IRJMST Vol 5 Issue 7 [Year 2014] ISSN 2250 – 1959 (0nline) 2348 – 9367 (Print)

A Study on Equity Share Price Behavior of Selected Stocks from Different

Sectors

Shivaraju S
th
4 Semester MBA, VVCE, Mysore

Rakesh H M
Assistant Professor, Dept of MBA, VVCE Mysore

Abstract

Stock markets play a pivotal role in growing industries and commerce of a country that eventually affect
the economy. Its importance has been well acknowledged in industries and investors perspectives. The
stock market avail long-term capital to the listed firms by pooling funds from different investors and
allow them to expand in business and also offers investors alternative investment avenues to put their
surplus funds in. The investors carefully watch the performance of stock markets by observing the
composite market index, before investing funds.

This paper analyses the equity share prices of different companies of different sectors.Stock returns for
5companies listed in five different indices on National Stock Exchange (NSE) i.e. Indian Capital Market
have been considered. The data for five years have been collected from 1st January 2009 to 31st the
December 2013 and were analyzed with the help of moving averages.
Keywords:Stock Market, Performance, Equity Share Prices, Sectors, Moving Averages.

Introduction
The Indian capital Market has witnessed a tremendous growth. There was an explosion of investor
interest during the nineties and an Equity Guilt emerged in statutory legislations has helped the capital
market. Foreign Exchange regulation act is one such legislation in this direction. An important recent
development has been the Entry of Foreign Institutional investors
are participants to the primary and secondary markets for the securities. In the past several years,
investments in developing countries have increased remarkably. Among the developing countries India
has received considerable capital inflows in recent years. The liberalization policy of the government of
India has now started fielding results and the country is poised for a big leap in the industrial and
economic growth.

The Economy of the country is mainly based on the development of the corporate sectors. A better
understanding of the stock market trend will facilitate allocation of financial sources to the most
profitable investment opportunity. The behavior of stock returns will enable the investors to make

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IRJMST Vol 5 Issue 7 [Year 2014] ISSN 2250 – 1959 (0nline) 2348 – 9367 (Print)

appropriate investment decisions. The fluctuations of stock returns are due to several economic and non-
economic factors. The study is aimed at ascertaining the behavior of share returns. This project analyses
the equity share fluctuations in India Selected Industry. It also measures the strength of the trend and the
money involved in investing in the stocks. Simple moving average model is applied for selected
companies which would give the investor a sell signal or buy signal.

In India most of the industries require huge amount of investments. Funds are raised mostly through the
issue of share. An investor is satisfied from the reasonable return from investment in shares. Speculation
involves higher risks to get return on the other hand investment involves no such risks and returns will
be fair. An investor can succeed in his investment only when he is able to select the right shares. The
investors should keenly watch the situations like market price, economy, company progress, returns, and
the risk involved in a share before taking decision on a particular share. This study made will help the
investors know the behavior of share prices and thus can succeed.

Literature review

Bennet, James A.et.al (2001) have conducted a study on "can money flow predict is defined as the
difference between up stick and down stick dollar trading volume. The study says that despite little
published research regarding its usefulness, the measure has become an increasingly popular technical
indicator because of its own means. The study summarizes its most important finding that money flow
appears to predict across- sectional variation in future returns. Their predictive ability is sensitive,
however, to the method of money flow measurement (ex. The exclusion or inclusion of block trades)
and the Forecast horizon

Daigler Robert T.et.Al., (1981) have conducted a study on the development and testing of trading rules
on the New York stock Exchange which are based on the discriminate Function. The study analysis the
ability of daily technical indicators to predict future changes in the "standard and poor's 500 index". The
study also signifies that the Technical indicators possess predictive ability to the extent that investor's
possess predictive ability to the extent that investors believe they contain information on Future Market
developments, and/or to the extent that the indicators reflect changing expectations among market
participants. The study summarizes that the initial analysis of the relationship between daily technical
data and future market movements is accomplished by examining the statistical difference between the
group means (computed via the usual F test applied to the group means estimated from the discriminate
function) of predicted "up days" versus predicted "down days" ("Up" and "down" days are define
shortly). The statistical analysis is extended by classifying the observations into groups.

Micko Tanaka Y amawakiet. Al., (2007)have conducted a study on the Adaptive use of Technical
Indicators for predicting the Intra-Day price movements. The researcher has proposed a system to select
the best combination of technical indicators and their parameter values adaptively by learning the
patterns from the tick-wise financial data. In this paper, the researcher has shown that this system gives
good predictions on the directors of motion with the hitting rate at 10 ticks ahead of the decision point as
high as 70% for foreign exchange rates (FX) in five years from kl1996 to 2000 and 8 different stock
prices in NY SE market in 1993 The study concludes that the tick-wise price time series carry a long
memory of the order of at least a few minutes, whichisequivalent to 10 ticks.

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IRJMST Vol 5 Issue 7 [Year 2014] ISSN 2250 – 1959 (0nline) 2348 – 9367 (Print)

Grewal S.S and NavjotGrewall (1984) revealed some basic investment rules and rules for selling
shares. They warned the investors not to buy unlisted shares, as Stock Exchanges do not permit trading
in unlisted shares. Another rule that they specify is not to buy inactive shares, ie, shares in which
transactions take place rarely. The main reason why shares are inactive is because there are no buyers
for them. They are mostly shares of companies, which are not doing well. A third rule according to them
is not to buy shares in closely-held companies because these shares tend to be less active than those of
widely held ones since they have a fewer number of shareholders. They caution not to hold the shares
for a long period, expecting a high price, but to sell whenever one earns a reasonable reward

Jack Clark Francis2 (1986) revealed the importance of the rate of return in investments and reviewed
the possibility of default and bankruptcy risk. He opined that in an uncertain world, investors cannot
predict exactly what rate of return an investment will yield. However he suggested that the investors can
formulate a probability distribution of the possible rates of return.
He also opined that an investor who purchases corporate securities must face the possibility of default
and bankruptcy by the issuer. Financial analysts can foresee bankruptcy. He disclosed some easily
observable warnings of a firm's failure, which could be noticed by the investors to avoid such a risk.
PreethiSingh3(1986) disclosed the basic rules for selecting the company to invest in. She opined that
understanding and measuring return md risk is fundamental to the investment process. According to her,
most investors are 'risk averse'. To have a higher return the investor has to face greater risks. She
concludes that risk is fundamental to the process of investment. Every investor should have an
understanding of the various pitfalls of investments. The investor should carefully analysis the financial
statements with special reference to solvency, profitability, EPS, and efficiency of the company.
David.L.Scott and William Edward4 (1990) reviewed the important risks of owning common stocks
and the ways to minimize these risks. They commented that the severity of financial risk depends on
how heavily a business relies on debt. Financial risk is relatively easy to minimize if an investor sticks to
the common stocks of companies that employ small amounts of debt.
They suggested that a relatively easy way to ensure some degree of liquidity is to restrict investment in
stocks having a history of adequate trading volume. Investors concerned about business risk can reduce
it by selecting common stocks of firms that are diversified in several unrelated industries.

Nabhi Kumar Jain6 (1992) specified certain tips for buying shares for holding and also for selling
shares. He advised the investors to buy shares of a growing company of a growing industry. Buy shares
by diversifying in a number of growth companies operating in a different but equally fast growing sector
of the economy.
He suggested selling the shares the moment company has or almost reached the peak of its growth. Also,
sell the shares the moment you realize you have made a mistake in the initial selection of the shares. The
only option to decide when to buy and sell high priced shares is to identify the individual merit or
demerit of each of the shares in the portfolio and arrive at a decision.
L.C.Gupta8 (1992) revealed the findings of his study that there is existence of wild speculation in the
Indian stock market. The over speculative character of the Indian stock market is reflected in extremely

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IRJMST Vol 5 Issue 7 [Year 2014] ISSN 2250 – 1959 (0nline) 2348 – 9367 (Print)

high concentration of the market activity in a handful of shares to the neglect of the remaining shares
and absolutely high trading velocities of the speculative counters.
He opined that, short- term speculation, if excessive, could lead to "artificial price". An artificial price is
one which is not justified by prospective earnings, dividends, financial strength and assets or which is
brought about by speculators through rum ours, manipulations, etc. He concluded that such artificial
prices are bound to crash sometime or other as history has repeated and proved.

Sunil Damodar'o (1993) evaluated the 'Derivatives' especially the 'futures' as a tool for short-term risk
control. He opined that derivatives have become an indispensable tool for finance managers whose
prime objective is to manage or reduce the risk inherent in their portfolios. He disclosed that the over-
riding feature of 'financial futures' in risk management is that these instruments tend to be most valuable
when risk control is needed for a short- term, ie, for a year or less. They tend to be cheapest and easily
available for protecting against or benefiting from short term price. Their low execution costs also make
them very suitable for frequent and short term trading to manage risk, more effectively.

Objectives of the study

 To analyze the share price behavior of the industries. Automobile, Banking, IT, Oil Exploration
and Refinery, Telecommunication
 To predict the day to day Fluctuations in the stock market

Limitations of the study

 This study is limited to some selected stocks ofAutomobile, Banking, IT, Oil Exploration and
Refinery, Telecommunication sectors
 Dividend is not considered in the calculation of Return. Price change is only taken into
consideration.

Research methodology
Secondary data was used for the analysis print media and internet has been used for data collection. The
data also obtained by the national stock exchange website(indiansc.com - Stock quotes Resources and
Information.). For the purpose of this study the daily closing prices of 5 companies included in National
stock exchange were taken and their price movement are computed and studied. The sectors selected are
as follows:Automobile(Maruti ltd), Banking(SBI), IT(TCS), Oil Exploration and Refinery(Reliance
industries) and Tele communication(Bharatiairtel).
The daily share prices of above mentioned companies were taken for a period of five year from 1st
January 2009 to 31st the December 2013. The closing prices of share priceswere taken and the future
price movements were analyzed.

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IRJMST Vol 5 Issue 7 [Year 2014] ISSN 2250 – 1959 (0nline) 2348 – 9367 (Print)

Since for the purpose of this analysis five sectors are taken and from the five sectors one company are
considered in each sector. Therefore the sampling used for selection ofthe sectors is judgmental
sampling based on the contribution of each sector to the GDPof the country. The three sample
companies in each sector are selected based upon theMarket capitalization of the companies in those
sectors. Simple moving average has been used for analysis

Data analysis and interpretation

MARUTHI LTD
4000

3000

2000

1000

0
Close1-Jan-11
1-Jan-09 1-Jan-10 Price Mov AVG
1-Jan-12 1-Jan-13

SBI
2500
2000
1500
1000
500
0
Date

23-Oct-12

22-Mar-12

13-Jan-11

16-Jun-10
29-May-13

4-May-11

1-Apr-09
8-Feb-13

6-Jul-12

17-Aug-11
13-Sep-13

8-Dec-11

29-Sep-10

26-Feb-10
10-Nov-09
22-Jul-09

Series1 Series5 Series6

Series7 Series8 Series9

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IRJMST Vol 5 Issue 7 [Year 2014] ISSN 2250 – 1959 (0nline) 2348 – 9367 (Print)

TCS
2000
1500
1000
500
0
Date

8-Jun-12
23-Jan-13

25-Oct-11

10-Mar-11

8-Apr-10
17-May-13

17-Aug-09
27-Apr-09
6-Sep-13

28-Sep-12

16-Feb-12

1-Jul-11

16-Nov-10
28-Jul-10

10-Dec-09
Series5 Series6 Series7
Series8 Series9

RELIANCE
2500
2000
1500
1000
500
0
Date

1-Apr-09
4-May-11
29-May-13

17-Aug-11
13-Sep-13

8-Feb-13

6-Jul-12

29-Sep-10

26-Feb-10
10-Nov-09
22-Jul-09
8-Dec-11
23-Oct-12

22-Mar-12

13-Jan-11

16-Jun-10

Series5 Series6 Series7

Series8 Series9

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IRJMST Vol 5 Issue 7 [Year 2014] ISSN 2250 – 1959 (0nline) 2348 – 9367 (Print)

4000 AIRTEL
3500
3000
2500
2000
1500
1000
500
0
Date

2-Jan-13

5-Jan-12

4-Jan-11

8-Jan-10
6-May-13

4-May-12

6-May-11

12-May-10

11-May-09
30-Aug-13

31-Aug-12

5-Sep-11

6-Sep-10

3-Sep-09

The daily closing price of Marutiltd. is found to be lesser than that of the moving average which
indicates that the stock is in a down trend and bearish signal would continue until there is a definite buy
signal.
The daily closing price of State Bank of India is found to be lesser than that of themoving average which
indicates that the stock is in a downtrend and bearish signal.
The daily closing price of TATA consultancy services ltd is found to lie below themoving average
which indicates that the stock is in a down trend and bearish signal.
The daily closing price of Reliance petroleum ltd. is found to lie below the movingaverage after showing
a recent sell signal which indicates that the stock is in adowntrend
The daily closing price of Bharti Airtel is found to lie below the moving average aftershowing a recent
sell signal which indicates that the stock is in a downtrend.

Conclusion

Volatile markets are characterized by wide price fluctuations and heavy trading.They often result from
an imbalance of trade orders is one direction, wide price fluctuations are a daily occurrence on the
world's stock markets as investors react to economic business and political events. Market watchers see
high volatility as a sign of investor nervousness which, in the counter-initiative world of market, is of
course bullish. It is suggested that the investors can invest in the shares that shows a definitive signal of
buy or sell decisions.The investors can invest in the companies which are recovering out of either over
brought or oversold condition since there might be a definite trend reversal in those stocks.
It is also advised for the investors to hold the stock which keep fluctuating unless until the stock follows
definite bearish or bullish trend. And also the investor can make investment not only following a
particular indicator but by confirming the signalwith several indicators for better returns.

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