SUMMER TRAINING PROJECT REPORT

ON

“ Study of Fluctuations In Indian Stock Market ”
SUBMITTED IN PARTIAL FULLFILMENT OF REQUIRMENT OF BBA

SUBMITTED TO :- Ms NEHA GUPTA SUBMITTED BY :- Amandeep Singh Kandhari Roll. No.:-01024501709 2010-2011 College:-Jagannath International management School University:-Indraprastha University

Preface

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

Contents

1. Abstract 2. Research Methodology 2.1 Title of the Study 2.2 Objective of Study 2.3 Type of Research 2.4 Scope of Study 2.5 Limitation of Study 3. Core Study 4. SWOT 5. Conclusion 6. Bibliography

Executive summary
A market is an environment that allows buyers and sellers to trade or exchange goods, services,and information. These interactions define demand and supply characteristics and are thereforefundamental to economies. A market can be defined as a place where any type of trade takesplace. Markets are dependent on two major participants – buyers and sellers. Buyers and sellers typically trade goods, services and/ or information. Historically, markets were physical meeting places where buyers and sellers gathered together to trade. Although physical markets are still vital, virtual marketplaces supported by IT networks such as the internet have become the largest and most liquid. Some markets are very competitive, with a number of vendors selling the same kinds of products or services. Conversely, some markets have low or no competition, particularly if the industry is protected by government legislation. The number of buyers and sellers involved will have a direct bearing on the price of the good or service to be sold, and has become known as the law of supply and demand. Where there are more sellers than buyers, the availability of supply will push down prices. If there are more buyers than sellers, the increased demand will push up prices.

Everyone has seen it and everyone is wishing if he should have buy stocks before this rally. Albeit it could have been a gamble buying stocks before declaration of election results, it paid off for those who bought. Now that's history. Stock markets are going to be volatile for next few days. and talked about all the "myths" that people have about the stock market.

INTRODUCTION TO THE ORGANIZATION
RESEARCH METHODOLOGY
TITLE OF THE STUDY:-

“Study of fluctuations of Indian stock market”
OBJECTIVE OF STUDY
 To know the basic terminology of stock market.  To make the investor aware about the factors which may affect their investment.  To get the knowledge of other markets such as commodity market and derivatives.  To know the ups and downs of stock market of last two years.  To forecast or predict the future trend of stock market which helps in investment.  To know the effect of these fluctuation on the Indian economy.

TYPE OF RESEARCH

Scientific research is funded by public authorities. Scientific research relies on the application of the scientific method. and the development of methods and systems for the advancement of human knowledge on a wide variety of scientific matters of our world and the universe. This research provides scientific information and theories for theexplanation of the nature and the properties of the world around us. this research could be used in order to find out what age group is buying a particular brand of cola. if the research is to return useful results. Research can use the scientific method. by charitable organizations and by private groups. whoever is conducting the research must comply with strict research requirements in order to obtain the most accurate figures/results possible. The primary purpose for applied research is discovering. but need not do so. including many companies. In this project the research type used is descriptive because this research is the most commonly used and the basic reason for carrying out descriptive research is to identify the cause of something that is happening. Scientific research can be subdivided into different classifications according to their academic and application disciplines. DESCRIPTIVE RESEARCH Descriptive research is used to obtain information concerning the current status of the phenomena to describe "what exists" with respect to variables or conditions in a situation. whether a company’s market share differs between geographical regions or to discover how many competitors a company has in their marketplace. The methods involved range from the survey which describes the status quo. the correlation study which investigates the relationship between variables. interpreting. It makes practical applications possible. However. Descriptive research can be of two types: . a harnessing of curiosity. For instance. to developmental studies which seek to determine changes over time.Research Research is defined as human activity based on intellectual application in the investigation of matter.

Qualitative descriptive research also emphasizes on what is. they refer to the data which have already been collected and analysed by someone else. In this research study also their were some limiting factors. record. and makes use of quantitative methods to describe. Quantitative descriptive research emphasizes on what is. ii. . Data Collection: The most important constraint in this study was data collection as Secondary data was selected for study. some of them are as under: 1. SCOPE OF STUDY • • • • • • • • • Derivatives Sebi Stock exchange Commodity market Stock market Securities Day trading Factor affecting Indian stock market Effect on Indian economy LIMITATIONS Limitations are the limiting lines that restrict the work in some way or other. analyze and interpret the present conditions.i. Secondary data means data that are already available i.e. but makes use of non-quantitative research methods in describing the conditions of the present.

a derivative 'bet' on an event occurring is offset by a comparable derivative 'bet' on the event not occurring. Accuracy: The facts and findings of the data cannot be accepted as accurate to some extent as firstly. 4. this puts a question mark on the reliability of this data. which a very important factor of this study as conclusion has been derived from this secondary data only. which traditionally refers to an actual value.2. The total world derivatives market has been estimated at about $791 trillion face or nominal value.6 trillion US at the beginning of October 2008 . Core study Stock market A stock market is a public market for the trading of company stock and derivatives at an agreed price. Secondly. the vast majority of derivatives 'cancel' each other out (i.e. for doing descriptive research time needed is to be more. because in short period you cannot cover each point accurately.) The stocks are listed and traded on stock exchanges which are entities a corporation or mutual organization specialized in the business of bringing buyers and sellers of the organizations to a listing of stocks and securities together. secondary data was collected.). The size of the world stock market was estimated at about $36. rather than an actual market price. The value of the derivatives market. these are securities listed on a stock exchange as well as those only traded privately. So. The stock market in the United States includes the . Reliability: The data collected in research work was secondary data. because it is stated in terms of notional values. Moreover.. 11 times the size of the entire world economy. Many such relatively illiquid securities are valued as marked to model. cannot be directly compared to a stock or a fixed income security.

This is an attractive feature of investing in stocks. Share prices also affect the wealth of households and their consumption. and can influence or be an indicator of social mood. for instance. OTCBB and Pink Sheets. 12 History has shown that the price of shares and other assets is an important part of the dynamics of economic activity. the Amex.trading of all securities listed on the NYSE. The liquidity that an exchange provides affords investors the ability to quickly and easily sell securities. Function and purpose The stock market is one of the most important sources for companies to raise money. An economy where the stock market is on the rise is considered to be an up and coming economy. Rising share prices. In fact.g. or raise additional capital for expansion by selling shares of ownership of the company in a public market. the stock market is often considered the primary indicator of a country's economic strength and development. tend to be associated with increased business investment and vice versa. the Deutsche Börse and the Paris Bourse. Therefore. the NASDAQ. compared to other less liquid investments such as real estate. European examples of stock exchanges include the London Stock Exchange. now part of Euronext. e. as well as on the many regional exchanges. central banks tend to keep an eye on the control and behavior of the . This allows businesses to be publicly traded.

Financial stability is the raison d'être of central banks. deposit accounts and other very liquid assets with little risk made up almost 60 percent of households' financial wealth. either directly or through mutual funds. mutual . Relation of the stock market to the modern financial system The financial system in most western countries has undergone a remarkable transformation. Exchanges also act as the clearinghouse for each transaction. pension funds. and guarantee payment to the seller of a security. One feature of this development is disintermediation. In this way the financial system contributes to increased prosperity. on the smooth operation of financial system functions. in Sweden. In the 1970s. A portion of the funds involved in saving and financing flows directly to the financial markets instead of being routed via the traditional bank lending and deposit operations.g. e. in general. The major part of this adjustment in financial portfolios has gone directly to shares but a good deal now takes the form of various kinds of institutional investment for groups of individuals. The smooth functioning of all these activities facilitates economic growth in that lower costs and enterprise risks promote the production of goods and services as well as employment. compared to less than 20 percent in the 2000s. has been an important component of this process. Statistics show that in recent decades shares have made up an increasingly large proportion of households' financial assets in many countries..stock market and. The general public's heightened interest in investing in the stock market. meaning that they collect and deliver the shares. This eliminates the risk to an individual buyer or seller that the counterparty could default on the transaction.

insurance investment of premiums. Television commentators. immersed in chat rooms and message boards. The stock market. despite all this available information. individual investors. and financial risk Riskier long-term saving requires that an individual possess the ability to manage the associated increased risks. hedge funds. Stock prices skyrocket with little .e. i. real estate and collectables).funds. Similar tendencies are to be found in other industrialized countries. individual investors. analysts. the United States. the noise level in the stock market rises. At the same time. This is something that could affect not only the individual investor or household. investors find it increasingly difficult to profit. Yet. or have acquired other 'risky' investments (such as 'investment' property. Stock prices fluctuate widely. With each passing year. such as the European Union. etc. in marked contrast to the stability of (government insured) bank deposits or bonds. This is certainly more important now that so many newcomers have entered the stock market.. and market strategists are all overtaking each other to get investors' attention. In all developed economic systems. are exchanging questionable and often misleading tips. Japan and other developed nations. permitting a 13 higher proportion of shares to bonds. financial writers. but also the economy on a large scale. the trend has been the same: saving has moved away from traditional (government insured) bank deposits to more risky securities of one sort or another. The following deals with some of the risks of the financial sector in general and the stock market in particular. The trend towards forms of saving with a higher risk has been accentuated by new rules for most funds and insurance.

Sometimes there appears to be no rhyme or reason to the market. then plummet just as quickly. Mumbai Headquarters of SEBI Organization Details:Headquarters Mumbai. Securities and Exchange Board of India SEBI Bhavan. Originally set up by the Government of .gov. India Established 1992 Jurisdiction India Head Chairman Chairman C B Bhave Official Website:-www. Maharashtra.in SEBI is the Regulator for the Securities Market in India. This is a quote from the preface to a published biography about the long-term value-oriented stock investor Warren Buffett.sebi. and $105. only folly.000 from seven limited partners consisting of Buffett's family and friends.reason. Over the years he has built himself a multi-billion-dollar fortune.[4] Buffett began his career with $100. The quote illustrates some of what has been happening in the stock market during the end of the 20th century and the beginning of the 21st century. and people who have turned to investing for their children's education and their own retirement become frightened.

he had been the chairman of NSDL (National Securities Depository Limited) ushering in paperless securities. Southern and Western regional offices in New Delhi. Prior to his stint at NSDL.India in 1988.4(1)(b) of the SEBI Act. 1992) Mr Mohandas Pai Director.4(1)(d) of the SEBI Act.Chaired by C B Bhave. SEBI is headquartered in the popular business district of Bandra-Kurla complex in Mumbai.4(1)(b) of the SEBI Act. National Judicial Academy. Prior to taking charge as Chairman SEBI.4(1)(d) of the SEBI Act. Kolkata. He is a former Indian Administrative Service officer of the 1975 batch. SEBI Member (S. 1992) Dr G Mohan Gopal Director. The Board comprises:Name Designation As per Mr CB Bhave Chairman SEBI CHAIRMAN (S.4(1)(d) of the SEBI Act. he had served SEBI as a Senior Executive Director. Ministry of Finance Member (S. Eastern. 15 1992) Mr KP Krishnan Joint Secretary. 1992) Mr MS Sahoo Whole Time Member. Chennai and Ahmedabad. Bhopal Member (S.4(1)(a) of the SEBI Act. Ministry of Corporate Affairs Member (S. 1992) Mr Anurag Goel Secretary. Infosys . and has Northern. it acquired statutory form in 1992 with SEBI Act 1992 being passed by the Indian Parliament. 1992) Dr KM Abraham Whole Time Member. SEBI Member (S. Organization Structure Chandrasekhar Bhaskar Bhave is the sixth chairman of the Securities Market Regulator.

Justice NK Sodhi. The initial . as modern markets are electronic networks. Stock exchanges also provide facilities for the issue and redemption of securities as well as other financial instruments and capital events including the payment of income and dividends. SEBI has enjoyed success as a regulator by pushing systemic reforms aggressively and successively (e. 1992) Functions and Responsibilities SEBI has to be responsive to the needs of three groups. derivatives. Though this makes it very powerful. • • • Stock exchange A stock exchange. it conducts investigation and enforcement action in its executive function and it passes rulings and orders in its judicial capacity. It drafts regulations in its legislative capacity.Member (S. but trade is less and less linked to such a physical place. (formerly a securities exchange) is a corporation or mutual organization which provides "trading" facilities for stock brokers and traders. to trade stocks and other securities. the quick movement towards making the markets electronic and paperless rolling settlement on T+2 basis). there is an appeals process to create accountability. Trade on an exchange is by members only. which gives them advantages of speed and cost of transactions. A second appeal lies directly to the Supreme Court.g. To be able to trade a security on a certain stock exchange. quasijudicial and quasiexecutive. There is a Securities Appellate Tribunal which is a three member tribunal and is presently headed by a former Chief Justice of a High court . The securities traded on a stock exchange include: shares issued by companies.Mr. Usually there is a central location at least for recordkeeping. it has to be listed there. SEBI has been active in setting up the regulations as required under law.4(1)(d) of the SEBI Act. unit trusts. SEBI has three functions rolled into one body quasi-legislative. which constitute the market: the issuers of securities the investors the market intermediaries. pooled investment products and bonds.

or acquire other necessary business assets. 4.offering of stocks and bonds to investors is by definition done in the primary market and subsequent trading is done in the secondary market. A stock exchange is often the most important component of a stock market. hedge against volatility. 3. which could have been consumed.Redistribution of wealth . increase its market share. nor must stock be subsequently traded on the exchange. Increasingly. This is the usual way that derivatives and bonds are traded. affect the price of stocks. Mobilizing savings for investment When people draw their savings and invest in shares. this may include the following: 1. The role of stock exchanges Stock exchanges have multiple roles in the economy. 2. There is usually no compulsion to issue stock via the stock exchange itself. commerce and industry. Such trading is said to be off exchange or over-the-counter. A takeover bid or a merger agreement through the stock market is one of the simplest and most common ways for a company to grow by acquisition or fusion. Facilitating Company Growth Companies view acquisitions as an opportunity to expand product lines. increase distribution channels. resulting in stronger economic growth and higher productivity levels and firms. Raising capital for businesses The Stock Exchange provide companies with the facility to raise capital for expansion through selling shares to the investing public. or kept in idle deposits with banks are mobilized &redirected to promote business activity with benefits for several economic sectors such as agriculture. it leads to a more rational allocation of resources because funds. as in all free markets. stock exchanges are part of a global market for securities. Supply and demand in stock markets is driven by various factors which.

some welldocumented cases are known where it is alleged that there has been considerable slippage in corporate governance on the part of some public companies.Creating investment opportunities for small investors As opposed to other businesses that require huge capital outlay. will share in the wealth of profitable businesses. investing in shares is open to both the large and small stock investors because a person buys the number of shares they can . or otherwise by a small group of investors). companies generally tend to improve on their management standards and efficiency in order to satisfy the demands of these shareholders and the more stringent rules for public corporations imposed by public stock exchanges and the government. Adelphia (2002). However. through dividends and stock price increases that may result in capital gains. Sunbeam (2001). often owned by the company founders and/or their families and 18 heirs. MCI WorldCom (2002). Companies like Pets. Webvan (2001). both casual and professional stock investors. The dot-com bubble in the early 2000s.Tel (2001).Corporate governance By having a wide and varied scope of owners. American International Group (2008).com (2000). Parmalat (2003). 7.Stock exchanges do not exist to redistribute wealth. 5. and Satyam Computer Services (2009) were among the most widely scrutinized by the media. and the subprime mortgage crisis in 2007-08. are classical examples of corporate mismanagement. One. Enron Corporation (2001). Consequently. However. Lehman Brothers (2008). it is alleged that public companies (companies that are owned by shareholders who are members of the general public and trade shares on public exchanges) tend to have better management records than privately-held companies (those companies where shares are not publicly traded.

An economic recession. the result is that the government must tax the citizens or otherwise raise additional funds to make any regular coupon payments and refund the principal when the bonds mature. Bombay Stock Exchange Introduction Bombay Stock Exchange is the oldest stock exchange in Asia with a rich heritage. in its 133 years of existence. What is now popularly known as BSE was . Share prices tend to rise or remain stable when companies and the economy in general show signs of stability and growth. Therefore the Stock Exchange provides the opportunity for small investors to own shares of the same companies as large investors. share prices rise and fall depending. The issuance of such bonds can obviate the need to directly tax the citizens in order to finance development. 9.afford. 8. or financial crisis could eventually lead to a stock market crash.Barometer of the economy At the stock exchange. although by securing such bonds with the full faith and credit of the government instead of with collateral. depression.Government capital-raising for development projects Governments at various levels may decide to borrow money in order to finance infrastructure projects such as sewage and water treatment works or housing estates by selling another category of securities known as bonds. Therefore the movement of share prices and in general of the stock indexes can be an indicator of the general trend in the economy. largely. thus loaning money to the government. These bonds can be raised through the Stock Exchange whereby members of the public buy them. on market forces.

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

the ICERS facilitates the corporates in sharing with BSE their corporate announcements. In 2006. BSE also has a wide range of services to empower investors and facilitate smooth transactions: . The systems and processes are designed to safeguard market integrity and enhance transparency in operations. It has successfully launched a reporting platform for corporate bonds in India christened the ICDM or Indian Corporate Debt Market and a unique ticker-cum-screen aptly named 'BSE Broadcast' which enables information dissemination to the common man on the street. BSE provides an efficient and transparent market for trading in equity. it has become the first national level stock exchange to launch its website in Gujarati and Hindi to reach out to a larger number of investors. hedging and arbitrage. It is also the first exchange in the country and second in the world to receive Information Security Management System Standard BS 7799-2-2002 certification for its BSE On-line Trading System (BOLT). called "SPIcE" is listed on BSE. The first Exchange Traded Fund (ETF) on SENSEX. The ETF enables investors in Hong Kong to take an exposure to the Indian equity market. BSE is the first exchange in India and the second in the world to obtain an ISO 9001:2000 certification. It brings to the investors a trading tool that can be easily used for the purposes of investment. BSE continues to innovate. trading. It has a nation-wide reach with a presence in more than 359 cities and towns of India.created the 'iShares® BSE SENSEX India Tracker' which tracks the SENSEX. In recent times. SPIcE allows small investors to take a long-term view of the market. debt instruments and derivatives. While the Directors Database provides a single-point access to information on the boards of directors of listed companies. BSE has always been at par with the international standards. BSE launched the Directors Database and ICERS (Indian Corporate Electronic Reporting System) to facilitate information flow and increase transparency in the Indian capital market.

22 • The Human Resource Management at BSE has won the Asia .com: In February 2001. Surveillance: BSE's On-Line Surveillance System (BOSS) monitors on a real-time basis the price movements. BOLT is currently operating in 25. health management .000 people have attended the BTI programmes Awards The World Council of Corporate Governance has awarded the Golden Peacock Global CSR Award for BSE's initiatives in Corporate Social Responsibility (CSR).Pacific HRM awards for its efforts in employer branding through talent management at work.'Safe Investing in the Stock Market' under which 264 programmes were held in more than 200 cities. BSEWEBX. volume positions and members' positions and realtime measurement of default risk. BSE introduced the world's first centralized exchangebased Internet trading system. This initiative enables investors anywhere in the world to trade on the BSE platform. market reconstruction and generation of cross market alerts.com. in collaboration with reputed management institutes and universities.000 Trader Workstations located across over 359 cities in India. BSE was the first exchange in the country to provide an amount of Rs.1 million towards the investor protection fund.21 Investor Services: The Department of Investor Services redresses grievances of investors. it is an amount higher than that of any exchange in the country. BSE launched a nationwide investor awareness programme. More than 20. 2006 and March 31 2007 have been awarded the ICAI awards for excellence in financial reporting. It offers over 40 courses on various aspects of the capital market and financial sector. The BSE On-line Trading (BOLT): BSE On-line Trading (BOLT) facilitates on-line screen based trading in securities. BSEWEBX. • The Annual Reports and Accounts of BSE for the year ended March 31. BSE Training Institute: BTI imparts capital market training and certification.

it is being calculated taking into consideration only the prices of stocks listed at BSE. History For the premier stock exchange that pioneered the securities transaction business in India. Since then. segment-specific and sector-specific indices. The BSE National Index was renamed BSE-100 Index from October 14. Delhi. BSE-500 Index and 5 sectoral indices were launched in . BSE launched on 27th May. The launch of SENSEX in 1986 was later followed up in January 1989 by introduction of BSE National Index (Base: 1983-84 = 100). Calcutta. In order to fulfill the need for still broader. became members of what today is called Bombay Stock Exchange Limited (BSE).at work and excellence in HR through technology Drawing from its rich past and its equally robust performance in the recent times. larger market capitalization and the new industry sectors. BSE will continue to remain an icon in the Indian capital market. came out with a Stock Index-SENSEX. 1. Over the decades. It comprised 100 stocks listed at five major stock exchanges in India . Till the decade of eighties. 2006. 1994 two new index series viz. BSE has come a long way in attuning itself to the varied needs of investors and market participants. With a view to provide a better representation of the increasing number of listed companies. the stock market in the country has passed through good and bad periods. there was no measure or scale that could precisely measure the various ups and downs in the Indian stock market. Ahmedabad and Madras. BSE. over a century of experience is a proud achievement. 1996 and since then.. The journey in the 20th century has not been an easy one. A lot has changed since 1875 when 318 persons by paying a then princely amount of Re. the 'BSE-200' and the 'DOLLEX-200'. in 1986. BSE launched the dollar-linked version of BSE-100 index on May 22.that subsequently became the barometer of the Indian stock market. BSE has continuously 23 been increasing the range of its indices.Mumbai.

[1]. is a Mumbai-based stock exchange. of listings 1587 MarketCap US$ 1. known as the Nifty. The NSE's key index is the S&P CNX Nifty. banks. In 2001. for both equities and derivative trading.85972 Owner National Stock Exchange of India Limited Key people Mr. India Coordinates 19°3′37″N 72°51′35″E &#20. 72. DOLLEX-30 and the country's first free-float based index . and between them are responsible for the vast majority of share transactions./&#20. Though a number of other exchanges exist. BSE launched BSE-PSU Index.nse-india. an index of fifty major stocks weighted by market capitalisation.06028°N 72. Over the years.85972°E &#20. NSE and the Bombay Stock Exchange are the two most significant stock exchanges in India. insurance companies and The National Stock Exchange of India Limited (NSE). BSE shifted all its indices to the free-float methodology National Stock Exchange of India National Stock Exchange Limited Type Stock Exchange Location Mumbai.46 trillion (2006) Indexes S&P CNX Nifty CNX Nifty Junior S&P CNX 500 Website http://www.06028./&#20.the BSE TECk Index. 19. Ravi Narain (Managing Director & CEO) Currency INR No.com/ 24 NSE is mutually-owned by a set of leading financial institutions.1999. . It is the largest stock exchange in India in terms of daily turnover and number of trades. 19.

NSE is the third largest Stock Exchange in the world in terms of .other financial intermediaries in India but its ownership and management operate as separate entities. making it the second largest stock exchange in South Asia. 2799 in total. cover more than 1500 cities across India .46 trillion. As of 2006[update]. There are at least 2 foreign investors NYSE Euronext and Goldman Sachs who have taken a stake in the NSE. the equity market capitalization of the companies listed on the NSE was US$ 1. In October 2007. the NSE VSAT terminals.

first depository in India[2]. and was incorporated in November 1992 as a tax-paying company. In April 1993. 1956. in India. in 1996. Origins NSE building at BKC The National Stock Exchange of India was promoted by leading Financial institutions at the behest of the Government of India. It is the second fastest growing stock exchange in the world with a recorded growth of 16. electronic limit order book (LOB) exchange to trade securities in India. derivatives market) trades in India.6%. • Co-promoting and setting up of National Securities Depository Limited. which led to the wide popularization of the NSE in the broker community. Innovations 25 NSE has remained in the forefront of modernization of India's capital and financial markets.the number of trades in equities. the NSE was permitted to start trading equity derivatives • Being the first and the only exchange to trade GOLD ETFs (exchange traded funds) in . • Being the first exchange that. • NSE pioneered commencement of Internet Trading in February 2000. NSE commenced operations in the Wholesale Debt Market (WDM) segment in June 1994. proposed exchange traded derivatives. and its pioneering efforts include: • Being the first national. existent market and new market structures have followed the "NSE" model. anonymous. • Setting up of S&P CNX Nifty." in India. The Capital Market (Equities) segment of the NSE commenced operations in November 1994. particularly on an equity index. After four years of policy and regulatory debate and formulation. it was recognized as a stock exchange under the Securities Contracts (Regulation) Act. while operations in the Derivatives segment commenced in June 2000. NSCCL was a landmark in providing innovation on all spot equity market (and later. Since the success of the NSE. • Setting up the first clearing corporation "National Securities Clearing Corporation Ltd.

2009. (IISL). If the Sensex goes up. which 26 is a joint venture between NSE and CRISIL.34% of the total market capitalization as on Mar 31. It gives you a general idea about whether most of the stocks have gone up or most of the stocks have gone down.India. it means that the prices of the stocks of most of the major companies on the BSE have gone up. IISL is India's first specialised company focused upon the index as a core product. this tells you that the stock price of most of the major stocks on the BSE have gone down. S&P CNX Nifty S&P CNX Nifty is a well diversified 50 stock index accounting for 21 sectors of the economy. The Sensex is an indicator of all the major companies of the BSE.16% • S&P CNX Nifty is professionally maintained and is ideal for derivatives trading Sensex & the Nifty The Sensex is an "index". it is the one of the most important stock exchange in the world.68% of the traded value of all stocks on the NSE • Nifty stocks represent about 65. IISL has a Marketing and licensing agreement with Standard & Poor's (S&P). It is used for a variety of purposes such as benchmarking fund portfolios. • NSE has also launched the NSE-CNBC-TV18 media centre in association with CNBCTV18. who are world leaders in index services. Just like the Sensex represents the top stocks of the BSE. • Impact cost of the S&P CNX Nifty for a portfolio size of Rs. is the Bombay Stock Exchange and the NSE is the . the Nifty represents the top stocks of the NSE. S&P CNX Nifty is owned and managed by India Index Services and Products Ltd. What is an index? An index is basically an indicator. The Nifty is an indicator of all the major companies of the NSE. the BSE.2 crore is 0. Just in case you are confused. If the Sensex goes down. index based derivatives and index funds. • The total traded value for the last six months of all Nifty stocks is approximately 65.

If you know this you will know what prices go up and what prices go down! To figure out the likes and dislikes of people. and the price would fall. (Basics of economics!) Understanding supply and demand is easy. then the price moves up! Conversely. These are the major stock exchanges in the country. Dalal Street watches with great attention at these times. and in the long run no company can survive without them. it isn't going to stay in business. If you understand this. By this we mean that stock prices change because of “supply and demand”. 27 Besides Sensex and the Nifty there are many other indexes. you will know what people are buying and what people are selling. It makes sense when you think about it. which are referred to as earnings seasons. Public companies are required to report their earnings four times a year (once each quarter). Earnings are the profit a company makes. if more people wanted to sell a stock than buy it. If a company never makes money. The reasons for stock prices going "up" and "down" Stock prices change every day because of market forces. If more people want to buy a stock (demand) than sell it (supply). This is called the “BSE Mid-cap Index”. you have to figure out what news is positive for a company and what news is negative and how any news about a company will be interpreted by the people.Most of the stock trading in the country is done though the BSE & the NSE. The most important factor that affects the value of a company is its earnings. but they are not as popular as the BSE and the NSE. What is difficult to understand is what makes people like a particular stock and dislike another stock. The reason behind this is that analysts base their future value of a company on their .National Stock Exchange. The BSE is situated at Bombay and the NSE is situated at Delhi. There are other stock exchanges like the Calcutta Stock Exchange etc. There is an index that gives you an idea about whether the mid-cap stocks go up and down. there would be greater supply than demand.

which is known as issuing stock. Still. you can determine when to buy and sell. what are "all the factors" that affect the stocks price? The best answer is that nobody really knows for sure. the stock price of dozens of internet companies rose without ever making even the smallest profit. which is issued by the private company itself. It would be a rather simple world if this were the case! During the “dotcom bubble”. . Some believe that it isn't possible to predict how stock prices will change. companies can either borrow it from somebody or raise it by selling part of the company. while others think that by drawing charts and looking at past price movements. If a company's results disappoint and are worse than expected. If a company's results are better than expected. the price jumps up. and most internet companies saw their values shrink to a fraction of their highs. this fact demonstrates that there are factors other than current earnings that influence stocks. On the other hand. All that the shareholders get in return for their money is the hope that the shares will someday be worth more than what they paid for them. As we all know. for example. Issuing stock is advantageous for the company because it does not require the company to pay back the money or make interest payments along the way. To do this. these high stock prices did not hold.earnings projection. 28 Of course. The first sale of a stock. The reasons for which companies issue stocks Why would the founders share the profits with thousands of people when they could keep profits to themselves? The reason is that at some point every company needs to "raise money". So. issuing stock is called “equity financing”. it's not just earnings that can change the feeling people have about a stock. The only thing we do know is that stocks are volatile and can change in price very very rapidly. is called the initial public offering (IPO). A company can borrow by taking a loan from a bank or by issuing bonds. Both methods come under "debt financing". then the price will fall.

you assume the risk of the company not being successful . neither is a shareholder.just as a small business owner isn't guaranteed a return. It depends more on experience and involves some statistics and mathematics. Shareholders earn a lot if a company is successful. This isn't the case with an equity investment. There are two major types of analysis: 1. but they also stand to lose their entire investment if the company isn't successful. On the other hand technical analysis look at the stocks chart. peoples buying behavior etc. Fundamental Analysis 2. Technical analysis is a little more complicated. When you buy a debt investment such as a bond. Stock Picking –Having understood all the basics of the stock market and the risk involved. you are guaranteed the return of your money (the principal) along with promised interest payments. In this article we will go into the basics of “fundamental analysis”. If you . now we will go into stock picking and how to pick the right stock. It is much more of an "art" than a science. Before picking the right stock you need to do some analysis.It is important that you understand the distinction between a company financing through 29 debt and financing through equity. for forecasting of future stock price or financial price movements. By becoming an owner. Calculation of BSE SENSEX… 30 This article explains how the value of the “BSE Sensex” or “sensitive index” is calculated. technical analysis is the study of prices and volume. so explaining technical analysis is out of the scope of this article. Technical Analysis Fundamental analysis is the analysis of a stock on the basis of core financial and economic analysis to predict the movement of stocks price. Simply put. fundamental analysis looks at the actual company and tries to figure out what the company price is going to be like in the future. On the other hand. to try and figure out what the stock price is going to be like in the future.

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

In more simpler form. nothing comes free. But if you are a new investor. You will have to loose some money. When a person invests in derivative. Ignore press releases which have very little substance. you will basically not loose too much! Derivatives Commodities whose value is derived from the price of some underlying asset like securities. You should only invest money that you can honestly afford to lose!! Everyone enters into investments with the idea of earning big profits. bullion. stock. but many many people miss it. By following these rules. The legal terms of a contract are much more varied and flexible than the terms of property ownership. interest level. In fact. or . You cannot understand the market by just looking at it from far. it’s this flexibility that appeals to investors 32 . rather than the asset itself. you MUST follow these rules. (Especially if you are new to investing in the stock market!) Please understand that the above tips are tips for beginners. Essentially. the underlying asset. They are for your own safety. and rely on "hype" to tell the company's story. bond.31 before you invest. And finally the most important tip!!! Only invest money you can afford to lose!! Sure this is a basic point. this means you buy a promise to convey ownership of the asset. the underlying asset is usually a commodity. derivatives are financial security such as an option or future whose value is derived in part from the value and characteristics of another security. commodities. stock market index or anything else are known as “Derivatives”. It is a generic term for a variety of financial instruments. But then again. currency. make some bad decisions and then only will you really understand the market. Once you really get into the stock market you do not need to follow these rules anymore. but in many cases. Everything has a price. this never works.

The commodity market in India comprises of all palpable markets that we come across in our daily lives. that they are investing in. On the other hand. ‘Futures’ and ‘options’ are two commodity traded types of derivatives. But derivatives are usually contracts. Here. It is likely that any person who has funds invested. The broadest classification of the Indian Market can be made in terms of the commodity market and the bond market. we shall deal with the former in a little detail. they will be usually be fairly standardised and governed by the property of securities laws in an appropriate country. Shares or bonds are financial assets where one can claim on another person or corporation. and exposed to. the derivatives range is only limited by the imagination of investment banks. The other examples of derivatives are warrants and convertible bonds (similar to shares in that they are assets). India Commodity Market can be subdivided into the following two categories: • Wholesale Market • Retail Market . the owner of a ‘futures’ contract is obligated to buy or sell the asset. The cost of goods is estimated in terms of domestic currency . An ‘options’ contract gives the owner the right to buy or sell an asset at a set price on or before a given date. Derivatives securities or derivatives products are in real terms contracts rather than solid as it fairly sounds. Beyond this. India Commodity Market 33 The vast geographical extent of India and her huge population is aptly complemented by the size of her market. He bet that the value derived from the underlying asset will increase or decrease by a certain amount within a certain fixed period of time. an insurance policy or a pension fund. derivatives – wittingly or unwittingly. Such markets are social institutions that facilitate exchange of goods for money.currency. where the contract details may not be standardized. On the other hand. a contract is merely an agreement between two parties.

The organized sector on the other hand are owned by various business houses like Pantaloons. Modern marketing strategies and other techniques of sales promotion enable such markets to draw customers from every section of the society. In recent years. perishable and durable. Tata and others. Such 34 markets are usually sell a wide range of articles both agricultural and manufactured. • The improvement in transport facilities made the retailers directly interact with the producers and hence the need for whole sellers was not felt. Almost every commodity under the sun both agricultural and industrial are now being provided at well distributed retail outlets throughout the country. the success stories of the commodity market of India in recent years has mainly centered around the growth generated by the Retail Sector. Considering the present growth rate. Moreover.the extent of the retail market (both organized and unorganized) has evolved in leaps and bounds. However the growth of such markets has still centered around the urban areas primarily due to infrastructural limitations. The traditional wholesale market in India dealt with whole sellers who bought goods from the farmers and manufacturers and then sold them to the retailers after making a profit in the process. With the passage of time the importance of whole sellers began to fade out for the following reasons: • The whole sellers in most situations. the retail outlets belong to both the organized as well as the unorganized sector. edible and inedible. acted as mere parasites who did not add any value to the product but raised its price which was eventually faced by the consumers. the total valuation of the Indian Retail Market is . In fact.Let us now take a look at what the present scenario of each of the above markets is like. Reliance. It was the retailers who finally sold the goods to the consumers. The unorganized retail outlets of the yesteryears consist of small shop owners who are price takers where consumers face a highly competitive price structure.

The money market deals with very short term debt securities that mature in less than a year. 10. The money market is a type of a dealer market where firms purchase securities in their own account by assuming the risks themselves. trading and the distribution of short-term debt instruments across different regions over the world. World Money Market World Money Market has been providing origination. Money Market Rates . which renders a clear-cut idea on making investment. Unlike the stock exchanges the money market securities do not operate in exchanges or through brokers. The money market securities that are issued by the government or financial institutions or large corporations are very liquid.estimated to cross Rs. then it becomes risky to keep savings there. Demand for commodities is likely to become four times by 2010 than what it presently is. Find detailed on the world money market. Although the stock market is associated with high risks and high returns . many are risk averse and prefer to invest in the more secure money market .000 billion by the year 2010. Money Market When the stock prices show a downward trend . Transactions take place over phone or the electronic system. One may browse through the following links to have a more detailed information about money market. Money Market Definition Money Market Definition is simply meant as the short-term debt market. Treasury Bills and 35 certificate of deposits are regarded as the instruments in the money market. it yields very low returns unlike the bond market. Since the money market securities trade at very high denominations it becomes very difficult for the individual investors to have access to it. Money Market Index Money Market Index is a true indicator of the prevailing money market. Since the money market is extremely safe.

So. Get the method of finding the money market rates. When people are buying more stocks. if you were to buy all the shares of a particular company. Market Cap 36 Never try to guess the worth of a company simply by comparing the price of the stock. so in that case you need to know the functioning of the market.Money Market Rates can be simply defined as the market rates including the broker call loan rate. You should always keep in mind that it is not the stock but the market capitalization of the company that determines the worth of the company. So market cap is another factor that affects stock price. federal funds rate. Demand AND SUPPLY One of the major factors affecting stock price is demand and supply. you are talking about market capitalization! Market cap or market capitalization is simply the worth of a company in terms of it’s shares! To put it in a simple way. then the price of that particular stock increases. "Market Capitalization"? You probably think that you have never heard of the term “market capitalization” before. “small-cap” and “largecap” stocks. As you know that you cannot predict the stock market. On the other hand if people are selling more stocks. rates on bankers' acceptance etc. what is the amount you would have to pay? That amount is called the “market capitalization”! . then you should always make a good survey of the whole market. So let us discuss about the different factors affecting the stock price in this article. There are some major factors that affect stock price. The trend of the stock market trading directly affects the price. Major Factors That Affect Stock Price in stock market globally When you wish to invest in the stock market. then the price of that stock falls. You have! When you are talking about “mid-cap”. you should be very careful when you decide to invest in the Indian stock market.

these are the major factors that affect stock price.705. currencies. . Day Trading Day trading (and trading in general) is the buying and selling of various financial instruments. ONGC. when there is a negative press release. and stocks. how do YOU calculate the market cap of a particular company? You don’t! Just go to a website like MoneyControl. the company will either be a “mid-cap” or “largecap” or “small-cap” company! Now the question is. has a market cap of “Rs. such as futures. Cap” will be the market cap value. news is another factor affecting stock price. So.21 Cr” (when this article was written) Depending on the value of the market cap. But if this is the case. News When you get positive news about a company then it can increase the buying interest in the market. then it has the potential to rise in the near future. with the goal of making a profit from the difference between the buying price and the selling price.To calculate the market cap of a particular company. Earning/Price Ratio 37 Another important factor affecting stock price is the earning/price ratio. options. it can ruin the prospect of a stock. Day trading differs slightly from other styles of trading in that positions are rarely (if ever) held overnight or when the market being traded is closed. On the other hand. The stock becomes overvalued if the price is much higher than the actual earning. This gives you a fair idea of a company’s share price when it is compared to its earnings.170. In this case you should remember that news should not matter much but the overall performance of the company matters more. The stock becomes undervalued if the price of the share is much lower than the earnings of a company. So.com and look up the company whose market cap you are interested in finding out! The figure in front of “Mkt. simply multiply the “current share price” by the “number of shares issued by the company”! Just to give you an idea.

Trend trades are trades in the direction of the current price movement (i. and can make the same trades at very low cost. but most traders will choose a single style and only take that type of trade. The styles range from short term trading such as scalping where positions are only held for a few seconds or minutes. Most day traders will choose a single type of trade. there are other variances between day traders. to longer term swing and position trading where a position may be held throughout the trading day. suited to different day trader personalities. Current State of the Indian Economy: . buying if the price is moving up). the trading process that is used. are the same. counter-trend trades.Day trading was originally only available to financial companies (such as banks). But with recent technology such as the Internet. and choose which one to trade depending upon the current condition of the market. and counter-trend trades are trades against the direction of the current price movement (i.e. Trading Styles There are several different styles of day trading. 38 Day trading also has different types of trade. and ranging trades. and the desired goal of making a profit. such as trend trades. selling if the price is moving up). and can have open positions for anywhere from a few minutes to a few hours. depending upon how the trade is doing (whether it is in profit). but some traders will take different types. In addition to the style and type of day trading. Some day traders will trade multiple styles. However many trades are made. and perhaps only make one trade per day. Ranging trades are trades that go back and forth between two prices. and are used when the market is moving sideways. Most day trading systems have a lot of flexibility. individual traders now have direct access to the same exchanges and market data. because only they had access to the exchanges and market data. Some day traders like to make many trades throughout the trading day. while others prefer to wait for what they consider the best conditions for their trade.e.

-1600 .100 (Base : 1983 .84 = 100) S & P CNX Nifty * (Base : November 3.15545 Source: Reserve Bank of India (RBI) Stock Market Trends * NSE .50. India attracted total foreign investments of US $ 15. Nifty has been rechristened as ' S & P CNX Nifty with effect BSE Sensitive Index (Base : 1978 . Monthly trends in foreign investments ($ million) Months Foreign direct investments Portfolio investments Total foreign investments 2007-08(P) 2008-09(P) 2007-08(P) 2008-09(P) 200708(P) 2008-09(P) April 1643 3749 1974 -880 3617 2869 May 2120 3932 1852 -288 3972 3644 39 June 1238 2392 3664 -3010 4902 -618 July 705 2247 6713 -492 7418 1755 August 831 2328 -2875 593 -2044 2921 September 713 2562 7081 -1403 7794 1159 October 2027 1497 9564 -5243 11591 -3746 November 1864 1083 -107 -574 1757 509 December 1558 1362 5294 30 6852 1392 January 1767 2733 6739 -614 8506 2119 February 5670 . 1995 = 1000) Averag .79 = 100) BSE . i.e.Capital Inflows During the April-January period of 2008-09. while the portfolio investment stood at US $ -11.-8904 .-3234 March 4438 . The foreign direct investment (FDI) stood at US $ 27.2838 AprilJanuary ..426 million.545 million.27426 .881 million.-11881 .

1 3 15503.70 Aug-0814722.6 5 17600.67 4124.49 4503.12 4647.32 6580.60 4040.00 8627.60 9969.66 5228.74 4463.10 Apr-0816290.30 June08 14997.50 8982.2 8 16063.84 5028.25 Mar08 15838.9 9 17378.80 7704.79 4739.92 14048.30 Feb-08 17727.35 6287.34 4214.54 11509.57 8095.00 May08 16945.55 July08 13716.91 5195.12 16275.90 8363.20 7909.01 4769.40 .02 4901.5 4 18663.59 8785.94 4899.20 9348.33 16729.88 14809.6 5 20873.71 7760.58 8907.75 8101.60 4476.80 3816.00 Sept- 10526.12 4620.88 5201.28 12575.23 7828.48 7362.46 15343.59 4835.59 9240.49 4417.64 8621.01 4838.85 9435.16 16608.e High Low Average High Low Average High Low 1 2 3 4 5 6 7 8 9 10 40 Jan-08 19325.60 7143.64 5756.50 4953.62 7029.3 8 16677.96 8895.56 5483.1 8 14942.18 13461.28 8488.

39 2.28 65.93 31.75 12.019.66 17.95 4441.22 3950.853.688.10 2.293.528.00 3850.87 4343.86 137.08 2.96 10631.697.45 Jan-09 9350.86 7.41 IT 2.744.77 7.60 3.69 4504.874.06 128.36 SMLCAP 5.87 6564.17 MIDCAP 4.622.949. crore) % to Total Mkt Cap (Rs.38 4.91 284.70 6.81 253.40 7.14 4.60 1.25 2553.02 921.161.06 4206.602.13 3.45 2678.549.450.598.88 CD 2.05 1.64 272.411.53 5.208.692.04 663.46 17.516.01 5328.54 13.398.673.75 7276.70 1.71 8.888.55 5181.18 2.638.50 2656.91 623.408.24 211.27 0.15 Dec-08 9513.285.127.74 FMCG 2.42 82.157.6 5 13055.547.864.01 3.30 660.505.367.53 8.68 10.35 4802.56 5432.806.29 BSE Sectoral Indices AUTO 4.19 BANKEX 7.80 3077.60 2.58 10099.52 6.907.75 3.897.18 86.919.24 4864.393.67 8509.85 .36 6.06 184.39 2.53 HC 3.990.251.69 906.59 5.93 8674.45 4.08 2.65 2.64 8.65 31.15 2.55 41 INDICES 52 Week Full Market Capitalisation Turnover Close High Low (Rs.186.60 8.59 1.262.28 4.79 3148.863.74 202.32 735.060.94 4443.08 13942.17 2834.02 0.27 48.899.77 3.86 123.890.56 2.162.774.99 2.20 Nov-089453.18 8.987.60 4.85 2.683.92 407.746.05 Oct-08 10549.112.34 7.875.75 2524.24 METAL 9.36 5396.120.77 BSE-100 7.01 4823.12 8451.917.35 7860.13 76.09 4332.20 BSE-500 5.809. crore) % to Total Turnover SENSEX 14.240.46 47.27 182.84 2854.485.516.90 13.63 4.866.57 CG 11.79 373.8 1 15049.805.25 9.86 12595.92 6776.91 8739.802.330.36 3121.12 95.96 4.490.58 3.54 3.69 BSE-200 1.102.24 94.43 2.95 9.50 2895.21 3210.428.42 10335.98 5.

16 12.99 12.75 191.28 1.72 330.638.18 7.66 2.00 -.042.94 177.582.15 8.45 807.00 173.750.43 192.-.227.664.41 1.38 42 TECk 2.32 2.-.93 328.90 668.312.607.63 320.274.64 3.-.88 314.618.37 4.30 194.20 7.77 17.40 March 196.88 533.59 0.569.30 200.472.28 204.361.90 315.00 August 205.925.001.77 11.02 202.54 11.05 June 203.328.30 July 204.02 195.28 February 196.38 11.472.43 8.78 310.00 -. Light & Lubricants Manufactured Products 2006 January 196.00 -.76 211.081.84 317.93 3.-Note : The market capitalisation of all the indices is free float market capitalisation except for BSEPSU.85 756.90 April 199.-DOLLEX100 1.82 104.803.62 3.-.94 REALTY 3. typically via .427.346.741.50 171.82 0.76 May 201.-.67 750.80 171.38 8. Trends in Inflation 43 (1) Index Numbers Of Wholesale Prices in India ( Monthly Averages) (Base: 1993-94 = 100) Year Month All Commodities Primary Articles Fuel.13 0.748.91 BSE Dollex Indices DOLLEX-30 2.76 326.05 324.77 1.-DOLLEX200 591.-.32 179. Power.31 1.10 171.297.04 29.99 PSU 7.OIL&GAS 9.423.72 3.58 841.08 44 Forex An overview of the Forex market The Forex market is a non-stop cash market where currencies of nations are traded.62 POWER 2.10 205.23 1.94 977.853.83 September 207.08 175.73 175.80 177.77 570.

S. .  An enormous liquid market making it easy to trade most currencies. This number is also referred to as a "Forex rate" or just "rate" for short.2083.S. One example of a risk-free investment is long-term U.S. 5 days a week with non-stop access to global Forex dealers. The main enticements of currency dealing to private investors and attractions for short-term Forex trading are:  24-hour trading. 2003 was 1. At the very minimum. Foreign exchange market conditions can change at any time in response to real-time events. government going bankrupt or being unable or unwilling to pay its debt obligation. The 45 investor could now sell the 1000 euros in order to receive 1208.  Leveraged trading with low margin requirements.70 U. For example. dollar.  Many options for zero commission trading. Forex trading The investor's goal in Forex trading is to profit from foreign currency movements. One year later. the return on investment (ROI) should be compared to the return on a "risk-free" investment. to know if the investor made a good investment. which means that the value of the euro (the numerator of the EUR/USD ratio) increased in relation to the U. i. dollars.  Standard instruments for controlling risk exposure. the U. Foreign currencies are constantly and simultaneously bought and sold across local and global markets and traders' investments increase or decrease in value based upon currency movements. he would have paid 1085. one needs to compare this investment option to alternative investments.e.30 dollars.60 more than what he had started one year earlier. Therefore. the Forex rate was 1. If the investor had bought 1000 euros on that date.0857.S. government bonds since there is practically no chance for a default.brokers.  Volatile markets offering profit opportunities. Forex trading or currency trading is always done in currency pairs. However. the investor would have USD 122. the exchange rate of EUR/USD on Aug 26th.  The ability to profit in rising or falling markets.

but both can be useful forecast tools for the Forex trader. you must sell back the other currency in order to lock in a profit. trade only when you expect the currency you are buying to increase in value relative to the currency you are selling. and creates charts from that data to use as the primary tool. However. rather than what should happen and takes into account the price of instruments and the volume of trading. rather. Technical analysis is concerned with what has actually 46 happened in the market. If the currency you are buying does increase in value. the person or institution that bought or sold the currency has no plan to actually take delivery of the currency in the end. Analysis Technical analysis is a method of predicting price movements and future market trends by studying charts of past market action. They have the same goal to predict a price or movement. Technical analysis and fundamental analysis differ greatly.When trading currencies. Many successful traders combine a mixture of both approaches for superior results. they were solely speculating on the movement of that particular currency. An open trade (also called an open position) is a trade in which a trader has bought or sold a particular currency pair and has not yet sold or bought back the equivalent amount to close the position. Technical analysis is built on three essential principles: 1. it is estimated that anywhere from 70%-90% of the FX market is speculative. In other words. The technician studies the effect while the fundamentalist studies the cause of market movement. Market action discounts everything! This means that the actual price is a reflection of . Forex-Forecasting This article provides insight into the two major methods of analysis used to forecast the behavior of the Forex market. One major advantage of technical analysis is that experienced analysts can follow many markets and market instruments simultaneously.

Stochastic oscillator: This is used to indicate overbought/oversold conditions on a scale of 0100%. Conversely. For many given patterns there is a high probability that they will produce the expected results. as prices fall in a strong down trend.: Relative Strength Index (RSI)  Number theory (Fibonacci numbers. political factors and market sentiment. there are recognized patterns that repeat themselves on a consistent basis. the pure technical analyst is only concerned with price movements. Forex charts are based on market action involving price. However. The indicator is based on the observation that in a strong up trend. History repeats itself Forex chart patterns have been recognized and categorized for over 100 years and the manner in which many patterns are repeated leads to the conclusion that human psychology changes little over time. open-closing)  Trends (following moving average). Gann numbers)  Waves (Elliott wave theory)  Gaps (high-low. If the RSI is 70 or greater. then the instrument is assumed to be overbought (a situation in which prices have risen more than market expectations). closing prices . supply and demand. Also. An RSI of 30 or less is taken as a signal that the instrument may be oversold (a situation in which prices have fallen more than the market expectations). period closing prices tend to concentrate in the higher part of the period's range. not with the reasons for any changes. for example. Some major technical analysis tools are described below: Relative Strength Index (RSI): 47 The RSI measures the ratio of up-moves to down-moves and normalizes the calculation so that the index is expressed in a range of 0-100. There are five categories in Forex technical analysis theory:  Indicators (oscillators.everything that is known to the market that could affect it. Prices move in trends Technical analysis is used to identify patterns of market behavior that have long been recognized as significant. 3. e.g. 2.

. which is an exponential moving average of the difference. which is a popular Fibonacci retracement number.21. If the MACD and trigger lines cross. but in essence he used angles in charts to determine support and resistance areas and predict the times of future trend changes.34. Number theory: Fibonacci numbers: The Fibonacci number sequence (1.5. The ratio of any number to the next larger number is 62%. 48 Gann numbers: W. Waves Elliott wave theory: The Elliott wave theory is an approach to market analysis that is based on repetitive wave patterns and the Fibonacci number sequence.13. An up gap is formed . The inverse of 62%.D. Moving Average Convergence Divergence (MACD): This indicator involves plotting two momentum lines.2.1.3.tend to be near to the extreme low of the period range. known as time/price equivalents. Gann was a stock and a commodity trader working in the '50s who reputedly made over million in the markets. is also used as a Fibonacci retracement number. Stochastic calculations produce two lines.) is constructed by adding the first two numbers to arrive at the third. which is 38%. An ideal Elliott wave patterns shows a five-wave advance followed by a three-wave decline. Gaps Gaps are spaces left on the bar chart where no trading has taken place. The MACD line is the difference between two exponential moving averages and the signal or trigger line. then this is taken as a signal that a change in the trend is likely.8. Divergence between the stochastic lines and the price action of the underlying instrument gives a powerful trading signal. He made his fortune using methods that he developed for trading instruments based on relationships between price movement and time. %K and %D that are used to indicate overbought/oversold areas of a chart.. There is no easy explanation for Gann's methods. He also used lines in charts to predict support and resistance areas.

49 The most common technical tools: Coppock Curve is an investment tool used in technical analysis for predicting bear market lows. Rising peaks and troughs constitute an up trend. but concentrates on the activity of that instrument's market. Trends A trend refers to the direction of prices. For that reason. political. environmental and other relevant factors and statistics . it is also called a measuring gap. An exhaustion gap is a price gap that occurs at the end of an important trend and signals that the trend is ending. Horizontal peaks and troughs characterize a trading range. A breakaway gap is a price gap that forms on the completion of an important price pattern. The breaking of a trend line usually signals a trend reversal. DMI (Directional Movement Indicator) is a popular technical indicator used to determine whether or not a currency pair is trending. while a down gap is a sign of market weakness. It usually signals the beginning of an important price move. Unlike the fundamental analyst.when the lowest price on a trading day is higher than the highest high of the previous day. Moving averages are used to smooth price information in order to confirm trends and support and resistance levels. They are also useful in deciding on a trading strategy. A down gap is formed when the highest price of the day is lower than the lowest price of the prior day. An up gap is usually a sign of market strength. the technical analyst is not much concerned with any of the "bigger picture" factors affecting the market. particularly in futures trading or a market with a strong up or down trend. falling peaks and troughs constitute a downtrend that determines the steepness of the current trend. Fundamental analysis Fundamental analysis is a method of forecasting the future price movements of a financial instrument based on economic. A runaway gap is a price gap that usually occurs around the mid-point of an important market trend.

3. Experts are now talking about 7% GDP growth in 2008-09 and 5% GDP growth in 2009-10. Crude Oil prices touched $147 per barrel and Goldman Sachs talked about $200 per barrel but crude oil in now trading around $45 levels. Commodities traded around all time high levels in June. Factors involved in price analysis: Supply and demand. Fundamental analysis is a macro or strategic assessment of where a currency should be trading based on any criteria but the movement of the currency's price itself.000 targets in 2009. Rupee strengthened to 39 against dollar and analysts like ICICI Kamat predicted 35 levels but rupee fell to 50 levels.that will affect the basic supply and demand of whatever underlies the financial instrument. 2008 but they collapsed to 2003 . weather and government policy. Experts are now talking about 4% levels in 2009. Indian GDP grew at 9% in 2007-08 and analysts predicted about 10% growth in 2009. 5. Experts are now talking about $30 per barrel in 20094. 50 What happened in 2008? Sensex was crossed 21. Experts are now talking about 55 against dollar in 2009.000 levels but Sensex fell to 7. monetary policy. 2. 6. These criteria often include the economic condition of the country that the currency represents. Experts are now talking about 7. many market players use technical analysis in conjunction with fundamental analysis to determine their trading strategy. Fundamental analysis focuses on what ought to happen in a market. Many profitable trades are made moments prior to or shortly after major economic announcements. and other "fundamental" elements.000 levels in January and analysts predicted 25. Inflation moved to 13% and analysts talked about 15% but inflation fell to 8% in December. But todays it has been touch the point 14000 due to government stability. They are actually now talking about deflation. seasonal cycles.800 in October. In practice.

Just see what happened to investors in Reliance Power IPO. Companies are now shutting down plants and are removing employees due to lack of demand and piling up of inventories. 51 8. Investment lessons from 2008: 1. 2008. Never follow herds. They are now announcing bonuses and free offers to attract buyers. 7. 2008. Timing: It is very difficult to time the stock market investments. 80% of price variations occur in 20% of days – time of maximum profits and losses. Real Estate prices reached stratospheric levels in early 2008 but investors bought them as if there will be no land available for purchase in 2009. even good companies with strong growth prospects also fall along with bad overvalued stocks. stocks will rise by late 2009. If real economy will suffer in early 2009. Stock market investors will never react normally – they will either overreact or under react to the economic or political events. Believe in your research and gut feeling. Investment banking is the most sought after industry in early 2008.levels in December. Many real estate stocks were corrected by 7090% in this year alone. . 2. 6. They are now either disappeared or merged with banks. DLF and Unitech will cut prices by 30% in 2009. 3. Unlike in past. more volatile and more unpredictable due to more global integration of economy and money flows. As I said in my previous posts. Biggest investment lesson: When investors are in panic mood. On 18 May we have been seen more variation in recession time market has been touched the level of 14000 with growth of 2100 points 5. stocks fell by October. One should take into consideration this psychological aspect along with business fundamentals in arriving at price target. We will hear some bankruptcies in 2009 in this sector. 4. Significant falls or rises do not occur in slow motion. If economic conditions will improve by early 2010. stock markets now become more dynamic. 7. stock markets always move much ahead of real economy. They are steep and severe.

How long Government will deceive people on this unmanageable issue? Biggest problem with this crisis is no one in the world 52 knows about magnitude and duration of financial crisis. Rakesh Jhunjhunwala: “India will see the mother of all bull runs in the next 4 or 5 years. Jack Welch (former GE Chairman): “The terror strike in Mumbai could well tilt the focus of foreign investors towards neighboring China. Significant statistics: 1.2% in 2009-10. RBI Governor: “The global economic crisis is turning out to be deeper and longer than we had earlier expected.” 4.5% in the last 5 years. . How India’s leaders respond to the Mumbai attacks will tell the business world what it wants and needs to know.Reuters poll: India's economy is expected to grow at its slowest pace in six years in the fiscal year to March 2009. 2. Indian GDP growth will be around 6.” 5. This is the perception of foreigners about India.” 3. India will grow by 5. World Bank: “The financial crisis is now likely to result in the most serious recession since the 1930s. International Energy Agency (IEA): for the first time in 25 years.8% in 2009. including pension and insurance funds. Commerce Minister: “Government will announce second stimulus package in the next week. According to World Bank. This is the first drop for crude oil demand since 1983. the impact on India is also turning out to be stronger than we had earlier expected. Textiles. demand for crude falls.” 6. Not just whether to pull back from India but how risky pushing forward will be. 2009-10 may be a more difficult year. Many investors will be thinking about tilting the balance to China. boosted by double-digit economic growth and increased investment by domestic investors. Agriculture and Construction are the priority sectors for Government in the next package.8% in 2008-09 and 6.Significant statements: 1. Indian economy never grew less than 7.” This is the frank statement from Subbarao. According to RBI Governor.

DLF and Unitech may lower property prices by 30% in mid-2009 to stimulate buyers. India needs particular attention. Positive Stock market news: 1. More than 20 lakh Americans will lose jobs in 2009 and unemployment rate will touch 9% level in 2009. India will be in election mood when we need these measures. 8. China: Exports fell by 2. 5. 2.the largest yearoveryear monthly decline since April 1999. These job losses will have cascading effect on real economy. 54 . 3. 53 2.2% in 2008-09. given its weaker fiscal position. Global Telecom Companies are planning to buy 20-25% stake in Reliance Communications. This deal is beneficial for investors as only 12% of shares are available for trading after this purchase in the secondary market. Asian Development Bank (ADB): Growth rates of China and India will be at 8. IT and Hospitality sectors are the worst affected while Telecom is the most optimistic one. These losses will increase if another major asset class will collapse 4. Shocking! China will grow at 9% in 2010 if Government takes proper simulative decisions. 3. Government stability is big positive reason for sensex. 5% in 2009-10 and will be around 7% in 2010-11.5% respectively in 2009. New claims for unemployment benefits reached their highest level (5. McKinsey report: United States credit losses may top $3 trillion. World economy will grow by 0. World Bank: Global trade will fall for the first time since 1982.73.9% in 2009 and inflows to developing countries will fall by 50%. 6.000) in 26 years in USA. Manpower survey: India is the second most optimistic employment market in the world but there will freezing in hiring in the next 3 months. R-Com stock lost 70% of value in 2008.2% and 6.It estimates for Indian GDP: 6. the first decline since June 2001 . Promoter will not reduce his holding. Anil Ambani family holds 67% stake in the company. 7. Goldman Sachs: China GDP growth for 2009 is around 6%.2% in November.

We may hear some shocking news on this front in the next 2 years. 3. ADB estimates about Asian economy in 2009: A. Interesting statistics about Asian and World economies: 1. Only positive aspect is many PSU banks reported fall in NPAs in 2008 over 2007 except SBI and IOB. B. NPA statistics: NPAs of ICICI Bank in 2007: Rs 5. 2008: Asian economy will grow by 7. As stock markets are unlikely to recover in the next 12-15 months.FCCB shocks: Foreign currency convertible bonds (FCCBs?) of many companies will be due for repayment in the next 3 years.5 This is a much severe crisis than 2001 slowdown.9% in 2009.2% in 2009. NPA shocks: Many people are underestimating the impact of Non Performing Assets (NPAs). The cause of concern for the Government was that in this major share of FIIs. NPAs will not only propel the negative sentiment but increase the banks reluctance to give loans which will once again destroy the positive aspects of the bailout packages. Effect of fluctuation on Indian stock market Nothing actually. P/E of Sensex in 2008 economic slowdown: 9. ADB estimates about Asian economy in 2008: A. 55 4.. Yet. it is interesting to see how promoters will clear their dues. NPAs will affect in 2 ways. December. 2008: World economy will grow by 0. Current P/E of Sensex: 10. 2. World Bank estimates: A. The economy is as sound as it was in the boom time.5% in 2008. November. December.9% in 2008. December. 2008: Asian economy will grow by 6. 2008: World economy will grow by 2. the market crashed because the Government tried to instill some sort of regulation in it.930 crore. 2008: Asian economy will grow by 7. B.8% in 2009. September. 2008: Asian economy will grow by 5. more than half was in the form . Let me explain it a bit : As I wrote in my last article that a major portion of the money being invested into the share market is coming from FIIs (Foreign Institutional Investors). B. September.500 crore. The companies are as profitable as they were a few days ago. NPAs of ICICI Bank in 2008: Rs 9.2% in 2009.

The hot money is that kind of money which is invested only for a short time to make some quick buck. this concept of allowing anonymous investors in the market broaden the reach of the market. All those foreign investors who are not registered with the SEBI (Stock Exchange Board of India). As of now the market is still fluctuating and is yet to be stabilized. This news will from the Business standard give you some detail of this exercise done by the Government. which ultimately allows them trade in the market. It is not invested with a long term mindset. Result. So they took a sort of permission from registered FIIs by buying Participatory Notes (PN) from them in exchange of dollars.the market fell more than a 1000 point in a few hours and had to shut down for some time. Since the continuous inflow of dollar into Indian economy is making the Indian currency (Rupee) stronger and thus making the export costlier. Ultimately the Government had to rush in to alleviate the growing concern of Investors by stating that it would not control the issuing of PN to investors. the Government was looking for someway to curb this inflow of dollars. can not directly deal in buying/selling of sticks. Making the availability of Participatory Notes some difficult for foreign investors was one step Government thought would help control the inflow of dollars. Though. As people found that it would be difficult to trade in the market in future owing to non-availability of PN. I think that in all . So a few days ago the SEBI contemplated on a draft policy to make the issuing of PN difficult for FIIs. 56 This was the step which gave a jolt to the buying spree of FIIs. However. it also ensure free entry of dollars into Indian economy as well as increase the percentage of hot money in the market.of hot money being invested into the market by anonymous investors who pump money into the market by utilizing the Participatory Note (PN) facility. the regulatory body for stocks in India. they started exiting form the market by selling their stock.

On the last count (as per a leading newspaper report) Mukesh Ambani. Owing to stock market boom. As this boom is being driven by FIIs (Foreign Institutional Investors). we must not forget that these people are here only till they find a new market more profitable than India.probability. here are some of my observations on what can happen if the stock market boom continues for lone in India: First some positive one First of all if this boom continues for long. With the above note. there is a word of caution here. The RBI is facing . Once they find a place which offer better return on their investment than India. it is also because of the appreciation in the price of the shares of Reliance industries. The word crorepati (multimillionaire) can soon become a common thing in India all thanks to share market. you never know what can happen in future. Though. The main reason of my belief is that the Indian economy as a whole is performing very well Same is the case with most Indian companies listed in the market. Yes you read it write. soon the richest person in the world will be an Indian. are going to become really rich. there is another very interesting situation being faced by Reserve Bank of India(RBI) (the leading central bank which decides various economic policies here just like the Federal Reserve Bank of US. they will immediately shift there. Secondly most investors. who are in the market for quite sometime. $100000 per minute ! Though it has much to do with his huge and expanding empire of Reliance industries. the chairman of Reliance group was earning Rs 40 Lakhs ($ 100000) per minute. That’s why most expert 57 are advising people to stick to their long-term investment plan and don’t make any move in haste. it will continue it’s upward swing despite such momentary crash. there is only a remote possibility of that as of now. However.) The investment being made by FIIs in Indian share market has resulted in to a huge inflow of dollars into the economy.

Recession A recession is a decline in a country's gross domestic product (GDP) growth for two or more consecutive quarters of a year. Some of our major export oriented industries such as Softwares and textiles are feeling the heat every day. 58 Causes of recession An economy which grows over a period of time tends to slow down the growth as a part of the normal economic cycle. As I explained in my earlier article. The last but not the least is the overvaluation of many stocks in the market. However. the continued depreciation of dollar is also a cause of deep concern which needs to be addressed. All these things.difficultly in managing this continuous inflow of dollars as their huge supply and easy availability has resulted into dollar’s depreciation vis-à -vis Rupee. can put a break on this boom. if happen. An economy typically expands for 6-10 years and tends to go into a . Or we may see emergence of a new market with great potential on some other place on earth. (it actually happened some days ago as I described above) Government certainly don’t want to spoil the party that is going on in the stock market. In nutshell if I am to summarize this boom of stock market. a increase in interest rate in US may reverse this flow of FIIs. this can only be done if Government put some break on the inflow of dollars by FIIs which will actually mean putting a break on stock market boom. The Rupee is becoming stronger to dollar thus making imports cheaper and export costlier. A recession is also preceded by several quarters of slowing down. Ironically. I must say that this boom is not going to last forever as it is dependent on some very volatile factors that may change in the times to come. The profits margin of these industries have reduced as it mostly depend on current value of dollar. There is a pressure on Government to mange the appreciation of rupee to favour exporters. Some experts have opined that market is trading at 22 to 23 times of actual earning and no one can justify these valuations.

lay-offs and a sharp rise in unemployment. And investors seem to have little faith in the Bush rescue plan's ability to ward off a recession in the US. a recession is yet to be declared by the Bureau of Economic Analysis. In the US. hitting a 10-month low. A recession normally takes place when consumers lose confidence in the growth of the economy and spend less. The Fed will almost certainly respond with sharp cuts in interest rates towards the end of the month. The Sensex crashed by nearly 13 per cent in just two trading sessions in January. Stock markets & recession The economy and the stock market are closely related. it was inevitable that stock markets around the world would start catching the chill. which in turn leads to a decrease in production. Investors spend less as they fear stocks values will fall and thus stock markets fall on negative sentiment. along with European stocks. The markets bounced back after the US Fed cut interest rates. but investors are a worried lot. However. Investors around the world have taken note of the fact that the broadbased S&P 500 index is at a 16-month low. The stock markets reflect the buoyancy of the economy. The way in which Asian stock prices responded last week to the fall of the Dow Jones and Nasdaq indices by 4 per cent. but the market has already 59 discounted for that. has also punctured a hole in the decoupling argument (which said Asia would not be hit by an Americabased problem) that had become fashionable in recent weeks.recession for about six months to 2 years. When the global economy has been cooling down. stock prices are now at a low ebb in India with little cheer coming to investors. This leads to a decreased demand for goods and services. and the financial sector in particular has been heading from one cold shower to the next. Indian markets worst hit . The Indian stock markets also crashed due to a slowdown in the US economy.

buying may soon begin A global liquidity surplus had certainly contributed to momentum buying. when compared to the same quarter a year earlier. Even after the 10 per cent correction from the market's peak. no more. The floor therefore would probably be a Sensex level of 17.150 billion)). or whether a further fall is required before value-based buying starts. which is not cheap in anyone's book. Provided the general economic and corporate news does not get worse than has already been anticipated. fresh buyingcannot be very far away. the Sensex trades at a trailing P/E multiple of 24.5 per cent decline in the Sensex. it was inevitable that stock prices would have to come off their dizzy highs. and that the industrial sector has suffered a sharp slowdown. Investors will also have noticed that the third-quarter corporate numbers show significant deceleration in both sales and profit growth. and FIIs have been net sellers to the tune of Rs 2. the Sensex trades at an FY09 estimated P/E of 18. What began with profit-booking and unwinding of long positions cascaded on Friday into a 3. The question is whether the correction that has occurred so far is enough for fresh buying to emerge. which pulled in a record amount of application money (Rs 1. When coupled with the data showing that the export target for the year will be missed by a wide margin. it is a large enough sum for the market to go into correction mode.It is interesting that Indian markets were hit the most. Foreign institutional investors had moved to the sidelines in the secondary markets even earlier. There is no doubt that valuations had become expensive.which would mean wiping out the gains of the past three months. This may have been because the correction in the overheated Chinese stock market began some weeks ago. Impact of a US recession on India . On a forward basis.15.200 crore (Rs 22 billion) in January. among all Asian markets.000-odd -.000 crore (Rs 1. Yet.5. Also relevant was the Reliance Power IPO. Even if a third or a fourth of that was being garnered by sale of stocks.

booking profits and making the most of the unprecedented bull run that has dominated the Indian stock market for a long time now. A weak dollar could bring more foreign money to Indian markets. there is a change in the global investment climate. factors. Indian companies with big tickets deals in the US would see their profit margins shrinking. But experts note that the long-term prospects for India are stable. while the Sensex fell by 14. . 60 Indian companies have major outsourcing deals from the US. Hedge funds and FIIs could have been the biggest sellers in the Indian markets. The India economy is likely to lose between 1 to 2 percentage points in GDP growth in the next fiscal year. One.6 per cent. reminding investors that there is no one-way bet on the stock market. the DJIA was down 30 per cent in December 2002 from the highs it hit in January 2000.7 per cent. In contrast. say experts. Asia is yet to totally decouple itself (or be independent) from the rest of the world.A slowdown in the US economy is bad news for India. Oil may get cheaper brining down inflation. the Sensex was down 45 per cent. One of the primary triggers is the huge fear of the United States' economy going into a recession with foreign institutional investors trying to reallocate their funds from risky emerging markets to stable developed markets. India's exports to the US have also grown substantially over the years. Black Monday saw bloodbath on Dalal Street as the Indian stock markets crashed by over 1430 points in afternoon trade (the market has since then recovered somewhat). If the fall from the record highs reached is taken. The worries for exporters will grow as rupee strengthens further against the dollar. A recession could bring down oil prices to $70. Between January 2001 and December 2002. The whole of Asia would be hit by a recession as it depends on the US economy. the Dow Jones Industrial Average went down by 22. Analysts are now expecting a cut in US interest rates.

India is trading at 65% premium to emerging markets and India is playing catchup with other declining global markets. he said. has increased event-related volatility. At current levels it would be a buy call and we would not advise investors to wait to catch the bottom. other emerging markets were down nearly 20% so India is playing catch-up. On the global front. This could be seen as a buying opportunity and we will revisit market valuations after the correction. he added. There is no need to get very pessimistic that this is the end of equity investing in India. said Mihir Vora of HSBC Mutual Fund. There is a big correlation among global markets. a technical correction in the derivatives segment has perpetrated a larger fall. along with increased global movement of capital. Also many IPOs have sucked out liquidity from the primary market into the secondary market. he said. he added. The presence of hedge funds across asset classes. 62 63 Strength:  High return  Large investment  Acquire capital for expanding the business  Secure the future losses Weakness:  High risk . The Sensex can fall another 10-15%. on NDTV Profit. 61 Volatility in commodities markets has also significantly affected equity markets. With the markets falling. Analysts expect the markets to continue to be choppy for a while till global liquidity and commodity prices settle in. on NDTV Profit. said Vora.The current volatility is also linked to global bourses. he added. said Adrian Mowat of JP Morgan. On the local front there has been a huge build-up in derivatives positions and volatility led to margin calls. A combination of global and local factors is affecting this market.

 Can’t predict future Opportunity:  Lot of people wants to invest but don’t invest due to insufficient knowledge.  Market is providing new opportunities and new options to invest. Threat :  Recession  New government  Bubble burst  Fluctuates dollar prices S W O T a n al y si . Based on the fluctuation. It becomes high loss when market goes down.

R.7 & 8 Investment Analysis and portfolio management-M Raghunathan. Hein.com • http://econ. W.28.ltslnewsStock_ExchangesStock. 64 Bibliography Text books • The Stock Market-The Stock Market .com • www.worldbank.  Stock market is all about future prediction.htm www.Hafer.  It is based on “high risk and high return.icai.Rik W.26. 6. 23.tdd.24.s: Conclusion: Through this research we can conclude that:  Stock market fluctuates by the external environment.com • The economics times 65 66 .stockmarkets.bseindia. may survive in the market and generates profits or good return whether the market is down  Investors should not invest on the basis of rumors they must observe the market condition or trends Indian economy and than invest If they wanna generate good return.209 Journals and magazines JARN.”  Comparatively stock market is less risky than the other market and generates more money for the economy  One who have good knowledge in stock market. Madhumati page no.org • www.org • www.  Stock market is very sensitive market.wikipedia.Hafer work package no. Scott E.org • http://en.tradingstock.200. Published Feb 2009 • Business today • Business standard Websites: www.

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