market
participants, in case of a breach.

Who Can Invest In India?

India started permitting outside investments only in the 1990s. Foreign investments are classified
into two categories: foreign direct investment (FDI) and foreign portfolio investment (FPI). All
investments in which an investor takes part in the day-to-day management and operations of the
company, are treated as FDI, whereas investments in shares without any control over
management and operations, are treated as FPI.

For making portfolio investment in India, one should be registered either as a foreign
institutional investor (FII) or as one of the sub-accounts of one of the registered FIIs. Both
registrations are granted by the market regulator, SEBI. Foreign institutional investors mainly
consist of mutual funds, pension funds, endowments, sovereign wealth funds, insurance
companies, banks, asset management companies etc. At present, India does not allow foreign
individuals to invest directly into its stock market. However, high-net-worth individuals (those
with a net worth of at least $US50 million) can be registered as sub-accounts of an FII.
Foreign institutional investors and their sub accounts can invest directly into any of the stocks
listed on any of the stock exchanges. Most portfolio investments consist of investment in
securities in the primary and secondary markets, including shares, debentures and warrants of
companies listed or to be listed on a recognized stock exchange in India. FIIs can also invest
in unlisted securities outside stock exchanges, subject to approval of the price by the Reserve
Bank of India. Finally, they can invest in units of mutual funds and derivatives traded on any
stock exchange.

An FII registered as a debt-only FII can invest 100% of its investment into debt instruments.
Other FIIs must invest a minimum of 70% of their investments in equity. The balance of 30%
can be invested in debt. FIIs must use special non-resident rupee bank accounts, in order to move
money in and out of India. The balances held in such an account can be fully repatriated.

Restrictions/Investment Ceilings

The government of India prescribes the FDI limit and different ceilings have been prescribed for
different sectors. Over a period of time, the government has been progressively increasing the
ceilings. FDI ceilings mostly fall in the range of 26-100%.

By default, the maximum limit for portfolio investment in a particular listed firm, is decided by
the FDI limit prescribed for the sector to which the firm belongs. However, there are two
additional restrictions on portfolio investment. First, the aggregate limit of investment by all FIIs,
inclusive of their sub-accounts in any particular firm, has been fixed at 24% of the paid-up
capital. However, the same can be raised up to the sector cap, with the approval of the company's
boards and shareholders.

Secondly, investment by any single FII in any particular firm should not exceed 10% of the paid-
up capital of the company. Regulations permit a separate 10% ceiling on investment for each of
the sub-accounts of an FII, in any particular firm. However, in case of foreign corporations or
individuals investing as a sub-account, the same ceiling is only 5%. Regulations also impose
limits for investment in equity-based derivatives trading on stock exchanges.

Investment Opportunities for Retail Foreign Investors

Foreign entities and individuals can gain exposure to Indian stocks through institutional
investors. Many India-focused mutual funds are becoming popular among retail investors.
Investments could also be made through some of the offshore instruments, like participatory
notes (PNs) and depositary receipts, such as American depositary receipts (ADRs), global
depositary receipts (GDRs), and exchange traded funds (ETFs) and exchange-traded
notes (ETNs).
As per Indian regulations, participatory notes representing underlying Indian stocks can be
issued offshore by FIIs, only to regulated entities. However, even small investors can invest in
American depositary receipts representing the underlying stocks of some of the well-known
Indian firms, listed on the New York Stock Exchange and Nasdaq. ADRs are denominated in
dollars and subject to the regulations of the U.S. Securities and Exchange Commission (SEC).
Likewise, global depositary receipts are listed on European stock exchanges. However, many
promising Indian firms are not yet using ADRs or GDRs to access offshore investors.

Retail investors also have the option of investing in ETFs and ETNs, based on Indian stocks.
India ETFs mostly make investments in indexes made up of Indian stocks. Most of the stocks
included in the index are the ones already listed on NYSE and Nasdaq. As of 2009, the two most
prominent ETFs based on Indian stocks are the Wisdom-Tree India Earnings Fund (NYSE: EPI)
and the Power Shares India Portfolio Fund (NYSE:PIN). The most prominent ETN is the MSCI
India Index Exchange Traded Note (NYSE:INP). Both ETFs and ETNs provide good investment
opportunity for outside investors.

2.3 PESTLE Analysis of Indian stock market

POLITICAL FACTOR

The capital market of India is very vulnerable. India has been politically instable in the past but it
is a little politically stable now-a-days.the political instability of the country has a very strong
impact on the capital market. The share market of India changes as the political changes took
place. The BSE Index, SENSEX goes up and down with any kind of small and big political
news, like, if there is news that a particular political party has withdrawn its support from the
ruling party, and then the capital market will go down with a bang. The capital market of India is
too weak and is based on speculations. The political stability of the country is very important for
the stability and growth of capital market in India. The political imbalance or balance of the
country is the major factor in deciding the capital market of India.

ECONOMICAL FACTOR

The economic measures taken by the government of India has a very strong relationship with the
capital market. Whenever the annual budget is announced the capital market goes up and down
with the economic policies of the government .If the policies are supportive to the companies
then the capital market takes it positively and if there is any other policy that is not supportive
and it is not welcomed then the capital market goes down. Like, in the case of allocation of 3-G
spectrum, those companies that got the license for 3-G, they witnessed sharp growth in their
share values so the economic policies play a major part in the growth and decline of the capital
market and again if there is relaxation on any kind of taxes on items of automobile industry then
the share of automobile sector goes up and virtually strengthen the capital market.

SOCIAL FACTOR

India is a country of unity in diversity .India is socially rich but the capital market is not very
attached with the social factors .Yes, there is some relation between the social factors with the
capital market. If there is any big social factor then to some extent it affects the capital market
but small social factors don’t impact at all. Like, there was opposition of reliance fresh in many
cities and many stores were closed. The share prices of the reliance fresh went down but the
impact was on and individual firm there was not much impact on the capital market on a whole
the social factors have not much of impact on the capital market in India. The social factors
include:
 emphasis on safety
 career attitudes
 population growth rate
 age distribution

TECHNOLOGICAL FACTOR

The technological factors have not that much effect on the capital market. India is technological
backward country. Same as social factors, technological factor can have an effect on an
individual form but it cannot have a big impact on a whole of capital market. The Bajaj got a
patent on its dts-i technology, and launched it in its new bike but it does not effect on capital
market. The technological change in India is always on a lower basis and it doesn’t effect on
country as a whole. The technological factors include:
 R&D activity
 technology incentives
 rate of technological change
 automation

ENVIRONMENTAL FACTOR
Initially the environmental factors don’t play a vital role in the capital market but the time has
changed and people are more eco-friendly. This is really bothering them that if any firm or
industry is environment friendly or not. An increasing number of people, investors, and corporate
executives are paying importance to these facts; the capital markets still see the environment as a
liability. They belie that it is of no use for their strategy. The environmental performance is even
under-valued by the markets.

LEGAL FACTOR

Legal factors play an important role in the development and sustain the capital market. Legal
issues relating to any industry or firm decides the fate of the capital market. If the govt. of India
or the parliament introduces a new law that can affect the running of the industry then the
industry will be demotivated and this demonization will lead to the demonization of the investors
and will result in the fall of capital market. Like after the Hardhat Mehta scam, new rules and
regulations were introduced like PAN card was made necessary for trading, if any investor was
investing too much money in a small firm, then the investors were questioned, etc. These
regulations were meant to maintain transparency in the capital market, but at that time,
investment was discouraged. Legal factors are necessary for the improvement and stability of the
capital market.

2.4 SWOT Analysis:


Strength:
 For most thing of strength of Indian stock market is its ability to provide high return.
 SEBI a regulatory body of Indian stock market who protects the interest of the investors.
 Large number of securities which provides medium for investment.
 Large number of Brokers who plays a role of facilitator for investment.

Weakness:
 The weak point of Indian stock market is its volatility i.e. High risk.
 It is a kind of gambling where no guarantee of return and some time it depends on luck
also.

Opportunity:
 Stock market provides an opportunity to money lender and money seeker to Invest and
use money for their plan.
 It provides an opportunity to the investor to be the owner of the company and contribute
in the business decision of the company.
 Stock market is a kind of indicator of the economic growth of the country where it
provides an opportunity to gain according to the inflation of the country or more than
that.

Threats:
 There are many competitors of stock market such as post office savings, public provident
fund, company fixed deposits, fixed deposits with bank etc. which provides fixed and
assured returns.

2.5 Current Trends in Stock Market :

As we discussed an earlier section, stock prices can be volatile in the short term. They don’t
necessarily move in a straight line. However, as you zoom out and look at slightly long-term
price patterns, you will discover a better defined market trend.

In general understanding, a trend is the broad upward or downward movement of a stock’s


price over time. Upward movement is called an uptrend, while those which move lower over
a period of time are said to be in a downtrend. Investors have a tendency of buying stocks
that are seemingly in an uptrend and selling the ones in a downtrend.

However, stock prices move in a zig-zag manner. In technical analysis, we don’t identify a
trend simply based on how far up or down a stock price has moved over a period of time. We
concern ourselves with the specifics--how much the stock rose when it moved up, and how
little it fell in a downtrend. In other words, we look at how high the share price touched – the
top or how low did it fall – the bottom.
Company Profile
ofICICI Prudential
Asset Management
Company Limited.
3.1 ICICI Prudential AMC Ltd.

ICICI Prudential Asset Management Company Ltd. is a leading asset


management company (AMC) in the country focused on bridging the gap between savings &
investments and creating long term wealth for investors through a range of simple and relevant
investment solutions.

The AMC is a joint venture between ICICI Bank, a well-known and trusted name
in financial services in India and Prudential Plc, one of UK’s largest players in the financial
services sectors. Throughout these years of the joint venture, the company has forged a position
of pre-eminence in the Indian Mutual Fund industry.

The AMC manages significant Assets under Management (AUM) in the mutual
fund segment. The AMC also caters to Portfolio Management Services for investors, spread
across the country, along with International Advisory Mandates for clients across international
markets in asset classes like Debt, Equity and Real Estate.

The AMC has witnessed substantial growth in scale; from 2 locations and 6
employees at the inception of the joint venture in 1998, to a current strength of 1913 employees
with a reach across over 200 locations reaching out to an investor base of more than 3 million
investors (As on March 31, 2018). The company’s growth momentum has been exponential and
it has always focused on increasing accessibility for its investors.

Driven by an entirely investor centric approach, the organization today is a suitable


mix of investment expertise, resource bandwidth and process orientation. The AMC endeavors to
simplify its investor’s journey to meet their financial goals, and give a good investor experience
through innovation, consistency and sustained risk adjusted performance.

Sponsors

 ICICI Bank

ICICI Bank is India's largest private sector bank with total consolidated assets of Rs. 11,242.81
billion (US$ 172.5 billion) at March 31, 2018 and profit after tax of Rs. 67.77 billion (US$ 1.0
billion) for the year ended March 31, 2018. ICICI Bank currently has a network of 4,867
Branches and 14,367 ATMs across India.

 Prudential

Prudential plc is an international financial services group with significant operations in Asia, US
and the UK. The company serves more than 26 million insurance customers and has £669 billion
of assets under management (as at 31 December 2017).

 Prudential Corporation Asia (PCA)

Prudential is a leading life insurer that spans 14 markets in Asia, covering Cambodia, China,
Hong Kong, India, Indonesia, Korea, Laos, Malaysia, the Philippines, Singapore, Taiwan,
Thailand and Vietnam. Prudential has a robust multi-channel distribution platform providing a
comprehensive range of savings, investment and protection products.

East spring Investments manages investments across Asia on behalf of a wide range of retail and
institutional investors, with about half of its assets sourced from life and pension products sold
by Prudential plc. It is one of the region’s largest asset managers with a presence in 10 major
Asian markets as well as distribution offices in the US and Europe. It has USD 188 billion in
assets under management (as at 31 December 2017), managing funds across a range of asset
classes including equities and fixed income.
 Jackson National Life Insurance Company

Jackson is one of the largest life insurance companies in the US, providing retirement products
and income strategies aimed at the approximately 75 million baby boomers in the United States.
Jackson is also one of the top three providers of variable annuities in the US. Founded over 50
years ago, Jackson has a long and successful record of providing advisers with the products,
tools and support to design effective retirement solutions for their clients.

M&G Prudential

M&G is Prudential's UK and European fund management business with total assets under
management in excess of £351 bn (as at 31 December 2017). M&G has been investing money
for individual and institutional clients for over 80 years. Today it is one of Europe's largest active
investment managers as well as being a powerhouse in fixed income.

 Product and Service

► Mutual Fund

ICICI Prudential Mutual Fund (the Fund) offers a wide range of retail and corporate investment
solutions across various asset classes - Equity, Fixed Income and Gold.

The Fund House has continuously aimed to provide investors with financial
solutions to aid them in achieving their lifecycle objectives. It has constantly been on the
forefront of innovation and has introduced various products aligned to meet customer needs,
leading to a well-diversified portfolio of around 47 mutual fund products, across equity and debt.
The success of the various endeavors is evident in the mutual fund investor base which has
witnessed tremendous growth over the years. As of March 31, 2018, the investor base for the
AMC stood at 3 million customers.
The fund house over the last 20 years has emerged as a leading investment solution
provider in India and has always aimed to fulfill its fiduciary responsibility of managing
investor's wealth with prudence and due diligence.

► Portfolio Management Service

ICICI Prudential AMC Limited was the first AMC to acquire PMS license in 2000.
Since then, we have covered various milestones. We have come out with many path-breaking
and first of its kind products in the industry. We offer a basket of products to ensure that we meet
the requirements of our investors.

At ICICI Prudential Portfolio Management Services, we strongly believe that


Innovation is the key to achieve differentiation in an increasingly competitive market
environment. Our endeavor is to generate new ideas that can stand the test of time and difficult
market conditions, thereby benefiting our esteemed investors. At the same time, we believe that
the successful art of investing lies in understanding investor’s requirements. Consequently, we
package our portfolios as per investor's specific requirements.

► Real Estate

ICICI Prudential AMC is one of the leading Real Estate Investment Managers in India. The Real
Estate division caters to high net worth investors and domestic institutional investors, with ICICI
Prudential AMC starting the Real Estate Investment Series Portfolio in the year 2007.
3.2 Organogram of ICICI Prudential Mutual Fund

Managing Director
Mr. Nimesh Shah

National Head
Mr. RaghavIyengar

Zonal Manager
Mr. Amar Shah

Regional Manager
Mr. MihirKapadia

Cluster Head
Mr. MehulModi

Relationship Relationship
Manager(IBank) Relationship Manager Operations
Manager(Privat (Distributer)
Mr. Parth bank) Mr. Henal
Mr. Amay Mr. Nilesh Ms. Bhavisha
Ms. Pooja
Ms. Shreya Mr. Darpan
 SWOT Analysis

The SWOT Analysis provides information that is helpful in matching the firm’s resources and
capabilities to the competitive environment in which it operates.

Strength

 The companies have a well-known name and reputation which is giving a hit to other
market players when it comes to competing in the market.
 The continuous dividend that the company keeps declaring is one of the most attractive
elements of its scheme.
 The large customer base around more than 50 lakhs.
 The fund house is considered to be very innovative by the distributor. Eg: Equity target
returns Fund NFO.
 Company strong distribution network is playing a great role in making ICICI prudential
AMC reaching out to maximum number of investors.
 It is the most trustable mutual fund brand in the country according to a survey conducted.
 The service centre has provided to be very efficient and strategically located in
commercial viable places.

Weakness

 The distributor not followed up properly of queries and complain and delivery of account
statement.
 Lack of awareness among investors and the agents about the fund.
 Weak support system.
 Personal attention not given to customers queries.
Opportunity

 The education Institutions turn out to be a great opportunity for ICICI prudential AMC in
terms of obtaining large number of investors and the amount of investment as well.
 The small and medium enterprises segments turn into big corporate with the current
boom in the economy.
 Informs household about the product than sell, also get leads and spread awareness about
the mutual fund.
 Investing internationally opens up a huge market which is otherwise left untapped.

Threat

 Increased competition in the industry in terms of more upcoming schemes and better
existing performance of mutual fund schemes of other AMC pose a threat.
 The improved services provided by competitors sooner will be providing threat to
Company.
 Recent volatility in stock market increase risk and decrease returns, hence it becomes a
big threat for the AMC.
 Due to the volatility in the market, customers have a fear in losing money. So more
redemption of the application are taking place.
REVIEW OF
LITERATURE
Hamid Mohtadi and SumitAgarwalstudied” Stock Market Development and economic
Growth:Evidence from Developing Countries” their main objective was find the impact of
stock market growth on economic development and they conclude from study that empirically
evaluates the relationship between stock market development and long-run growth. A time series
cross-section data for 21 countries from 1977-1997 suggests that stock market development is
positively associated with economic growth. They show that market liquidity (Turnover ratio)
has a positive impact on growth. Indirectly, market size (Capitalization Ratio) affects
investments which, in turn, affect growth. For this they consider Historical yearly data on Market
Capitalization Ratio (MCR), Total Value of Shares Traded Ratio (STR), and Turnover Ratio
(TR)data for twenty-one emerging markets are obtained from the Emerging Markets Database7
(EMDB) provided by the International Financial Corporation (IFC) and variables like Growth,
INV, GDP, SE, and FDI data are from the World Development Indicators (2000) data set. They
perform Hausman test and F test on collected data for the research.

Yılmaz Bayar, Abdulkadir Kaya & Murat Yıldırımstudied “Effects of Stock Market
Development on Economic Growth: Evidence from Turkey” their main objective to
determine the contribution of rapidly expanding BIST on economic growth in Turkey and they
conclude from the study that The relationship between stock market development and economic
growth has investigated with rapidly expanding stock market during the past three decades. This
study examined the relationship between stock market development and economic growth in
Turkey during the period 1999-2013 by using Johansen-Juseliuscointegration test and Granger
causality test. They found that there was a long run relationship between economic growth and
stock market capitalization, total value of stocks traded, turnover ratio of stocks traded and also
there was unidirectional causality from stock market capitalization, total value of stocks traded
and turnover ratio of stocks traded to economic growth. Variable they used in research was
RGDP, GDP and MC, STV, TR.

Alajekwu, Udoka Bernard, Achugbuand Austi A. studied “The Role of Stock Market
Development on Economic Growth in Nigeria: A Time Series Analysis” to check some
hypothesis (1) There is no significant relationship between stock market size and economic
growth. (2)There is no significant relationship between stock market liquidity and economic
growth. They collect data of 1994 to 2008 from Nigerian Stock Exchange Annual Reports and
Accounts, Various years; Securities and Exchange Commission Annual Reports and Accounts;
Central Bank of Nigeria Statistical Bulletin and the National Bureau of Statistics. They used
GDP, MCR, and VTR, TOR and stock market capitalization ratio, value trade ratio and turnover
ratio. They applied Engle-Granger cointegration test, Durbin–Watson statistic to collected data to
check hypothesis. And they conclude that stock market turnover ratio (a proxy for liquidity) has
a very strong relationship with economic growth while stock market capitalization ratio (a proxy
for stock market size) gives very weak negative correlation which is not statistically significant.
Also they establish that liquidity was significant for economic growth but does not establish
same for stock market size.
Sudharshan Reddy Paramati and Rakesh Gupta studied “An Empirical Analysis of Stock
Market Performan” their main objectives are of this study is to investigate the causal nexus
between stock market performance and economic growth and to find the short-run and long-run
dynamics of the variables by considering both monthly and quarterly data on Index of Industrial
Production (IIP), Gross Domestic Production (GDP) and Stock Prices in the Indian context. For
study they use monthly and quarterly data for the time span of April, 1996 to March, 2009. And
variables are for monthly analysis - IIP (Index of Industrial Production is used as a proxy for
GDP), BSESENSEX and NSE-S&P CNX Nifty (Broad based active indices of stock markets of
India). For quarterly analysis - RGDP (constant prices with base year 1999-2000), BSE-
SENSEX and NSE-S&P CNX Nifty (quarterly average closing prices) are used for the
analysis.They undertakes a comprehensive set of econometric tests for the empirical analysis
such as; Unit root (ADF, PP and KPSS) tests, Granger Causality test, Engle-Granger
Cointegration method and finally; Error Correction Model (ECM). They conclude that the
economic growth has been playing an important role in determining the stock price movements
and economic growth also tends to be more likely to stimulate and promote stock market
development by adopting appropriate reallocation of resources.

Seyyed Ali PaytakhtiOskooestudied “Emerging Stock Market Performance and Economic


Growth” their main objective was to examine the long run relationship among stock market
performance and economic growth in Iran for that they apply granger causality test based on a
vector error correction model in order to examine the causal relationships between the stock
prices and GDP growth taking into account Johansen cointegration analysis. For this study they
use the data set of the study consists of 45 observations covering the period from 1997:3-2008:3.
Variable used are Gross Domestic Product (GDP) and Iran stock market index (BPI) and applied
test are unit root test, Johansen cointegration test, Causality test and Granger causality test. And
they conclude that the results from the Johansen cointegration test indicate that stock price
movements are influenced by the level of real economic activities in the long run in Iran. In other
words, economic growth is important in expectations and decisions of investors in stock market
and movements in stock prices are determined by economic growth or economic fundamentals.

SheillaNyashaand Nicholas M. Odhiambo studied “Banks, stock market development and


economic growth in South Africa: a multivariate causal linkage.” Their main objective to
investigates the dynamic causal relationship between bank-based financial development, stock
market development and economic growth in South Africa – during the period 1980–2012 using
variables areGDP (growth rate of real gross domestic product – economic growth proxy),BFD
(index of bank-based financial development), MFD (index of stock market development),
INV(investment/GDP), SAV(savings/GDP), ECM(error-correction model). They apply F-test
for co-integration, Granger-causality tests. From this all things they found that that there was a
distinct short- and long-run unidirectional Granger-causality from stock-market development to
economic growth in South Africa.

Erasmus L. Owusu and Nicholas M. Odhiambostudied “Stock market development and


economic growth in Ghana: an ARDL-bounds testing approach” with objective of stock
market developments and capital account liberalization policies have no positive effect on
economic growth in Ghana. By using variables like Real GDP (Real Gross Domestic
Production), stock market capitalization, stock value traded, stock market turnover, rade
openness calculated as the sum of exports plus imports, foreign direct investments, real credit to
the private sector, inflation, stock market development index, capital account liberalization index
and applied F-test for co-integration, unrestricted error-correction model (UECM) and use
ARDL (autoregressive distributed lag model)bound test for analyse the data and conclude from
results that stock market development has an insignificant effect on the economic growth in
Ghana.

Jung-Suk Yuay, M. KabirHassanb, and Benito Sanchezcstudied “A re-examination of


financial development, stock markets development and economic growth” with objective of
investigating the relationship between financial development, stock market development and
economic growth across geographic regions and income groups is motivated by many factors.
Their sample periods cover 1980 through 2009. Variable used in this study are GDP, Gross
domestic savings, Stock market capitalization on this collected data they applied Granger
causality tests and conclude that Granger causality tests show that the short-run relationship
between finance and growth so it was possible for underdevelopment countries to experience
slower economic growth despite financial and stock market development in the short-run (e.g.
less than 10 years) mainly due to ill-enforced legal systems and political instability.

Sheilla Nyasha1, Nicholas M. Odhiambostudied “The Impact of Banks and Stock Market
Development on Economic Growth in South Africa: an ARDL-bounds Testing Approach
ABST” with objective of examined the relative impact of bank- and market-based financial
development on economic growth in South Africa during the period from 1980 to 2012. They
analysis the variable growth rate of real gross domestic product, index of bank-based financial
development, index of market-based financial development, stock market capitalization, Stock
market trade value, Stock market turnover, investment in gross domestic product, share of
savings in gross domestic product, trade openness for the period 1980 to 1988, which were
obtained from the Johannesburg Stock Exchange (Johannesburg Stock Exchange, 2014). They
apply Stationarity Tests, F-test for Cointegration, ARDL bound test, ARDL – VECM Diagnostic
Tests to analyse the data and they conclude that there is a positive relationship between bank-
based financial development and economic growth in South Africa.

AkeBoubakari and Dehuan Jin studied “The Role of Stock Market Development in
economic Growth: Evidence from Some Euronext Countries” with objective of explore
causality relationship between stock market and economic growth based on the time series data
compiled from 5 Euronext countries (Belgium, France, Portugal, Netherlands and United
Kingdom) for the period 1995:Q1 to 2008:Q4.variable they used for their study was stock market
proxies through market capitalization, total trade value, turnover ratio and economic growth
(GDP and FDI) applied Granger causality test to test for analysing the relationship between stock
market growth and economic development. The results of that study suggest that the stock
market growth and economic growth have long-run relationship. It reveals that the stock market
liquidity do help to improve the future economy.
Ted Azarmi, Daniel Lazar and Joseph Jeyapaul studied “Is the Indian Stock Market a
Casino?” with objective to know relation between stock market development and economic
growth in India. By using stock market size, liquidity, concentration, and volatility for a twenty-
one year period from 1981 to 2001, is obtained from Bombay Stock Exchange (BSE) primary
publications, its website, stock exchange reviews, and annual reports and GDP, Inflation on
Indian Economic for 2001.They applied regression on time series data. They conclude that the
time series growth regressions imply a link between stock market development and economic
growth the link is positive for the pre-liberalization period and negative for the post-
liberalization period may account for lack of sinificance over the entire period.

Zahid Ahmad, AtherAzim Khan and AnamTariq studied “Stock market development and
economic growth: A comparative study of Pakistan and Bangladesh” with objective to
investigate the effect of stock markets development on the economic growth of Pakistan. They
collect data like GDP per capita, market capitalization, total value of stock traded, stock turnover
ratio, volume of the stock market and applied Statistical regression analysis and conduct that
both Pakistan and Bangladesh stock markets lead to the economic growth of their respective
countries, Both stock market development and economic growth in each country has significant
positive relationship.

Baboo M Nowbutsing and M. P. Oditstudied “Stock Market Development And Economic


Growth: The Case Of Mauritius” with objective of analyse the relationship between stock
market development and economic growth in Mauritius for this they collect data of past period
of time 1989 to 2006.They use measures of stock market development namely SIZE and
LIQUIDITY and GDP as economic growth measures. They applied The ADF Test, Granger
causality test and Unit root test analyse the collected data from that they conclude stock market
development is an important ingredient for growth in Mauritius since the stock market gives a
general idea of an economy health.The positive relationship between stock market development
and economic growth was replicated in both the long run and short run equations.
Research Methodology
5.1 Problem Statement

In India’s scenario it’s important to know about the economic growth with the growth of stock
market. Like now a days growth in stock market is somewhat connected with the economic
growth. Here is to find the relationship between the economic growth and stock market
development where economic growth is dependent variable whereas stock market is independent
variable.

5.2 Research Objective

 To find the impact of stock market development on economic growth.


 To find the relationship between the economic growth and stock market development
 Find the best factor of stock market that effect more on economic growth

5.3 Research Design

5.3.1 Type of design

The research design used for the study is descriptive research design.

5.3.2 Sampling Data size

Past 15 years of data of stock market and economic growth.

5.4 Data collection:

A study contains all secondary data of past fifteen years.

Variables are as follow:

For stock market

 Market Capitalization Ratio (MCR): the value of a company that is traded on the stock
market, calculated by multiplying the total number of shares by the present share price.
 Total Value of Shares Traded Ratio (STR): Stocks traded, total value (% of GDP)
Definition: The value of shares traded is the total number of shares traded, domestic and
foreign, multiplied by their respective matching prices.
 Turnover Ratio (TR): A measure of the number of times a company's inventory is replaced
during a given time period. Turnover ratio is calculated as cost of goods sold divided by
average inventory during the time period. A high turnover ratio is a sign that the company is
producing and selling its goods or services very quickly.
For Economic Growth

 GDP: Gross domestic product (GDP) is the monetary value of all the finished goods and
services produced within a country's borders in a specific time period.
 Inflation: Inflation is the rate at which the general level of prices for goods and services is
rising and, consequently, the purchasing power of currency is falling.

5.5 Tools for analysis

The analysis of all collected data will be done through Eviews7, SPSS and Excel.

Here we try to apply following test on collected data:

 F-test: An F-test is any statistical test in which the test statistic has an F-distribution
under the null hypothesis. ... Exact "F-tests" mainly arise when the models have been
fitted to the data using least squares.
 Unit root Test: In statistics, a unit root test tests whether a time series variable is non-
stationary and possesses a unit root. The null hypothesis is generally defined as the
presence of a unit root and the alternative hypothesis is stationarity, trend stationarity or
explosive root depending on the test used.
 Co-relation Analysis: Correlation is a statistical measure that indicates the extent to
which two or more variables fluctuate together. A positive correlation indicates the extent
to which those variables increase or decrease in parallel; a negative correlation indicates
the extent to which one variable increases as the other decreases.
 Regression Analysis: Statistical approach to forecasting change in a dependent variable
(sales revenue, for example) on the basis of change in one or more independent variables
(population and income, for example). Known also as curve fitting or line fitting because
a regression analysis equation can be used in fitting a curve or line to data points, in a
manner such that the differences in the distances of data points from the curve or line are
minimized. Relationships depicted in a regression analysis are, however, associative only,
and any cause-effect (causal) inference is purely subjective. It also called regression
method or regression technique.
 Descriptive Analysis: Descriptive statistics are used to describe the basic features of the
data in a study. They provide simple summaries about the sample and the measures.
Together with simple graphics analysis, they form the basis of virtually every quantitative
analysis of data.

5.6 Limitation of study:

 The study contains only 5 years of data and I will measure all thing with only past five
years.
 Many of tests and statistical tools apply for the analysis but here we use only correlation
and regression.
Data Analysis and
Interpretation:
1. Descriptive analysis: Descriptive statistics are used to describe the basic features of the
data in a study. They provide simple summaries about the sample and the measures.
Together with simple graphics analysis, they form the basis of virtually every
quantitative analysis of data.

Table1: Descriptive analysis of all stock market and economic data.

Standard
Var N Minimum Maximum Mean Skewness Kurtosis
Deviation
46.5470536 151.451393 26.2196031 1.69325828 3.85687568
MC 15 9 4 77.0261613 9 3 5
46.8911002 142.992563 71.8036792 26.9789539 1.40721780 2.15148179
TR 15 6 2 9 4 2 2
-
28.9638036 95.1937763 53.4378555 20.7397533 0.72097632
STV 15 7 1 7 7 0.67438663 9
-
GD 3.89095706 10.2599630 7.63644014 1.70583787 0.48613632 0.23164503
P 15 2 6 9 3 4 8
6.96333333 3.36160180 0.92885793 0.82849995
INF 15 2.23 14.97 3 1 2 4

Where,

MC: - Market Capitalization.

TR:-Stock market Turnover Ratio.

STV:-Stock Trade Value.

GDP:-Gross Domestic Product.

INF:-Inflation.
2. Unit Root Test: - a unit root test tests whether a time series variable is non-stationary
and possesses a unit root. The null hypothesis is generally defined as the presence of
a unit root and the alternative hypothesis is stationarity, trend stationarity or
explosive root depending on the test used.

Table2: Unit Root test to check stationarity of data.

Variable T- Statistics 1 % level 5% level 10 % level


GDP -3.310722 -4.05791 -3.11991 -2.701103
INF -2.012582 -4.004425 -3.098896 -2.690439
MC -3.726814 -4.004425 -3.098896 -2.690439
TR -2.239052 -4.004425 -3.098896 -2.690439
TV -1.211503 -4.004425 -3.098896 -2.690439

Hypothesis of this test are H0: "Process has unit root" vs. H1: "Process has no unit root". The test
statistic GDP is -3.31722 test statistic is much lower than all of the critical values here reject H0
at a significance level < 5% and <10%. So conclude with a very low probability of making an
error that time series has no unit root. So reject H0.

Hypothesis of this test are H0: "Process has unit root" vs. H1: "Process has no unit root". The test
statistic INF is -2.012582 test statistic is higher than all of the critical values so here accept H0
at a significance level 1%, < 5% and <10%. So conclude with a very low probability of making
an error that time series has unit root. So accept H0.

Hypothesis of this test are H0: "Process has unit root" vs. H1: "Process has no unit root". The test
statistic MC is -3.726814 test statistic is much lower than all of the critical values here reject H0
at a significance level < 5% and <10%. So conclude with a very low probability of making an
error that time series has no unit root. So reject H0.

Hypothesis of this test are H0: "Process has unit root" vs. H1: "Process has no unit root". The test
statistic TR is -2.239052 test statistic is higher than all of the critical values so here accept H0 at
a significance level 1%, < 5% and <10%. So conclude with a very low probability of making an
error that time series has unit root. So accept H0.

Hypothesis of this test are H0: "Process has unit root" vs. H1: "Process has no unit root". The test
statistic TV is -1.211503 test statistic is higher than all of the critical values so here accept H0
at a significance level 1%, < 5% and <10%. So conclude with a very low probability of making
an error that time series has unit root. So accept H0.
3. Co-Relation Analysis: - Correlation is a statistical measure that indicates the extent to
which two or more variables fluctuate together. A positive correlation indicates the extent
to which those variables increase or decrease in parallel; a negative correlation indicates
the extent to which one variable increases as the other decreases.

Table3: Co-relation of all variable

Variable MC TR TV GDP IFT


MC 1
TR -0.2832 1
TV 0.64042 0.54143 1
GDP 0.574498 -0.19894 0.388024 1
IFT 0.145592 0.115894 0.29324 -0.13354 1

As table 3 shows as the co-relation of all variable it conclude that…

MC (Market Capitalization) has a strong positive relationship with TV (Trade Value) and GDP
with 64.04% , 57.47% respectively.MC has moderate negative relationship with TR (Turnover
Ratio) with 28.32%.MC has no positive nor negative relation with Inflation.

TR (Turnover Ratio) has a strong positive relationship with TV (Trade Value) as 54.74%. TR
has neither positive nor negative relation with Inflation and GDP.

TV (Trade Value) has moderate positive relation with GDP and Inflation as 38.80%, 29.32%
respectively.

GDP has neither positive nor negative relation with Inflation (-13.35%).
4. Regression Analysis:- Statistical approach to forecasting change in a dependent variable
(sales revenue, for example) on the basis of change in one or more independent variables
(population and income, for example). Known also as curve fitting or line fitting because
a regression analysis equation can be used in fitting a curve or line to data points, in a
manner such that the differences in the distances of data points from the curve or line are
minimized. Relationships depicted in a regression analysis are, however, associative only,
and any cause-effect (causal) inference is purely subjective. It also called regression
method or regression technique.

1. Multiple R. This is the correlation coefficient. It tells you how strong the linear
relationship is. For example, a value of 1 means a perfect positive relationship and a
value of zero means no relationship at all. It is the square root of r squared.
2. R squared. This is r2, the Coefficient of Determination. It tells how many points fall on
the regression line. For example, 80% means that 80% of the variation of y-values around
the mean is explained by the x-values. In other words, 80% of the values fit the model.
3. Standard Error of the regression: An estimate of the standard deviation of the error μ.
This is not the same as the standard error in descriptive statistics! The standard error of
the regression is the precision that the regression coefficient is measured; if the
coefficient is large compared to the standard error, then the coefficient is probably
different from 0.

Table 4: Regression Statistics.

Dependent Variable Independent Variable multiple R R square Standard Error


GDP MC,TR,TV,INF 0.807173 0.651528 1.191477
INF GDP,MC,TV,TR 0.758105209 0.574723508 2.593856669
MC GDP,INF,TV,TR 0.992972237 0.985993864 3.67154874
TR GDP,INF,MC,TV 0.99270786 0.985468896 3.848029869
TV GDP,INF,MC,TR 0.995585705 0.991190897 2.303209589

For the further declaration the following columns are:

1. Coefficient: Gives you the least squares estimate.


2. Standard Error: the least squares estimate of the standard error.
3. T Statistic: The T Statistic for the null hypothesis vs. the alternate hypothesis.
4. P Value: Gives you the p-value for the hypothesis test.
5. Lower 95%: The lower boundary for the confidence interval.
6. Upper 95%: The upper boundary for the confidence interval.
Table 4A: GDP with MC, TR, TV, INF

Standard
Coefficients Error t Stat P-value Lower 95% Upper 95%
Intercept 20.56861749 5.640626657 3.646512833 0.00448813 8.000518089 33.1367169
MC -0.190433965 0.083093685 -2.29179828 0.044876203 -0.375578234 -0.005289696
TR -0.203660154 0.073753021 -2.761380517 0.020082162 -0.367992125 -0.039328184
TV 0.342966273 0.122468473 2.800445396 0.018780193 0.070089509 0.615843037
IFT -0.282567794 0.114522415 -2.467357967 0.033254944 -0.537739637 -0.027395951

Table 4B: INF with GDP, MC, TR and TV.

Coefficients Standard Error t Stat P-value Lower 95% Upper 95%


Intercept 44.72227007 12.30002453 3.635949664 0.004567325 17.31610753 72.12843262
MC -0.480221846 0.163857751 -2.93072402 0.015022133 -0.845319666 -0.115124025
TR -0.472481457 0.152031889 -3.107778634 0.011102595 -0.811229617 -0.133733298
TV 0.811845655 0.246822912 3.289182713 0.008161288 0.261889935 1.361801375
GDP -1.339194049 0.542764393 -2.467357967 0.033254944 -2.54854848 -0.129839618

Table 4C: MC with GDP, INF, TR and TV.

Coefficients Standard Error t Stat P-value Lower 95% Upper 95%


Intercept 80.84365757 7.091218647 11.40053094 4.72324E-07 65.04343779 96.64387735
TR -0.939545469 0.05256639 -17.87350184 6.42155E-09 -1.056670685 -0.822420253
TV 1.574805065 0.078196578 20.13905348 2.00549E-09 1.400572232 1.749037898
GDP -1.808305936 0.789033639 -2.29179828 0.044876203 -3.566382442 -0.05022943
IFT -0.962162796 0.328302081 -2.93072402 0.015022133 -1.693665419 -0.230660173

Table 4D: TR with GDP, MC, INF, and TV.

Standard
Coefficients Error t Stat P-value Lower 95% Upper 95%
Intercept 86.20854572 5.473086865 15.75135711 2.18398E-08 74.01374823 98.4033432
TV 1.657100092 0.067335989 24.60942693 2.8021E-10 1.507066159 1.807134024
GDP -2.124280386 0.769282021 -2.761380517 0.020082162 -3.838347545 -0.410213226
IFT -1.03984759 0.334595128 -3.107778634 0.011102595 -1.785371995 -0.294323186
MC -1.032038921 0.057741283 -17.87350184 6.42155E-09 -1.160694516 -0.903383326
Table 4E: TV with GDP, MC, INF and TR.

Coefficients Standard Error t Stat P-value Lower 95% Upper 95%


Intercept -51.16780471 3.894559391 -13.13827819 1.24045E-07 -59.8454238 -42.49018562
GDP 1.281584467 0.457635942 2.800445396 0.018780193 0.261908045 2.301260889
IFT 0.640100907 0.19460789 3.289182713 0.008161288 0.206487507 1.073714306
MC 0.619719451 0.030772025 20.13905348 2.00549E-09 0.551155107 0.688283794
TR 0.593661373 0.024123332 24.60942693 2.8021E-10 0.53991124 0.647411506
Findings& Conclusion
Findings:

• By Appling co-relation on all variables finds that GDP and Market capitalization ratio
has strong positive relation with each other.
• Also Market capitalization ratio has no positive or negative relation with Inflation.
• Turnover ratio has no positive or negative relation with Inflation and GDP.
• Stock Traded Value has moderate positive relation with GDP and Inflation.
• GDP has minor negative relation with the Inflation.
• By Appling unit root its shows that GDP and Market Capitalization Ratio has no unit
root.

Conclusion:

• The impact of stock market development on economic growth is positive because co-
relation analysis shows that GDP and Market Capitalization Ratio has a Strong positive
relation with 57.47%. Also the Stock Traded value(% GDP) and GDP has a moderate
positive relation with 38.80%.
• As comparing the relation of stock market growth with the economic development is
shows that as market capitalization will increase the GDP also increase. In year 2003
Total Market capitalization ratio is 46.55% and GDP was 7.860 in 2010 Total Market
capitalization ratio is 98.50% and GDP was 10.25%.
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