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INTRODUCTION
Economic factors are the real indicators of growth of any country, which also have huge
impact on investment decision making and portfolio management, simply making investment
without doing homework and detail analysis is of blind work, just by looking the financial
performances (Profit and loss account, Balance sheet, cash flow statement etc) of companies
or statistical data of companies are not enough, investor also need to consider the external
factors i.e economic indicators which also has a huge impact on investment and financial
decisions. We will be discussing some of such factors: Wholesaler Price Index, Index of
Industrial Production, Producer Price Index, Inflation, Consumer Price Index, GST etc.
To study the various economic factors and their impact on portfolio management and
investment decisions making.
To know the movements in share market due to changes in economic factors
This study will help us to know apart from fundamental and technical analysis, what
are all the other economical factors which affects the investment decision and
portfolio management to get high return and avoid the future risk.
As many investors blindly go with the fundamental and technical analysis they land
up in making wrong investment decision and portfolio management hence need to
study on economic factors also as a part of analysis.
Methodology adopted:
To study all the economic factors is not possible in the short span of time hence this
study considers only few economic factors as such as: Wholesaler Price Index, Index
of Industrial Production, Inflation, Consumer Price Index, GDP, and GST.
The suggestion and recommendation is made may not be an accurate perfect
prediction of the future.
Statistical data is from October 2nd 2015 to September 2nd 2016.
Choosing of NIFTY 5 listed companies are based on clients investment requirement
Lack of availability of detailed information
Due to shortage of time study has been restricted to small sample and few economic
factors.
The data collected are secondary data for the analysis purpose. Index values are
collected from NSE official website, Moneycontrol application.
Economic indicator statistical data are also secondary data collected from Ministry of
Statistic and Programme Implementation(MOSPI)
Sample size:
1. ITC
2. TATA Steel
3. HUL
4. AXIS Bank
5. Bank Of Baroda
BACKGROUND
INDUSTRY PROFILE
The stock trade or market is a spot where stocks, offers, and other long term investments are
bought and sold. The securities contract act 1956 defines a stock market as “an association,
organisation, or body of individuals whether incorporated or not set up with the end goal of
helping, directing and controlling business in buying, selling and dealing securities.
The first Indian stock market was started in 1875 at Bombay, in 1984 the Ahmadabad stock
exchange was started dealings in the shares of textile mills, The Calcutta stock exchange
started in 1908 to provide shares of manors and jute factories, then the madras stock
exchange was started in 1920.
Till 1980s stock broking service were used only by wealthy class who can afford them. Later
due to internet the stock broking became very easy and spread through world and were the
stock broking price tag became lowered considerably and the service became available even
to common man.
At present there are 24 stock exchanges in the country. As of financial year 2015, India has
approximately 1cr of Demat account. Of these 1cr Demat account, many are owned by the
same person or same individual family members. This effectively means that only around 40-
60 lakh of Indian are directly holding Indian shares. NSE & BSE are two exchange platforms
were Indian trade more, with an average market capitalization of 1.5 USD trillion each.
The SEBI was established on April 12, 1988 through and Extraordinary Notification of the
Government of India in the Gazette of India was given statutory acknowledgment with the
Promulgation of the Securities and Exchange Board of India (EBI) Ordinance on January
30,1992 and the Board was set up on February 21, 1992. The security capital markets in India
are controlled by the Securities and Exchange Board of India(SEBI) under the procurements
of the Securities Contracts (Regulations) Act, 1956 and Securities and Exchange Board of
India Act, 1922.
The main fundamental point of the SEBI is towards managing the capital business
sector to secure the premiums of financial specialists. The investment markets in India are
directed by the SEBI.
The BSE is the Indian stock exchange platform established in the year 1875, located in
Mumbai, Maharashtra. It is the Asia’s first stock exchange. Its trade speed is noted to be 6
microseconds and claims to be the world fasted stock exchange. It is the world 11th largest
stock exchange with market capitalization of US$ 1.7 trillion. There are more than 5500
companies which are publically listed on BSE. BSE is also partner with United Nation
Sustainable Stock Exchange Initiative (UNSSEI), join in September 2012. Major of the
Indian Stock brokers are investing their services in the stocks of Bombay Stock Exchange.
The National Stock Exchange of India Limited (NSE) is located in Mumbai, was advanced
by IDBI, ICICI, IFCI,GIC, LIC, State Bank of India, SBI Capital Markets Ltd., and as Joint
Stock Company under the organizations Act 1956, on November 27, 1992.NSE is India’s
largest exchange. More than 66% of India’s total turnover takes place through NSE terminals
spread across India, followed by 33.4% in Bombay Stock Exchange and 0.6% in Calcutta
Stock Exchange. NSE stands 2nd largest in Indian market. A company seeking listing on the
NSE should have a minimum capital of Rs.10 crore and Market capitalisation of at least 25
crore, if it is listed on any other stock exchange. NSE has the overall market capitalization of
US$ 1.65 trillion in total. The first online trading transaction in stock market was started by
NSE.
COMPANY PROFILE
Destimoney was established in the year 2005, it is listed as one of the most leading full
financial service origination in a country today. It believes in creating the trust towards
their client and customers as every business relation is based on trust. The satisfaction
expressed by its customers’ bears detestimoney to this fact.
Objective of the company is to create maximum value for their clients & stakeholders. It was
registered on 18/03/2005 . The company has an authorized capital of Rs 65,00,00,000 and
paid-up capital of Rs 31,39,06,780. Registered head office is located at Mumbai.
Promoters
Vision:
To unlock and explore potential across four dimensions: Individual, Team, Customer
and Marketplace.
Mission:
To build strong, sustained relationships with our clients by creating value for
them.
To get deep thorough insight into client's financial needs and goals & offer
customized solutions.
To hold clients trust in our products & services.
To protect & increase client's capital.
To Enable transparent and knowledge based investment process & systems.
CASE CONTEXT
STRENGTH WEEKENESS
INTERNAL
Strength:
Destimoney brand:
The biggest strength is the brand itself, as Destimoney is one of the most leading
company and has a good goodwill the brand name itself will attract the customer
towards the organisation
Low prising:
The brokerage charges rate of Destimoney is lower as what it is in other organisation
and banks.
Co-operative & experienced managers:
The staff and manager are well qualified and having good experience in their work
.they well co-operate with the clients as well among themselves.
Good database
Weakness:
In experience staff:
This is the problem in most of the organisation as to non-experience staff, sometime it
might be possible that certain activities are given to the employee who doesn’t know
about the particular job
Opportunities:
Threats:
Organisation competitors:
There are many other stock broking companies in India which are said to be the competitors
of Destimoney. Some of them are as follows.
Challenge of profitability:
Every business or investor first objective is to earn profit. Therefore, the main
challenge is to analysis the proper investment so that the investor can seek profit and
the firm too earn profit and seek goodwill, firm earns low profit due to various
reasons like, lower yield, competitive pressure, higher employee and operating cost.
The major challenges is to get back the old customer and to maintain the customer for
the long run by providing the best services and taking care of customer so to avoid
losing of customer
CASE STUDY
Stock market is very volatile; investors cannot predict 100% accurate movements in price of
stocks, most of the time he cannot just relay on the technical analysis and fundamental
analysis of the stocks, he also needs to study the economic factors which indirectly affects on
During internship period, was given with the NIFTY 5 listed companies, as per clients
portfolio requirement and asked to record their movements in prices and calculate simple
moving average. The fundamental and technical analysis have done by company experts, I
used to keep track on the prices and the economical factors affecting the same, and the result
of all these analysis would be used to suggest the client in portfolio management. As there is
a restriction on the case study report pages, I am doing study on only 6 major economic
factors such as Consumer Price Index, Wholesale Price Index, Index of Industrial Production,
It is one of the factors, which reflects the price changes in a basket of goods and services
consumption, which indicates the consumption expenditure of consumers in an economy. It
determines how the value of goods and services increases or decreases for certain period.
This includes transportation, electrical items, the average prices of merchandised products
and services, such as food products, medical care and shipping, garments, teaching and
indemnity. The CPI is dictated by considering value changes for each thing in the
prearranged wicker container of products and averaging them, the merchandise are weighted
by noteworthiness.
Here the X axis is duration and Y axis is index rates, as CPI increases the inflation rate also
increases result of which stock market may fall or raise because of the reason there is hike in
prices of goods and services money flow in the economy falls down, and there won’t be
capital formation in the economy. CPI has been increasing from April 2016, it remains same
in the month of August 2016 at at rate 131.1
As there is a usually inverse relationship between Stock market and CPI it was showing
upward movements in consumer price index and downward movements in stock market, but
from the period February both stock market and consumer price index are moving in the
same direction.
Wholesale Price Index is a key index that measures the inflation and records the price of
wholesale products. Wholesale Price Index account on month to month premise to
demonstrate the consistent value changes of merchandise exchanged expansive. It is the
macroeconomic standard made accessible to arrangement creators. In India, a whole of 435
products information on change in value level is followed through WPI which is a sign at
changes in costs of items in all exchange.
Here the X axis is duration and Y axis is index rates, as WPI increases the inflation rate also
increases result of which stock market will fall, and if decreases stock market raises. WPI has
been increasing from April 2016.
The Wholesale price index based inflation curve shift positive after a break of 17 months,
ascending 0.34% in April 2016 as against -0.85 %, in the previous month as food and
produced items curved beloved while downfall in fuel products reduced sharply. An increase
in WPI Inflation will further hit up the gross domestic product deflator. Even stock market
also hit positive growth after February 2016, and still in upward facing curve.
Index of Industrial Production (IIP) is one of the real indicator of growth of an economy of
India which reflects the growth of various sectors in an economy such as industrial
production, mining, electricity and manufacturing etc, which has the real and direct impact on
stock market, as many of the listed companies are manufacturing and production industries in
India.
Interpretation
In the above graph IIP is showing positive growth from February 2016, again falls in April
2016, in second quarter again there is a negative index of -2.4, which also has a negative
impact on stock market as Industrial production has lion’s share in the stock market, a slight
changes in IIP index will make huge impact on investment decisions and portfolio
management
As we can observe in the graph there is so much of fluctuation in the Industrial production
index rate and stock market movements, from January 2015 to July 2015 there was direct
relationship between these 2 indicators but, on November there is a high fall in Industrial
production not that major effect on stock market, later there was fluctuation in Industrial
production but continuous upward movement in stock market.
Inflation
Inflation indicates sudden and continuous change in price of goods and services in the
economy for the given period of time, high inflation is bad indicator for the economy as it
stops money flow in the economy, and purchasing power of the consumer’s decreases due to
the price rising effect of goods and services.
Interpretation
Inflation rates also has the inverse relation with the stock market where inflation is high
people spending pattern will be reduced result of which there will be less deposits or less
investments willingness which declines the liquidity in the capital and stock markets. Here
Inflation rate has increased from 1st quarter of 2016, but drastic decline of 1.02 in the August
2016, which has positive impact on stock market.
Raise in inflation rates are not always adverse to stock market, in a same way fall in
inflation is also not good indicator to stock market, it depends on which sector or which
industry the investor is planning to invest. Things matters are Prices of which stocks are
increasing or decreasing due to change in inflation rate matters.
Here on Feb 2016 there is fall in stock as a result of fall in inflation rate, and there is raise in
inflation rate at 6 in the month of July and stock also at the index rate of 2800 but suddenly
inflation rate falls still stock market is hitting high price in the month of August 2016.
GDP
It is total amount of goods and services produced in a country for a specific financial year.
GDP is a very strong economical indicator, which is also called as economic health of the
country, which includes total consumption by all the sectors, exports minus imports within
the territory.
When the GDP rates are high, economy is growing, which has direct relationship with the
stock market, and has huge impact on investment and portfolio management. If there is a
increase in GDP rate it leads to healthy economy, which makes individuals to push towards
investments and manage their financial stability, hence provoke them to make investments
and get high returns.
Here the graph represents the highest GDP rate 8.4 in the last quarter of 2014, currently for
this month its 7.1, which also indicates relatively lower rate.
GST
Goods and Services Tax majorly affects securities exchange and different divisions. GST is a
comprehensive indirect tax on assembling, deal and utilization of merchandise also as
services at the national level. It is proposed tax which will replace all indirect taxes on goods
and services such as VAT, service tax, central sales tax, and excise duty etc. which are levied
by the Indian Central and State governments.
BANKS – All banking sectors will have negative impact as the current service tax is
15%, proposed GST will be 18%
CONSUMER STAPLES – It has both positive and negative impacts on few
industries, as current tax rate 22%, proposed GST will be18% hence positive impact
on- Asian paints, Dabur, HUL, and Negative impact on- ITC, UNITED BEVERIES.
CONSUMER DISCRETIONARY – Present tax rate is 15% proposed GST rate
will be 18% hence negative for Jubilant Food works,Coffe Day & Restaurant
Businesses.
MEDIA - Present tax rate is 15% service tax and 7% entertainment Tax, proposed
GST rate will be 18% hence Positive for DISH TV, VIDEOCON D2H, BIG TV.
TELECOM - Present tax rate is 15% proposed GST rate will be 18% hence negative
impact.
AUTO INDUSTRIES - Present tax rate is 27%, proposed GST rate will be 18%
hence positive for MARUTI,BAJAJ AUTO, ASHOK LEYLAND etc.
METALS - Present tax rate is 18% proposed GST rate will be 18% hence no major
impact
CEMENT - Present tax rate is 27%, proposed GST rate will be 18% hence positive
for Ultra tech cement, ambuja cement etc.
PHARMA - Present tax rate is 15% proposed GST rate will be 18% hence negative
for Pharma companies.
THEORATICAL CONCEPTS
This case will be studying only on keeping track on price movements of 5 NSE listed
companies which are demanded by client’s portfolio, and economic factors affected on the
same.
Followings are the live case study of 5 NSE listed companies moving averages calculation
and interpretation on the same.
Weekly
moving
Sl.No Company averages In %
I 1st Aug - 5th Aug
Changes in stock price =Today’s closing price –Previous day’s closing price
Changes in %= (Changes in stock price*100)/Previous day closing price
Moving average=(sum of 5 days movements in price)/5
DISCUSSION
Total
12
10
8
AXIS
6
Bank of Baroda
4 HUL
ITC
2
Tata Steel
0
AXIS Bank of Baroda HUL ITC Tata Steel
-2
-4
Ranks
1st
2nd
3rd
4th
5th
Interpretation:
Above graph represents the price movements of NSE 5 listed companies, calculation is done
by using simple moving averages for the period from 02-08-2016 to 02-09-2016.
Here X axis represents the companies; Y axis represents the moving averages index rates
from the period 02-08-2016 to 02-09-2016. These 5 companies’ stocks price movements are
Axis Bank has the highest moving averages of 10.5 comparing with all other stocks.
There are many internal and external factors for the upward results, Axis bank
signed for an new agreement to buy of 13.67 stakes i.e 7328334 shares for RS.
22.72 crore with the Assets Care and Reconstruction Enterprise, which led to
Bank of Baroda has comparatively little lower rate of 5.5 comparing with Axis Bank
Its first quarter profit fell to 423.6 crore from 1052.5 in the previous year
results as there was less interest income and more tax liability profit earning
was less.
Provision for bad debt also increased from 600 crore to 2004 crores
Tata Steel has got 3rd place in performance at the rate of 4, there were also few factors
Its low cost and product mix made the company to survive so long and they
ITC has growth rate of 1.5 which is comparatively poor performance and lower
When GST discussion and proposal has been made ITC had hit very low price
REFLECTION
All the above companies affected by different economic and non economic factors, hence it is
important to study the economic factors also before making any investment decisions. It was a
great learning experience as it made to analyse the internal and external economical factors
which directly and indirectly affect on stocks performance and price movements.
Investor or a stock broker before making any investment or guiding his client on portfolio
management needs to analyse not only internal factors like company’s statistical performance
such as profit and loss a/c, balance sheet, dividend policies, ratio analysis etc. He also needs
to have an idea and study about the external factors such as economic indicators which
directly and indirectly have major impact on movement in stock market and in investment
Learnt the Impact of economic factors in investment decision making and portfolio
management
Learnt how to analyse different index rates which have effects on stock market
Helped to watch and keep track on updates and latest news related to stock market
REFERENCE
Books Referred:
1. Donald E. Fischer and Ronald J. Jordan, “Security Analysis and Portfolio Management”,
Prentice hall of India Pvt Ltd., New Delhi.
2. Prasanna Chandra, “Investment Analysis & Portfolio Management”
Websites:
1. www.m.moneycontrol.com
2. http://www.invetopedia.com
3. www.destimoneysecurities.com
4. http://www.tradingeconomics.com
5. http://www.gstindia.com
6. http://www.moneco.com/Economic-Indicators-and-their-Impacts-on-Financial-Markets
7. http://www.investopedia.com/articles/investing/031413/economic-indicatiors-affect-us-stock-
market.asp
8. http://www.moneycontrol.com/stocks/company_info/stock_news.php?sc_id=BOB&duration
Type=M&duration=3
9. http://www.tradingeconomics.com/stocks
10. http://www.tradingeconomics.com/india/producer-prices-change
Research Articles:
Economic Indicators That Affect The U.S. Stock Market - By Aaron Levitt
APPENDICES
Gain/Loss In %
tv18
hindzinc
arvind
lic
ifci
mc dowell
hsil
concor
ongc
FSL
JET
maruti
ioc
jisljaleos
welcorp
ipcalab
adani power
ADANIPORTS
ADANITRANS
CIPLA
STCINDIA
TECHM
capf Gain/Loss In %
jswsteel
reliance
india cement
indusind
iob
ambuja
mindtree
petronet
icicibank
tatamoters
havells
ashokley
siemens
hexaware
tata moters
tata global
tata steel
srf
hindalco
sbi
infy
(4.00) (2.00) - 2.00 4.00 6.00 8.00