SUMMER TRAINING PROJECT REPORT

UNDER

BANK OF BARODA
ON
“Study of Indian Stock Market”

SUBMITTED IN PARTIAL FULLFILMENT OF THE REQUIRMENT FOR THE AWARD

OF THE DEGREE OF MASTER OF BUSINESS ADMINISTRATION OF THE UTTAR
PRADESH TECHNICAL UNIVERSITY, LUCKNOW

SUPERVISED BY:- SUBMITTED BY :-

Mr. S. Srivastava Mayank Pandey
Roll No- 1068870011

FACITLITY SUPERVISOR:-
Ms. Swati Goel

SUBMITTED TO :-
DEVPRAYAG INSTITUTE OF MANAGEMENT AND TECHNICAL STUDIES
(2011-2012)

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 DECLARATION

I Mayank Pandey, student of Devprayag Institute of

Management and Technical Studies of M.B.A. hereby declare
that I have completed project on “Study of Indian Stock
Market” at BANK OF BARODA in the academic year 2011-
2012. The information submitted is true and original to the best
of my knowledge.

Date-__/__/____ Mayank Pandey

Place-_________ (Roll No.1068870011)
(Student Of M.B.A IInd year)

Preface

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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 fluctuation 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.

Acknowledgement

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“The completion of any project depends upon the co-operation, coordination and
combined efforts of several resources of knowledge, inspiration & energy.”

Words fall short acknowledging immense support lent to me yet I will try to give full
credit to the deserver's.

My sincere thanks goes to Mr. S. Srivastava (Finance Manager of Bank of Baroda)

giving me an opportunity to discover more knowledge. I am also thankful to Mr.
Prabhat Tandan (Addi.Director,Devprayag Institute of Management) for his support,
guidance and cooperation throughout to accomplish this project also expressing deep
sense of gratitude to my Project guide, Ms. Swati goel (Lecturer) for her valuable
guidance, continuous encouragement and tremendous patience in discussing my
problems, have been of the greatest help in bringing out my task in present shape. I
am equally grateful to all my other teachers for their complete support.

It would be unfair on my part if I do not thank my colleagues for their continuous help
without which this work could never have been accomplished. They made me realize
the importance of teamwork and also the leadership skills. I am grateful to all of them
standing with me and supporting me in this project.

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TABLE OF CONTENTS

 Student’s Declaration…………………………………………...…..…….…2

 Preface………………………………………………………………………..3

 Acknowledgement……………………………………………………..….…4

 Table of contents………………………………………………………..…...5

 Executive Summary……………………………………………………...….8

 Abbreviation……………………………………………………………...….9

 Introduction …………………..………………………………………..…..10

 Organization Climate and Culture……………..………….……...11

 Mission and Vision of BOB…………………………….………..…14

 About the Organization………………….………………..........….15

 International presence………………………………………….…..16

 History……………………………………………………………….17

 Financial Result………………………………………………..…...23

 Research Methodology..…………………………………………..…….….24

 Core Study……….………………………………………………….…...….28

 SEBI………..………………………..……………………………..…..…....32

 Stock Exchange...…………………………...…………………………....…34

 Bombay Stock Exchange.……………...…………………………………...37

 NSE……………………….………………………………………………….42

 S&P CNX Nifty………………………………………………………...…...45

 Derivatives…………….……………...……………………………………..52

 India Commodity Market………………….……………………...……….54

 Money Market……………………………………………………...55

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  Day Trading…………………………………………………………….…..59

 Current State of Indian Economy……………………………………...….61

 Monthly trends in foreign investments…………………………….61

 Stock Market Trends……………………………………………….62

 Trends in Inflation………………………………………………….63

 Index of Stock Market...…………………………………………....66

 Position of Bank of Baroda in Stock Market……………..……....68

 Forex…………..…………………………………………………................71

 Recession…………………………………………………………….………86

 Impact US Recession on India……………………………..…...….88

 SWOT Analysis……………………………………………………….…….90

 Data Analysis And Interpretation……………………………………..…..91

 Conclusion……………………………………………………………….…100

 Suggestion…………………………………………………………………..101

 Bibliography……….……………………………………………………….104

 Annexure…………………………………………………………………...105

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 therefore fundamental to economies. A market can be

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defined as a place where any type of trade takes place. 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 cervices. 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. Markets can appear spontaneously when there are
goods or services to be exchanged, or they can be planned and regulated. Free
markets operate under ‘laissez-fare’ conditions, in that the government does not
intervene in how the market operates. These markets may be distorted if a seller
gains monopoly power by managing the majority of supply (or indeed if a buyer
develops monophony power by managing demand). Governments or trade bodies
often step in when such distortions undermine the smooth functioning of free markets.
The currency markets are the largest continuously traded markets in the world.
Twenty four hours a day, seven days a week, governments, banks, investors and
consumers are buying and selling every currency, leading to massive money flows
constantly changing hands. Stock markets have become highly complex markets that
allow investors to buy shares in companies or in funds that aggregate companies or
industries together. Most stock markets today are primarily electronic networks,
although they often maintain a physical location for buyers, sellers and market
makers to interact directly. Markets originally started as market places usually in the
center of villages and towns, for the sale or barter of farm produce, clothing and tools.
These kinds of street markets developed into a whole variety of consumer-
oriented markets, such as specialist markets, shopping centers, supermarkets,
or even virtual markets such as eBay. With the rising price of oil and food,
commodity markets are once again under the spotlight. Commodities
underpin economic activity. Commodity markets include: energy (oil, gas, coal and
increasingly renewable energy sources such as biodiesel), soft commodities and

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grains (wheat, oat, corn, rice, soya beans, coffee, cocoa, sugar, cotton, frozen orange
juice, etc), meat, and financial commodities such as bonds. Capital goods markets
help businesses to buy durable goods to be used in industrial and manufacturing
processes. A number of services can also be associated with these goods.
Transactions tend to be wholesale with large quantities of goods being transacted at
low 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. Today, i.e. on Tuesday, markets opened in red, went
till 3oo points down, then recovered and went up to 500 points up and finally settled
for flat closing. So what should a small investor do now? Should he buy stocks or
should be selling stocks that he holds. This article is a COMPLETE guide to the
basics of making money in the stock market! If you are considering investing in the
stock market, you MUST read this article! We have explained all the concepts and
talked about all the "myths" that people have about the stock market!

ABBRIVIATION :-

Q1 ---------------------------------------------- 1ST QUARTER

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Q2 ---------------------------------------------- 2ND QUARTER

FY --------------------------------------------- FINANCIAL YEAR

BOB ---------------------------------------- BANK OF BARODA

DC ---------------------------------------- DATA CENTER

CBS ------------------------------- CORE BANKING SOLUTIONS

Y-O-Y ---------------------------- YEAR OVER YEAR

NYSE ----------------------- NEW YORK STOCK EXCHANGE

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 INTRODUCTION

Organizational Climate and culture

Climate and culture are both important aspects of the overall context,
environment or situation. Organizational culture tends to be shared by all or
most members of some social group; is something that older members usually

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try to pass on to younger members; shapes behavior and structures
perceptions of the world. Cultures are often studied and understood at a
national level, such as the American or French culture. Culture includes deeply
held values, beliefs and assumptions, symbols, heroes, and rituals. Culture
can be examined at an organizational level as well. The main distinction
between organizational and national culture is that people can choose to join
a place of work, but are usually born into a national culture.

Organizational climate, on the other hand, is often defined as the recurring

patterns of behavior, attitudes and feelings that characterize life in the
organization, while an organization culture tends to be deep and stable.
Although culture and climate are related, climate often proves easier to assess
and change. At an individual level of analysis the concept is called individual
psychological climate. These individual perceptions are often aggregated or
collected for analysis and understanding at the team or group level, or the
divisional, functional, or overall organizational level.

Approaches to defining organization climate

There are two related difficulties in defining organization climate: how to define
climate , and how to measure it effectively on different levels of analysis. Further more,
there are several approaches to the concept of climate. Two in particular have
received substantial patronage: the cognitive schema approach and the shared
perception approach.

The cognitive schema approach regards the concept of climate as an individual

perception and cognitive representation of the work environment. From this perspective
climate assessments should be conducted at an individual level.

The shared perception approach emphasizes the importance of shared perceptions as

underpinning the notion of climate. Organisational climate has also been defined as
"the shared perception of the way things are around here". There is great deal of
overlap in the two approaches..

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Cognitive schema approach
Cognitive representations of social objects are referred to as schemas. These
schemas are a mental structure that represents some aspect of the world.
They are organized in memory in an associative network. In these associative
networks, similar schemas are clustered together. When a particular schema is
activated related schemas may be activated as well . Schema activation may
also increase the accessibility of related schemas in the associative network.
When a schema is more accessible this means it can more quickly be
activated and used in a particular situation. When related schemas are
activated, inferences beyond the information given in a particular social
situation may Influence thinking and social behavior, regardless of whether
those inferences are accurate or not. Lastly, when a schema is activated a
person may or may not be aware of it.

Two processes that increase the accessibility of schemas are salience and
priming. Salience is the degree to which a particular social object stands out
relative to other social objects in a situation. The higher the salience of an
object the more likely that schemas for that object will be made accessible.
For example, if there is one female in a group of seven males, female
gender schemas may be more accessible and influence the group’s thinking
and behavior toward the female group member. Priming refers to any
experiences immediately prior to a situation that caused a schema to be more
accessible. For example watching a scary movie at a theatre late at night
might increase the accessibility of frightening schemas that affect a person’s
perception of shadows and background noises as potential threats.

Shared perception approach

Some researchers have pursued the shared perception model of organizational

climate. Their model identifies the variables which moderate an organisation’s
ability to mobilise its workforce in order to achieve business goals and
maximise performance.

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One of the major users of this model are departments of the Queensland
State Government Australia. These departments use this model of climate to
survey staff in order to identify and measure those aspects of a workplace
which impact on: stress, morale, quality of work life, wellbeing , employee
engagement , absenteeism/presenteeism, turnover and performance.

While an organisation and its leaders cannot remove every stressor in the
daily life of its employees, Organisational Climate studies have identified a
number of behaviours of leaders which have a significant impact on stress
and morale. For instance, one Queensland state government employer,
Queensland Transport, has found that increasing managers’ awareness of these
behaviours has improved quality of work life employees and the ability of QT’s
to deliver its organisational goals.

Climate surveys

Theories of Cognitive and Neuropsychology and Emotional Intelligence provide

additional scientific rationale for why leaders should improve stress and morale
in the workplace to achieve maximum performance. Climate surveys can
provide concrete evidence of how this works in action.

Organisational climate surveying enables th e impact of Human Resource (HR)

strategies to be evaluated to create HR Return on Investment (HRROI) calculations.
This data has been found to be highly effective in changing the perspective of
people-based initiatives as being an “investment” rather than a “cost” and transforming
HR into a “mission-critical strategic partner” from its perception of “personnel
administration”.

MISSION OF BANK OF BARODA

“To be a top ranking National Bank of International Standards committed to
augmenting stake holders’ value through concern , care & Competence.”

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VISION OF BANK OF BARODA
It has been a long and eventful journey of almost a century across 25
countries. Starting in 1908 from a small building in Baroda to its new hi-rise
and hi-tech Baroda Corporate Centre in Mumbai, is a saga of vision, enterprise,
financial prudence and corporate governance.

It is a story scripted in corporate wisdom and social pride. It is a story crafted

in private capital, princely patronage and state ownership. It is a story of
ordinary bankers and their extraordinary contribution in the ascent of Bank of
Baroda to the formidable heights of corporate glory. It is a story that needs to
be shared with all those millions of people - customers, stakeholders, employees
& the public at large - who in ample measure, have contributed to the making
of an institution.

ABOUT THE ORGANIZATION

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  Bank of Baroda (BoB) is the third largest bank in India, after
the State Bank of India and the Punjab National Bank and ahead
of ICICI Bank.

 BoB has total assets in excess of Rs. 3.58 lakh crores, or Rs.
3,583 billion, a network of over 3,409 branches and offices, and
about 1,657 ATMs.

 It plans to open 400 new branches in the coming year. It offers

a wide range of banking products and financial services to
corporate and retail customers through a variety of delivery
channels and through its specialized subsidiaries and affiliates in
the areas of investment banking, credit cards and asset
management. Its total business was Rs. 5,452 billion as of June.

 As of August 2010, the bank has 78 branches abroad and by

the end of FY11 this number should climb to 90. In 2010 , BOB
opened a branch in Auckland, New Zealand, and its tenth branch
in the United Kingdom. The bank also plans to open five
branches in Africa. Besides branches, BoB plans to open three
outlets in the Persian Gulf region that will consist of ATMs with a
couple of people

 The Maharajah of Baroda, Sir Sayajirao Gaekwad III, founded the

bank on 20 July 1908 in the princely state of Baroda, in Gujarat.
The bank, along with 13 other major commercial banks of India,
was nationalised on 19 July 1969, by the government of India.

International presence :-

 Among the Bank of Baroda’s 85 overseas branches are ones in the

world’s major financial centers (e.g., New York, London, Dubai, Hong Kong

15
 (which it has upgraded recently), Brussels and Singapore), as well as a
number in other countries. The bank is engaged in retail banking via 17
branches of subsidiaries in Botswana, Guyana, Kenya, Tanzania, and
Uganda. The Bank of Baroda also has a joint-venture bank in Zambia
with nine branches. The Bank of Baroda maintains representative offices
in Malaysia, China, Thailand , and Australia. It plans to upgrade its
offices in China and Malaysia shortly to a branch and joint-venture,
respectively.

 The Bank of Baroda has received permission or in principle approval

from host country regulators to open new offices in Trinidad and
Tobago and Ghana, where it seeks to establish joint ventures or
subsidiaries. The bank has received Reserve Bank of India approval to
open offices in The Maldives, and New- Zealand. It is seeking approval
for operations in Bahrain, South Africa , Kuwait , Mozambique , and Qatar
and is establishing offices in Canada, New
Zealand, Sri Lanka, Bahrain, Saudi Arabia, and
Russia. It also has plans to extend its existing
operations in the United Kingdom, the United
Arab Emirates, and Botswana.

 The slogan of Bank of Baroda is "India's

International Bank".

HISTORY
{SAYAJI RAO GAEKWARD III}
{Founder of Bank Of Baroda}

History Of Bank Of Baroda:-

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 1908-1959

 1908: Maharaja Sayajirao Gaekwad III set up Bank of Baroda

 1910: BoB established its first branch in Ahmedabad

 1953: BoB established a branch in Mombasa and another in Kampala

 1954: BoB opened a branch in Nairobi.

 1956: BoB opened a branch in Dar-es-Salaam.

 1957: BoB established a branch in London.

 1959: BoB acquired Hind Bank

1960s

 1961: BoB merged in New Citizen Bank of India. This merger helped It
increase its branch network in Maharashtra.

 BOB also opened a branch in Fiji.

 1962: BoB opened a branch in Mauritius.

 1963: BoB acquired Surat Banking Corporation in Surat, Gujarat.

 1964: BoB acquired two banks, Umbergaon People’s Bank in southern

Gujarat and Tamil Nadu Central Bank in Tamil Nadu state.

 1964: BoB lost its branch in Narayanjanj (East Pakistan) due to the
Indo-Pakistan war. It is unclear when BOB had opened the branch.

 1967: The Tanzanian government nationalized BoB’s three branches

there and transferred their operations to the Tanzanian government-
owned National Banking Corporation.

 1969: The Government of India nationalized 14 top banks, including

BoB.

17
  BoB incorporated its operations in Uganda as a 51% subsidiary, with
the government owning the rest

1970s

 1972: BoB acquired The Bank of India’s operations in Uganda.

 1974: BoB opened a branch each in Dubai and Abu Dhabi.

 1975: BoB acquired the majority shareholding and management control

of Bareilly Corporation Bank (est. 1928) and Nainital Bank (est. in 1954),
both in Uttar Pradesh. Since then, Nainital Bank has expanded to
Uttarakhand State.

 1976: BoB opened a branch in Oman and another in Brussels. The

Brussels branch was aimed at Indian firms from Mumbai (Bombay)
engaged in diamond cutting and jewellery having business in Antwerp, a
major center for diamond cutting

 1978: BoB opened a branch in New York and another in the

Seychelles.

 1979: BoB opened a branch in Nassau, the Bahamas.

 1977: BoB Opened a branch in Imphal

 BoB opened a branch in Bahrain and a representative office in Sydney,

Australia.

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 1980s

 BoB, Union Bank of India and Indian Bank established IUB International
Finance, a licensed deposit taker, in Hong Kong. Each of the three
banks took an equal share.

 1985: BoB (20%), Bank of India (20%), Central Bank of India (20%) and
ZIMCO (Zambian government; 40%) established Indo-Zambia Bank
(Lusaka). BoB also opened an Offshore Banking Unit (OBU) in Bahrain.

 1988: BoB acquired Traders Bank, which had a branch network in Delhi.

1990s

 1990: BoB opened an OBU in Mauritius, but closed its representative

office in Sydney.

 1991: BoB took over the London branches of Union Bank of India and
Punjab & Sind Bank (P&S). P&S’s branch had been established before
1970 and Union Bank’s after 1980. The Reserve Bank of India ordered
the takeover of the two following the banks' involvement in the Sethia
fraud in 1987 and subsequent losses.

 1992 BoB incorporated its operations in Kenya into a local subsidiary

with a small tranche of shares quoted on the Nairobi Stock Exchange.

 1993: BoB closed its OBU in Bahrain.

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 1996: BoB Bank entered the capital market in December with an Initial
Public Offering (IPO). The Government of India is still the largest
shareholder, owning 66% of the bank's equity.

 1997: BoB opened a branch in Durban.

 1998: BoB bought out its partners in IUB International Finance in Hong
Kong. Apparently this was a response to regulatory changes following
Hong Kong’s reversion to the People’s Republic of China. They now
wholly owned subsidiary became Bank of Baroda (Hong Kong), a
restricted license bank.

 BoB also acquired Punjab Cooperative Bank In a rescue.

 BoB also incorporate wholly owned subsidiary BOB Capital Markets Ltd.
for Broking Business.

 1999: BoB merged in Bareilly Corporation Bank in another rescue. At

the time, Bareilly had 64 branches, including four in Delhi.

 In Guyana, BoB incorporated its branch as a subsidiary, Bank of Baroda

Guyana.

 BoB added a branch in Mauritius, but closed its Harrow Branch in

London.

2000:-

 2000: BoB established Bank of Baroda (Botswana).

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 2002: BoB acquired Benares State Bank (BSB) at the Reserve Bank of
India’s request. BSB was established in 1946 but traced its origins back
to 1871 and its function as the treasury office of the Benares state. In
1964, BSB had acquired Bareilly Bank (est. 1934), with seven branches;
it also had taken over Lucknow Bank in 1968. The acquisition of BSB
brought BOB 105 new branches.

 2002: Bank of Baroda (Uganda) was listed on the Uganda Securities

Exchange (USE).

 2003: BoB opened an OBU in Mumbai.

 2004: BoB acquired the failed Gujarat Local Area Bank, and returned to
Tanzania by establishing a subsidiary in Dar-es-Salaam. BoB also
opened a representative office each in Kuala Lumpur, Malaysia, and
Guangdong , China.

 2005: BoB built a Global Data Centre (DC) in Mumbai for running its
centralized banking solution (CBS) and other applications in more than
1,900 branches across India and 20 other countries where the bank
operates. BoB also opened a representative office in Thailand.

 2006: BoB established an Offshrore Banking Unit (OBU) in Singapore.

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  2007: In its centenary year, BoB’s total business crossed 2.09 lakh
crores, its branches crossed 1000, and its global customer base 29
million people .

 2008: BoB opened a branch in Guangzhou, China (02/08/2008) and in

Kenton, Harrow United Kingdom.

 2008: BoB opened a joint venture life insurance company with Andhra
Bank and Legal and General (UK) called IndiaFirst Life Insurance
Company

 2009: The Bank of Baroda registered with the Reserve Bank of New
Zealand, enabling it to trade as a bank in New Zealand (2009/09/01)

 2010: Malaysia awarded a commercial banking license to a locally

incorporated bank to be jointly owned by Bank of Baroda, Indian
Overseas Bank and Andhra Bank. The new bank, India BIA Bank
(Malaysia), will reside in Kuala Lumpur, which has a large population of
Indians. Andhra Bank will hold a 25% stake in the joint-venture, BoB will
own 40% and IOB the remaining 35%.

Bank of Baroda Financial Results

Q1, 2011-12 or Q1, FY12

July 27, 2011

 Net Profit up 20.2%(y-o-y) to Rs 1,033 crore

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  Operating Profit up 19.9% (y-o-y) to Rs 1,831 crore

 Net Interest Income up 23.6% (y-o-y) to Rs 2,297 crore

 Total Business up 23.9% (y-o-y) to Rs 5,45,283 crore

 Total Advances up 25.2% (y-o-y)

 Total Deposits up 22.9% (y-o-y)

 Net NPAs (%) at 0.44%

 Capital Adequacy Ratio at 13.10%

 NIM at 2.87% in Global & at 3.39% in Domestic operations

 ROAA (annualized) at 1.13%

 ROE (annualized) at 19.88%

Bank of Baroda has announced its reviewed results for the first quarter
of 2011-12 (April-June,2011-12) following the approval of Its Board of
Directors on July 27, 2011.

RESEARCH METHODOLOGY

Title of The Study:-

“Study of Indian stock market”

Duration of The Project:- 45 days

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Objective 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.

Research type: - Descriptive Research

Data Source: -
Research data is collected through two main data sources.
PRIMARY DATA:
For primary data collection I will personally met the head of finance
department & other persons related with my project.
 Supervisor:
Mrs. S. Srivastava

24
 Guider :
Miss. Swati Goel.

SECONDARY DATA:

 For collecting additional data I will take help of internet.

I will search all important websites related to my topic.

 After that I would deeply study of collected data .and I

will personally visit the organization & met with finance
head of that organization.

 I will also refer all books will available, magazines, and

economical news papers for update knowledge about my
topic.

 In these steps I will collect all required information for

my project report to make my project good one.

Research Instrument:- Questionnaire

Type of questionnaire- Structured

Sample: - A sample is a subset of actual observations taken from any larger set of
possible observations. The larger set of observations is known as a population.

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 Sample Unit- People
Sample Method- Survey
Sample Size- 100
Area of Study- Allahabad

SCOPE OF STUDY: -

 Core Study

 SEBI

 Stock exchange

 Derivatives

 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. In
this research study also their were some limiting factors, some of them are as under:

1. Data Collection:
The most important constraint in this study was data collection as Secondary
data was selected for study. Secondary data means data that are already

26
 available i.e. they refer to the data which have already been collected and
analyzed by someone else.

2. Time Period:
Time period was one of the main factor as only one month was allotted and the
topic covered in research has a wide scope. So, it was not possible to cover it in a
short span of time.

3. Reliability:
The data collected in research work was secondary data, So, 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.

4. Accuracy:
The facts and findings of the data cannot be accepted as accurate to some
extent as firstly, secondary data was collected. Secondly, for doing descriptive
research time needed to be more, because in short period you cannot cover each
point accurately.

Core study
Stock market

A stock market is a public market for the trading of company stock and
derivatives at an agreed price; these are securities listed on a stock exchange as well
as those only traded privately.

The size of the world stock market was estimated at about $36.6 trillion US at

27
the beginning of October 2008. The total world derivatives market has been
estimated at about $791 trillion face or nominal value, 11 times the size of the entire
world economy. The value of the derivatives market, because it is stated in terms of
notional values, cannot be directly compared to a stock or a fixed income security,
which traditionally refers to an actual value. Moreover, the vast majority of derivatives
'cancel' each other out (i.e., a derivative 'bet' on an event occurring is offset by a
comparable derivative 'bet' on the event not occurring.). Many such relatively illiquid
securities are valued as marked to model, rather than an actual market price.)

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. The stock market in the
United States includes the trading of all securities listed on the NYSE, the NASDAQ,
the Amex, as well as on the many regional exchanges, e.g. OTCBB and Pink
Sheets. European examples of stock exchanges include the London Stock
Exchange, the Deutsche Börse and the Paris Bourse, now part of Euronext.

Function and purpose

The stock market is one of the most important sources for companies to
raise money. This allows businesses to be publicly traded, or raise additional capital
for expansion by selling shares of ownership of the company in a public market. The
liquidity that an exchange provides affords investors the ability to quickly and easily
sell securities. This is an attractive feature of investing in stocks, compared to other
less liquid investments such as real estate.

History has shown that the price of shares and other assets is an important
part of the dynamics of economic activity, and can influence or be an indicator of
social mood. An economy where the stock market is on the rise is considered to be
an up and coming economy. In fact, the stock market is often considered the
primary indicator of a country's economic strength and development. Rising share
prices, for instance, tend to be associated with increased business investment and

28
vice versa. Share prices also affect the wealth of households and their consumption.
Therefore, central banks tend to keep an eye on the control and behavior of the stock
market and, in general, on the smooth operation of financial system functions.
Financial stability is the raison d'être of central banks.

Exchanges also act as the clearinghouse for each transaction, meaning that
they collect and deliver the shares, and guarantee payment to the seller of a security.
This eliminates the risk to an individual buyer or seller that the counterparty could
default on the transaction.

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. In this way the financial system contributes to increased prosperity.

Relation of the stock market to the modern financial system

The financial system in most western countries has undergone a remarkable

transformation. One feature of this development is disintermediation. 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. The general
public's heightened interest in investing in the stock market, either directly or through
mutual funds, 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. In the 1970s, in Sweden, deposit
accounts and other very liquid assets with little risk made up almost 60 percent of
households' financial wealth, compared to less than 20 percent in the 2000s. 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, e.g., pension funds, mutual funds, hedge funds, insurance investment of
premiums, etc. The trend towards forms of saving with a higher risk has been
accentuated by new rules for most funds and insurance, permitting a higher

29
proportion of shares to bonds. Similar tendencies are to be found in other
industrialized countries. In all developed economic systems, such as the European
Union, the United States, Japan and other developed nations, 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 stock market, individual investors, and financial risk

Riskier long-term saving requires that an individual possess the ability to manage the
associated increased risks. Stock prices fluctuate widely, in marked contrast to the
stability of (government insured) bank deposits or bonds. This is something that could
affect not only the individual investor or household, but also the economy on a large
scale. The following deals with some of the risks of the financial sector in general and
the stock market in particular. This is certainly more important now that so many
newcomers have entered the stock market, or have acquired other 'risky' investments
(such as 'investment' property, i.e., real estate and collectables).

With each passing year, the noise level in the stock market rises. Television
commentators, financial writers, analysts, and market strategists are all overtaking
each other to get investors' attention. At the same time, individual investors,

immersed in chat rooms and message boards, are exchanging questionable and
often misleading tips. Yet, despite all this available information, investors find
it increasingly difficult to profit. Stock prices skyrocket with little reason, then
plummet just as quickly, and people who have turned to investing for their
children's education and their own retirement become frightened. Sometimes there
appears to be no rhyme or reason to the market, only folly.

This is a quote from the preface to a published biography about the long-term

30
value-oriented stock investor Warren Buffett.[4] Buffett began his career with $100,
and $105,000 from seven limited partners consisting of Buffett's family and friends.
Over the years he has built himself a multi-billion-dollar fortune. 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.

Securities and Exchange Board of India

SEBI Bhavan, Mumbai Headquarters of SEBI

Organization Details

Headquarters Mumbai, Maharashtra, India

Established 1992

Jurisdiction India

Head Chairman

31
 Chairman C B Bhave

Term February 16, 2008 -

Total Staff [1] 525

Official Website

Website www.sebi.gov.in

SEBI is the Regulator for the Securities Market in India. Originally set up by the
Government of India in 1988, it acquired statutory form in 1992 with SEBI Act 1992
being passed by the Indian Parliament.Chaired by C B Bhave, SEBI is
headquartered in the popular business district of
Bandra-Kurla complex in Mumbai, and has Northern, Eastern, Southern and Western
regional offices in New Delhi, Kolkata, Chennai and Ahmedabad.

Organization Structure
Chandrasekhar Bhaskar Bhave is the sixth chairman of the Securities Market
Regulator. Prior to taking charge as Chairman SEBI, he had been the chairman
of NSDL (National Securities Depository Limited) ushering in paperless securities.
Prior to his stint at NSDL, he had served
SEBI as a Senior Executive Director. He is a former Indian Administrative Service
officer of the 1975 batch. The Board comprises [2]

Name Designation As per

Mr CB Bhave Chairman SEBI CHAIRMAN (S.4(1)(a) of the SEBI Act,

1992)
Mr KP Krishnan Joint Secretary, Ministry of Member (S.4(1)(b) of the SEBI Act,
Finance 1992)

Mr Anurag Goel Secretary, Ministry of Member (S.4(1)(b) of the SEBI Act,

Corporate Affairs 1992)
Dr G Mohan Director, National Judicial Member (S.4(1)(d) of the SEBI Act,
Gopal Academy, Bhopal 1992)
Mr MS Sahoo Whole Time Member, SEBI Member (S.4(1)(d) of the SEBI
Act,1992)
Dr KM Abraham Whole Time Member, SEBI Member (S.4(1)(d) of the SEBI

32
 Act,1992)
Mr Mohandas Pai Director, Infosys Member (S.4(1)(d) of the SEBI
Act,1992)

Functions and Responsibilities

SEBI has to be responsive to the needs of three groups, which constitute the market:
 the issuers of securities
 the investors
 the market intermediaries.
SEBI has three functions rolled into one body quasi-legislative, quasi-
judicial and quasi-executive. It drafts regulations in its legislative capacity,
it conducts investigation and enforcement action in its executive function and it
passes rulings and orders in its judicial capacity. Though this makes it
very powerful, there is an appeals process to create accountability. 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 - Mr. Justice NK Sodhi. A second
appeal lies directly to the Supreme Court.

SEBI has enjoyed success as a regulator by pushing systemic reforms

aggressively and successively (e.g. the quick movement towards making the
markets electronic and paperless rolling settlement on T+2 basis). SEBI has been
active in setting up the regulations as required under law.

Stock exchange
A stock exchange , (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. 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. The
securities traded on a stock exchange include: shares issued by companies, unit
trusts, derivatives, pooled investment products and bonds. To be able to trade a
security on a certain stock exchange, it has to be listed there. Usually there is a

33
central location at least for recordkeeping, but trade is less and less linked to such a
physical place, as modern markets are electronic networks, which gives them
advantages of speed and cost of transactions. Trade on an exchange is by
members only. The initial 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. Supply and demand in stock market is driven by various factors which,
as in all free markets, affect the price of stocks (see stock valuation).

There is usually no compulsion to issue stock via the stock exchange itself, nor must
stock be subsequently traded on the exchange. Such trading is said to be off
exchange or over-the- counter. This is the usual way that derivatives and bonds are
traded. Increasingly, stock exchanges are part of a global market for securities.

The role of stock exchanges

Stock exchanges have multiple roles in the economy, this may include the
following:

1. Raising capital for businesses

The Stock Exchange provide companies with the facility to raise capital for
expansion through selling shares to the investing public.

2. Mobilizing savings for investment

When people draw their savings and invest in shares, it leads to a more
rational allocation of resources because funds, which could have been consumed, or
kept in idle deposits with banks, are mobilized and redirected to promote business
activity with benefits for several economic sectors such as agriculture, commerce
and industry, resulting in stronger economic growth and higher productivity levels
and firms.

3. Facilitating company growth

Companies view acquisitions as an opportunity to expand product lines,

34
increase distribution channels, hedge against volatility, increase its market share, or
acquire other necessary business assets. 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.
4. Redistribution of wealth
Stock exchanges do not exist to redistribute wealth. However, both casual and
professional stock investors, through dividends and stock price increases that may
result in capital gains, will share in the wealth of profitable businesses.

5. Corporate governance
By having a wide and varied scope of owners, 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.
Consequently, 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, often owned by
the company founders and/or their families and heirs, or otherwise by a small
group of investors). However, some well-documented cases are known where it is
alleged that there has been considerable slippage in corporate governance on the
part of some public companies. The dot-com bubble in the early 2000s, and the
subprime mortgage crisis in 2007-08, is classical examples of corporate
mismanagement. Companies like Pets.com (2000), Enron Corporation (2001),
One.Tel (2001), Sunbeam (2001), Webvan (2001), Adelphia (2002), MCI
WorldCom (2002), Parmalat (2003), American International Group (2008),
Lehman Brothers (2008), and Satyam Computer Services (2009) were among the
most widely scrutinized by the media.

7. Creating investment opportunities for small investors

As opposed to other businesses that require huge capital outlay, investing in
shares is open to both the large and small stock investors because a person buys the
number of shares they can afford. Therefore the Stock Exchange provides the
opportunity for small investors to own shares of the same companies as large

35
investors.

8. 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. These
bonds can be raised through the Stock Exchange whereby members of the public buy
them, thus loaning money to the government. The issuance of such bonds can
obviate the need to directly tax the citizens in order to finance development, although
by securing such bonds with the full faith and credit of the government instead of with
collateral, 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.

9. Barometer of the economy

At the stock exchange, share prices rise and fall depending, largely, on market
forces. Share prices tend to rise or remain stable when companies and the economy
in general show signs of stability and growth. An economic recession, depression, or
financial crisis could eventually lead
to a stock market crash. Therefore the movement of share prices and in general of
the stock indexes can be an indicator of the general trend in the economy.

Bombay Stock Exchange

Introduction

Bombay Stock Exchange is the oldest stock exchange in Asia with a rich heritage,
now spanning three centuries in its 133 years of existence. What is now popularly
known as BSE was established as "The Native Share & Stock Brokers' Association"
in 1875.

BSE is the first stock exchange in the country which obtained permanent recognition

36
(in 1956) from the Government of India under the Securities Contracts (Regulation)
Act 1956. BSE's pivotal and pre-eminent role in the development of the Indian
capital market is widely recognized. It migrated from the open outcry system to an
online screen-based order driven trading system in 1995. Earlier an Association Of
Persons (AOP), BSE is now a corporatised and demutualised entity incorporated
under the provisions of the Companies Act1956, pursuant to the BSE
(Corporatisation and Demutualisation) Scheme, 2005 notified by the Securities and
Exchange Board of India (SEBI). With demutualisation, BSE has two of world's best
exchanges, Deutsche Börse and Singapore Exchange, as its strategic partners.

Over the past 133 years, BSE has facilitated the growth of the Indian corporate sector
by providing it with an efficient access to resources. There is perhaps no major
corporate in India which has not sourced BSE's services in raising resources from the
capital market.

Today, BSE is the world's number1exchange in terms of the number of listed

companies and the world's 5th in transaction numbers. The market capitalization as
on December 31, 2007 stood at USD 1.79 trillion. An investor can choose from more
than 4,700 listed companies, which for easy reference, are classified into A, B, S, T
and Z groups.

The BSE Index, SENSEX, is India's first stock market index that enjoys an iconic
stature, and is tracked worldwide. It is an index of 30 stocks representing 12 major
sectors. The SENSEX is constructed on a 'free-float' methodology, and is sensitive to
market sentiments and market realities. Apart from the SENSEX, BSE offers 21
indices, including 12 sectoral indices. BSE has entered into an index cooperation
agreement with Deutsche Börse. This agreement has made
SENSEX and other BSE indices available to investors in Europe and America.
Moreover, Barclays Global Investors (BGI), the global leader in ETFs through its
iShares® brand, has created the 'iShares® BSE SENSEX India Tracker' which
tracks the SENSEX. The ETF enables investors in Hong Kong to take an
exposure to the Indian equity market.

The first Exchange Traded Fund (ETF) on SENSEX, called "SPICE" is listed on BSE.

37
It brings to the investors a trading tool that can be easily used for the purposes of
investment, trading, hedging and arbitrage. SPICE allows small investors to take a
long-term view of the market.

BSE provides an efficient and transparent market for trading in equity, debt
instruments and derivatives. It has a nation-wide reach with a presence in more than
359 cities and towns of India. BSE has always been at par with the international
standards. The systems and processes are designed to safeguard market integrity
and enhance transparency in operations. BSE is the first exchange in India and the
second in the world to obtain an ISO 9001:2000 certification. 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).

BSE continues to innovate. In recent times, 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. 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.

In 2006, BSE launched the Directors Database and ICERS (Indian

Corporate Electronic Reporting System) to facilitate information flow and increase
transparency in the Indian capital market. While the Directors Database provides a
single-point access to information on the boards of directors of listed companies, the
ICERS facilitates the corporate in sharing with BSE their corporate
announcements.

BSE also has a wide range of services to empower investors and facilitate smooth
transactions:

Investor Services: The Department of Investor Services redresses grievances of

38
investors. BSE was the first exchange in the country to provide an amount of Rs.1
million towards the investor protection fund; it is an amount higher than that of any
exchange in the country. BSE launched a nationwide investor awareness programme
- 'Safe Investing in the Stock Market' under which 264 programmes were held in more
than 200 cities.

The BSE On-line Trading (BOLT): B SE On-line Trading (BOLT) facilitates on-line
screen based trading in securities. BOLT is currently operating in 25,000 Trader
Workstations located across over 359 cities in India.

BSEWEBX.com: In February 2001, BSE introduced the world's first centralized

exchange-based Internet trading system, BSEWEBX.com. This initiative enables
investors anywhere in the world to trade on the BSE platform.

Surveillance: BSE's On-Line Surveillance System (BOSS) monitors on a real-time

basis the price movements, volume positions and members' positions and real- time
measurement of default risk, market reconstruction and generation of cross market
alerts.

BSE Training Institute: BTI imparts capital market training and certification, in
collaboration with reputed management institutes and universities. It offers over 40
courses on various aspects of the capital market and financial sector. More than
20,000 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).
 The Annual Reports and Accounts of BSE for the year ended March 31, 2006
and March 31 2007 have been awarded the ICAI awards for excellence in
financial reporting.
 The Human Resource Management at BSE has won the Asia- Pacific HRM
awards for its efforts in employer branding through talent management at work,
health management at work and excellence in HR through technology

39
Drawing from its rich past and its equally robust performance in the recent times, BSE
will continue to remain an icon in the Indian capital market.

History

For the premier stock exchange that pioneered the securities transaction business in
India, over a century of experience is a proud achievement. A lot has changed since
1875 when 318 persons by paying a then princely amount of Re. 1, became
members of what today is called Bombay
Stock Exchange Limited (BSE).

Over the decades, the stock market in the country has passed through good and bad
periods. The journey in the 20th century has not been an easy one. Till the decade of
eighties, there was no measure or scale that could precisely measure the various
ups and downs in the Indian stock market. BSE, in 1986, came out with a Stock
Index-SENSEX- that subsequently became the barometer of the Indian stock
market.

The launch of SENSEX in 1986 was later followed up in January 1989 by introduction
of BSE National Index (Base: 1983-84 = 100). It comprised 100 stocks listed at
five major stock exchanges in India - Mumbai, Calcutta, Delhi, Ahmadabad and
Madras. The BSE National Index was renamed BSE-100 Index from October 14,
1996 and since then, it is being calculated taking into consideration only the prices of
stocks listed at BSE. BSE launched the dollar-linked version of BSE-100 index on
May 22, 2006.

With a view to provide a better representation of the increasing number of listed

companies, larger market capitalization and the new industry sectors, BSE launched
on 27th May, 1994 two new index series viz., the 'BSE-200' and the 'DOLLEX-200'.
Since then, BSE has come a long way in attuning itself to the varied needs of
investors and market participants. In order to fulfill the need for still broader, segment-

40
specific and sector-specific indices, BSE has continuously been increasing the range
of its indices. BSE-500 Index and 5 sectoral indices were launched in 1999. In 2001,
BSE launched BSE-PSU Index, DOLLEX-30 and the country's first free-float based
index - the BSE TEC k Index. Over the years, BSE shifted all its indices to the free-
float methodology.

National Stock Exchange of India

41
Type Stock Exchange

Location Mumbai, India

Coordinates 19°3'37”N 72°51’35”E/19.06028°N

72.85972°E /19.06028;72.85972

Owner National Stock Exchange of India Limited

Key people Mr. Ravi Narain (Managing Director & CEO)

Currency INR

No. of listings 1587

MarketCap US$ 1.46 trillion (2006)

S&P CNX Nifty

Indexes CNX Nifty Junior
S&P CNX 500

Website http://www.nse-india.com/

NSE is mutually-owned by a set of leading financial institutions, banks,

insurance companies and The National Stock Exchange of India Limited (NSE), is
a Mumbai-based stock exchange. It is the largest stock exchange in India in terms of
daily turnover and number of trades, for both equities and derivative trading.[1].
Though a number of other exchanges exist, NSE and the Bombay Stock Exchange
are the two most significant stock exchanges in India, and between them are
responsible for the vast majority of share transactions. The NSE's key index is the
S&P CNX Nifty, known as the Nifty, an index of fifty major stocks weighted by market
capitalization.

42
 Other financial intermediaries in India but its ownership and management
operate as separate entities. There are at least 2 foreign investors NYSE Euronext
and Goldman Sachs who have taken a stake in the NSE. As of 2006 [update], the
NSE VSAT terminals, 2799 in total, cover more than 1500 cities across India. In
October 2007, the equity market capitalization of the companies listed on the NSE
was US$ 1.46 trillion, making it the second largest stock exchange in South Asia.
NSE is the third largest Stock Exchange in the world in terms of the number of trades
in equities. It is the second fastest growing stock exchange in the world with a
recorded growth of 16.6%.

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, and was incorporated in November
1992 as a tax-paying company. In April 1993, it was
recognized as a stock exchange under the Securities
Contracts (Regulation) Act, 1956. NSE commenced operations in the Wholesale Debt
Market (WDM) segment in June 1994. The Capital Market (Equities) segment of the
NSE commenced operations in November 1994, while operations in the
Derivatives segment commenced in June 2000.

Innovations

NSE has remained in the forefront of modernization of India's capital and financial
markets, and its pioneering efforts include:

 Being the first national, anonymous, electronic limit order book (LOB)
exchange to trade securities in India. Since the success of the NSE,
existent market and new market structures have followed the "NSE" model.
 Setting up the first clearing corporation "National Securities Clearing

43
 Corporation Ltd." in India. NSCCL was a landmark in providing innovation on
all spot equity market (and later, derivatives market) trades in India.
 Co-promoting and setting up of National Securities Depository Limited, first
depository in India [2].
 Setting up of S&P CNX Nifty.
 NSE pioneered commencement of Internet Trading in February 2000, which
led to the wide popularization of the NSE in the broker community.
 Being the first exchange that, in 1996, proposed exchange traded derivatives,
particularly on an equity index, in India. After four years of policy and
regulatory debate and formulation, the NSE was permitted to start trading
equity derivatives
 Being the first and the only exchange to trade GOLD ETFs (exchange traded
funds) in India.
 NSE has also launched the NSE-CNBC-TV18 media centre in association with
CNBC- TV18, it is the one of the most important stock exchange in the world.

S&P CNX Nifty

S&P CNX Nifty is a well diversified 50 stock index accounting for 21 sectors of
the economy. It is used for a variety of purposes such as benchmarking fund
portfolios, index based derivatives and index funds.

S&P CNX Nifty is owned and managed by India Index Services and Products Ltd.
(IISL), which is a joint venture between NSE and CRISIL. IISL is India's first
specialized company focused upon the index as a core product. IISL has a Marketing
and licensing agreement with Standard & Poor's (S&P), who are world leaders in
index services.

44
  The total traded value for the last six months of all Nifty stocks is
approximately 65.68% of the traded value of all stocks on the NSE
 Nifty stocks represent about 65.34% of the total market capitalization as on
Mar 31, 2009.
 Impact cost of the S&P CNX Nifty for a portfolio size of Rs.2 crore is 0.16%
 S&P CNX Nifty is professionally maintained and is ideal for derivatives trading

Sensex & the Nifty

The Sensex is an "index". What is an index? An index is basically an indicator.

It gives you a general idea about whether most of the stocks have gone up or most of
the stocks have gone down.

The Sensex is an indicator of all the major companies of the BSE.

The Nifty is an indicator of all the major companies of the NSE.

If the Sensex goes up, it means that the prices of the stocks of most of the major
companies on the BSE have gone up. If the Sensex goes down, this tells you that the
stock price of most of the major stocks on the B SE have gone down.

Just like the Sensex represents the top stocks of the BSE, the Nifty represents the top
stocks of the NSE.

Just in case you are confused, the BSE is the Bombay Stock Exchange and the NSE
is the National Stock Exchange. The BSE is situated at Bombay and the NSE is
situated at Delhi. These are the major stock exchanges in the country. There are
other stock exchanges like the Calcutta Stock Exchange etc. but they are not as
popular as the BSE and the NSE.Most of the stock trading in the country is

45
done though the BSE & the NSE.

Besides Sensex and the Nifty there are many other indexes. There is an index that
gives you an idea about whether the mid-cap stocks go up and down. This is called
the “BSE Mid-cap Index”.

The reasons for stock prices going "up" and "down"

Stock prices change every day because of market forces. By this we mean that stock
prices change because of “supply and demand”. If more people want to buy a stock
(demand) than sell it (supply), then the price moves up!

Conversely, if more people wanted to sell a stock than buy it, there would be greater
supply than demand, and the price would fall. (Basics of
economics!)Understanding supply and demand is easy. What is difficult to
understand is what makes people like a particular stock and dislike another stock. If
you understand this, you will know what people are buying and what people are
selling. 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, 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.

The most important factor that affects the value of a company is its earnings.
Earnings are the profit a company makes, and in the long run no company can
survive without them. It makes sense when you think about it. If a company never
makes money, it isn't going to stay in business. Public companies are required to
report their earnings four times a year (once each quarter).

46
Dalal Street watches with great attention at these times, which are referred
to as earnings seasons. The reason behind this is that analysts base their future
value of a company on their earnings projection.

If a company's results are better than expected, the price jumps up. If a company's
results disappoint and are worse than expected, then the price will fall.

Of course, it's not just earnings that can change the feeling people have about a
stock. It would be a rather simple world if this were the case! During the “dotcom
bubble”, for example, the stock price of dozens of internet companies rose without
ever making even the smallest profit. As we all know, these high stock prices did not
hold, and most internet companies saw their values shrink to a fraction of their highs.
Still, this fact demonstrates that there are factors other than current earnings that
influence stocks.

So, what are "all the factors" that affect the stocks price? The best answer is that
nobody really knows for sure. Some believe that it isn't possible to predict how stock
prices will change, while others think that by drawing charts and looking at past price
movements, you can determine when to buy and sell. The only thing we do know is
that stocks are volatile and can change in price very very rapidly.

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". To do this, companies can either borrow it from somebody or raise it
by selling part of the company, which is known as issuing stock.

A company can borrow by taking a loan from a bank or by issuing bonds. Both
methods come under "debt financing". On the other hand, issuing stock is called

47
“equity financing”. 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.

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. The first sale of a
stock, which is issued by the private company itself, is called the initial
public offering (IPO).

It is important that you understand the distinction between a companies financing

through

debt and financing through equity. When you buy a debt investment such as a bond,
you are guaranteed the return of your money (the principal) along with promised
interest payments.

This isn't the case with an equity investment. By becoming an owner, you assume the
risk of the company not being successful - just as a small business owner isn't
guaranteed a return, neither is a shareholder. Shareholders earn a lot if a company
is successful, but they also stand to lose their entire investment if the company isn't
successful.

Stock Picking – Having understood all the basics of the stock market and the risk
involved, now we will go into stock picking and how to pick the right stock. Before
picking the right stock you need to do some analysis.

There are two major types of analysis:

1. Fundamental Analysis
2. 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.

48
On the other hand, technical analysis is the study of prices and volume, for
forecasting of future stock price or financial price movements.

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 technical
analysis look at the stocks chart, peoples buying behavior etc. to try and figure out
what the stock price is going to be like in the future.

In this article we will go into the basics of “fundamental analysis”. Technical analysis
is a little more complicated. It is much more of an "art" than a science. It depends
more on experience and involves some statistics and mathematics, so explaining
technical analysis is out of the scope of this article.

Calculation of BSE SENSEX…

This article explains how the value of the “BSE Sensex” or “sensitive index” is
calculated. If you are not sure what we mean by the Sensex or what the Sensex is all
about, you can find this out by reading our “How to make money in the stock
market?” article.

The Sensex has a very important function. The Sensex is supposed to be an indicator
of the stocks in the BSE. It is supposed to show whether the stocks are generally
going up, or generally going down.

To show this accurately, the Sensex is calculated taking into consideration stock
prices of 30 different BSE listed companies. It is calculated using the “free-float
market capitalization” method. This is a world wide accepted method as one of the
best methods for calculating a stock market index.

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 done to make

49
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. The stock market is a field dominated by savvy investors who
know the ins-and-outs of the market. For people who are not “on the inside”, the stock
market can be a VERY dangerous place.

Don't even consider "tips" that tell you about "hot stocks". Consider the source: There
are many people in the market who put in all their time and effort in promoting certain
stocks. They do this because they have their money invested in those stocks. 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.

Always use your own brain: It's extremely important. You must always use your own
brain. Relying on the advice of others, no matter how well intentioned it may be, is
almost always a complete disaster. Make sure you dig in and really examine the
"facts about the companies"
before you invest. Ignore press releases which have very little substance, and rely on
"hype" to tell the company's story.

And finally the most important tip!!!

Only invest money you can afford to lose!! Sure this is a basic point, but many many
people miss it. You should only invest money that you can honestly afford to lose!!
Everyone enters into investments with the idea of earning big profits, but in
many cases, this never works. (Especially if you are new to investing in the stock
market!)

Please understand that the above tips are tips for beginners. Once you really get into

50
the stock market you do not need to follow these rules anymore. But if you are a new
investor, you MUST follow these rules. They are for your own safety.

But then again, nothing comes free. Everything has a price. You will have to loose
some money, make some bad decisions and then only will you really understand
the market. You cannot understand the market by just looking at it from far. By
following these rules, you will basically
not loose too much!

Derivatives

Commodities whose value is derived from the price of some underlying asset
like securities, commodities, bullion, currency, interest level, stock market index or
anything else are known as “Derivatives”.

In more simpler form, derivatives are financial security such as an option or future
whose value is derived in part from the value and characteristics of another security,
the underlying asset.

51
It is a generic term for a variety of financial instruments. Essentially, this means
you buy a promise to convey ownership of the asset, rather than the asset itself.
The legal terms of a contract are much more varied and flexible than the terms of
property ownership. In fact, it’s this
flexibility that appeals to investors.

When a person invests in derivative, the underlying asset is usually a commodity,

bond, stock, or currency. 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.

‘Futures’ and ‘options’ are two commodity traded types of derivatives. An ‘options’
contract gives the owner the right to buy or sell an asset at a set price on or before a
given date. On the other hand, the owner of a ‘futures’ contract is obligated to buy or
sell the asset.

The other examples of derivatives are warrants and convertible bonds (similar to
shares in that they are assets). But derivatives are usually contracts. Beyond this, the
derivatives range is only limited by the imagination of investment banks. It is likely
that any person who has funds invested, an insurance policy or a pension fund,
that they are investing in, and exposed to, derivatives – wittingly or unwittingly.

Shares or bonds are financial assets where one can claim on another person or
corporation; they will be usually be fairly standardised and governed by the property
of securities laws in an appropriate country.

On the other hand, a contract is merely an agreement between two

parties, where the contract details may not be standardized.

Derivatives securities or derivatives products are in real terms contracts rather

than solid as it fairly sounds.

52
 India Commodity Market
The vast geographical extent of India and her huge population is aptly
complemented by the size of her market. The broadest classification of the Indian
Market can be made in terms of the commodity market and the bond market.
Here, we shall deal with the former in a little detail.

The commodity market in India comprises of all palpable markets that we come
across in our daily lives. Such markets are social institutions that facilitate exchange
of goods for money. The cost of goods is estimated in terms of domestic currency.
India Commodity Market can be subdivided into the following two categories:

53
  Wholesale Market
 Retail Market
Let us now take a look at what the present scenario of each of the above markets is
like.

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. It was the retailers who finally sold the goods
to the consumers. With the passage of time the importance of whole sellers began to
fade out for the following reasons:

 The whole sellers in most situations, 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 improvement in transport facilities made the retailers directly
interact with the producers and hence the need for whole sellers was not felt.

In recent years,the extent of the retail market (both organized and unorganized)
has evolved in leaps and bounds. In fact, the success stories of the commodity
market of India in recent years has mainly centered around the growth
generated by the Retail Sector. Almost every commodity under the
sun both agricultural and industrial are now being provided at well distributed
retail outlets throughout the country
Moreover, the retail outlets belong to both the organized as well as the unorganized
sector. 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 organized sector on the other hand are owned by various business
houses like Pantaloons, Reliance, Tata and others. Such markets are usually selling
a wide range of articles both agricultural and manufactured, edible and inedible,
perishable and durable. Modern marketing strategies and other techniques of sales
promotion enable such markets to draw customers from every section of the society.
However the growth of such markets has still centered around the urban areas

54
primarily due to infrastructural limitations.

Considering the present growth rate, the total valuation of the Indian Retail Market is
estimated to cross Rs 10,000 billion by the year 2010. Demand for commodities is
likely to become four times by 2010 than what it presently is.

Money Market

When the stock prices show a downward trend , then it becomes risky to
keep savings there. 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.

The money market deals with very short term debt securities that mature in less
than a year. Since the money market is extremely safe, it yields very low returns
unlike the bond market. The money market securities that are issued by the
government or financial institutions or large corporations are very liquid. Since the
money market securities trade at very high denominations it becomes very difficult
for the individual investors to have access to it.

The money market is a type of a dealer market where firms purchase securities
in their own account by assuming the risks themselves. Unlike the stock
exchanges the money market securities do not operate in exchanges or through
brokers. 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.

55
Treasury Bills and certificate of deposits are regarded as the instruments in the
money market.

World Money Market

World Money Market has been providing origination, trading and the
distribution of short-term debt instruments across different regions over the world.
Find detailed on the world money market.

Money Market Index

Money Market Index is a true indicator of the prevailing money market, which
renders a clear- cut idea on making investment.

Money Market Rates

Money Market Rates can be simply defined as the market rates including the
broker call loan rate, federal funds rate, rates on bankers' acceptance etc. Get the
method of finding the money market rates.

Major Factors That Affect Stock Price in stock market globally

When you wish to invest in the stock market, then you should always make a
good survey of the whole market. As you know that you cannot predict the stock
market, so in that case you need to know the functioning of the market. There are
some major factors that affect stock price . So let us discuss about the different
factors affecting the stock price in this article.
Demand AND SUPPLY
One of the major factors affecting stock price is demand and supply. The
trend of the stock market trading directly affects the price. When people are buying
more stocks, then the price of that particular stock increases. On the other hand if
people are selling more stocks, then the price of that stock falls. So, you should be
very careful when you decide to invest in the Indian stock market .

Market Cap
Never try to guess the worth of a company simply by comparing the price of
the stock. 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

56
market cap is another factor that affects stock price.

"Market Capitalization"?

You probably think that you have never heard of the term “market capitalization”
before. You have! When you are talking about “mid-cap”, “small-cap” and
“large-cap” stocks, 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, if you were to buy all the shares of a particular
company, what is the amount you would have to pay? That amount is
called the “market capitalization”!
To calculate the market cap of a particular company, simply multiply the “current
share price” by the “number of shares issued by the company”! Just to give you an
idea, ONGC, has a market cap of “Rs.170,705.21 Cr” (when this article was
written)Depending on the value of the market cap, the company will either be a
“mid-cap” or “large-cap” or “small-cap” company! Now the question is, how do YOU
calculate the market cap of a particular company? You don’t! Just go to a website
like MoneyControl.com and look up the company whose market cap you are
interested in finding out! The figure in front of “Mkt. Cap” will be the market cap value.

News

When you get positive news about a company then it can increase the buying
interest in the market. On the other hand, when there is a negative press release, it
can ruin the prospect of a stock. In this case you should remember that news
should not matter much but the overall performance of the company matters more.
So, news is another factor affecting stock price.

Earning/Price Ratio
Another important factor affecting stock price is the earning/price ratio. This
gives you a fair idea of a company’s share price when it is compared to its

57
earnings. The stock becomes undervalued if the price of the share is much lower
than the earnings of a company. But if this is the case, then it has the potential to rise
in the near future. The stock becomes overvalued if the price is much higher than the
actual earning. So, these are the major factors that affect stock price .

Day Trading

Day trading (and trading in general) is the buying and selling of various
financial instruments, such as futures, options, currencies, and stocks, with the
goal of making a profit from the difference between the buying price and the selling
price. 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.

Day trading was originally only available to financial companies (such as banks),
because only they had access to the exchanges and market data. But with

58
recent technology such as the Internet, individual traders now have direct access to
the same exchanges and market data, and can make the same trades at very low
cost.

Trading Styles

There are several different styles of day trading, suited to different day trader
personalities. The styles range from short term trading such as scalping where
positions are only held for a few seconds or minutes, to longer term swing and
position trading where a position may be held throughout the trading day. Most day
trading systems have a lot of flexibility, 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). Some day traders will trade multiple styles, but most traders
will
choose a single style and only take that type of trade.

Day trading also has different types of trade, such as trend trades, counter-trend
trades, and ranging trades. Trend trades are trades in the direction of the current
price movement (i.e. buying if the price is moving up), and counter-trend trades are

trades against the direction of the current price movement (i.e. selling if the price is
moving up). Ranging trades are trades that go back and forth between two prices,
and are used when the market is moving sideways. Most day traders will choose a
single type of trade, but some traders will take different types, and choose which one
to trade depending upon the current condition of the market.

In addition to the style and type of day trading, there are other variances between
day traders. 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,
and perhaps only make one trade per day. However many trades are made, the

59
trading process that is used, and the desired goal of making a profit, are the same.

Current State of the Indian Economy:

During the April-January period of 2008-09, India attracted total foreign

investments of US $ 15,545 million. The foreign direct investment (FDI) stood at US $
27,426 million, while the portfolio investment stood at US $ -11,881 million.

Monthly trends in foreign investments:

($ million)
Foreign direct Total foreign
Months investments Portfolio investments investments

60
 2007- 2008- 2007- 2007- 2008-
2008-09(P)
08(P) 09(P) 08(P) 08(P) 09(P)

April 1643 3749 1974 -880 3617 2869

May 2120 3932 1852 -288 3972 3644

June 1238 2392 3664 -3010 4902 -618

July 705 2247 6713 -492 7418 1755

Aug 831 2328 -2875 593 -2044 2921

Sept 713 2562 7081 -1403 7794 1159

Oct 2027 1497 9564 -5243 11591 -3746

Nov 1864 1083 -107 -574 1757 509

Dec 1558 1362 5294 30 6852 1392

Jan 1767 2733 7639 -614 8506 2119

Feb 5670 - -8904 - -3234 -

March 4438 - -1600 - 2838 -

April
- - 27426 - -11881 - 15545
Jan

Source: Reserve Bank of India (RBI)

Stock Market Trends:

* NSE-50,i.e., Nifty has been rechristened as' S & P CNX Nifty with effect

BSE Sensitive Index BSE - 100 S & P CNX Nifty *

(Base : 1978 - 79 = 100) (Base : 1983 - 84 = 100) (Base : November 3,

61
 1995= 1000)
Avg. High Low Avg. High Low Avg. High Low
1 2 3 1 2 3 1 2 3
19325.6 20873.3 16729.9 10526.5 11509.9 8895.6 5756.3 6287.8 4899.3
Jan-08
5 3 4 4 6 4 5 5 0

17727.5 18663.1 16608.0 8785.8 5201.5 5483.9 4838.2

Feb-08 9435.06 9969.59
4 6 1 8 6 0 5

15838.3 16677.8 14809.4 7828.0 4769.5 4953.0 4503.1

Mar-08 8363.58 8907.23
8 8 9 1 0 0 0

16290.9 17378.4 15343.1 8095.0 4901.9 5195.5 4647.0

Apr-08 8627.59 9240.57
9 6 2 2 1 0 0

16945.6 17600.1 16275.5 8621.8 5028.6 5228.2 4835.3

May-08 8982.20 9348.64
5 2 9 4 6 0 0

June- 14997.2 16063.1 13461.6 7029.7 4463.7 4739.6 4040.5

7909.28 8488.62
08 8 8 0 4 9 0 5

13716.1 14942.2 12575.8 6580.6 4124.6 4476.8 3816.7

July-08 7143.71 7760.32
8 8 0 7 0 0 0

14722.1 15503.9 14048.3 7362.4 4417.1 4620.4 4214.0

Aug-08 7704.75 8101.48
3 2 4 9 2 0 0

13942.8 15049.8 12595.7 6564.0 4206.6 4504.0 3850.0

Sep-08 7276.35 7860.87
1 6 5 6 9 0 5

10549.6 13055.6 4343.2 3210.2 3950.7 2524.2

Oct-08 8509.56 5432.92 6776.87
5 7 1 2 5 0

10631.1 4332.1 2834.7 3148.2 2553.1

Nov-08 9453.96 8491.01 4823.36 5396.09
2 7 9 5 5

10099.9 48064.5 4443.5 2895.8 3077.5 2656.4

Dec-08 9513.58 8739.24 5181.94
1 5 0 0 0 5

10335.9 4441.8 2854.3 3121.4 2678.5

Jan-09 9350.42 8674.35 4802.01 5328.95
3 4 6 5 5

Trends in Inflation

62
(1) Index Numbers Of Wholesale Prices in India ( Monthly Averages)

(Base: 1993-94 = 100)

Year Month All Commodities Primary Fuel, Power, Manu-

Articles Light & factured
Lubricants Products

2006 Jan. 196.30 194.78 310.80 171.28

Feb. 196.43 192.88 314.10 171.40

Mar. 196.75 191.90 315.50 171.90

Apr. 199.02 195.84 317.00 173.76

May 201.30 200.63 320.08 175.05

Jun. 203.10 205.05 324.73 175.30

July 204.02 202.76 326.94 177.00

Aug. 205.28 204.93 328.80 177.83

Sep. 207.76 211.72 330.32 179.08

63
 Oct. 208.65 213.35 328.93 180.20

Nov. 209.08 213.95 326.70 181.13

Dec. 208.44 212.98 322.34 181.46

 
2007 Jan. 208.83 214.23 322.05 181.70

Feb. 208.88 214.95 319.80 182.00

Mar. 209.76 214.64 319.84 183.52

Apr. 211.50 219.18 320.35 184.55

May 212.28 220.93 322.05 184.83

Jun. 212.28 220.60 321.98 184.88

July 213.63 224.50 321.85 185.73

Aug 213.78 223.75 322.35 186.08

Sep. 215.06 225.98 321.86 187.46

Oct. 215.05 224.08 323.70 187.68

Nov. 215.53 223.63 325.90 188.10

Dec. 216.42 222.50 331.70 188.58

 
2008 Jan. 218.15 224.58 334.50 189.95

64
 Feb. 219.88 230.55 335.25 190.43

Mar. 225.54 235.86 341.52 196.10

Apr. 228.50 238.63 342.85 199.48

May 231.08 241.94 346.96 201.50

Jun. 237.38 243.95 376.43 204.50

July 240.00 248.68 377.20 206.35

Aug. 241.24 249.28 377.94 207.94

Sep. 241.13 251.50 375.30 207.63

Oct. 239.03 251.45 369.15 205.73

Nov. 234.18 250.94 348.00 203.00

Dec. 229.75 247.33 331.00 201.08

 
2009 Jan. 229.64 248.98 328.62 200.86

Feb. 227.78 247.93 323.50 199.43

Source: Reserve Bank of India (RBI)

(2) Monthly All-India Consumer Price Index (General) for Industrial Workers

(Base: 1982=100)
Year Jan Feb Mar Apr May Jun July Aug Sept Oct Nov Dec
2004 504 504 504 504 508 512 517 522 523 526 525 521
2005 526 525 525 529 527 529 538 540 542 548 553 550
(Base: 2001=100)
Year Jan Feb Mar Apr May Jun July Aug Sept Oct Nov Dec

65
 2006 119 119 119 120 121 123 124 124 125 127 127 127
2007 127 128 127 128 129 130 132 133 133 134 134 134
2008 134 135 137 138 139 140 143 145 146 148 148 147
2009 148 - - - - - - - - - -
( Linking Factor between 1982 and 2001 Series for the All-India is 4.63 )

(3) Consumer Price Index for Agricultural Labourers

(Base: 1986-87=100)
Year Jan Feb Mar Apr May Jun July Aug Sept Oct Nov Dec
2004 332 332 332 331 333 336 338 341 343 345 344 342
2005 341 340 340 341 343 345 350 352 354 356 360 358
2006 357 357 358 360 365 370 372 375 380 386 390 390
2007 391 392 392 394 395 399 404 408 410 413 414 413
2008 413 417 423 429 431 434 442 450 455 459 460 459
2009 461 - - - - - - - - - - -
(4) Consumer Price Index For Rural Labourers

(Base: 1986-87=100)
Year Jan Feb Mar Apr May Jun July Aug Sept Oct Nov Dec
2004 334 335 334 334 335 338 340 343 345 347 346 344
2005 343 343 342 344 345 347 353 354 356 358 362 361
2006 359 359 360 362 367 372 374 376 381 387 391 391
2007 391 393 393 395 396 400 404 408 410 413 414 413
2008 414 417 423 429 431 435 442 450 455 459 460 459
2009 461 - - - - - - - - - - -
Source: Labour Bureau , Ministry of Labour

Index of Stock Market:

Full Market
52 Week Turnover
Capitalisation
Category/
Close % to % to
Index Total (Rs. Total
High Low (Rs. crore)
Mkt crore) Turn-
Cap over

66
Broad

SENSEX 16,162.06 21,108.64 15,765.53 2,707,288.31 45.33 956.03 36.15

MIDCAP 6,222.80 8,791.10 6,014.18 917,310.43 15.36 632.42 23.92

SMLCAP 7,041.12 11,366.68 6,892.98 279,804.96 4.68 327.76 12.39

BSE-100 8,529.43 11,192.91 8,270.95 4,206,058.00 70.42 1,392.76 52.67

BSE-200 2,014.80 2,671.95 1,955.28 4,966,864.24 83.16 1,652.14 62.48

BSE-500 6,356.36 8,434.05 6,165.06 5,589,173.40 93.58 2,172.49 82.15

Thematic

1,721,070.5
SHARIAH 50 1,073.57 1,258.88 1,047.04 28.82 381.46 14.42
8

Investment Strategy or BSE Dollex Indices

BSE IPO 1,599.35 2,293.02 1,536.87 390,134.83 6.53 208.45 7.88

DOLLEX-30 2,689.85 3,918.30 2,647.81 -- -- -- --

DOLLEX-100 1,788.70 2,618.66 1,758.78 -- -- -- --

DOLLEX-200 680.0 1,006.05 668.58 -- -- -- --

BSE Sectoral Indices

AUTO 8,419.51 10,536.92 7,972.17 243,217.00 4.07 97.92 3.70

BANKEX 10,760.73 15,108.27 10,196.90 553,860.77 9.27 345.87 13.08

CD 6,648.37 7,369.77 5,239.21 45,986.81 0.77 83.97 3.18

CG 11,164.28 16,860.58 11,059.60 280,044.59 4.69 172.37 6.52

FMCG 3,831.31 4,137.07 3,171.61 340,714.62 5.70 27.02 1.02

HC 5,871.81 6,871.32 5,683.12 230,496.54 3.86 53.55 2.03

IT 4,985.55 6,921.41 4,638.80 480,432.83 8.04 99.36 3.76

METAL 11,513.80 18,129.92 11,077.76 630,713.51 10.56 187.89 7.11

OIL&GAS 8,263.34 11,270.27 7,983.66 747,232.47 12.51 220.05 8.32

POWER 2,138.09 3,393.32 2,109.88 471,893.09 7.90 97.43 3.68

67
 1,642,112.9
PSU 7,485.25 10,708.33 7,423.00 27.49 340.44 12.87
3

REALTY 1,723.43 4,034.35 1,602.40 76,986.82 1.29 63.32 2.39

TECk 3,122.60 4,072.58 2,982.32 732,841.41 12.27 177.86 6.73

Position of Bank Boroda in Stock Market

Stock Market of Bank Baroda

Share Price, Volume of Shares Traded in Stock Exchanges (From 01.04.2010 to

31.03.2011)
Month National Stock Exchange of India Bombay Stock Exchange Ltd.
Limited (NSE) (BSE)
Volume Volume
Highest Highest Lowest
Low Traded Traded
(Rs.) (Rs.) (Rs.)
(Nos.) (Nos.)
   
APR 2010 702.00 615.85 14914982 701.95 616.00 2603626
MAY 2010 726.00 653.60 12861573 722.70 655.20 2146775
JUN 2010 754.50 678.25 12603181 753.35 678.50 1836906
JUL 2010 764.00 690.80 9042643 762.40 695.50 2320588
AUG 2010 848.00 750.20 8555922 848.00 750.30 1985239
SEP 2010 906.00 802.30 5982809 905.30 803.95 1126910
OCT 2010 1049.00 872.60 10923826 1048.65 875.30 1991143
NOV 2010 1051.90 836.25 6881088 1050.00 835.00 1586167
DEC 2010 999.50 862.00 6704981 999.95 860.00 1500897
JAN 2011 906.95 805.25 9929651 906.50 783.50 2592608
FEB 2011 969.00 795.25 6603376 932.00 798.00 1383035
MAR 2011 974.00 860.40 8446660 973.00 869.00 1145024

68
Market Share of Bank Of Baroda

Balance Sheet of Bank Of Baroda:

Balance Sheet of Bank Of

------------------- in Rs. Cr. -------------------
Baroda
Mar '11 Mar '10 Mar '09 Mar '08

69
 12 mths 12 mths 12 mths 12 mths

Capital and Liabilities:
Total Share Capital 392.81 365.53 365.53 365.53
Equity Share Capital 392.81 365.53 365.53 365.53
Share Application Money 0.00 0.00 0.00 0.00
Preference Share Capital 0.00 0.00 0.00 0.00
Reserves 20,600.30 14,740.86 12,470.01 10,678.40
Revaluation Reserves 0.00 0.00 0.00 0.00
Net Worth 20,993.11 15,106.39 12,835.54 11,043.93
241,044.2 152,034.1
Deposits 305,439.48 192,396.95
6 3
Borrowings 22,307.85 13,350.09 5,636.09 3,927.05
254,394.3 155,961.1
Total Debt 327,747.33 198,033.04
5 8
Other Liabilities &
9,656.73 8,815.97 16,538.15 12,594.41
Provisions
278,316.7 179,599.5
Total Liabilities 358,397.17 227,406.73
1 2
Mar '11 Mar '10 Mar '09 Mar '08

12 month’s 12 month’s 12 month’s 12 month’s

Assets
Cash & Balances with
19,868.18 13,539.97 10,596.34 9,369.72
RBI
Balance with Banks,
30,065.89 21,927.09 13,490.77 12,929.56
Money at Call
175,035.2 106,701.3
Advances 228,676.36 143,985.90
9 2
Investments 71,260.63 61,182.38 52,445.88 43,870.07
Gross Block 4,548.16 4,266.60 3,954.13 3,787.14
Accumulated
2,248.44 1,981.84 1,644.41 1,360.14
Depreciation
Net Block 2,299.72 2,284.76 2,309.72 2,427.00
Capital Work In Progress 0.00 0.00 0.00 0.00
Other Assets 6,226.40 4,347.22 4,578.12 4,301.83

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 278,316.7 179,599.5
Total Assets 358,397.18 227,406.73
1 0

112,272.6
Contingent Liabilities 77,997.01 64,745.82 75,364.33
4
Bills for collection 33,735.67 27,949.60 22,584.64 15,105.51
Book Value (Rs) 536.16 414.71 352.37 303.18

Source : Dion Global Solutions Limited

Forex

An overview of the Forex market

The Forex market is a non-stop cash market where currencies of nations are traded,
typically via brokers. 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. Foreign exchange market
conditions can change at any time in response to real-time events.

The main enticements of currency dealing to private investors and attractions for
short-term Forex trading are:

 24-hour trading, 5 days a week with non-stop access to global Forex dealers.
 An enormous liquid market making it easy to trade most currencies.
 Volatile markets offering profit opportunities.
 Standard instruments for controlling risk exposure.
 The ability to profit in rising or falling markets.
 Leveraged trading with low margin requirements.

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  Many options for zero commission trading.

Forex trading

The investor's goal in Forex trading is to profit from foreign currency movements.
Forex trading or currency trading is always done in currency pairs. For
example, the exchange rate of EUR/USD on Aug 26th, 2003 was 1.0857. This
number is also referred to as a "Forex rate" or just "rate" for short. If the investor had
bought 1000 euros on that date, he would have paid 1085.70 U.S. dollars. One year
later, the Forex rate was 1.2083, which means that the value of the euro (the
numerator of the EUR/USD ratio) increased in relation to the U.S. dollar.

The investor could now sell the 1000 euros in order to receive 1208.30 dollars.
Therefore, the investor would have USD 122.60 more than what he had started one
year earlier. However, to know if the investor made a good investment, one needs to
compare this investment option to alternative investments. At the very minimum, the
return on investment (ROI) should be compared to the return on a "risk-free"
investment. One example of a risk-free investment is long-term U.S. government
bonds since there is practically no chance for a default, i.e. the U.S. government
going bankrupt or being unable or unwilling to pay its debt obligation.

When trading currencies, trade only when you expect the currency you are buying to
increase in value relative to the currency you are selling. If the currency you are
buying does increase in value, you must sell back the other currency in order to lock
in a profit. 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.

However, it is estimated that anywhere from 70%-90% of the FX market is

speculative. In other words, the person or institution that bought or sold the currency
has no plan to actually take delivery of the currency in the end; rather, they were

72
solely speculating on the movement of that particular currency.

Forex-Forecasting

This article provides insight into the two major methods of analysis used to forecast
the behavior of the Forex market. Technical analysis and fundamental analysis differ
greatly, but both can be useful forecast tools for the Forex trader. They have the
same goal - to predict a price or movement. The technician studies the effect while
the fundamentalist studies the cause of market movement. Many successful traders
combine a mixture of both approaches for superior results.

Analysis

Technical analysis is a method of predicting price movements and future

market trends by studying charts of past market action. Technical analysis is
concerned with what has actually happened in the market, rather than what should
happen and takes into account the price of instruments and the volume of trading,
and creates charts from that data to use as the primary tool. One major advantage of
technical analysis is that experienced analysts can follow many markets and market
instruments simultaneously.

Technical analysis is built on three essential principles:

1. Market action discounts everything! This means that the actual price is a
reflection of everything that is known to the market that could affect it, for example,
supply and demand, political factors and market sentiment. However, the pure
technical analyst is only concerned with price movements, not with the reasons for
any changes.

2. Prices move in trends - Technical analysis is used to identify patterns of market

behavior that have long been recognized as significant. For many given patterns

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there is a high probability that they will produce the expected results. Also, there are
recognized patterns that repeat themselves on a consistent basis.

3. 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.

Forex charts are based on market action involving price. There are five categories in
Forex technical analysis theory:

Indicators (oscillators, e.g.: Relative Strength Index (RSI)

Number theory (Fibonacci numbers, Gann numbers)
Waves (Elliott wave theory)
Gaps (high-low, open-closing)
Trends (following moving average)
Some major technical analysis tools are described below:

Relative Strength Index (RSI):

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. 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). 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).

Stochastic oscillator:

This is used to indicate overbought/oversold conditions on a scale of 0-100%. The

indicator is based on the observation that in a strong up trend, period closing prices
tend to concentrate in the higher part of the period's range. Conversely, as prices fall
in a strong down trend, closing prices tend to be near to the extreme low of the period
range. Stochastic calculations produce two lines, %K and %D that are used to

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indicate overbought/oversold areas of a chart. Divergence between the stochastic
lines and the price action of the underlying instrument gives a powerful trading signal.

Moving Average Convergence Divergence (MACD):

This indicator involves plotting two momentum lines. The MACD line is the difference
between two exponential moving averages and the signal or trigger line, which is an
exponential moving average of the difference. If the MACD and trigger lines cross,
then this is taken as a signal that
a change in the trend is likely.

Number theory

Fibonacci numbers:
The Fibonacci number sequence (1, 1, 2,3,5,8,13,21,34...) is constructed by
adding the first two numbers to arrive at the third. The ratio of any number to the next
larger number is 62%, which is a popular Fibonacci retracement number. The inverse
of 62%, which is 38%, is also used as a Fibonacci retracement number.

Gann numbers:
W.D. Gann was a stock and a commodity trader working in the '50s who
reputedly made over million in the markets. He made his fortune using methods that
he developed for trading instruments based on relationships between price
movement and time, known as time/price equivalents. There is no easy explanation
for Gann's methods, but in essence he used angles in charts to determine support
and resistance areas and predict the times of future trend changes. He also used
lines in charts to predict support and resistance areas.

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. An

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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. An up
gap is formed when the lowest price on a trading day is higher than the highest high
of the previous day. 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,
while a down gap is a sign of market weakness. A breakaway gap is a price gap that
forms on the completion of an important price pattern. It usually signals the beginning
of an important price move. A runaway gap is a price gap that usually occurs around
the mid-point of an important market trend. For that reason, 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.

Trends
A trend refers to the direction of prices. Rising peaks and troughs constitute an
up trend; falling peaks and troughs constitute a downtrend that determines the
steepness of the current trend. The breaking of a trend line usually signals a
trend reversal. Horizontal peaks and troughs characterize a trading range.

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, particularly in futures trading or a market with a strong up or down trend.
The most common technical tools:

Coppock Curve is an investment tool used in technical analysis for predicting bear
market lows. DMI (Directional Movement Indicator) is a popular technical
indicator used to determine whether or not a currency pair is trending.

Unlike the fundamental analyst, the technical analyst is not much concerned with any
of the "bigger picture" factors affecting the market, but concentrates on the activity of
that instrument's market.

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Fundamental analysis
Fundamental analysis is a method of forecasting the future price
movements of a financial instrument based on economic, political, environmental
and other relevant factors and statistics that will affect the basic supply and demand
of whatever underlies the financial instrument. In practice, 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.
Factors involved in price analysis: Supply and demand, seasonal cycles, weather and
government policy.

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.
These criteria often include the economic condition of the country that the currency
represents, monetary policy, and other "fundamental" elements.
Many profitable trades are made moments prior to or shortly after
major economic announcements.

What happened in 2008?

Sensex was crossed 21,000 levels in January and analysts predicted 25,000 levels
but Sensex fell to 7,800 in October. Experts are now talking about 7,000 targets in
2009. But todays it has been

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touch the point 14000 due to government stability.

2. Rupee strengthened to 39 against dollar and analysts like ICICI Kamat predicted
35 levels but rupee fell to 50 levels. Experts are now talking about 55 against dollar in
2009.

3. Crude Oil prices touched $147 per barrel and Goldman Sachs talked about $200
per barrel but crude oil in now trading around $45 levels. Experts are now talking
about $30 per barrel in 20094. Inflation moved to 13% and analysts talked
about 15% but inflation fell to 8% in December. Experts are now talking about
4% levels in 2009. They are actually now talking about deflation.

5. Indian GDP grew at 9% in 2007-08 and analysts predicted about 10% growth
in 2009. Experts are now talking about 7% GDP growth in 2008-09 and 5% GDP
growth in 2009-10.

6. Commodities traded around all time high levels in June, 2008 but they collapsed
to 2003 levels in December, 2008. Companies are now shutting down
plants and are removing employees due to lack of demand and piling up of
inventories.

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7. Investment banking is the most sought after industry in early 2008. They are now
either disappeared or merged with banks.

8. Real Estate prices reached stratospheric levels in early 2008 but investors
bought them as if there will be no land available fo purchase in 2009. They are now
announcing bonuses and free offers to attract buyers. Many real estate stocks were
corrected by 70-90% in this year alone. We will hear some bankruptcies in 2009 in
this sector. DLF and Unitech will cut prices by 30% in 2009.

Investment lessons from 2008:

1. Unlike in past, stock markets now become more dynamic, more

volatile and more unpredictable due to more global integration of economy and
money flows.

2. Stock market investors will never react normally – they will either overreact or
under react to the economic or political events. One should take into consideration
this psychological aspect along with business fundamentals in arriving at price target.

3. As I said in my previous posts, stock markets always move much ahead of real
economy. If real economy will suffer in early 2009, stocks fell by October, 2008. If
economic conditions will improve by early 2010, stocks will rise by late 2009.

4. 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. 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. Significant falls or rises do not occur in slow motion. They are

steep and severe.

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6. Never follow herds. Believe in your research and gut feeling. Just see what
happened to investors in Reliance Power IPO .

7. Biggest investment lesson: When investors are in panic mood, even good
companies with strong growth prospects also fall along with bad overvalued stocks.

Significant statements:

1. RBI Governor: “The global economic crisis is turning out to be deeper and longer
than we had earlier expected, the impact on India is also turning out to be stronger
than we had earlier expected.” This is the frank statement from Subbarao. How
long Government will deceive people on this unmanageable issue? Biggest problem
with this crisis is no one in the world knows about magnitude and duration of financial
crisis. According to RBI Governor, 2009-10 may be a more difficult year.

2. Commerce Minister: “Government will announce second stimulus package in the

next week. Textiles, Agriculture and Construction are the priority sectors for
Government in the next package.”

3. Jack Welch (former GE Chairman): “The terror strike in Mumbai could well tilt
the focus of foreign investors towards neighboring China. This is the perception of
foreigners about India. Many investors will be thinking about tilting the balance to
China. How India’s leaders respond to the Mumbai attacks will tell the business world
what it wants and needs to know. Not just whether to pull back from India but how
risky pushing forward will be.”

4. Rakesh Jhunjhunwala: “India will see the mother of all bull runs in the next 4 or
5 years, boosted by double-digit economic growth and increased investment by
domestic investors, including pension and insurance funds.”

5. World Bank: “The financial crisis is now likely to result in the most serious
recession since the 1930s.”

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6. International Energy Agency (IEA): for the first time in 25 years, demand for
crude falls. This is the first drop for crude oil demand since 1983.

Significant statistics:

1. Reuters poll: India's economy is expected to grow at its slowest pace in six years
in the fiscal year to March 2009. Indian GDP growth will be around 6.8% in 2008-09
and 6.2% in 2009-10. Indian economy never grew less than 7.5% in the last 5 years.
According to World Bank, India will grow by 5.8% in 2009.

It estimates for Indian GDP: 6.2% in 2008-09, 5% in 2009-10 and will be around
7% in 2010-11.

2. New claims for unemployment benefits reached their highest level (5, 73,000) in 26
years in USA. These job losses will have cascading effect on real
economy. More than 20 lakh Americans will lose jobs in 2009 and
unemployment rate will touch 9% level in 2009.

3. McKinsey report: United States credit losses may top $3 trillion. These losses will
increase if another major asset class will collapse

4. Goldman Sachs: China GDP growth for 2009 is around 6%. Shocking! China
will grow at 9% in 2010 if Government takes proper simulative decisions. India will be
in election mood when we need these measures.

5. World Bank: Global trade will fall for the first time since 1982. World economy will
grow by 0.9% in 2009 and inflows to developing countries will fall by 50%.

6. Asian Development Bank (ADB): Growth rates of China and India will be at
8.2% and 6.5% respectively in 2009. India needs particular attention, given
its weaker fiscal position.

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7. China: Exports fell by 2.2% in November, the first decline since June 2001 - the
largest year-over-year monthly decline since April 1999.

8. DLF and Unitech may lower property prices by 30% in mid-2009 to stimulate
buyers.

Positive Stock market news:

1. Government stability is big positive reason for sensex.

2. Global Telecom Companies are planning to buy 20-25% stake in Reliance

Communications. R-Com stock lost 70% of value in 2008. Anil Ambani family holds
67% stake in the company. This deal is beneficial for investors as only 12% of shares
are available for trading after this purchase in the secondary market. Promoter will not
reduce his holding.

3. Manpower survey: India is the second most optimistic employment market in the
world but there will freezing in hiring in the next 3 months. IT and Hospitality sectors
are the worst affected while Telecom is the most optimistic one.

FCCB shocks: Foreign currency convertible bonds (FCCBs?) of many companies

will be due for repayment in the next 3 years. As stock markets are unlikely to recover
in the next 12-15 months, it is interesting to see how promoters will clear their dues.
We may hear some shocking news on this front in the next 2 years.

NPA shocks:Many people are underestimating the impact of Non Performing

Assets (NPAs). NPAs will affect in 2 ways. 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. Only positive
aspect is many PSU banks reported fall in NPAs in 2008 over 2007 except SBI and
IOB.

NPA statistics:

NPAs of ICICI Bank in 2007: Rs 5,930 crore.

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NPAs of ICICI Bank in 2008: Rs 9,500 crore..

Interesting statistics about Asian and World economies:

1. World Bank estimates:

A. November, 2008: World economy will grow by 2.2% in 2009.

B. December, 2008: World economy will grow by 0.9% in 2009.

2. ADB estimates about Asian economy in 2009:

A. September, 2008: Asian economy will grow by 7.2% in 2009.

B. December, 2008: Asian economy will grow by 5.8% in 2009.

3. ADB estimates about Asian economy in 2008:

A. September, 2008: Asian economy will grow by 7.5% in 2008.

B. December, 2008: Asian economy will grow by 6.9% in 2008.

4. Current P/E of Sensex: 10.

A. P/E of Sensex in 2008 economic slowdown: 9.5

B. This is a much severe crisis than 2001 slowdown.

Effect of fluctuation on Indian stock market

Nothing actually, the economy is as sound as it was in the boom time. The
companies are as profitable as they were a few days ago. Yet, the market crashed
because the Government tried to instill some sort of regulation in it.

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

83
Investors). The cause of concern for the Government was that in this major share of
FIIs, more than half was in the form of hot money being invested into the market by
anonymous investors who pump money into the market by utilizing the Participatory
Note (PN) facility. All those foreign investors who are not registered with the SEBI
(Stock Exchange Board of India), the regulatory body for stocks in India, can not
directly deal in buying/selling of sticks. So they took a sort of permission from
registered FIIs by buying Participatory Notes (PN) from them in exchange of dollars,
which ultimately allows them trade in the market.

Though, this concept of allowing anonymous investors in the market broaden the
reach of the market, it also ensure free entry of dollars into Indian
economy as well as increase the percentage of hot money in the market. The
hot money is that kind of money which is invested only for a short time to make some
quick buck. It is not invested with a long term mindset. Since the continuous inflow of
dollar into Indian economy is making the Indian currency (Rupee) stronger and thus
making the export costlier, the Government was looking for someway to curb this
inflow of dollars. Making the availability of Participatory Notes some difficult for foreign
investors was one step Government thought would help control the inflow of dollars.
So a few days ago the SEBI contemplated on a draft policy to make the issuing of PN
difficult for FIIs. This was the step which gave a jolt to the buying spree of FIIs. As
people found that it would be difficult to trade in the market in future owing to non-
availability of PN, they started exiting form the market by selling their stock.

Result- the market fell more than a 1000 point in a few hours and had to shut down
for some time. 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.
This news will from the Business standard give you some detail of this exercise done
by the Government.

As of now the market is still fluctuating and is yet to be stabilized. However, I think
that in all probability, it will continue it’s upward swing despite such momentary
crash. 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.

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With the above note, 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, soon the richest person in the world will be
an Indian. On the last count (as per a leading newspaper report) Mukesh Ambani,
the chairman of Reliance group was earning Rs 40 Lakhs ($ 100000) per minute.
Yes you read it write. $100000 per minute! Though it has much to do with his huge
and expanding empire of Reliance industries, it is also because of the appreciation in
the price of the shares of Reliance industries.

Secondly most investors, who are in the market for quite sometime, are going to
become really rich. The word crorepati (multimillionaire) can soon become a common
thing in India all thanks to share market.

However, there is a word of caution here. 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. Once they find a place which offer
better return on their investment than India, they will immediately shift there.
Though, there is only a remote possibility of that as of now, you never know what
can happen in future. That’s why most expert are advising people to stick to their
long-term investment plan and don’t make any move in haste.

Owing to stock market boom, 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.)
The investment being made by FIIs in Indian share market has resulted in to a huge
inflow of dollars into the economy. The RBI is facing 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. The Rupee is becoming
stronger to dollar thus making imports cheaper and export costlier. Some of our major

85
export oriented industries such as Softwares and textiles are feeling the heat every
day. 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. Ironically, 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. (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. However, the continued depreciation of dollar is also a cause of deep
concern which needs to be addressed.

The last but not the least is the overvaluation of many stocks in the market. Some
experts have opined that market is trading at 22 to 23 times of actual earning and no
one can justify these valuations.

In nutshell if I am to summarize this boom of stock market, 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. As I explained in my earlier article, a increase in
interest rate in US may reverse this flow of FIIs. Or we may see emergence of a new
market with great potential on some other place on earth. All these things, if happen,
can put a break on this boom.

Recession
A recession is a decline in a country's gross domestic product (GDP) growth
for two or more consecutive quarters of a year. A recession is also preceded by
several quarters of slowing down 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. An economy typically expands for 6-10 years and tends to go into a recession
for about six months to 2 years. A recession normally takes place when consumers
lose confidence in the growth of the economy and spend less. This leads to a
decreased demand for goods and services, which in turn leads to a decrease in
production, lay-offs and a sharp rise in unemployment. Investors spend less as they
fear stocks values will fall and thus stock markets fall on negative sentiment.

86
Stock markets & recession

The economy and the stock market are closely related. The stock markets
reflect the buoyancy of the economy. In the US, a recession is yet to be declared by
the Bureau of Economic Analysis, but investors are a worried lot. The Indian stock
markets also crashed due to a slowdown in the US economy. The Sensex crashed by
nearly 13 per cent in just two trading sessions in January. The markets bounced back
after the US Fed cut interest rates. However, stock prices are now at low ebb in India
with little cheer coming to investors. When the global economy has been cooling
down, and the financial sector in particular has been heading from one cold shower to
the next, it was inevitable that stock markets around the world would start catching
the chill. The way in which Asian stock prices responded last week to the fall of the
Dow Jones and Nasdaq indices by 4 per cent, hitting a 10-month low, has
also punctured a hole in the decoupling argument (which said Asia would not be
hit by an America-based problem) that had become fashionable in recent weeks.
Investors around the world have taken note of the fact that the broad-based S&P 500
index is at a 16-month low, along with European stocks. And investors seem to have
little faith in the Bush rescue plan's ability to ward off a recession in the US. The Fed
will almost certainly respond with sharp cuts in interest rates towards the end of
the month, but the market has already discounted for that. Indian markets worst
hit It is interesting that Indian markets were hit the most, among all Asian markets.
This may have been because the correction in the overheated Chinese stock market
began some weeks ago. Investors will also have noticed that the third-quarter
corporate numbers show significant deceleration in both sales and profit growth,
when compared to the same quarter a year earlier. When coupled with the data
showing that the export target for the year will be missed by a wide margin, and that
the industrial sector has suffered a sharp slowdown, it was inevitable that stock prices
would have to come off their dizzy highs. What began with profit-booking and
unwinding of long positions cascaded on Friday into a 3.5 per cent decline in the
Sensex? Foreign institutional investors had moved to the sidelines in the secondary
markets even earlier, and FIIs have been net sellers to the tune of Rs 2,200 crore (Rs
22 billion) in January. Also relevant was the Reliance Power IPO, which pulled in a

87
record amount of application money (Rs 1,15,000 crore (Rs 1,150 billion)). Even if a
third or a fourth of that was being garnered by sale of stocks, it is a large enough sum
for the market to go into correction mode. There is no doubt that valuations had
become expensive. Even after the 10 per cent correction from the market's peak, the
Sensex trades at a trailing P/E multiple of 24.5, which is not cheap in anyone's book.
Yet, buying may soon begin A global liquidity surplus had certainly contributed to
momentum buying. The question is whether the correction that has occurred so far
is enough for fresh buying to emerge, or whether a further fall is required before
value-based buying starts. On a forward basis, the Sensex trades at an FY09
estimated P/E of 18. The floor therefore would probably be a Sensex level of 17,000-
odd -- which would mean wiping out the gains of the past three months, no mor e.
Provided the general economic and corporate news does not get worse than has
already been anticipated, fresh buying cannot be very far away.

Impact of a US recession on India

A slowdown in the US economy is bad news for India.

Indian companies have major outsourcing deals from the US. India's exports to the
US have also grown substantially over the years. The India economy is likely
to lose between 1 to 2 percentage points in GDP growth in the next fiscal year.
Indian companies with big tickets deals in the US would see their profit margins
shrinking. The worries for exporters will grow as rupee strengthens further against the
dollar. But experts note that the long-term prospects for India are stable. A weak
dollar could bring more foreign money to Indian markets. Oil may get cheaper brining
down inflation. A recession could bring down oil prices to $70. Between January 2001

88
and December 2002, the Dow Jones Industrial Average went down by 22.7 per cent,
while the Sensex fell by 14.6 per cent. If the fall from the record highs reached is
taken, the DJIA was down 30 per cent in December 2002 from the highs it hit in
January 2000. In contrast, the Sensex was down 45 per cent. The whole of Asia
would be hit by a recession as it depends on the US economy. Asia is yet to totally
decouple itself (or be independent) from the rest of the world, say experts.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),
reminding investors that there is no one-way bet on the stock market.

Factors.

One, there is a change in the global investment climate. 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. Analysts are now expecting a cut in US
interest rates. Hedge funds and FIIs could have been the biggest sellers in the Indian
markets, booking profits and making the most of the unprecedented Bull Run that has
dominated the Indian stock market for a long time now. The current volatility is also
linked to global bourses. There is a big correlation among global markets. The
presence of hedge funds across asset classes, along with increased
global movement of capital, has increased event-related volatility.

Volatility in commodities markets has also significantly affected equity markets. A

combination of global and local factors is affecting this market, said Mihir Vora of
HSBC Mutual Fund, on NDTV Profit. On the global front, other emerging markets
were down nearly 20% so India is playing catch-up, he said. On the local front there
has been a huge build-up in derivatives positions and volatility led to margin calls.
Also many IPOs have sucked out liquidity from the primary market into the
secondary market, said Vora. At current levels it would be a buy call and we would
not advise investors to wait to catch the bottom, he added. Analysts expect the

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 markets to continue to be choppy for a while till global liquidity and
commodity prices settle in. With the markets falling, a technical correction in the
derivatives segment has perpetrated a larger fall. The Sensex can fall another 10-
15%, said Adrian Mowat of JP Morgan, on NDTV Profit. India is trading at 65%
premium to emerging markets and India is playing catchup with other declining global
markets, he added. There is no need to get very pessimistic that this is the end of
equity investing in India, he said. This could be seen as a buying opportunity and we
will re-visit market valuations after the correction, he added.

Weakness:
Strength:
High return High risk
Large investmentBased on the fluctuation. It becomes high loss when market goes down.
re capital for expanding the business
Secure the future losses Can’t predict future

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 Threat:
Opportunity: Recession

invest but don’t invest due to insufficient knowledge.

New government

ing new opportunities and new options to invest. Bubble burst

Fluctuates dollar prices

Data Analysis and Interpretation

Data Interpretation- A questionnaire was prepared for the purpose of getting
feedback from participators Trader of Stock or Derivatives Instruments regarding
“Stock Market”. 100 people (trader of stock and derivatives instrument) are selected
from different area and were distributing the questionnaire from the purpose of study.

Data Analysis- Data analysis of the data is done as per the survey finding. The data
is representing graphically in percentage.

The percentage of the people opinion were analyzed and expressed in the form of
chart and have been placed in the next few pages.

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Analysed and Interpreted the Data.

Q1. Tell us something about your overall stocked market research experience?

Chosen in best

I've been trading for 2 decades and the markets are a lot more complex now

than they were just even 3 years ago. I would not advise trading if you don't have full

time attention, the right technology, understand the basics of fundamental and

technical analysis, a basic education in market history, market psychology, a ton of

experience with depth of understanding on how markets really work, and the capital

to play in this big game.

Q2. Do you think stock market research is essential for investing your money to earn
high returns?

S. No Opinion No. of Respondent Percentage

1 Yes 75% 75
2 No 25% 25

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 Thinker
25

Yes
No

75

75% people said that stock market research is essential for investing your money to
earn high returns and 25% people said in against

Q3. How long have you been indulged into the stock market research and this
business?

S. No Opinion No. of Respondent Percentage

1 More than a year 60 60%
2 More than three year 20 20%
3 More than five years 10 10%
4 More than seven years 05 05%
5 More than this 05 05%

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 Indulged in Stock Market
10 5
5
More than a year
More than three year
More than five years
More than seven years
More than this
20 60

60% people indulged into the stock market research and this business more than a
year,

20% people indulged into the stock market research and this business more than
Three year,

10% people indulged into the stock market research and this business more than
five year,

5% people indulged into the stock market research and this business more than
Sever year,

5% people indulged into the stock market research and this business more than this,

Q4. Which of the following mentioned factors play an important role while you finalize
a stock company?

S. No Opinion No. of Respondent Percentage

1 Overall reputation 45 45%
2 Offered stock market term & conditions 25 25%
3 Capability of affecting investments 20 20%
4 Current stock quotes 05 05%
5 Other factor 05 05%

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 Factors play an important role

5
5 Overall reputation
20 Offered stock market term &
45 conditions
Capability of affecting
investments
Current stock quotes
Other factor

25

45% people said Overall reputation play in important role while you finalize a stock
company,

25% people said Offered stock market term & conditions play in important role while
you finalize a stock company,

20% people said Capability of affecting investments play in important role while you
finalize a stock company,

5% people said Current stock quotes play in important role while you finalize a stock
company,

5% people said mentioned Other factor

Q5. You purchase the shares to:

S. No Opinion No. of Respondent Percentage

1 Invest your money wisely 20 20%
2 For long term money investment 23 23%
3 For high end returns 44 44%
4 To invest money regularly 13 13%

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 13 20

Invest your money wisely

For long term money investment
For high end returns
To invest money regularly
23
44

20% people said purchase the shares for Invest your money wisely

23% people said purchase the shares for long term money investment

44% people said purchase the shares for high end returns

13% people said purchase the shares for To invest money regularly

Q6. Which of the following risk factors disturb the stock market continuously?

S. No Opinion No. of Respondent Percentage

1 Corporate drawn 25 25%
2 Market value fluctuations 40 40%
3 Economic breakdown 35 35%

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 Factors disturb the stock market continuously

25
35

Corporate drawn
Market value fluctuations
Economic breakdown

40

25% people said Corporate drawn factors disturb the stock market continuously

40% people said Market value fluctuations factors disturb the stock market
continuously

35% people said Economic breakdown factors disturb the stock market continuously

Q7. Which of the methods do you use to conduct a stock market research before
investing money into shares?

S. No Opinion No. of Respondent Percentage

1 Internet 30 30%
2 Friend’s advice 35 35%
3 News paper 15 15%

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 4 Television 15 15%
5 Other 10 10%

10 30
15

Internet
Friend’s advice
News paper
Television
15 Other

35

30% people use the Internet to conduct a stock market research before investing
money into shares, 35% people use the Friend’s advice to conduct a stock market
research before investing money into shares, 15% people use the News paper to
conduct a stock market research before investing money into shares, 15% people
use Television to conduct a stock market research before investing money into
shares, 10% people use other elements to conduct a stock market research before
investing money into shares

Q8. Do you deal in Derivative instruments?

S. No Opinion No. of Respondent Percentage

1 Yes 80 80%
2 No 20% 20%

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 20

Yes
No

80

80% people deal in Derivatives instruments

20% people not deal in Derivatives instruments

Q9.Would you like to give any suggestions regarding improvement of trading in

Stock Market?

Suggestion Chosen in best

 Do not overtrade.

 Do not trade on rumors.

 Do not trade in all stocks of one sector.

99
  It's better to buy the wrong stocks at the right time than to buy the right stocks
at the wrong time.

 Trade with the trends rather than trying to pick tops and bottoms.

 As long as a market is acting right, don't rush to take profits.

 Don't buy something because it is low priced.

Money cannot be made everyday from the markets

Conclusion:

Through this research we can conclude that:

 Stock market fluctuates by the external environment.

 Stock market is all about future prediction.

 Stock market is very sensitive market.

100
  It is based on “high risk and high return.”

 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, 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.

Suggestion

Stock Investing Tips & Ideas

Learn how to invest in the Stock market. If you are a beginner or an expert,
you can find basic and advanced trading tips and ideas on stock investing in this site.

Before investing in the stock market, you'd better learn some tips about how to invest
in the market. In other words understanding of the market is required.

101
Beginner Investing Tips and Ideas
(How to Begin):

Do you know? Many people trade in the stock market with the same chance, but
few percent of them make money in stocks. Many of these people, who don't earn
enough return, have enough information about investing in the stock market. They
make common mistakes and you should avoid them by having a high level of market
understanding.

There are two analytic methods for investing in the stock market, technical and
fundamental analysis.

Technical analysis is based on prices and volume. Technical investors believe price
and volume interpret everything in the market. They study charts for forecasting of
future stock price or financial price movements.

For learning technical analysis academic knowledge isn't required, with every level of
knowledge you can learn it.

Fundamental analysis is a stock valuation method that uses financial and economic
analysis to predict the movement of stock prices.

To begin investing in the stock market, you must choose a stock broker. A stock
broker performs transactions in financial instruments on a stock market as an agent
of their clients.

If you are a beginner see: Beginners Guide

Advanced Investing Tips and Ideas:

102
Learn more Technical Tips:
you can learn about Fibonacci Sequences, Elliott Wave Theory, Dow Theory and
other stock trading strategies.

Stock Market Risk:

What's your understanding and Perception of risk? How do you recognize risk? Is
risk Quantifiable? How to manage risk?

The concept of risk and managing it is a complicated part in investing money.

Automate your Trading:

You can learn and use trading software to automate your stock investing strategy.
Many investors use stock trading software to control their emotions and to enable
them to focus on their stock trading strategy.

There are many other advantages of using trading software and systems, such as
saving time and managing your risk.

Enjoy making money in stocks. We hope you improve your understanding of the
stock market by reading and learning these Tips and Ideas.

Four steps to riches

We wanna know that something we require for achieving to rich:

1. A profit-optimizing investment philosophy is the first step for reaching to rich, the
elements of which include:

a) Trading- as opposed to investing is the first part toward rich

103
b) Maximization of percent per year yield on each trade is the second part to rich

c) Maximization of percent of time invested is the third part to rich

d) Minimization of the trading interval is the fourth part to rich

e) Optimization of transaction timing is the fifth part to rich

2. Fast and simple issue selection for getting to rich

3. Fast and simple transaction-timing analysis is the other steps to rich

4. Accurate and timely stock price tracking is the last steps to rich

Bibliography

Text books

 The Stock Market-The Stock Market - Rik W.Hafer, Scott E. Hein, R.

W.Hafer work package no. 6,7 & 8
 Investment Analysis and portfolio management-M Raghunathan,
Madhumati page no. 23,24,26,28,200,209

104
 Journals and magazines

o JARN, Published Feb 2009

 Business today 2008-09

 Business standard 2008-09

Websites:

o www.tdd.ltslnewsStock_ExchangesStock.htm

o www.stockmarkets.com

 www.bseindia.com
 http://econ.worldbank.org
 www.icai.org
 http://en.wikipedia.org -
 www.tradingstock.com
 The economics times
 http://www.bankofbaroda.com/finance
 economictimes.indiatimes.com/Market

Annexure

Questionnaire
Sample Stock Market Research Questionnaire:

Name of the participant: ________________

Age: ___________

105
Gender: _____________

Occupation: ______________

Contact number: _____________________

Date: ____/____/____

Survey on the Study of Indian Stock Market

Dear Respondent,

We are conducting a survey on The Indian Stock Market. Your free and frank opinion
would we very valuable in the conducting the survey. Pleas answer the following
question with a sign of right in the appropriate boxes:

Q1. Tell us something about your overall stocked market research experience?

______________

Q2. Do you think stock market research is essential for investing your money to earn high
returns?

 Yes ( )
 No ( )

Q3. How long have you been indulged into the stock market research and this business?

 More than a year ( )

 More than three year ( )
 More than five years ( )
 More than seven years ( )
 More than this ( )

Q4. Which of the following mentioned factors play an important role while you finalize a
stock company?

 Overall reputation ( )
 Offered stock market term & conditions ( )
 Capability of affecting investments ( )

106
  Current stock quotes ( )
 Other, please write: ________________

Q5. You purchase the shares to:

 Invest your money wisely ( )

 For long term money investment ( )
 For high end returns ( )
 To invest money regularly ( )

Q6. Which of the following risk factors disturb the stock market continuously?

 Corporate drawn ( )
 Market value fluctuations ( )
 Economic breakdown ( )

Q7. Which of the methods do you use to conduct a stock market research before investing
money into shares?

 Internet ( )
 Friend’s advice ( )
 News paper ( )
 Television ( )
 Other, please mention: __________________

Q8. Do you deal in Derivative instruments?

Yes - ( ) No - ( )

Q9.Would you like to give any suggestions regarding improvement of trading in

Stock Market?

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108