SUBJECT: Law related to investment, securieties, corporate

finance and competition.

Project topic:
Stock market and its operation base case study of a indian co.

Submitted By
RAJ VARDHAN SINGH
Roll no. 1635
th th
5 Year , 9 Semester,B. B.A.LL.B(Hons.)

Submitted to
Dr. Ashok Kumar Sharma
Faculty of law

Chanakya national Law University, Patna

october, 2020.

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 DECLARATION BY THE CANDIDATE

I hereby declare that the work reported in the B.B.A. LL.B (Hons.) Project Report entitle “Stock
market and its operation based case study of Indian Co.” submitted at Chanakya National
Law University, Patna is an authentic record of my work carried out under the supervision of
Dr. Ashok Sharma. I have not submitted this work elsewhere for any other degree or diploma. I
am fully responsible for the contents of my Project Report.

(Signature of the Candidate)

RAJ VARDHAN SINGH
Chanakya National Law University, Patna

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 Acknowledgement

I record my deep sense of obligations and gratitude to Dr. Ashok Kumar Sharma, Faculty of
Law, Chanakya National Law University, Patna for his guidance offered with commendable
clarity and for persistent encouragement in the execution of the present project work.

I owe a special words of gratitude to my family specially my father Justice Arun Kumar who
himself being a High Court Judge was always there to provide me a helping hand whenever I
needed.

I will be failing in my duty if I don’t thank my friends who helped me immensely with the source
of research material and I would also like to thank the library staff for working long hours to
facilitate us with required material going a long way in quenching our thirst for Knowledge.

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 Research methodology.

 Whether Doctrinal or Non Doctrinal?

This Project is based upon Doctrinal method of research. Doctrinal in the sense that that i
have collected theoretical material from different sources such as text books and Internet
resources.

 Whether Primary or Secondary sources?

My research is based on secondary sources as I have totally relied upon Articles, Books,
journals and internet sources for collecting data.

 Whether Analytical or Descriptive?

The method of writing followed in the course of this research project is a blend of analytical
and descriptive method.

 Mode of Citation:

The researchers have followed a uniform mode of citation throughout the course

of this project.

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 TABLE OF CONTENT
INTODUCTION 04

Stock Market: An Indian Perspective. 05

Historical Evolution of Indian Stock Market 06

Case Study WIPRO. 08

Conclusion 10

Bibliography 11

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INTRODUCTION

As a part of the process of economic liberalization, the stock market has been assigned an
important place in nancing the Indian corporate sector. Besides enabling mobilizing resources for
investment directly from the investors, providing liquidity for the investors and monitoring and
disciplining company managements are the principal functions of the stock markets. The main
attraction of the stock markets is that they provide entrepreneurs and governments a means of
mobilizing resources directly from the investors, and to the investors they offer liquidity. It has
also been suggested that liquid markets improve the allocation of resources and enhance
prospects of long term economic growth. Stock markets are also expected to play a major role in
disciplining company's managements1. In India, Equity market development received emphasis
since the very rst phase of liberalization in the early 'eighties. Additional emphasis followed after
the liberalization process got deepened and widened in 1991 as development of capital markets
was made an integral part of the restructuring strategy. Today, Indian markets conform to
international standards both in terms of structure and in terms of operating efficiency.

STOCK MARKET - AT INDIAN PERSPECTIVE

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Narasimham Committee Report (1992) on nancial system. 2

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 The concept of stock markets came to India in 1875, when Bombay Stock Exchange (BSE) was
established as 'The Native Share and Stockbrokers Association' a voluntary non-prot making
association. We all know it, the Bhaji (Sabji) market in your neighborhood is a place where
vegetables are bought and sold. Like Bhaji (Sabji) market, a stock market as a place where stocks
shares are bought and sold. The stock market determines the day's price for a stock through a
process of bid and offer. You have right to bid and buy a stock shares and offer to sell the stock
shares at a valuable price. Buyers compete with each other for the best bid and got their highest
price quoted to purchase a particular Stock Market Shares. Similarly, sellers compete with each
other for the lowest price quoted to sell the stock. When a match is made between the best bid
and the best offer a trade is executed. In automated exchanges high speed computers do this
entire job. Stocks of various companies are listed on stock exchanges. Presently there are 23
stock markets In India. The Bombay Stock Exchange (BSE), the National Stock Exchange
(NSE) and the Calcutta Stock Exchange (CSE) are the three large stock exchanges. There are
many small regional exchanges located in state capitals and other major cities.

HISTORICAL EVOLUTION OF INDIAN STOCK MARKET

As already stated, the Indian Stock markets have played a significant role in the early attempts at
industrialization in India in the late nineteenth and early twentieth century's. The early textile
mills and the rest steel plants were funded in the stock market. Some of these capital raising
exercises were large in relation to the size of the financial sector in those days 2. Beginning in the
late fifties, the country embarked on an inward looking socialistic model of development that
sought to put the commanding heights of the economy in the hands of the public sector. The state
took control of the allocation of resources in the economy as the banks and insurance companies
were nationalized and development financial institutions grew in importance. A regime of
finnancial repression came into being and the stock market stagnated. The period from 1984 to
1992 was in some ways the high water mark of the Indian capital markets. As the markets
responded enthusiastically to the rst whiff of reforms in the mid 1980s and to the major reform
initiative of 1991, the stock market soared through the roof. From October 1984 to September

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L. C. Gupta Committee Report (1997) In India, derivatives was introduced in a phased manner after the
recommendations

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1992, the stock market index went up more than ten times representing an annual compound
return of 34per cent3.

CASE STUDY WIPRO.

Indian stock market is filled with the examples of amazing stocks which has created enough
wealth for its loyal shareholders to live a long happy life.

We are going to discuss the case study of WIPRO- an Indian information technology giant
company owned by Azim Premji.

WIPRO Wealth Creation Story:

Assume you bought 100 shares of WIPRO in 1990. At that time, the face value of one stock of
WIPRO was Rs 10. For simplicity, we are considering that you bought the stocks at the face
value. Hence, your initial investment would have been Rs 1,000.

(Stocks in the Indian stock market rarely trade below their face value. Most of the shares trade
at a high premium compared to their face value. However, there has been a number of
adjustment in the share price of the company since 1990 because of various bonuses and stock
split. Therefore, just for simplicity, we are considering that you purchased the stock at the face
value. Moreover, when you compare the appreciated value with the purchase price, you’ll
understand that it wouldn’t have made much difference even if you had bought this stock at a
little premium.)

Since 1990, WIPRO has given seven bonuses to its shareholders and one stock split (till 2017).
Let’s also assume that you didn’t touch the stock after buying. This means that you didn’t sell
any stock since the purchase and also avoided any profit booking.

Now, let us analyze the bonuses and stock split of WIPRO for past 27 years.

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Peijie Wang ( 2009), “ Financial Econometrics”, Roultledge Publishers, 2e, pp. 66-74.

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  1990: 100 shares

 1992: 200 shares (1:1 bonus on 12-08-1992)

 1995: 400 shares (1:1 bonus on 24-02-1995)

 1997: 1,200 shares (2:1 bonus on 20-10-1997)

 1999: 6,000 shares (5:1 split on 27-09-1999)

 2004: 18,000 shares (2:1 bonus on 25-06-2004)

 2005: 36,000 shares (1:1 bonus on 22-08-2005)

 2010: 60,000 shares (2:3 bonus on 15-06-2010)

 2017: 1,20,000 shares (1:! Bonus on 17-06-2017)

In short, 100 shares of WIPRO bought in 1990 would have turned out to be 1,20,000 share by
2017.

Capital Appreciation:

Let’s find out the current worth of the 100 shares that you bought in 1990.

As of May 2018, the market price of one share of Wipro is Rs 273.75

Total Number of share= 1,20,000

Net Value = Rs 273.75 * 1,20,000 = Rs 3,28,50,000.

The net appreciated value would be worth over 3.28 crores.

Your small investment in the 100 shares of WIPRO in 1990 would have turned out to be worth
over 3.28 crores in next 27 years.

Don’t forget the dividends…

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In the last 27 years, WIPRO has given a decent annual dividend to its shareholders. However,
here we are just considering the dividends for the last four years.

Annual dividend per share by WIPRO for last 4 years–

 2014: Rs 8.00

 2015: Rs 12.00

 2016: Rs 6.00

 2017: Rs 4.00

Annual dividend received by the shareholders can be calculated using this formula:

Annual dividend received= Dividend per share * Total Number of shares

Assuming that you bought 100 shares of WIPRO in 1990, here are the annual dividends that you
would have received:

 Dividends (2014) = Rs 8 * 60,000 = Rs 4,80,000

 Dividends (2015) = Rs 12 * 60,000 = Rs 7,20,000

 And Dividends (2016) = Rs 6 * 60,000 = Rs 3,60,000

Moreover, for the year 2017, the total number of shares in your portfolio would have turned out
to be 1,20,000.

Dividends (2017) = Rs 4 * 1,20,000 = Rs 4,80,000

Overall, you would have received dividends worth Rs 4,80,000 in just an year by literally doing
nothing.

The best part…

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Even if you don’t sell your stocks, you are holding a total of 1,20,000 shares in your portfolio
and hence are eligible to get dividends on all those shares.

Moreover, dividends increase over time. If the company announces a bigger dividend next year,
you will receive even a bigger passive income through dividends. In addition, if the company
announces any bonuses in future, even your grandchildren lives can be considered as secured 🙂
(kidding!!).

Conclusion:

Time and again, the stock market has proved that the long-term investment is the real strategy to
create huge wealth.

WIPRO is just an example. There are a number of companies in the Indian stock market which
has given even a better return compared to WIPRO. For example- Eicher Motors, MRF,
Symphony, Page Industries etc. Although it’s little difficult to hold a stock for such long-term
and not to book any profit. However, if you are a conservative investor with good patience level,
then you can definitely receive amazing returns from your investments.

Stock Market is the mitigation of risk through the spreading of investments across multiple entities,
which is achieved by the pooling of a number of small investments into a large bucket. Stock Market is
the most suitable investment for the common man as it offers an opportunity to invest in a diversied,
professionally managed portfolio at a relatively low cost. The review of literature has brought to light
that:

 Enlistment of corporate securities in more than one stock exchange at the same time improves
liquidity of securities and functioning of stock exchange.
 There is existence of wild speculation in the Indian stock market.
 Risk is not measurable or quantiable. But risk is calculated on the basis of historic volatility.
 Stock market movements are largely inuenced by, broad money supply, ination, C/D ratio and
scal decit apart from political stability.
 Low execution costs make the derivatives especially futures, very suitable for frequent and
short term trading to manage risk, more effectively.

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The analysis of the stock market cycles shows that in general over the reference period the bull phases
are longer, the amplitude of bull phases is higher and the volatility in bull phases is also higher. The gains
during expansions are larger than the losses during the bear phases of the stock market cycles. The bull
phase in comparison with its pre liberalization character is more stable in the post liberalization phase.
The results of our analysis also show that the stock market cycles have dampened in the recent past.
Volatility has declined in the post liberalization phase for both the bull and bear phase of the stock
market cycle.

In the end, here’s a quote by Warren Buffett:

“Our favorite holding period is forever.” 

BIBLIOGRAPHY.

www.moneycontrol.com

www.wipro.com

www.tradeanalyst.com

www.businessinsider.com

www.trademarket.com

www.nseindia.com

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