An Analysis of Volatility in Stock Market (With Reference to 100 Scripts of NSE & BSE From Jan 1999 to June 2009)

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A

PROJECT REPORT

ON

“An Analysis of Volatility in Stock Market (with reference to 100

Scripts of NSE & BSE from Jan 1999 to June 2009)”

Supervisor:

Name: Mr. Amit GogiaDesignation: Sales Manager

Religare Security Kaithal

Submitted by:

Name of Student:Vikash Bhanwala

Roll No.-1009004

SARSWATI INSTITUTE

OF

MANAGEMENT & TECHNOLOGY

TEEK (KAITHAL)

COURSE- MBA

SESSION-2009-2011



1.1Preface

For any management course, summer training is essential and important part of

curriculum of MBA degree. It is an exposure to corporate environment and help MBA

aspirants to get acquainted with organizational norms, procedure, practices, ethics, and

culture. It also gives an insight of actual functioning of the organization. It helps the

student to understand and to correlate with theoretical aspect with practical reality.

It was the great experience to work with RELIGARE SECURITIES Ltd. During my

summer project which has helped me to improve my communication and interpersonal

skills and also give me the better understanding of the subject Demat Account.



1.2 Acknowledgement

I am grateful to make this report under my summer project for duration of two months in

course of “Master In Business Administration”. I have done my project work in

“RELIGARE SECURITIES Ltd.” at ‘KAITHAL’.

I would like to express my gratitude toward “RELIGARE” company for giving me this

opportunity to work on a project at one of the prestigious and professional organization.

I would like to thank all the people who directly or indirectly helped me during my

summer project and helped me in making this report. Mr. BHARAT KHURANA, Branch

Manager, Religare Securities Ltd. Kaithal :- He has given me valuable information about

stock market and depositaries. Mr.Amit Gogia, Relationship Manager, Religare

Securities Ltd. :- He helped me in my marketing research and other part of project. Prof.

Pooja Bansal, Prof. Nidhi garg has given their valuable guidance in making of this

report.

In the last, I would like to thank all my colleagues in Religare Securities Ltd, College

who has helped in making of this report. Without the help of above mentioned people

making of this report could be very difficult for me.



1.3 Declaration

I hereby declare that this report on “An analysis of volatility in stock market(with

reference to 100 scripts of NSE & BSE from Jan 1999 to June 2009)” has been written

and prepared by me during the academic year 2008-2010. This project was done under

the able guidance and supervision of Mr. Bharat Khurana, Branch Manager, Mr. Amit

Gogia, Sales Manager, Religare Securities Ltd., Kaithal) and Prof. Pooja Bansal.,

Faculty, Saraswati Institute of Management & Technology. I also declare that this project

is the result of my own effort and has not been submitted to any other institution.



Contents

1. An introduction to Religare Securities

2. An over view of Capital Market

3. Objective of the Project

4. Role and importance of Stock Exchange

• Functions of Stock Market

• Development and trend of Indian Stock Market

• Globalization on Indian Stock Market

5. Securities Exchange Board of India(SEBI) and functions

6. Concept of Risk & Return and Beta

7. Overview and reasons of Volatility

8. Review of related literature

9. Research Methodology

10. Analysis and Results

10. Conclusion

11. Bibliography





INTRODUCTION TO RELIGARE SECURITIESLTD.

Religare, a Ranbaxy promoter group company, is one of India’s largest and fastest

growing integrated financial services institutions. The company offers a large and diverse

bouquet of services ranging from equities, commodities, insurance broking, to wealth

advisory, portfolio management services, personal finance services, Investment banking

and institutional broking services. The services are broadly clubbed across three key

business verticals- Retail, Wealth management and the Institutional spectrum. Religare

Enterprises Limited is the holding company for all its businesses, structured and

being operated through various subsidiaries.

Religare’s retail network spreads across the length and breadth of the country with its

presence through more than 900 locations across more than 300 cities and towns.

Having spread itself fairly well across the country and with the promise of not resting on

its laurels, it has also aggressively started eyeing global geographies



Recently, Religare has also partnered with AEGON, one of the largest insurance and

pension companies globally, to offer Life Insurance and Mutual Fund products in India.

The venture shall combine the international expertise of AEGON with the distribution

strength of Religare.

Vision & Mission of Religare Securities Ltd.

Vision:-

To build Religare as a globally trusted brand in the financial Services domain and present

it as the ‘investment of India`

Mission:-

Providing financial care driven by the core values of diligence and transparency.

Brand Essence:-

Providing financial service care

Management profile:-

Mr. Sunil Godhwani- CEO & Managing director,

Religare Enterprises Ltd. He is also a director in subsidiary business including

Religare Securities Ltd., Religare Commodities Ltd. and Religare Insurance Broking Ltd.

Mr. Anil Saxena:-Group chief operating officer, Religare Enterprises Ltd.

Mr. Anil Saxena (Group Chief Finance Officer),



Aged 38 years, carries the overall responsibility for management and supervision of our

group and has played a key role in driving its growth. He joined RSL on August 1, 2001.

RSL, at that relevant point of time, was a subsidiary of Fortis Financial Services Limited,

our Promoter Group Company. He received a bachelor’s degree in commerce from the

University of Delhi.

He is a member of the Institute of Chartered Accountants of India as well as the Institute

of the Cost and Works Accountants of India. Prior to joining us, he was at Kotak

Securities Limited as their Vice-President. In the past, he has also worked with Fortis

Financial Services Limited and R. Singhania & Co. He has over 15 years of experience in

the financial services industry.

Board of Directors - Religare Enterprises Limited

Mr. Malvinder Mohan Singh - Chairman (Non Executive)

Mr. Sunil Godhwani - CEO & Managing Director

Mr. Shivinder Mohan Singh - Non Executive Director

Mr. Harpal Singh - Non Executive Director

Mr.Deepak Ramchand Sabnani - Independent Director

Mr.Padam Bahl - Independent Director

Mr.J.W. Balani - Independent Director

Mr. Baldev Singh Johal - Independent Director

Mr. R. K. Shetty - Alternate to Mr. J. W. Balani

Capt.G.P.S.Bhalla - Alternate to Mr. Deepak Sabnani



Establishment of Religare Securities Ltd.:-

Religare Enterprises Limited establish on may 2006 by Ranbaxy Promoter group

company .

The group include following:



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Brand Identity

Name:-

Religare is a Latin word that translates as 'to bind together'. This name has been chosen to

reflect the integrated nature of the financial services the company offers. The name is

intended to unite and bring together the phenomenon of money and wealth to co-exist and

serve the interest of individuals and institutions, alike.

Symbol:-

The Religare name is paired with the symbol of a four-leaf clover. The four-leaf clover is

used to define the rare quality of good fortune that is the aim of every financial plan. It

has traditionally been considered good fortune to find a single four leaf clover

considering that statistically one may need to search through over 10,000 three-leaf clovers to even find one four leaf clover

Each leaf of the four-leaf clover has a special meaning in the sphere of Religare.

1st Leaf :-

The first leaf of the clover represents Hope. The aspirations to succeed the dream of

becoming, Of new possibilities. It is the beginning of every step and the foundations on

which a person reaches for the stars.

2nd Leaf :-

The second leaf of the clover represents Trust. The ability to place ones own faith in

another. To have a relationship as partners in a team. To accomplish a given goal with the

balance that brings satisfaction to all not in the binding but in the bond that is built.

3rd Leaf:-

The third leaf of the clover represents Care. The secret ingredient that is the cement in

every relationship. The truth of feeling that underlines sincerity and the triumph of

diligence in every aspect. From it springs true warmth of service and the ability to adapt

to evolving environments with consideration to all.

4th Leaf:-

The fourth and final leaf of the clover represents Good Fortune. Signifying that rare

ability to meld opportunity and planning with circumstance to generate those often

looked for remunerative moments of success.



Investment Banking

We provide innovative, integrated and best-fit solutions to our corporate customers. It is

our continuous endeavor to provide value enhancement through diverse financial

solutions on an ongoing basis, through offerings like Corporate Debt, Private Equity,

IPO, ECB, FCCB, GDR/ADR etc.

Investment Banking with Religare offers the following services:-

Corporate Finance:-

We focus on finding right and relevant partners for our clients, who not only help in

adding value but also improve the future valuation of the organization. We specialize in

structured financing and providing advisory services related to financial planning,

modeling and advising on financial requirements.

Corporate finance products offered by us:-

Placement of Debt

Syndication of Domestic Loan / Foreign Currency Loan

Securitization

Debt Swap & Loan Restructuring

Short Term Corporate Debt

Working Capital (Cash Credit & Short term Loan)

Capital Market Instruments

Overseas Acquisition

Placement of Equity (Private Equity)

Both for listed and unlisted companies

Merchant Banking

IPO/FPO/RIGHTSMergers & Acquisitions

Corporate Advisory Services

ADR/GDR/FCCB

BUY BACK OF SHARES



R-ALLY

Trading in Equities with Religare truly empowers you for your investment needs. A

highly process driven, diligent approach backed by powerful Research & Analytics and

one of the “best in class” dealing rooms ensures that you have a superlative experience.

Further, Religare also has one of the largest retail networks, with its presence in more

than 900 locations across more than 320 towns & cities. This means, you can walk into

any of these branches and connect to our highly skilled and dedicated relationship

managers to get the best services. You could also choose to enjoy the freedom to execute

your own trade through our online mechanism.

International Advisory

International Advisory Fund Management Services (AFMS)

- A new horizon for international investments

We provide our wealth clients an opportunity to invest in international financialinstruments (currently limited to the US). Equities, Mutual Funds and Debts are

some of the key instruments available and the clients have the option to choose

from various asset allocation modules.

Why Invest Overseas?

Avenues for enhancing returns, minimizing risk and portfolio diversification

Global outreach of opportunities Pre-approved route for resident individuals to invest

(Healthy Govt. Patronage and favorable regulatory developments)



ON LINE TRADING BY RELIGARE SECURITIES

LTD.

On line investing will never be the same .Trade rewards at Religare on line .A unique 360

degree portal that offers not just an enriched investment experience but also reward each

time you invest

.

Now can reward points each time you trade in Equities and Commodities or invest in

mutual funds and your favorite IPO’s with us through our highly sophisticated and

customized trading platform R-ACE (Religare Advanced Client Engine) .You can start

redeeming your reward points against our list of attractive Gift Vouchers and Offers . So

join the revolution! Enrich your experience of investing online and open yourself to a

whole new world of rewards and goodies.

All this with a host of revolutionary features, will surely change the way you invest

online.



PORTFOLIO MANAGEMENT SERVICE (PMS)

Religare offers PMS to address varying investment preferences. As a focused service,

PMS pays attention to details, and portfolios are customized to suit the uniquerequirements of investors.

Religare PMS currently extends five portfolio management schemes, viz Panther,

Tortoise, Elephant, Caterpillar and Leo. Each scheme is designed keeping in mind the

varying tastes, objectives and risk tolerance of our investors.

Investment Philosophy

We believe that our investors are better served by a disciplined investment approach,

which combines an understanding of the goals and objectives of the investor with a fine

tuned strategy backed by research.

• Stock specific selection procedure based on fundamental research for making

sound investment decisions.

• Focus on minimizing investment risk by following rigorous valuation disciplines.

• Capital preservation.

• Selling discipline and use of Derivatives to control volatility.

• Overall to enhance absolute return for investors.

Our Schemes:-

Panther:-

The Panther portfolio aims to achieve higher returns by taking aggressive positions across

sectors and market capitalizations. It is suitable for the “High Risk High Return” investor

with a strategy to invest across sectors and take advantage of various market conditions.



Tortoise:-

The Tortoise portfolio aims to achieve growth in the portfolio value over a period of time

by way of careful and judicious investment in fundamentally sound companies havinggood prospects. The scheme is suitable for the “Medium Risk Medium Return” investor

with a strategy to invest in companies which have consistency in earnings, growth and

financial performance.

Elephant:-

The Elephant portfolio aims to generate steady returns over a longer period by investing

in Securities selected only from BSE 100 and NSE 100 index. This plan is suitable for the“Low Risk Low Return” investor with a strategy to invest in blue chip companies, as

these companies have steady performance and reduce liquidity risk in the market.

Caterpillar:-

The Caterpillar portfolio aims to achieve capital appreciation over a long period of time

by investing in a diversified portfolio. This scheme is suitable for investors with a high

risk appetite. The investment strategy would be to invest in scrips which are poised to get

a re-rating either because of change in business, potential fancy for a particular sector in

the coming years/months, business diversification leading to a better operating

performance, stocks in their early stages of an upturn or for those which are in sectors

currently ignored by the market.

Leo:-

Leo is aimed at retail customers and structured to provide medium to long-term capital

appreciation by investing in stocks across the market capitalization range. This scheme is

a mix of moderate and aggressive investment strategies. Its aim is to have a balanced

portfolio comprising selected investments from both Tortoise and Panther. Exposure to

Derivatives is taken within permissible regulatory limits.



The Religare Edge:-

We serve you with a diligent, transparent & process driven approach and ensure that your

money gets the care it deserves.

No experts, only expertise:-

Religare PMS comes to you from Religare, a Ranbaxy promoter group company with a

solid reputation for an ethical and scientific approach to financial management. While we

offer you the services of a Dedicated Relationship Manager who is at your service 24x7,

we do not depend on individual expertise alone. For you, this means lower risk, higher

dependability and unhindered continuity. Moreover, you are not limited by a particular

individual’s investment style.

No Hidden profits :

We ensure that a part of the broking at Religare Portfolio Management Services is

through external broking houses. This means that your portfolio is not churned

needlessly. Using more broking firms gives us access to a larger number of reports and

analysis, enabling us to make better, more informed decisions. Furthermore, your

portfolio is customised to suit your investment objectives.

Daily disclosures:

Religare Portfolio Management Services gives you daily updates on your investment.

You can pinpoint where your money is being invested, 24x7, instead of waiting till the

end of the month to keep track.





What is on Line Share Trading or internet trading?On line trading is a service offered on the internet for purchase and sale of share. In thereal world, you place order on your stock broker either verbally (personally or

telephonically) or in a return form (Fax). In on Line Trading, you will access a stock

broker’s website through your internet enabled PC and place orders through the broker’s

internet – based trading engine .These orders are routed to the stock Exchange either outmanual intervention and executed there on in a matter of a few second.

How Online Trading Is Done

Computer at NSE via VSAT at NSE’s office. A message relating to the order activity is

broadcast to the respective member. The order confirmation message is immediately

displayed on the PC of the broker. This order matches with the existing passive order(s),

otherwise it waits for the active orders to enter the system. On order matching, a message



is broadcast to the respective member. The trading system operates on a strict price time

priority. All orders received on the system are sorted with the best priced order getting

the first priority for matching i.e., the best buy orders match with the best sell order.

Similar priced orders are sorted on time priority basis, i.e. the one that came in early gets

priority over the later one. Orders are matched automatically by the computer keeping the

System transparent, objective and fair. Where an order does not find a match, it remains

in the system and is displayed to the whole market, till a fresh order comes in or the

earlier order is cancelled or modified. The trading system provides tremendous flexibility

to the users in terms of kinds of orders that can be placed on the system. Several time-

related (good till cancelled, good till day, immediate or cancel), price-related (buy/sell

limit and stop loss orders) or volume related (all or none, minimum fill, etc) conditions

can be easily built into an order. The trading system also provides complete market

information on-line. The market screens at any point of time provide complete

information on total order depth in a security, the five best buys and sells available in the

market, the quantity traded during the day in that security, the high and the low, the last

traded price, etc. Investors can also know the fate of the orders almost as soon as they are

placed with the trading members. Thus the NEAT system provides an Open Electronic

Consolidated Limit Order Book (OECLOB). Limit orders are orders to buy or sell shares

at a stated quantity and stated price. If the price quantity conditions do not match, the

limit order will not be executed. The term “limit order book” refers to the fact that only

limit orders are stored in the book and all market orders are crossed against the limit

orders sitting in the book. Since the order book is visible to all market participants, it is

termed as an ‘Open Book’.

Let us start with the United States. A brief set of information consisting of Stock

Exchanges functioning, online share broking firms, and the latest technology they are

offering for hassle -tree service for their customers etc.

Why Online Share Trading?

What about security of my money, demat shares and my transaction documents?



Isn't trading through the Internet a difficult and cumbersome process?

But I am not comfortable with Internet, or with finance, how can online trading be easyfor me?

Isn't trading through the Internet a costly affair?

I am pretty satisfied with my present broker who serves me off line. Why should I choose

to go online to trade shares?

How frequently is the price updated at all these online trading sites?

How can I be sure that I shall be trading at a price I want to or at a ricpe appearing in thewebsite?

Is trading through the Internet safe?

The safety of transactions on the Internet depends on the encryption system used. The better this transaction system, the more difficult it is for any person to hack the site.

Firstly:

Internationally, the best system available today, is the 128-bit encryption, a system,

which even the Pentagon uses. ICICIdirect.com is one of the few online share-tradingsites in the country equipped with this 128-bit encryption.

Secondly:

you too can ensure the safety of the transactions online. You normally get a secured user

id and password, the secrecy of which is to be maintained entirely by you.

Thirdly:

If the transaction system requires no manual intervention, you further improve the safety

in the transactions. Among Indian sites, ICICIdirect.com is one of the very few fullyintegrated online trading sites. This enables the elimination of the possibility of any

manual intervention. Which means orders are directly sent to the exchange ensuring that

you get the best and right price?

No charge till you profit



So sure are we of our approach to Portfolio Management that we do not charge you for

our services, until your investments start showing profit. With customized investment

options Religare Portfolio Management Services invites you to invest across five broad

portfolios to suit your investment needs. Except fixed administrative charges.



An overview of capital market

The term capital market refers to the institutional arrangements for facilitating the

borrowing and lending of long term funds. In widest sense, it consists of a series

of channels through which savings the community are available for industrial and

commercial enterprises and public authorities.

The major functions performed by a capital market are:

1. Mobilization of financial resources on a nation wide scale.

2. Securing the foreign capital and know how to fill up the deficit in the requiredresources for economic growth at a faster rate.

3. Effective allocation of the mobilized financial resources, by directing the same

to projects yielding highest yield or to the projects needed to promote balanced

economic development.

Intermediaries:

Intermediaries are institutional or individual agencies who assist in the process of

transforming savings into investment. The major intermediaries in the capital

market are:

1. Merchant banker,

2. Under-writers,

3. Registrars,

4. Brokers,

5. Depositories,

6. Collecting agents,

7. Agents,

8. Stock brokers and sub brokers.

9. Mutual funds.



Market Types

The Capital Market system has four types of market.

(a) Normal Market Normal market consists of various book types wherein orders are segregated as

Regular Lot Orders, Special Term Orders, Negotiated Trade Orders and Stop Loss

Orders depending on their order attributes.

(b) Odd Lot Market

Pursuant to the directive of SEBI to provide an exit route for small

investors holding physical shares in securities mandated for

compulsory dematerialized settlement, the Exchange has

provided a facility for such trading in physical shares not

exceeding 500 shares. This market segment is referred to as

'Limited Physical Market' (small window). The Limited Physical

Market was introduced on June 7, 1999.

(c) RETDEBT Market

Trading in the Retail Debt Market takes place in the same manner

in which the trading takes place in the equities (Capital Market)

segment. The RETDEBT Market facility on the NEAT system of

Capital Market Segment is used for entering transactions in RDM

session. Trading Members who are registered members of NSE in

the Capital Market segment or Wholesale Debt Market segment

are allowed to trade in Retail Debt Market (RDM) subject to

fulfilling the capital adequacy norms.

(d) Auction Market

In the Auction market, auctions are initiated by the Exchange on behalf of trading

members for settlement related reasons. Auctions are initiated by the

Exchange on behalf of trading members for settlement related



reasons. The main reasons are Shortages, Bad Deliveries and

Objections. There are three types of participants in the auction

market.

(a) Initiator: The party who initiates the auction process is calledan initiator.

(b) Competitor: The party who enters on the same side as of the

initiator is called a competitor.

(c) Solicitor: The party who enters on the opposite side as of the

initiator is called a solicitor.

Other types of Capital Market

These are of two types:

a) Primary Market or New Issue Market

b) Secondary Market or Stock Market

Primary and Secondary Market

In the primary market, securities are offered to public for subscription for the

purpose of raising capital or fund. Primary market is where a company makes its

first contract with the public at large in search of capital.

Secondary market is an equity trading avenue in which already existing/pre-

issued securities are traded amongst investors. The secondary market refers to the

stock market where the long term financial instruments which are used for raising

capital are traded.

Stock Exchange: An Overview

To stock exchange is basically a market place where buyers and sellers

transact business through agents called broker. That is why stock exchange is

often referred to a stock market or share market. The term security is a broad



genetic term covering equity shares, preference shares, debentures and loans.

Floated by Govt. and any other instrument prescribed by Govt. as a security.

In a layman’s language you can define stock exchange as legally

recognized place where the brokers can sell and purchase securities as the

described by the common public.

In a stock exchange only the member can transact in securities according to

the rules and regulations, laws and by the laws of the stock exchange. Those

members are at liberty to act either as jobber’s brokers.

The stock exchange is an institution of paramount importance in economic

life of a country. In fact in the absence of the stock it would be impossible to

mobilize the resources from investors to the new projects as the ownership right

i.e. share will not via bought and sold. This is the stock exchange that provides

liquidity to the private investment in corporate enterprises.

The past decade in many ways has been remarkable for securities market in

India. It has grown exponentially as measured in terms of amount raised from the

market, number of stock exchanges and other intermediaries, the number of listed

stocks, market capitalization, trading volumes and turnover on stock exchanges,

and investor population. Along with this growth, the profiles of the investors,

issuers and intermediaries have changed significantly. The market has witnessed

several institutional changes resulting in drastic reduction in transaction costs and

significant improvements in efficiency, transparency, liquidity and safety. In a

short span of time, Indian derivatives market has got a place in list of top global

exchanges. In single stock futures category, the Futures Industry Association

(FIA) placed NSE in second position in the year 2000.



Reforms in the securities market, particularly the establishment and

empowerment of SEBI, market determined allocation of resources, screen based

nation-wide trading, dematerialization and electronic transfer of securities, rolling

settlement and ban on deferral products, sophisticated risk management and

derivatives trading, have greatly improved the regulatory framework and

efficiency of trading and settlement. Indian market is now comparable to many

developed markets in terms of a number of qualitative parameters.

Management of stock exchange is done by an elected body of members.

These bodies are known by different names in different stock exchange for

example, Bombay, Indore,, Ahemdabad stock exchange are managed by a

Governing board, the madras stock exchange is managed by a committee while

other stock exchanges are managed by board of directors.

These governing bodies are powerful bodies enjoying extensive

administrative power of management and control over their respective stock

exchange; the day to day functions of the stock exchanges are executed by the sub-

committee like the defaulters committee, listing committee, settlement committee

etc.

The stock exchanges are the important segments of their capital market. If

the stock exchange is well organized and regulated and work smoothly then it is an

indicator of healthy capital market. If the state of the stock exchange is good then

overall capital market will grow and otherwise it can suffer a great set back which

is not good for the country. The stock market and the capital market are controlled

by the government at various stages.



A capital market comprises of financial assets excluding coins and

currency. The majority of financial assets include banking accounts, pension,

provident funds, mutual funds, insurance policies, shares and securities.

Financial assists are the claim of holders over issuer (business firms and

government). They enter in the different segments of financial market, those

having short maturities are non transferable like bank savings, and current

accounts set the identifications for the monetary financial assets. This market is

known as money market, equity, preferential shares and bonds and debentures

issued by the companies and bond securities issued by the government constitute

the financial assets which are traded in the capital market Both money market and

financial market constitute the financial market. Capital market generally known

as stock exchange. This is an institution around which every activity of national

capital market resolves.

Through the medium of stock exchange the investors gets on impetus and

motivation to invest in securities. Without stock exchange they would not able to

make the liquidity in their securities. If there will no stock exchange then they

could not be able to get so much return on their investment. The stock exchange

provides the opportunities to the investors for continuing trading in securities.

Origin and Growth

The first stock exchange was set up in India under the name of Native share and

stock broker’s association of Bombay (known as Mumbai stock exchange) in

1875. The stock exchanges in India had made a phenomenal growth since World

War II. During this period, numerous stock exchanges were set up at Ahmedabad,



Kanpur, and Hydrabad and at Delhi. In 1951 the government prepared a draft bill

for stock exchange regulation and referred it to an expert committee under the

chairmanship of A.D.Gorwala.

On the recommendations of the committee, the government passed the securities

contracts (regulation) act, 1956.

The principal objectives of this act are:

1. To regulate stock market practices.

2. To create efficient securities market.

3. To ensure fair dealing and protection to investors.

4. To improve the working of stock exchange.

So far govt. of India has recognized 23 stock exchanges which are as follows:

U.P. stock exchange, Kanpur.

Vadodara stock exchange, Vadodara.

Koyambtour stock exchange, Coimbatore.

Meerut stock exchange, Meerut.

Mumbai stock exchange, Mumbai.

Over the counter exchange of India, Mumbai.

National stock exchange, Mumbai.

Ahmedabad stock exchange, Ahmedabad.

Bangalore stock exchange, Bangalore.



Bhuvaneshwar stock exchange, Bhuvneshwar.

Calcutta stock exchange, Calcutta

Cochin stock exchange, Cochin.

Delhi stock exchange, Delhi.

Guwahati stock exchange Guwahati.

Hydrabad stock exchange, Hydrabad.

Jaipur stock exchange, Jaipur.

Canara Stock exchange, Mangalore.

Ludhiana stock exchange, Ludhiana.

Chennai stock exchange, Chennai.

M.P. stock exchange, Indore.

Magadh stock exchange, Patna.

Pune stock exchange, Pune.

Saurashtra stock exchange, Rajkot.

So there are 21 stock exchanges in India (excluding NSE and OTCI), the largest

among them being the Bombay stock exchange (BSE). BSE alone accounts for

over 80% of the total volume of transactions in shares. Typically, a stock

exchange is governed by a board consisting of directors largely elected by the

member brokers, and a few is nominated by the government. Government

nominees include representatives of the Ministry of Finance, as well as some

public representatives, who are expected to safeguard the public interest in the

functioning of the exchanges. The board is headed by a president, who is an

elected member, usually nominated by the government from the elected members.

The Executive director, who is usually appointed by stock exchange with

government approval, is the operational chief of the stock exchange. His duty is to



ensure that the day to day operations of the stock exchange are carried out in

accordance with the various rules and regulations governing its functioning. The

overall development and regulation of the securities market has been entrusted to

the Securities and Exchange Board of India(SEBI) by an act of parliament in 1992.

OBJECTIVES OF THE STUDY

1. To study the investor’s perception towards Stock Market.

2. To study the awareness level about Stocks.

3. To study the preference of investment of investors.

4. To study the market share of particular Stock.

5. To study the volatility of Stock market.

6. To study the awareness of Stocks at different different time.

:





Role and Importance of Stock Exchange

The stock exchange plays a vital role in the economic functions of any

country. Its role can be elaborated as under :

• Liquidity and price continuity : The stock exchange provides a liquidity

and continuous market where investors can convert their money in to

securities in to money quickly with little variations in current market price

during the trading hours by making bids and offer as it is open auction

market where buyer and sellers compete among each other. The free market

operation provides marketability, stability and continuity in prices.

• Safety to investors : The transactions in the stock market are susceptible to

fraud and manipulation by the speculators and members. To come over this,

the central government has been provided wide powers by SCRA, 1956 and

1957. There are well defined by laws rules and regulations to admission of

members, share trading practices, listing securities, continuous disclosure of

material information by a listed company, penalties etc. to curb the

unhealthy and speculative practices..

• Evaluation of securities : Stock exchange like any other market, provides

a mechanism for fixing the prices of securities through the inter play of

demand and supply. It provides the mean for continuous process of

evaluation of securities in term of their real worth in the market as close as

possible to investment values, based on present and future earnings

capacity, growth potential etc. The prices quoted on the stock market are

given wide publicity and coverage through financial dailies like The

Economic Times, Financial Express, Business Standard and websites also

like www.nseindia.com, www.bseindia.com, www.timesofmoney.com.



• Mobilization of savings : stock market mobilizes the saving of individuals

and institutions and directs its flows into the most productive channels so as

to serve in the best possible manner the interest of investors and economy.

In prosperous and growing industries, the share price exhibits a rising trendand more flows of funds takes place. While in declining and sick industries,

it shows declining trend and restricts the flow of funds these industries. The

price movement on the stock exchange governs the flow of funds into a

particular industry; thereby a well regulated stock exchange is of immense

importance to economic development.

• Widening share-ownership base : In a democratic developing economy,

the fruits of growth in the national income should be shared by as many

people as possible. The diffused ownership of the means of production

helps in reducing the income disparities and checking the concentration of

wealth in a few hands. In this endeavor, it becomes the duty of the security

market to educate the masses in the art investment in securities in general

and especially in developing countries where majority of people lives in the

villages, uneducated and adequate up-to-date information is not available.

Functions of Stock Market

• Maintaining active trading : Shares are traded on the stock exchange.

Enabling the investors to buy and sell securities. The prices may vary from

transaction to transaction. A continuous trading increases the liquidity or

marketability of share traded on the stock exchange.

• Fixation of prices : Prices is determined by the transaction that flow from

investor’s demand and supplier’s preference. Usually the traded prices are

made known to public this help the investor to make better decision.

• Ensure safe and fair dealing : The rules regulations and bye-laws of the

stock exchange provide a measure of safety to the investors. Transactions



are conducted under competitive conditions enabling the investors to get a

fair deal.

• Aids in financing the industry : A continuous market for share provides a

favorable climate for raising capital. The negotiability and transferability of the securities helps the companies to raise long term funds. When it is easy

to trade the securities investors are willing to subscribe to initial public

offering. This stimulates the capital formation.

• Dissemination of information : Stock exchange provides the information

through various publications. They publish the share prices traded on daily

basis along with the volume traded. Directory of corporate information is

useful for the investor’s assessment regarding the corporate handout,

handbooks and pamphlets provide information regarding the functioning of

stock exchange.

• Performance induces : The price of stock reflects the performance of the

traded companies. This makes the corporate more concerned with its public

image and tries to maintain good performance.

• Self-regulation organization : The stock exchange monitors the integrity

of the member’s brokers, listed companies and clients. Continuous internal

audit safeguards the investors against unfair trade practices; it settles the

disputes between member brokers, investors and brokers.

Developments and Trends of Indian Stock Market

The post independent India has seen many radical changes in the stock

market. With the rapid industrialization and increased pressure for economic



development, the government has taken many steps to promote the health of the

Indian stock market. This is the evidence from the number of legislation’s that

have come up after independence. The increase in the number and scope of

development banks, growth in the underwriting business, rise in the number of stock exchanges and the emergence of full fledged regulatory body like the

Controller of capital issue (now abolished) and the Securities and Exchange Board

of India (SEBI) indicate the amount of efforts that has gone into creating a strong

and well developed capital market.

With the growing financial needs of the economy in general, and corporate

and individual investors in particular, the Indian capital market has witnessed the

emergence of newer type of organizations like Mutual Funds and Asset

Management Companies, Merchant Bankers, specialist services like Financial

Advertisement, Credit Rating, Custodial and Depository services etc. even the

working of stock exchange has made a departure from conventional floor trading

to online and a much more transparent system of trading with the establishment of

new variant of stock exchanges like National Stock Exchange (NSE) and Over the

Counter Exchange of India (OTCEI). With an intention to promoting investors

convenience and physical shares have given way to dematerialized scripts, where

an investor is saved from the botheration of handling and safeguarding physical

certificates.

Globalization on Indian Securities Market

In view of the globalization and the policy of liberalization, the Indian stock

market is getting increasingly integrated with the rest of the world. Indian

companies have been permitted to resources from abroad through issue of ADRs,



GDRs, FCCBs and EDBs. Indian companies are permitted to list their securities

on foreign stock exchanges by sponsoring ADR/GDR issues against block

shareholding. Further NRIs and OCBs are allowed to invest in Indian companies.

FIIs have been permitted to invest in all type of securities, including governmentsecurities. The investment by FIIs enjoys full capital account convertibility with

the evidence of the globalization, the quest for funds has broken the national

frontiers and issues of securities have expanded their investor base in other

countries also. Many new instruments have been issued overseas to raise capital

from abroad like the floating rates notes (FRNs), the fixed rate bonds, Resurgent

Indian Board etc. In the international debt market, the most commonly, important

and widely accepted instruments has been, however the GDRs. This is the

evidence from the fact that since the financial year 1993 to financial year 1997, the

amount raise through GDRs has increased with the only drop in the year 1996

when it showed an decrease. There has been no dearth of instrument floating by

Indian companies in the international capital market, foreign currency, convertible

bonds, Yankee bonds etc are few examples of this category.

Securities and Exchange Board of India (SEBI)

SEBI was initially constituted on 12 April 1988 as a non statutory

body through a resolution of the government for dealing with all matters relating

to development and regulation of securities market and investor protection and to



advise the government on all these matters. SEBI was given statutory status and

power through an ordinance promulgated on January 30, 1992.

SEBI is managed by six members-one chairman (nominated by

central government), two members (officers of central ministers), one member from RBI and remaining two members are nominated by central government. The

office of SEBI is situated at Mumbai with its regional offices at Calcutta, Delhi

and Chennai. In 1988 the initial capital of SEBI was Rs. 7.5 crore which are

provided by its promoters (IDBI, ICICI, IFCI). This amount was invested and with

its interest amount day to day SEBI are met. All statutory power for regulating

Indian capital market are vested with SEBI itself.

Functions of SEBI

1. To safeguard the interests of investors and to regulate capital market with

suitable measures.

2. To regulate the business of stock exchanges and other securities market.

3. To regulate the working of stock brokers, sub-brokers, share transfer

agents, trustees, merchant bankers, underwriters, portfolio managers etc. and also

to make their registration.

4. To register and regulate collective investment plans of mutual funds.

5. To encourage self regulatory organizations.

6. To eliminate malpractices of security markets.

7. To train the persons associated with security markets and also to encourage

investors’ education.

8. To check insider trading of securities.

9. To supervise the working of various organizations trading in security market

and also to ensure systematic dealings.



10. To promote research and investigations for insuring the attainment of above

objectives.

The following departments of SEBI take care of the activities in the secondary

market.

Sr.No. Name of the

Department

Major Activities

1. Market

Intermediaries

Registration and

Supervision

department (MIRSD)

Registration, supervision, compliance

monitoring and inspections of all market

intermediaries in respect of all segments of the

markets viz. equity, equity derivatives, debt

and debt related derivatives.

2. Market Regulation

Department (MRD)

Formulating new policies and supervising the

functioning and operations (except relating to

derivatives) of securities exchanges, their

subsidiaries, and market institutions such as

Clearing and settlement organizations and

Depositories (Collectively referred to as

‘Market SROs’.)

3. Derivatives and New

Products Departments

(DNPD)

Supervising trading at derivatives segments of

stock exchanges, introducing new products to

be traded, and consequent policy changes

Two main stock exchanges of India:

1. National stock exchange (NSE).

2. Bombay stock exchange (BSE).

NSE :



The National Stock Exchange of India Limited has genesis in the report of

the High Powered Study Group on Establishment of New Stock Exchanges, which

recommended promotion of a National Stock Exchange by financial institutions

(FIs) to provide access to investors from all across the country on an equal footing.Based on the recommendations, NSE 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 unlike other stock exchanges in the

country.

On its recognition as a stock exchange under the Securities Contracts (Regulation)

Act, 1956 in April 1993, NSE commenced operations in the Wholesale Debt

Market (WDM) segment in June 1994. The Capital Market (Equities) segment

commenced operations in November 1994 and operations in Derivatives segment

commenced in June 2000.

BSE :

The Stock Exchange, Mumbai, is now Bombay Stock Exchange Limited.

The Exchange has a new name, and an entirely new perspective. A perspective

born out of corporatization and demutualization. Bombay Stock Exchange Limited

is Asia’s oldest stock exchange. It carries within itself the depth of knowledge of

capital markets acquired since its inception in 1875. Located in Mumbai, the

financial capital of India, it has been the backbone of the country’s capital

markets.

Concept of Risk & Return

Whenever we talk about investments, there is always some risk associated with all

of them. Risk is the most dreaded word in all the financial markets across the

globe. Any person, who is operating in the financial markets, in whatever capacity,



has to face risk. So the question in most minds is, what exactly this RISK is?

What does it mean?

In general terms, risk means any deviation from expectations. In Financial

parlance, risk means any deviation from the expected returns. More specifically,

the probability that the returns from any asset will differ from the expected yields

is the risk inherent in that asset.

Risk inherent in equity investments

Equity investment is the most risky investment in all the financial markets. So one

needs to have an understanding of risks associated with equity investments.Broadly, there are two types of risks associated with equity investments, viz.,

systematic risk and unsystematic risk. Lets have an understanding of these two

types of risks.

Systematic Risk Or Market Risk

Systematic risk can be defined as that portion of total risk, which is caused by factors that

are uncontrollable, external and broad in their effect. These factors can be attributed to

the investor’s reaction to tangible as well as intangible events.

Tangible events include economic, political and sociological changes that occur

within a particular country. Intangible events are subjective and depend on the

psyche of the investor. Change in share price is the result of the investor’s

response to external events. For example, the investor’s reaction to excessive

selling could push the prices down much below its fundamental value. Or fear that

a particular government may collapse could also adversely affect the stock market,

as the investor may be pessimistic about the overall economy of the country.



Interest rate and Inflation are integral forces behind market risk and a part of the

larger category of systematic or market risk.

Interest Rate Risk

The deviation of the actual income from the expected income due to fluctuations

in interest rates is known as interest rate risk. The rate of return on various

securities is benchmarked with the rate of return on government securities, which

are considered risk-free by investors. For example, if the interest rate on

government securities changes from 9% to 9.5% p.a, then the market prices of all

the securities yielding 9% return will decline. The increase in interest rates will

cause the price of securities price to fall or vice-versa. Changes in interest rate can

influence the purchase of stocks to be more or less attractive, in terms of margin.

Changes in interest rate will affect a firm whose capital structure contains a major

portion of debt and also, financial institutions whose main area of business is

lending. As the interest rate increases, a major portion of the income of these firms

(with high debt) will go towards paying interest on borrowed capital. This will

result in lower earnings, dividends and ultimately share prices. Increasing interest

rate will also impact the lending institutions but in positive way. Increase in

interest will increase the revenue of these financial institutions by way of interest

received on loans. So, for these institutions higher earning will lead to increase in

dividend payment and hence increase in share prices.

Purchasing-Power Risk

Purchasing Power risk can be defined as changes that occur in investor purchasing

power as a result of changes in the general price level. Rising prices of goods and

services is referred to as inflation, while declining prices of goods and services is



known as deflation. Both inflation and deflation affect the purchasing power of the

customer. Any rational investor should include in their estimates, future changes

in general price levels. As the interest rate risk affects prices of bonds and stocks,

in the same way changes in price levels also affect the prices of stocks. Supposethe consumer index hovers around 3.5% and gradually increases to 4.5 %, then the

required rate of return will shift upward, affecting Government bonds as well as

stocks. Interest rate risk can be defined as uncertainties in terms of money

received, and purchasing power risk in terms of goods and services that can be

purchased with the money received.

Measurement of Market Risk

Systematic risk of a portfolio is measured by Beta (ß). An index of systematic

risk. It measures the sensitivity of a stock’s return to changes in returns on the

market portfolio. The beta of a portfolio is simply a weighted average of the

individual stock betas in the portfolio. Beta (ß) is simply the slope (i.e. the change

in excess return on the stock over the change in excess return on the market

portfolio) of the characteristic line. If the slope is 1.0, it means the stock has the

same systematic risk as the market as a whole. A slope greater than 1.0 means that

the stock’s excess return varies more than proportionally with the excess return of

the market portfolio. This type of stock is often called as aggressive investment.

Calculation of Beta (ß)

ß is expressed as (R j) and the Rate of return on market portfolio i.e. R m divided by

the Standard deviation of the return on market portfolio.



ß = Cov (R j,`R m)/ sm2

Advantages of Beta

To followers of CAPM, beta is a useful measure. A stock's price variability is

important to consider when assessing risk. Indeed, if you think about risk as the

possibility of a stock losing its value, beta has appeal as a proxy for risk.

Intuitively, it makes plenty of sense. Think of an early-stage technology stock with

a price that bounces up and down more than the market. It's hard not to think that

stock will be riskier than, say, a safe-haven utility industry stock with a low beta.

Besides, beta offers a clear, quantifiable measure, which makes it easy to work

with. Sure, there are variations on beta depending on things such as the market

index used and the time period measured, but broadly speaking, the notion of beta

is fairly straightforward to understand. It's a convenient measure that can be used

to calculate the costs of equity used in a valuation method that discounts cash

flows.

Disadvantages of Beta

However, if you are investing in a stock's fundamentals, beta has plenty of

shortcomings.

http://www.investopedia.com/terms/u/utility.asp

http://www.investopedia.com/terms/u/utility.asp



For starters, beta doesn't incorporate new information. Consider the electrical

utility company American Electric Power (AEP). Historically, AEP has been

considered a defensive stock with a low beta. But when it entered the merchant

energy business and assumed high debt levels, AEP's historic beta no longer captured the substantial risks the company took on. At the same time, many

technology stocks, such as Google, are so new to the market they have insufficient

price history to establish a reliable beta.

Another troubling factor is that past price movements are very poor predictors of

the future. Betas are merely rear-view mirrors, reflecting very little of what lies

ahead.

Furthermore, the beta measure on a single stock tends to flip around over time,

which makes it unreliable. Granted, for traders looking to buy and sell stocks

within short time periods, beta is a fairly good risk metric. But for investors with

long-term horizons, it's less useful.

What Is Volatility?

People speak of volatility without defining what they mean by the term. In

financial terms, volatility is:

http://www.investopedia.com/terms/d/defensivestock.asp






The degree to which the price of a security, commodity, or market

rises or falls within a short-term period.

There are several things to note about this definition. Most importantly, the

definition specifically mentions price increases and decreases. People are usually

most concerned about volatility during periods when prices decrease or go through

a “correction.” During an extreme bull market, no one (with the possible

exception of investors with short positions) seems to care that the markets are

exhibiting volatility. Also, most people use volatility and risk interchangeably.

However, volatility has to do with variability while risk has to do with variability

that is unpredictable or uncertain.

Different investors in different market sectors may have different characteristics

with respect to risk. Because of this, different sectors may have different

volatilities. Therefore, looking at the volatility of a market really means looking at

the volatility of the indices of the securities within the market. For each individual

security, its beta measures the security’s volatility relative to the market as a

whole, but if beta stays the same, and the market’s risk increases, then the risk

associated with a given security will increase.

What Causes Volatility?

There are a number of things that cause volatility. Arbitrage causes volatility.

Arbitrage is the simultaneous or almost simultaneous buying and selling of an



asset to profit from price discrepancies. Arbitrage causes markets to adjust prices

quickly. This has the effect of causing information to be more quickly assimilated

into market prices. This is a curious result because arbitrage requires no more

information than the existence of a price discrepancy. Another obvious reason for market volatility is technology. This includes more timely information

dissemination, improved technology to make trades and more kinds of financial

instruments. The faster information is disseminated, the quicker markets can react

to both negative and positive news. Improved trading technology makes it easier

to take advantage of arbitrage opportunities, and the resulting price alignment

arbitrage causes. Finally, more kinds of financial instruments allow investors

more opportunity to move their money to more kinds of investment positions

when conditions change.

Unsystematic risk

Unsystematic risk is specific to particular company or an industry. It is that

portion of the total risk that arise due to the factors which effects the internal

working of the firm. Factors like, management capability, consumer preferences,

labor strikes and stages in product life cycle can affect the firm’s variability in

return.

Business Risk

Business risk is faced by the firm due to the operating conditions prevailing within

a firm and also the extent to which these conditions effects the operating income



and expected dividend variability of the firm. Business risk can be divided into

two categories: Internal and External. Internal business risk signifies the internal

competency or efficiency of the firm to effectively operate in the environment

imposed on it. Every business firm is faced with internal risk and the degree towhich these risk are minimized are reduce or minimized depends on the efficiency

of the firm. External business risk arises from the circumstances imposed by the

operating environment, which are beyond the control of the firm.

Financial Risk

The ways and means by which company finances their activity constitutes

financial risk. The degree of financial risk can be inferred from the capital

structure of the firm. The amount of debt or borrowed capital in the financial

structure signifies interest payment by the firm to the debt holders or preference

shareholders. Financial risk can be avoidable to the extent to which the

management has the freedom to decide whether to borrow money or not. A debt

free firm has no financial risk.

Return

The objective of any investor is to maximize expected returns from his

investments, subject to various constraints, primary risk. Return is the motivating

force, inspiring the investor in the form of rewards, for undertaking the

Investment. The importance of returns in any investment decision can be traced to

the following factors:



• It enables investors to compare alternative investments in terms of what

they have to offer the investor.

• Measurement of historical returns enables the investors to assess how well

they have done.• Measurement of historical returns also helps in estimation of future returns.

This reveals that there are two types of returns- Realized or Historical return and

expected return.

Realized Return

This is ex-post return or return that was or could have been earned.

Expected Return

This is return from an asset that investors anticipate or expect to earn

over some future period. The expected return is subject to uncertainty, or risk, and

may or may not

Risk and return trade off:

Risk and return are the primary ingredients in making investment choices.

Expected return must be compared to risk. As risk increases, so must the return to

compensate for the greater uncertainty. This is called the risk-return trade-off;

Namely, that there is greater risk in investment classes that offer potential of

higher returns and vice-versa. Therefore, an investor has to choose between higher

returns with higher risk versus lower risk accompanied, alas, by lower returns. The



risk/return trade-off is crucial. A new business may involve a lot of risk, but may

offer higher return. On the other hand, government securities have minimal risk,

so a low return is appropriate.

Risk/Return Trade-Offs for Various Investment Vehicles

Risk and return trade off



CHAPTER – 2



Review of the Literature

Review of Related Studies

Several research studies have been carried out to observe the stock market

volatility. Volatility of stock returns has been mainly studied in the developed

economies. After the seminal work of Engel(1982) on the autoregressive

conditional Heteroscedasticity(ARCH) model and its generalized form(GARCH)

by Bollerslev(1986), much of the empirical work has been used these models and

their extensions. There is relatively less empirical research on stock return

volatility in the emerging markets.

In the Indian context, Roy and Karmakar (1995) focused on the measurement of

the average level of volatility as the sample standard deviation and examined

whether volatility has increased in the early 1990s; Goyal (1995) used conditional

volatility estimates as suggested by Schwert (1989) to study the nature and trend

of stock return volatility and the impact of carry forward system on the level of

volatility; Reddy (1997-98) analyzed the effects of market microstructure, e.g.,

establishment of the NSE and the introduction of Bombay Stock Exchange Online

Trading (BOLT) system on the stock return volatility measured as the sample

standard deviation of the closing prices.

Harvinder Kaur’s study describes the extent and pattern of volatility in the Indian

stock market during the last decade of the previous millennium i.e. from 1990-

2000 the market is represented by the two most prominent spot prices indices viz.

BSE Senses and S & P CNX Nifty.

It is found that the stock market volatility was the highest during 1992 followed by

1990 and 2000, in that order. It fell sharply after 1992 until 1995, after which it

started increasing again. Among the months, April has been the most volatile



followed by March and February. Another study by Harvinder Kaur on Time

varying Volatility in the Indian stock market describes that asymmetrical GARCH

models outperform the conventional OLS models and symmetrical GARCH

models. By the application of asymmetrical GARCH models EGARCH (1,1) tosenses and TARCH (1,1) to Nifty returns, it is shown that day of the week effect

or the weekend effect and the January effect are not present while the return and

volatility do show intra week and intra year seasonality. The return and volatility

on various weekdays have somewhat changed after the introduction of Rolling

settlements.

The paper of Golaka C nath and Manoj Dalvi tries to search for a suitable

volatility measure for Indian stock market using tick level data and estimates six

different kind volatility measures and compare them to understand which one

performs best. The realized volatility estimates using the sum of squared returns

from high frequency data performs better than the currently used IGARCH model

by stock exchanges. The result is in agreement with the findings from developed

markets.

The aim of paper of Madhusudan Karmakar was to estimate conditional volatility

models in an effect to capture the salient features of the stock market volatility in

india and evaluates the models in terms of out of sample forecast accuracy. The

estimation of volatility is made at macro level on two major market indices,

namely, S &P CNX Nifty and BSE Senses. The fitted model is then evaluated in

terms of its forecasting accuracy on these two indices.

In addition, 50 individual companies share prices included in S & P CNX Nifty

are used to examine the heteroskedastic behavior of Indian stock market at the

micro level. The vanilla GARCH (1,1) model has been fitted to both the market



indices and it is found that there is a strong evidence of time varying volatility, a

tendency of the periods of high and low volatility to cluster, a high persistence and

predictability of volatility. While turning to 50 individual underlying shares, it is

observed that the GARCH (1,1) model has been fitted for almost aa companies.only eight out of 50 shares show significant leverage effects and really need an

asymmetric GARCH model such as EGARCH to capture their volatility clustering

which is left for future research.

Prof. Turan and Dr. Bodla (2004) made a study of risk return analysis and

correlation analysis for the select Asian stock markets. The study had brought out

that the stock markets of Hong Kong and India have generated the highest return

amongst select Asian countries, in terms of dollar and local currency respectively.

Both risk and return are found lowest in case of Japan. Moreover, the Indian stock

market shows the highest potential for inclusion in the international portfolio of

equity securities as the correlation coefficients of it with other Asian markets are

found lowest. Further, no significant difference is observed between different

investment horizons as annualized returns are concerned. In other words, both

active and passive investment strategies have yielded the similar level of

return/risk irrespective of the country under consideration. Although the stock of

Hong Kong and Singapore move more closely, the correlation between the returns

of Asian countries is substantially less than unity. It implies that the Asian market

offers a good opportunities for equity portfolio diversification.



CHAPTER – 3

Research Methodology

The procedure adopted for conducted the research requires a lot of attention as it

has direct bearing on accuracy, reliability and adequacy of results obtained. It is

due to this reason that research methodology, which we used at the time of

conducting the research, needs to be elaborated upon. Research methodology is a

way of systematically study & solve the research problems. If a researcher wants

to claim his study as a good study, he/she must clearly state the methodology

adopted in conducting the research so that it may be judged by the reader whether

the methodology of work done is sound or not.

The research methodology here includes-

• Introductory

• Population

• Sampling Technique

• Sample size

• Data Collection

• Statistical Technique

• Limitation



Introductory

The main aim of my project is to find the stock market volatility in context of

Indian stock market.. The volatility is measured by risk return pattern and for this

purpose I have selected 100 companies and an index for achieving the abovementioned objective I have undertaken the following procedure:

Sampling Technique

The sample has been selected on the basis of availability of required data. In other

words convenient sampling method is adopted.

Sample Size

From all the listed companies and indices of NSE, 100 companies and S&P CNX

Nifty index is selected. The list of the sample companies:

Company Name Symbol

1 Andhra sugars Ltd ANDHRSUGAR

2 Aarti industries Ltd AARTIIND

3 ABB Ltd ABB

4 Associated Cement Co. Ltd. ACC

5 Alfa Laval India Ltd ALFALAVAL

6 Apollo Tyres Ltd. APOLLOTYRE

7 Arvind Mills Ltd. ARVINDMILL

8 Ashok Leyland Ltd ASHOKLEY

9 Asian paints Ltd ASIANPAINTTable

3.

1

10 Balrampur Chini Mills Ltd BALRAMCHIN

11 Basf India Ltd. BASF

12 Bharat gears Ltd BHARATGEAR

13 Bharat Petroleum Corporation Ltd BPCL

14 Birla Ericsson Optical Ltd BIRLAERIC

15 Birla Global Finance Ltd BGFL

16 Bajaj Auto Ltd BAJAJAUTO

17 Bajaj Hindustan Ltd BAJAJHIND

18 Bombay Dyeing & Mfg Co. Ltd BOMDYEING

19 Can Fin Homes Ltd CANFINHOME

20 Carborundam Universal Ltd CARBORUNIV

21 Ceat Ltd. CEAT



22 Century Enka Ltd CENTENKA

23 Chambal Fertilisers & Chemicals Ltd CHAMBLFERT

24 Ciplal Ltd CIPLA

25 Cochi Refineries Ltd COCHINREFN

26 Dhampur Sugar Mills Ltd DHAMPURSUG

27 EIH Ltd EIHOTEL28 Escorts Ltd ESCORTS

29 Essar Oil Ltd ESSAROIL

30 The Fedral Bank Ltd FEDERALBNK

31 Flex Industries Ltd FLEX

32 GIC Housing Finance Ltd GICHSGFIN

33 Godfrey Phillips India Ltd GODFRYPHLP

34 Goetz(India) Ltd GOETZEIND

35 Grasim Industries Ltd GRASIM

36 GTC Industries Ltd GTCIND

37 Gujrat State Fertilisers & Chemicals GSFC38 Housing Development Finance Corp. HDFC

39 HDFC Bank Ltd HDFCBANK

40 Hindustan Motors Ltd HINDMOTOR

41 Hindustan Lever Ltd HLL

42 Hotel Leela Venture Ltd HOTELEELA

43 Industrial Development Bank Of India IDBI

44 IFB Industries Ltd IFBIND

45 IFCI Limited IFCI

46 Indian Hotels Co. Ltd INDHOTEL

47 Infosys Technologies Ltd INFOSYSTCH48 Indian Oil Corporation Ltd IOC

49 Indian Petrochemicals Corpn. Ltd IPCL

50 IPCA Laboratories Ltd IPCALAB

51 ITC Ltd ITC

52 Jay Bharat Maruti Ltd JAYBARMARU

53 Jayshree Tea & Industries Ltd JAYSREETEA

54 Laxmi Machine Works Ltd LAXMIMACH

55 Liberty Shoes Ltd LIBERTSHOE

56 LML Ltd LML

57 Mahindra & Mahindra Ltd M & M

58 Maharashtra Scooters Ltd MAHSCOOTER

59 Mastek Ltd MASTEK

60 MRF Ltd MRF

61 Mysore Cements Ltd MYSORECEM

62 Nagarjuna Fertilisers & Chemicals Ltd NAGARFERT

63 Navneet Publications Ltd NAVNETPUBL

64 Nirma Ltd NIRMA



65 Oil & Natural Gas Corpn Ltd ONGC

66 Oudh Sugar Mills Ltd OUDHSUG

67 Parkash Industries Ltd PRAKASH

68 Pidilite Industries Ltd PIDILITIND

69 Punjab Tractors Ltd PUNJABTRAC

70 Rajasthan Spg. & Wvg. Mills Ltd RAJASSPG71 Rajsree Sugars & Chemicals Ltd RAJSREESUG

72 Rama Newsprint and Papers Ltd RAMANEWSPR

73 Ranbaxy Laboratories Ltd RANBAXY

74 Raymond Ltd RAYMOND

75 Reliance Capital Ltd RELCAPITAL

76 Reliance Industries Ltd RELIANCE

77 Reliance Industrial Infrastructure Ltd RIIL

78 S.kumars Nationwide Ltd SKUARSYNF

79 Steel Authority of India Ltd SAIL

80 Sakhti Sugars Ltd SAKHTISUG81 Salora International Ltd SALORAINTL

82 State Bank of India SBIN

83 Siemens Ltd SIEMENS

84 Sirpur Paper mills Ltd SIRPAPER

85 Shree Cements Ltd SHREECEM

86 Sun Pharmaceuticals Industries Ltd SUNPHARMA

87 Supreme Industries Ltd SUPREMEIND

88 Surya Roshni Ltd SURYAROSNI

89 Sutlej Industries Ltd SUTLEJINDS

90 Swaraj Engines Ltd SWARAJENG91 Tamilnadu Newsprint & Papers Ltd TNPL

92 Tata Power Co. Ltd TATAPOWER

93 TIL Ltd TIL

94 Universal Cables Ltd UNIVCABLES

95 Videocon Appliances Ltd VDOCONAPPL

96 Voltas Ltd VOLTAS

97 Videsh Sanchar Nigam Ltd VSNL

98 Wipro Ltd WIPRO

99 Zodiac Clothing Company Ltd ZODIACLOTH

100 Zuari Industries Ltd ZUARIAGRO



Data Collection

The data regarding the selected companies is obtained from website of National

Stock Exchange and India Infoline. The prices of the equity shares, NSE indexfigures have been collected from the Website of NSE. Data for the project is

collected from secondary sources like newspapers, books, journals etc.

Study Period

In this study, study period is of 9 years from Jan 1997 to Dec 2005. Daily data of

security and stock index have been collected from the website of NSE.

Statistical Techniques

No. of statistical techniques are used in project for achieving the desired objective. The

daily rate of return is calculated for all the 100 scrips during the study period. So the

techniques used in the project are:

Return

R = (Pt-Pt-1)/Pt-1

Where

R is daily return

Pt is the current day’s closing price

Pt-1 is the previous day’s closing price

Standard Deviation

Estimates standard deviation based on a sample. The standard deviation is a measure of

how widely values are dispersed from the average value (the mean).

STDEV uses the following formula:



Variance

Estimates variance based on a sample. In addition to numbers, text and logical values

such as TRUE and FALSE are included in the calculation.

VARA uses the following formula

Skew ness

Returns the skew ness of a distribution. Skew ness characterizes the degree of asymmetry

of a distribution around its mean. Positive skew ness indicates a distribution with an

asymmetric tail extending toward more positive values. Negative skew ness indicates a

distribution with an asymmetric tail extending toward more negative values.

• The equation for skew ness is defined as:

where

n = no. of observation

xi = values

s = standard deviation

Kurtosis

Returns the kurtosis of a data set. Kurtosis characterizes the relative peaked ness or

flatness of a distribution compared with the normal distribution. Positive kurtosis



indicates a relatively peaked distribution. Negative kurtosis indicates a relatively flat

distribution.

Kurtosis is defined as

where:

s is the sample standard deviation.

Limitations of the Study

However I have tried my best in collecting the relevant information. Yet there are

always present some limitations under which researcher has to work. Here

following are some limitations under which I had to work as shown below:

Sample Size

The prime limitation of the study is the size of the sample. The sample consists of

100 scrips, which are specified, in the National Stock Exchange. A larger sample,

including more number of scrips would be a right choice. However, in general, a

sample of carefully selected 100 scrips is considered as a larger sample. Since the

sample scrips are selected randomly from the specified group shares, it is

considered that the above sample would be sufficient for the purpose of analysis.

Time Constraint

We had a limited time for conducting this analysis report, which was of three four

months only. So some shortfalls may be present.



Based on secondary source

Data is collected from secondary sources so authenticity of data depends on the

authenticity of the sources from which the data is collected.



Chapter 4Analysis and Results

Return & risk Statistics for S & P CNX Nifty and 100 NSE listed

companies for period commencing from Jan 1999 to June 2009

Table 4.1

Mean S.D. Var Skew KurtNo. of

S&P CNX Nifty 0.00064 0.01610 0.00026 -0.2230 4.9533 2256Aandhra Sugar 0.00150 0.04047 0.00164 0.4479 3.4985 1975

Aarti Industries 0.00165 0.03675 0.00135 -2.5419 50.5802 2009

ABB 0.00056 0.02491 0.00062 -0.0144 3.3209 2256

ACC 0.00053 0.03653 0.00133 -7.4277 186.1596 2256

Alfa Laval 0.00126 0.02904 0.00084 0.3976 1.8251 2236

Apollo Tyre 0.00100 0.03605 0.00130 0.7316 3.0446 2256

Arvind Mill 0.00063 0.03630 0.00132 0.9495 3.9726 2256

Ashok Leyland 0.00059 0.04082 0.00167 -5.0370 118.4198 2256

Asian Paint 0.00032 0.02269 0.00051 -3.9980 77.6867 2256

Bajaj Hindustan 0.00267 0.04503 0.00203 -4.1125 87.2412 1814

Bajaj Hotel 0.00038 0.02415 0.00058 -1.0456 19.2264 2256

Balrampur Chini 0.00150 0.02912 0.00085 0.5084 1.8135 2255

BASF 0.00042 0.02728 0.00074 -0.0815 7.7111 2237

Bharat Gear 0.00241 0.06672 0.00445 8.0156 176.1557 1710

Bharat Petrol 0.00082 0.03405 0.00116 -1.4314 24.2277 2253

Birla Eric 0.00100 0.04284 0.00184 1.0001 3.6914 2251

Birla Global 0.00245 0.04734 0.00224 -1.4780 35.3938 1863

Bombay Dyeing 0.00097 0.03584 0.00128 0.5477 2.7793 2256

Can Fin Home 0.00099 0.02779 0.00077 1.1211 10.8599 2225

Carborundam 0.00087 0.03481 0.00121 -5.6816 137.0795 2165

Ceat 0.00067 0.03785 0.00143 0.5245 1.7343 2254Century Enka 0.00021 0.03923 0.00154 -5.5839 133.9161 2230

Chambal Fertiliser 0.00089 0.02536 0.00064 1.1761 14.0711 1935

Cipla 0.00066 0.03447 0.00119 -9.2054 200.3654 2256

Cochi Refinary 0.00099 0.03376 0.00114 -0.6616 25.3624 2256

Dhampur 0.00152 0.04611 0.00213 0.9170 5.8465 2132

Eih Hotel 0.00008 0.02398 0.00057 0.2993 2.2389 2254

Escorts 0.00050 0.03446 0.00119 0.4682 2.4433 2256



Essar Oil 0.00131 0.04315 0.00186 1.7684 13.0071 2197

Federal Bank 0.00110 0.03738 0.00140 -2.3276 49.9083 1935

Flex 0.00088 0.04746 0.00225 0.6658 3.6863 2255

GIC Housing 0.00074 0.03591 0.00129 0.6965 5.6132 2171

Godfrey Phillip 0.00136 0.03117 0.00097 0.5154 2.6547 2175

Goetz 0.00117 0.03142 0.00099 0.7620 2.7336 2235Grasim 0.00098 0.02886 0.00083 0.2149 2.0167 2256

GTC 0.00273 0.06864 0.00471 2.6111 30.6058 2164

Gujrat stat 0.00077 0.03712 0.00138 0.7300 3.6157 2254

HDFC 0.00052 0.03334 0.00111 -11.1489 284.2803 2256

HDFC Bank 0.00161 0.02674 0.00071 0.6340 7.8185 2256

Hindustan Motor 0.00133 0.04663 0.00217 1.9639 11.7272 2218

HLL 0.00022 0.02861 0.00082 -13.5299 428.4556 2256

Hotel Leela 0.00091 0.03483 0.00121 1.0264 5.3425 2170

IDBI 0.00068 0.03499 0.00122 0.1567 10.3853 2256

IFB 0.00297 0.08609 0.00741 1.6802 17.1110 1877

IFCI 0.00041 0.04033 0.00163 1.4708 7.2762 2256

Indian Hotel 0.00014 0.02311 0.00053 0.0716 3.3235 2256

Infosys 0.00164 0.04226 0.00179 -5.0763 75.3539 2256

IOC 0.00035 0.03016 0.00091 -2.2754 39.1808 2172

IPCA Lab 0.00167 0.03394 0.00115 0.2569 1.5236 2253

IPCL 0.00075 0.03300 0.00109 -0.0509 8.2825 2256

ITC 0.00098 0.02501 0.00063 0.1208 2.5586 2256

Jai Bharat Maruti 0.00195 0.04759 0.00226 -0.0748 7.9374 1784

Jai Sree Tea 0.00062 0.03522 0.00124 -0.6680 19.4248 2180

Laxmi Machine 0.00126 0.03503 0.00123 -1.3008 20.6714 2047

Liberty 0.00107 0.03336 0.00111 0.7831 3.3706 2123LML 0.00070 0.03653 0.00133 0.6102 2.3805 2152

M&M 0.00074 0.03117 0.00097 0.0654 1.6496 2256

Maharashtra Scot. 0.00065 0.03595 0.00129 -0.0700 19.4435 2194

Mastek 0.00198 0.05230 0.00274 -1.1547 11.7912 2236

MRF 0.00036 0.02752 0.00076 0.8112 4.8589 2193

Mysore Cement 0.00165 0.05624 0.00316 0.9132 4.0422 2214

Nagarjun 0.00044 0.03213 0.00103 1.3837 7.5287 2256

Navneet 0.00127 0.03555 0.00126 -3.9836 86.6597 1771

Nirma 0.00040 0.02557 0.00065 0.6821 4.1648 2222

ONGC 0.00121 0.02866 0.00082 0.4435 3.7120 2254

Oudh Sugar 0.00227 0.06872 0.00472 1.2917 57.1374 1669

Parkash 0.00360 0.09076 0.00824 2.6628 28.7117 1563

Pidilite 0.00080 0.02613 0.00068 -2.3476 47.6701 2248

Punjab Tractors 0.00008 0.02874 0.00083 -5.6578 138.8020 2206

Rajasthan Spinning 0.00128 0.04011 0.00161 0.6822 3.4385 1998

Rajsree Sugar 0.00152 0.04581 0.00210 1.8444 14.3287 2203

Rama Newsprint 0.00231 0.06027 0.00363 1.4500 7.0477 2254



Ranbaxy 0.00082 0.02827 0.00080 -3.4658 58.8981 2256

Raymond 0.00097 0.03205 0.00103 0.4810 1.6071 2256

Reliance Capital 0.00105 0.03443 0.00119 0.1713 1.4417 2256

Reliance Ind. 0.00088 0.02765 0.00076 -2.4000 48.7777 2256

RIIL 0.00092 0.03147 0.00099 0.6777 3.2315 2230

S.kumar 0.00220 0.06063 0.00368 2.8438 32.3337 1779SAIL 0.00144 0.04340 0.00188 1.2409 8.2761 2256

Sakhti Sugar 0.00198 0.05576 0.00311 0.8238 3.7497 2150

Salora 0.00328 0.08052 0.00648 20.5876 706.9379 2015

SBI 0.00082 0.02618 0.00069 0.1106 2.3040 2256

Siemens 0.00096 0.02861 0.00082 0.2248 2.1910 2256

Sirpur Paper Mill 0.00148 0.04139 0.00171 0.5865 4.6941 1848

Sree Cement 0.00225 0.03701 0.00137 0.5075 2.0463 1933

Sun Pharma 0.00126 0.03785 0.00143 -4.7604 78.6828 2254

Supreme 0.00054 0.03230 0.00104 0.3075 1.2816 2237

Surya Roshni 0.00109 0.04301 0.00185 0.7756 6.3195 2143

Sutlej 0.00111 0.04010 0.00161 -1.1597 15.9793 1267

Swaraj Engine 0.00042 0.02528 0.00064 0.2211 1.6889 2196

Tamilnadu Newsprint 0.00071 0.03815 0.00146 0.6023 2.7820 2253

Tata Power 0.00096 0.02840 0.00081 0.1355 4.1597 2256

Til Ltd 0.00358 0.07461 0.00557 9.2363 208.2372 1463

Universal Cable 0.00267 0.06430 0.00413 1.3216 11.4994 1657

Videocon Appliances 0.00106 0.04755 0.00226 1.5711 8.5168 2206

Voltas 0.00146 0.03444 0.00119 0.6107 1.9305 2255

VSNL 0.00034 0.03962 0.00157 -2.5416 42.6803 2047

Wipro 0.00193 0.04743 0.00225 -4.6166 71.7315 2212

Zodiac 0.00188 0.04182 0.00175 -0.4373 12.3605 1843Zuari 0.00013 0.03846 0.00148 -0.5453 12.7290 2214

It is obvious from Table 4.1 that Parkash industries shows the highest daily return

(0.00360) followed by TIL ltd (0.00358) and Salora International (0.00328). The

bottom three companies on the basis of daily returns are Punjab tractors (0.00008)

followed by EIH (0.00008) and Zuari (0.00013).

Standard deviation, which is a measure of total risk, turns highest in case of Park

ash industries (0.09076) followed by IFB (0.08609) and Salora (0.08052). on the

other hand the least risky companies are Asian paints (0.02269), Indian hotel

(0.02311), EIH hotel (0.02398). From this result it is clear that Parkash industry

which has highest return have highest standard deviation (risk).



Variance turns highest in case of Prankish (0.00824) followed by IFB (0.00741)and Salora (0.00648).on the other hand the least variance companies are Asian

paints (0.00051), Indian hotel (0.00053), EIH hotel (0.00057). A relatively small

variance means a high degree of uniformity in the data, with smaller overall

divergence of individual observations from their mean. A high variance, on the

other hand, indicates a greater degree of diversions of individual observations

from the mean. This helps decide which of the two sets of data with the same

mean value, is represented more adequately by their respective means.

Skew ness turns highest in case of Salora (20.587) followed by TIL Ltd. (9.236)

and Bharat Gear (8.016).on the other hand the least Skew ness companies are HLL

(-13.509), HDFC (-11.148), CIPLA (-9.205).

Kurtosis turns highest in case of Salora (706.937) followed by HLL (428.455) and

HDFC (284.280).on the other hand the least Kurtosis companies are Supreme

(1.282), Reliance Capital (1.442), IPCA Lab (1.524).



Beta values for S&P CNX Nifty and 100 NSE listed companies.

Table 4.2

Company Name Beta

Aadhra Sugar 0.03431

Aarti Industries 0.00810

ABB 0.62292

ACC 1.09619

Alfa Laval 0.10934

Apollo Tyre 1.04259

Arvind Mill 1.12732

Ashok leyland 0.96628

Asian Paint 0.44250

Bajaj Auto 0.69746

Bajaj Hindustan 0.14165

Balrampur Chini 0.59786

BASF Ltd 0.00234

Bharat Gear 0.06554

Bharat Petrol 0.01757

Birla Eric 0.27088

Birla Global Finance -0.01391

Bombay Dyeing 0.98667

Can Fin Home 0.07757

Carborundam 0.06871

Ceat 0.56924

Century Enka 0.01010

Chambal Fertiliser 0.34149

Ciplal 0.66500

Cochi Refinery 0.84474

Dhampur 0.26662

EIH 0.16927

Escorts 1.07750

Essar Oil 0.71525

Fedral Bank 0.63226

Flex 0.38597

GIC Housing 0.21024

Godfrey Phillip 0.01994

Goetz 0.04292

Grasim 0.82831

GTC Ind -0.00452

gujrat stat 0.03687

HDFC 0.53807

HDFC Bank 0.80053

Hindustan Motor 0.96057

HLL 0.75212

Hotel Leela Venture 0.86140

0.94941



IDBI

IFB 0.22829

IFCI 1.03814

Indian Hotel 0.60624

Infosys 1.16071

IOC -0.04145

IPCA lab 1.11427IPCL 0.10375

ITC Ltd 0.90269

Jai Bharat Maruti 0.06528

Jai Sree Tea -0.03041

Laxmi Machine 0.03902

Liberty -0.02087

LML 1.17448

M&M 1.01084

Maharashtra Scooter 0.07726

Mastek -0.08402

MRF 0.03778

Mysore Cement 0.04619

Nagarjun 0.79566

Navneet -0.02692

Nirma -0.01429

ONGC 0.09634

Oudh Sugar -0.13635

Parkash 0.57034

Pidilite 0.14562

Punjab Tractors 0.06091

Rajasthan Spinning -0.01007

Rajsree Sugar 0.10523

Rama News 0.33767

Ranbaxy 0.73960

Raymond 0.89132

Reliance capital 1.41422

Reliance Ind. 1.11119

RIIL 0.23334

S&P CNX Nifty 1.00000

S.kumar 0.03396

Sail 1.31575

Sakhti Sugar 0.05445

Salora 0.06053

SBI 1.11604

Shree Cement 0.16493

Siemens 0.81697

Sirpur Paper Mill -0.02731

Sun Pharma -0.00501

Supreme -0.01129

Surya Roshni 0.03010

Sutlej 0.02592

Swaraj Engine 0.01365

Tamilnadu Newsprint 0.02810



Tata Power 0.99190

TIL -0.01970

Universal Cable 0.03910

Videocon Appliances 0.85453

Voltas 0.71012

VSNL -0.02144

Wipro -0.02959Zodiac -0.03225

Zuari 0.02341

It is obvious from the table 4.2, that the lowest Beta is of Oudh Sugar (-0.136) and

followed by Mastek (-0.080) and IOC (-0.041). On the other hand the highest Beta

company is Reliance Capital (1.414) followed by SAIL (1.316) and LML (1.174).

It means these companies have beta higher then the index which is one. Reliance

capital has the highest beta but the highest return security is Park ash Industries.

Mean Daily Return of Various Months for S&P CNX Nifty (Jan 1999 to June

2009).

Return

Table 4.3

1999 2000 2002 2004 2005 2006 2007 2008 2009 Avera

Jan 0.00381 -0.00529 0.00487 0.00248 0.00381 0.00071 -0.00207 -0.00158 -0.00045 0.0006

Feb 0.00140 0.00512 0.00090 0.00340 -0.00063 0.00312 0.00112 -0.00014 0.00113 0.0017

Mar -0.00106 0.00258 0.00439 -0.00359 -0.00733 -0.00051 -0.00411 -0.00062 -0.00143 -0.0012

Apr 0.00588 0.00200 -0.00434 -0.00403 -0.00083 -0.00179 -0.00222 0.00077 -0.00330 -0.0008

May -0.00126 -0.00444 0.00721 -0.00052 0.00173 -0.00231 0.00360 -0.00819 0.00425 0.0000Jun 0.00607 -0.00506 0.00226 0.00301 -0.00243 0.00145 0.00573 0.00077 0.00272 0.0016

Jul 0.00119 -0.00031 0.00459 -0.00455 -0.00141 -0.00421 0.00199 0.00376 0.00207 0.0003

Aug -0.00489 -0.00427 0.00350 0.00210 -0.00084 0.00254 0.00686 0.00003 0.00145 0.0007

Sep 0.00081 0.00279 0.00012 -0.00439 -0.00679 -0.00238 0.00214 0.00310 0.00422 -0.0000

Oct -0.00163 -0.00440 -0.00285 -0.00373 0.00301 -0.00055 0.00418 0.00122 -0.00452 -0.0010

Nov -0.00293 -0.00030 0.00192 0.00366 0.00476 0.00523 0.00195 0.00463 0.00566 0.0027

Dec 0.00249 0.00366 0.00342 -0.00080 -0.00033 0.00197 0.00696 0.00265 0.00311 0.0025



Return

-0.002000

0.000000

0.002000

0.004000

1 2 3 4 5 6 7 8 9 10 11 12

Months

Series1

Mean Daily Risk (S.D.) of Various Months for S&P CNX Nifty (Jan 1999 to

June 2009).

S.D.

Table 4.4

1999 2000 2002 2004 2005 2006 2007 2008 2009Avera

ge

Jan 0.0220 0.0149 0.0202 0.0256 0.0121 0.0099 0.0080 0.0218 0.0167 0.0168

Feb 0.0130 0.0100 0.0182 0.0184 0.0158 0.0148 0.0089 0.0169 0.0078 0.0138

Mar 0.0350 0.0161 0.0153 0.0199 0.0290 0.0118 0.0109 0.0148 0.0108 0.0181

Apr 0.0160 0.0167 0.0326 0.0351 0.0223 0.0110 0.0136 0.0140 0.0123 0.0193

May 0.0080 0.0149 0.0217 0.0264 0.0090 0.0135 0.0075 0.0421 0.0068 0.0167

Jun 0.0090 0.0306 0.0135 0.0148 0.0127 0.0113 0.0094 0.0146 0.0073 0.0136

Jul 0.0140 0.0184 0.0159 0.0176 0.0101 0.0101 0.0105 0.0129 0.0094 0.0132

Aug 0.0150 0.0162 0.0139 0.0107 0.0057 0.0085 0.0151 0.0099 0.0098 0.0117

Sep 0.0090 0.0140 0.0130 0.0204 0.0252 0.0072 0.0181 0.0083 0.0119 0.0142

Oct 0.0300 0.0239 0.0205 0.0159 0.0121 0.0084 0.0153 0.0097 0.0151 0.0168

Nov 0.0170 0.0118 0.0168 0.0144 0.0125 0.0069 0.0130 0.0068 0.0095 0.0121

Dec 0.0140 0.0146 0.0143 0.0142 0.0122 0.0096 0.0097 0.0074 0.0109 0.0119



Risk

0.0000

0.0050

0.0100

0.0150

0.0200

0.0250

1 2 3 4 5 6 7 8 9 10 11 12

Series1

Mean Daily Coefficient of variation of various Months for S&P CNX Nifty

(Jan 1999 to June 2009).

Coefficient of Variation

Table 4.5

1999 2000 2002 2004 2005 2006 2007 2008 2009A

e

Jan 0.1734 -0.3550 0.2410 0.0971 0.3148 0.0720 -0.2589 -0.0723 -0.0269 Feb 0.1080 0.5124 0.0492 0.1847 -0.0397 0.2106 0.1254 -0.0083 0.1446

Mar -0.0303 0.1604 0.2872 -0.1807 -0.2527 -0.0435 -0.3771 -0.0417 -0.1320 -

Apr 0.3673 0.1197 -0.1332 -0.1148 -0.0371 -0.1627 -0.1630 0.0552 -0.2695 -

May -0.1574 -0.2982 0.3325 -0.0197 0.1923 -0.1709 0.4806 -0.1944 0.6296

Jun 0.6743 -0.1653 0.1674 0.2035 -0.1915 0.1284 0.6096 0.0530 0.3705

Jul 0.0848 -0.0171 0.2886 -0.2585 -0.1397 -0.4168 0.1897 0.2916 0.2206

Aug -0.3257 -0.2638 0.2518 0.1958 -0.1473 0.2986 0.4540 0.0030 0.1475

Sep 0.0898 0.1996 0.0090 -0.2146 -0.2694 -0.3301 0.1184 0.3739 0.3537

Oct -0.0543 -0.1840 -0.1388 -0.2340 0.2484 -0.0655 0.2734 0.1255 -0.2995 -

Nov -0.1721 -0.0251 0.1145 0.2540 0.3808 0.7585 0.1503 0.6764 0.5938

Dec 0.1779 0.2508 0.2394 -0.0565 -0.0271 0.2055 0.7177 0.3573 0.2865



Coefficient of Variation

-0.1000

0.0000

0.1000

0.2000

0.3000

0.4000

1 2 3 4 5 6 7 8 9 10 11 12

Series1

Table 4.3 summarizes the volatility of daily returns in each month for the period of

study. It can be seen from table 4.3 that volatility has varied across months in a

year and across years. November has been the most volatile month followed by

December and February. The higher volatility in the month of February may be

due to the most significant economic event in a year namely the presentation of the

Union Budget, which is usually presented on the last day of the month. Volatility

in November and December is higher due to the effect of half year results declared

by various companies. It can be seen from the table 4.4 that S.D. is highest in the

month of April followed by March and January. This may be due to the reason that

new financial year is started and there are always some new policies of Govt.

related to the corporate sector. Annual reports of various companies are also

published in this month. From table 4.3, we can see that the most volatile year is

2006.



Chapter 5

Conclusion

The measure findings of the study are listed below:

Lowest ten and top ten companies according to the return are as follows:

Lowest return securities Highest return securitiesPunjab Tractors 0.00008 Rama Newsprint 0.00231Eih Hotel 0.00008 Bharat Gear 0.00241Zuari 0.00013 Birla Global 0.00245Indian Hotel 0.00014 Universal Cable 0.00267Century Enka 0.00021 Bajaj Hindustan 0.00267HLL 0.00022 GTC 0.00273Asian Paint 0.00032 IFB 0.00297VSNL 0.00034 Salora 0.00328IOC 0.00035 Til Ltd 0.00358MRF 0.00036 Parkash 0.00360

Lowest ten and top ten companies according to the S.D. are as follows:

Lowest S.D. securities Hghest S.D. securities

Asian Paint 0.02269 Rama Newsprint 0.06027Indian Hotel 0.02311 S.kumar 0.06063Eih Hotel 0.02398 Universal Cable 0.06430Bajaj Hotel 0.02415 Bharat Gear 0.06672ABB 0.02491 GTC 0.06864ITC 0.02501 Oudh Sugar 0.06872Swaraj Engine 0.02528 Til Ltd 0.07461Chambal Fertiliser 0.02536 Salora 0.08052Nirma 0.02557 IFB 0.08609Pidilite 0.02613 Parkash 0.09076



Lowest ten and top ten companies according to the Variance are as follows:

Lowest VAR. securities Highest VAR. securities

Asian Paint 0.00051RamaNewsprint 0.00363

Indian Hotel 0.00053 S.kumar 0.00368Eih Hotel 0.00057 Universal Cable 0.00413Bajaj Hotel 0.00058 Bharat Gear 0.00445ABB 0.00062 GTC 0.00471ITC 0.00063 Oudh Sugar 0.00472

Swaraj Engine 0.00064 Til Ltd 0.00557Chambal Fertiliser 0.00064 Salora 0.00648Nirma 0.00065 IFB 0.00741Pidilite 0.00068 Parkash 0.00824

Lowest ten and top ten companies according to the Skewness are as follows:

Lowest SKEW securities Highest SKEW securities

HLL -13.52991 IFB 1.68023HDFC -11.14893 Essar Oil 1.76843Cipla -9.20537 Rajsree Sugar 1.84443ACC -7.42768 Hindustan Motor 1.96390Carborundam -5.68162 GTC 2.61110Punjab Tractors -5.65784 Parkash 2.66277Century Enka -5.58385 S.kumar 2.84381Infosys -5.07629 Bharat Gear 8.01556Ashok Leyland -5.03697 Til Ltd 9.23631Sun Pharma -4.76043 Salora 20.58760



Lowest ten and top ten companies according to the Kurtosis are as follows:

Lowest KURT securities Highest KURT securitiesSupreme 1.28157 Century Enka 133.9161Reliance Capital 1.44170 Carborundam 137.0795IPCA Lab 1.52358 Punjab Tractors 138.8020Raymond 1.60713 Bharat Gear 176.1557M&M 1.64959 ACC 186.1596Swaraj Engine 1.68887 Cipla 200.3654Ceat 1.73431 Til Ltd 208.2372

Balrampur Chini 1.81345 HDFC 284.2803Alfa Laval 1.82508 HLL 428.4556Voltas 1.93051 Salora 706.9379

Lowest ten and top ten companies according to the Beta are as follows:

Lowest beta securities Highest beta securitiesOudh Sugar -0.13635 Escorts 1.07750Mastek -0.08402 ACC 1.09619IOC -0.04145 Reliance Ind. 1.11119Zodiac -0.03225 IPCA lab 1.11427Jai Sree Tea -0.03041 SBI 1.11604Wipro -0.02959 Arvind Mill 1.12732Sirpur Paper Mill -0.02731 Infosys 1.16071Navneet -0.02692 LML 1.17448VSNL -0.02144 Sail 1.31575Liberty -0.02087 Reliance capital 1.41422

Months with Highest Return Months with Highest S.D.November December February

AprilMarch

January



Bibliography

1. www.nseindia.com

2. www.nsdl.co.in

3. www.cdsl.co.in

4. www.religaresecurities.com

5. www.reliancemoney.com

6. www.uniconinvestment.com

7. www.moneycontrol.com

8. www.bseindia.com

http://www.nseindia.com/

http://www.nsdl.co.in/

http://www.cdsl.co.in/

http://www.religaresecurities.com/

http://www.reliancemoney.com/

http://www.uniconinvestment.com/

http://www.moneycontrol.com/

http://www.bseindia.com/

http://www.nseindia.com/

http://www.nsdl.co.in/

http://www.cdsl.co.in/

http://www.religaresecurities.com/

http://www.reliancemoney.com/

http://www.uniconinvestment.com/

http://www.moneycontrol.com/

http://www.bseindia.com/





OBJECTIVES OF THE STUDY

1. To study the investor’s perception towards Stock Market.

2. To study the awareness level about Stocks.

3. To study the preference of investment of investors.

4. To study the market share of particular Stock.

5. To study the volatility of Stock market.

6. To study the awareness of Stocks at different different time.

Basically there are some objectives of every study. The main objectives of my studyare as follow:



SWOT Analysis

STRENGTHS

Services:-

As a product Religare is a extremely innovative product with very less cost. Services like

online trading facility, institutional and domestic broking, customized research

reports with almost 80% efficiency etc give Religare an edge over its competitors.

Religare provides other support services that make retail investors more confident

and assured with their trading. SMS alerts (allowing traders and investors to make

the most of the available opportunities), Softer, intangible features like imagery,

equity driving preference. Through efficient trading processes Investors can place

their orders directly on the Internet, do all the information seeking and basically own

investing process.

Distribution Network:-

Religare with almost 900 location spread across 300 cities beefed up by comprehensive

online research, advice and transaction services. In near future expect to make 200000+

retail customers being serviced through centralized call centre / web solution,



60 branches/semi branches servicing affluent/aggressive traders through highly skilled

financial advisors, 250 independent investment managers/franchisees servicing 50000

highly valued clients, strong advisory role through Fundamental & technical research and

new initiatives are being made in Portfolio Management Services & Commodities

trading.

Products:-

Company’s product line is quite flexible in the sense that there is a product for every kind

of investors. Also all the products cover all the loop holes of all the products offered by

the other competitors like low cost, user friendly online trading services etc.

Branch Network :-

Branch network is a strength of the company.

Performing Organization:-

In stage of evaluation Religare is going to be a “Performing Organization from a

Learning Organization ”

Weakness

Customer Satisfaction:-

As far as customer satisfaction goes Religare has to tighten their socks. Many broking

house catering to heavy investors or small segment of the market can afford to and does

provide relationship managers for their customers, who can understand the trading needs

of individual customers, and advise accordingly. However, a broking house like Religare,

that caters to the mass segment, is in no position to provide relationship managers for

individual customers.



Branding:-

Though the company has a efficient products but large part of investment interested

population does not know the company. The most basic expectation for a trader or

investor when one begins trading is that one must get timely delivery of shares and

proceeds from sale of shares. Also ones cash balances with the broker must be safe and

secure. Though this confidence in the broker comes with time and experience, good and

transparent practices also play a major role in imbibing confidence in traders.

Competition from banks:-

Most of the banks due to good branding have the faith of the customers of their banking

database. So they enjoy the liberty of huge database and customers find it more reliable to

trade there rather than with a unknown broker. Also banks like HDFC Bank and ICICI

Bank have the advantage of linking the trading accounts of their customers to saving

accounts. This makes trading easier, and at the same time a trader withdraws exactly as

much money from his account as is needed to complete the trade. Similarly sales

proceeds are credited directly to saving account.

Limited exploration of potential market.

Less market awareness about full product range.

Low customer confident in the quality of services.

Religare Securities has less number of brokers.

Religare Securities has less number of branches.

Religare Securities has less number of employees.

Religare Securities is in evolution stage.



Opportunities:-

The external environment analysis may reveal certain new opportunities for profit and

growth.

Ever-increasing market:-

After the NSE brought the screen based trading system stock markets are now more

secured which has attracted lot of retail investors and the demand is increasing day by

day. This has resulted in improved liquidity and heavy volumes on transactions. Religare

is one of the early entrants here. As to how much it will roar and how swift it can swoop

on the market, the future alone can answer such queries. Religare has been a mega player

and is known for being a mover of stocks. It is also known for putting big deals through

and enjoys good networking with the FIIs.

Improving Technology:-

In country like India technology is always improving which gives the company a chance

to keep on improving their product with time whereas for the small players like local

brokers it will be difficult to keep the same pace as the changing technology. Also with

SEBI lying down some strict guidelines small brokers are finding it harder to retain the

customers with no research department and small capital. The traditional business model





A lot of new competitors are trying to enter the market in this bullish run to taste the

flavor of this cherry. This is creating a lot of competition for large players like Religare

and it is creating little confusion in the minds of the customers about the services

provided by the broker. Also many banking firms are entering into the market with huge

investment. Competitors like ICICI, KOTAK, HDFC, 5-PAISA etc. are posing a lot of

threats to the company.

Documents

An Analysis of Volatility in Stock Market (With Reference to 100 Scripts of NSE & BSE From Jan 1999 to June 2009)