fluctuation indian stock mkt

7/30/2019 fluctuation indian stock mkt

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SUMMER TRAINING PROJECT REPORTUNDER

PRABATH FINANCIAL SERVICES LIMITED

ON

Study of Fluctuations of Indian Stock Market

SUBMITTED IN PARTIAL FULLFILMENT OF THE REQUIRMENT FOR THE AWARDOF THE DEGREE OF MASTER OF BUSINESS ADMINISTRATION OF THE RAJASTHAN

TECHNICAL UNIVERSITY, KOTA.

SU P E R V I S E D B Y:- SU BM I T TE D B Y :-

Mr. S. P. Kabra Rahul Jajoo

FA CI T L IT Y SU P E R V I SO R : -

Ms. Shilpi Kuntal

SUBMITTED TO :-

DEPARTMENT OF MANAGENENT STUDIES, SWAMI KESHVANAND INSTITUTE OFTECHNOLOGY, MANAGEMENT & GRAMOTHAN. JAIPUR

2008-2010

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Acknowledgement

The completion of any project depends upon the co-operation, coordination and combined

efforts of several resources of knowledge, inspiration & energy.

Words fall short acknowledging immense support lent to me yet I will try to give full credit to

the deserver's.

My sincere thanks goes to Mr. Vikas Shrotriya (HOD DMS) giving me an opportunity to

discover more knowledge. I am also thankful to Mr. S. P. Kabra (Director,Prabhat financialservices) for his support, guidance and cooperation throughout to accomplish this project also

expressing deep sense of gratitude to my Project guide, Ms. Shilpi Kuntal (Lecturer) for her

valuable guidance, continuous encouragement and tremendous patience in discussing my

problems, have been of the greatest help in bringing out my task in present shape. I am equally

grateful to all my other teachers for their complete support.

It would be unfair on my part if I do not thank my colleagues for their continuous help without

which this work could never have been accomplished. They made me realize the importance of

teamwork and also the leadership skills. I am grateful to all of them standing with me and

supporting me in this project.

( Rahul Jajoo )

Preface

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In the present situation where stock market is going up and down, it is necessary to invest

consciously in the market whatever it is, this is the study about the last two year fluctuation in

stock market which enables the investor in taking decision regarding investment. This study tells

the factor which directly or indirectly affects the market and some basic information not only

share market but also other market such as derivatives or commodity market for the new

investors or the students who have some interest in stock market. The objective of selecting the

topic is to know about the market trends of the stock market and the information related to the

investment for the future investor. The study of fluctuations of stock market makes the investor

aquatinted with the factor affecting the investment and Stock prices can be volatile and some

analysts argue that this volatility is excessive. This is not easy to prove, since it is difficult to

assess certainty about future earnings and dividends. Companies tend to smooth dividends, sothey will be less volatile than stock prices. Volatile stock prices do not have a major impact on

consumption and capital spending since there is a good chance that price movements in one

direction may be reversed.

Contents

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1. Abstract

2. Research Methodology

2.1 Title of the Study

2.2 Duration of the Project

2.3 Objective of Study

2.4 Type of Research

2.5 Scope of Study

2.6 Limitation of Study

3. Core Study

4. SWOT

5. Conclusion

6. Bibliography

Executive summary

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A market is an environment that allows buyers and sellers to trade or exchange goods, services,

and information. These interactions define demand and supply characteristics and are therefore

fundamental to economies. A market can be defined as a place where any type of trade takes

place. Markets are dependent on two major participants buyers and sellers. Buyers and sellerstypically trade goods, services and/ or information. Historically, markets were physical meeting

places where buyers and sellers gathered together to trade. Although physical markets are still

vital, virtual marketplaces supported by IT networks such as the internet have become the largest

and most liquid. Some markets are very competitive, with a number of vendors selling the same

kinds of products or services. Conversely, some markets have low or no competition,

particularly if the industry is protected by government legislation.

The number of buyers and sellers involved will have a direct bearing on the price of the good orservice to be sold, and has become known as the law of supply and demand. Where there are

more sellers than buyers, the availability of supply will push down prices. If there are more

buyers than sellers, the increased demand will push up prices.

Markets can appear spontaneously when there are goods or services to be exchanged, or they can

be planned and regulated .Free markets operate under laissez-fare conditions, in that the

government does not intervene in how the market operates. These markets may be distorted if a

seller gains monopoly power by managing the majority of supply (or indeed if a buyer develops

monophony power by managing demand). Governments or trade bodies often step in when such

distortions undermine the smooth functioning of free markets. The currency markets are the

largest continuously traded markets in the world. Twenty four hours a day, seven days a week,

governments, banks, investors and consumers are buying and selling every currency, leading to

massive money flows constantly changing hands. Stock markets have become highly

complex markets that allow investors to buy shares in companies or in funds that aggregate

companies or industries together. Most stock markets today are primarily electronic networks,

although they often maintain a physical location for buyers, sellers and market makers tointeract directly. Markets originally started as marketplaces usually in the center of villages

and towns, for the sale or barter of farm produce, clothing and tools. These kinds of street

markets developed into a whole variety of consumer-oriented markets, such as specialist

markets, shopping centers, supermarkets, or even virtual markets such as eBay. With the

rising price of oil and food,

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commodity markets are once again under the spotlight. Commodities underpin economic

activity. Commodity markets include: energy (oil, gas, coal and increasingly renewable energy

sources such as biodiesel), soft commodities and grains (wheat, oat, corn, rice, soya beans,

coffee, cocoa, sugar, cotton, frozen orange juice, etc), meat, and financial commodities such as

bonds. Capital goods markets help businesses to buy durable goods to be used in industrial and

manufacturing processes. A number of services can also be associated with these goods.

Transactions tend to be wholesale with large quantities of goods being transacted at low prices.

Everyone has seen it and everyone is wishing if he should have buy stocks before this rally.

Albeit it could have been a gamble buying stocks before declaration of election results, it paid

off for those who bought. Now that's history. Stock markets are going to be volatile for next few

days. Today, i.e. on Tuesday, markets opened in red, went till 3oo points down, then recovered

and went up to 500 points up and finally settled for flat closing. So what should a small investor

do now? Should he buy stocks or should be selling stocks that he holds.This article is a

COMPLETE guide to the basics of making money in the stock market! If you are considering

investing in the stock market, you MUST read this article! We have explained all the concepts

and talked about all the "myths" that people have about the stock market!

INTRODUCTION TO THE ORGANIZATION

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Study of fluctuations of Indian stock market

DURATION OF THE PROJECT:- 45 days

OBJECTIVE OF STUDY

To know the basic terminology of stock market.

To make the investor aware about the factors which may affect their investment.

To get the knowledge of other markets such as commodity market and derivatives.

To know the ups and downs of stock market of last two years.

To forecast or predict the future trend of stock market which helps in investment.

To know the effect of these fluctuation on the Indian economy.

TYPE OF RESEARCH

Research

Research is defined as human activity based on intellectual application in the investigation

of matter. The primary purpose for applied research is discovering, interpreting, and

the development of methods and systems for the advancement of human knowledge on a wide

variety of scientific matters of our world and the universe. Research can use the scientific

method, but need not do so. Scientific research relies on the application of the scientific method,

a harnessing of curiosity. This research provides scientific information and theories for the

explanation of the nature and the properties of the world around us. It makes practicalapplications possible. Scientific research is funded by public authorities, by charitable

organizations and by private groups, including many companies. Scientific research can be

subdivided into different classifications according to their academic and application disciplines.

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In this project the research type used is descriptive because this research is the most commonly

used and the basic reason for carrying out descriptive research is to identify the cause of

something that is happening. For instance, this research could be used in order to find out what

age group is buying a particular brand of cola, whether a companys market share differs

between geographical regions or to discover how many competitors a company has in their

marketplace. However, if the research is to return useful results, whoever is conducting the

research must comply with strict research requirements in order to obtain the most accurate

figures/results possible.

DESCRIPTIVE RESEARCH

Descriptive research is used to obtain information concerning the current status of the

phenomena to describe "what exists" with respect to variables or conditions in a situation. The

methods involved range from the survey which describes the status quo, the correlation study

which investigates the relationship between variables, to developmental studies which seek to

determine changes over time.

Descriptive research can be of two types:

i. Quantitative descriptive research emphasizes on what is, and makes use of quantitative

methods to describe, record, analyze and interpret the present conditions.

Qualitative descriptive research also emphasizes on what is, but makes use of non-quantitative

research methods in describing the conditions of the present.

SCOPE OF STUDY

Derivatives

Sebi

Stock exchange

Commodity market

Stock market

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Securities

Day trading

Factor affecting Indian stock market

Effect on Indian economy

LIMITATIONS

Limitations are the limiting lines that restrict the work in some way or other. In this research

study also their were some limiting factors, some of them are as under:

1. Data Collection:The most important constraint in this study was data collection as Secondary data was

selected for study. Secondary da t a means data that are already available i.e. they

refer to the data which have already been collected and analysed by someone else.

2. Time Period:

Time period was one of the main factor as only one month was allotted and the topic

covered in research has a wide scope. So, it was not possible to cover it in a short span of

time.

3. Reliability:

The data collected in research work was secondary data, So, this puts a question mark on

the reliability of this data, which a very important factor of this study as conclusion has

been derived from this secondary data only.

4. Accuracy:

The facts and findings of the data cannot be accepted as accurate to some extent as

firstly, secondary data was collected. Secondly, for doing descriptive research time

needed to be more, because in short period you cannot cover each point accurately .

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Core study

Stock market

A stock market is a public m arket forthetrad ing ofco m pany stock and der iva ti ves at an agreed

price; these ares ecur iti es listed on as tock exchange as well as those only traded privately.

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

October 2008 . The totalworld derivatives market has been estimated at about $791 trillion face

or nominal value, 11 times the size of the entire world economy. The value of the derivatives

market, because it is stated in terms ofno ti onal va lue s, cannot be directly compared to a stock or

a fixed income security, which traditionally refers to an ac tual va lu e . Moreover, the vast majorityof derivatives 'cancel' each other out (i.e., a derivative 'bet' on an event occurring is offset by a

comparable derivative 'bet' on the event notoccurring.). Many such relatively illiquid securities

are valuedas m arked to m ode l , rather than an actual market price.)

The stocks are listed and traded on stock exchanges which are entities a corporation or mutual

organization specialized in the business of bringing buyers and sellers of the organizations to a

listing of stocks and securities together. The stock market in the United States includes the

trading of all securities listed on the N Y S E , theN A S D A Q , the A m ex, as well as on the manyregional exchanges, e.g. O T CBB and Pink Sheets. European examples of stock exchanges

include the L ondon S tock E xchang e , the D eu ts che Br s e and the Par is Bour s e , now part of

E uronex t .

Function and purpose

The stock market is one of the most important sources for co m pan ies to raise m oney. This

allows businesses to be publicly traded, or raise additional capital for expansion by selling sharesof ownership of the company in a public market. The li qu id it y that an exchange provides affords

investors the ability to quickly and easily sell securities. This is an attractive feature of investing

in stocks, compared to other less liquid investments such as real e s ta te .

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History has shown that the price ofs hares and other assets is an important part of the dynamics

of economic activity, and can influence or be an indicator of social mood. An economy where

the stock market is on the rise is considered to be an up and coming economy. In fact, the stock

market is often considered the primary indicator of a country's economic strength and

development. Rising share prices, for instance, tend to be associated with increased business

investment and vice versa. Share prices also affect the wealth of households and their

consumption. Therefore, cen tral banks tend to keep an eye on the control and behavior of the

stock market and, in general, on the smooth operation of f inanc ia l s y s tem functions. Financial

stability is the ra is on d ' tre of central banks.

Exchanges also act as the clearinghouse for each transaction, meaning that they collect and

deliver the shares, and guarantee payment to the seller of a security. This eliminates the risk to

an individual buyer or seller that the coun terpar ty could default on the transaction.

The smooth functioning of all these activities facilitates econo mi c gr o w th in that lower costs and

enterprise risks promote the production of goods and services as well as employment. In this

way the financial system contributes to increased prosperity.

Relation of the stock market to the modern financial

system

The financial system in most western countries has undergone a remarkable transformation. One

feature of this development is d is in ter m ed ia ti o n . A portion of the funds involved in saving and

financing flows directly to the financial markets instead of being routed via the traditional bank

lending and deposit operations. The general public's heightened interest in investing in the stock

market, either directly or through m u tual fun d s , has been an important component of this

process. S ta ti s ti cs show that in recent decades shares have made up an increasingly large

proportion of households' financial assets in many countries. In the 1970s, in S w ede n ,depo s it

accoun ts and other very liquid assets with little risk made up almost 60 percent of households'financial wealth, compared to less than 20 percent in the 2000s. The major part of this

adjustment in f inanc ial por tfo li os has gone directly to shares but a good deal now takes the form

of various kinds of institutional investment for groups of individuals, e.g., pension funds, mutual

funds, hedge funds, insurance investment of premiums, etc. The trend towards forms of saving

with a higher risk has been accentuated by new rules for most funds and insurance, permitting a

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Securities and Exchange Board of India

SEBI Bhavan, Mumbai Headquarters of SEBI

Organization Details

Headquarters M u m ba i , M ahara s h tr a , Ind ia

Established 1992

Jurisdiction India Head

Chairman

Chairman C B Bhave

Term February 16, 2008 -

Total Staff[1] 525

Official Website

Website w ww .s eb i.gov.in

SEBI is the Regulator for the Securities Market in India. Originally set up by the G overn m ent of

India in 1988, it acquired statutory form in 1992 with S E BI A ct 1992 being passed by the Indian

Parliament.Chaired by C B Bhav e , SEBI is headquartered in the popular business district of

Bandra-Kurla complex in M u m ba i , and has Northern, Eastern, Southern and Western regionaloffices inN e w D e lh i , K o lka ta , Chennai and A h m edaba d .

Organization Structure

Chandra s ekhar Bha s kar Bhave is the sixth chairman of the Securities Market Regulator. Prior to

taking charge as Chairman SEBI, he had been the chairman of NSDL (N a ti onal Secur iti es

D ep o s it ory Limit e d ) ushering in paperless securities. Prior to his stint at NSDL, he had served

SEBI as a Senior Executive Director. He is a formerInd ian A d mi n is tra ti v e Serv ice officer of the

1975 batch. The Board comprises[2]

Name Designation As per

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

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1992)

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

1992)

Mr Anurag Goel Secretary, Ministry of CorporateAffairs

Member (S.4(1)(b) of the SEBI Act,1992)

Dr G Mohan

Gopal

Director, National Judicial Academy,

Bhopal

Member (S.4(1)(d) of the SEBI Act,

1992)

Mr MS Sahoo Whole Time Member, S E BIMember (S.4(1)(d) of the SEBI Act,

1992)

Dr KM Abraham Whole Time Member, S E BI

Member (S.4(1)(d) of the SEBI Act,

1992)

Mr Mohandas Pai Director, InfosysMember (S.4(1)(d) of the SEBI Act,

1992)

Functions and Responsibilities

SEBI has to be responsive to the needs of three groups, which constitute the market:

the issuers of securities

the investors

the market intermediaries.

SEBI has three functions rolled into one body quasi-legislative, quasi-judicial and quasi-

executive. It drafts regulations in its legislative capacity, it conducts investigation and

enforcement action in its executive function and it passes rulings and orders in its judicial

capacity. Though this makes it very powerful, there is an appeals process to createaccountability. There is a Securities Appellate Tribunal which is a three member tribunal and is

presently headed by a former Chief Justice of a High court - Mr. Justice NK Sodhi. A second

appeal lies directly to theSupre m e Cour t .

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SEBI has enjoyed success as a regulator by pushing systemic reforms aggressively and

successively (e.g. the quick movement towards making the markets electronic and paperless

rolling settlement on T+2 basis). SEBI has been active in setting up the regulations as required

under law.

Stock exchange

A stock exchange, (formerly a securities exchange) is a corpora ti on or m u tual organ iza ti on

which provides "trading" facilities for s tock brokers and trader s , to trade s tocks and other

s ecur iti e s . Stock exchanges also provide facilities for the issue and redemption of securities as

well as other financial instruments and capital events including the payment of income and

d iv idend s . The securities traded on a stock exchange include: s hares issued by companies, un it

tru s ts , der iva ti ve s , pooled investment products and bon d s . To be able to trade a security on acertain stock exchange, it has to be listed there. Usually there is a central location at least for

recordkeeping, but trade is less and less linked to such a physical place, as modern markets are

e lec tron ic ne tw orks, which gives them advantages of speed and cost of transactions. Trade on an

exchange is by members only. The initial offering of stocks and bonds to inve s tors is by

definition done in thepr im ary m arket and subsequent trading is done in the s econdary m arke t . A

stock exchange is often the most important component of a s tock m arke t . Supply and demand in

stock markets is driven by various factors which, as in all free m arke ts , affect the price of stocks

(see s tock va lua ti o n ).

There is usually no compulsion to issue stock via the stock exchange itself, nor must stock be

subsequently traded on the exchange. Such trading is said to be off exchange orover- the - coun ter.

This is the usual way that der iva ti v es and bonds are traded. Increasingly, stock exchanges are

part of a global market for securities.

The role of stock exchanges

Stock exchanges have multiple roles in theecono m y , this may include the following:

1. Raising capital for businesses

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The Stock Exchange provide co m pan ies with the facility to raise cap it a l for expansion through

selling s hares to the inve s ti ng public.

2.Mobilizing savings for investment

When people draw their savings and invest in shares, it leads to a more ra ti onal allocation of

resources because funds, which could have been consumed, or kept in idle depo s it s withbank s ,

are mobilized and redirected to promote b u s ine s s activity with benefits for several economic

sectors such as agr icu lt u r e ,co mm erce and indu s try, resulting in strongerecono mi c gro w th and

higher produc ti v it y levels and firms.

3.Facilitating company growth

Companies view acquisitions as an opportunity to expand product li ne s , increase distribution

channels, hedge against volatility, increase its m arket s har e ,or acquire other necessary business

a s s e ts . A takeover bid or a m erger agreement through the s tock m arket is one of the simplest and

most common ways for a company to grow by acquisition or fusion.

4.Redistribution of wealth

Stock exchanges do not exist to redistribute wealth. However, both casual and professional s tock

inve s tor s , through d iv idends and s tock pr ice increases that may result in cap it al ga ins, will share

in the wealth of profitable businesses.

5.Corporate governance

By having a wide and varied scope of owners, companies generally tend to improve on their

m anage m ent standards and eff ic iency in order to satisfy the demands of these shareholders and

the more stringent rules for public corporations imposed by public stock exchanges and the

government. Consequently, it is alleged that pub li c co m pan ies (companies that are owned by

shareholders who are members of the general public and trade shares on public exchanges) tend

to have better management records than pr iva te ly - he ld co m pan ies (those companies where

shares are not publicly traded, often owned by the company founders and/or their families and

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heirs, or otherwise by a small group of investors). However, some well-documented cases are

known where it is alleged that there has been considerable slippage in corpora te governance on

the part of some public companies. The do t- com bubb le in the early 2000s, and the s ubpr im e

m or tgage cr is is in 2007-08, are classical examples of corporate mismanagement. Companies like

Pe ts .com (2000), E nron Corpora ti on (2001), O ne.T el (2001), Sunbeam (2001), Webvan (2001),

A de lph ia (2002), M CI Wor ldCom (2002), Par m a lat (2003), A m er ican In terna ti o n al G roup

(2008), L eh m an Bro thers (2008), and Sa tyam Co m pu ter Serv ices (2009) were among the most

widely scrutinized by the media.

7.Creating investment opportunities for small investors

As opposed to other businesses that require huge capital outlay, investing in shares is open to

both the large and small s tock inve s tors because a person buys the number of shares they can

afford. Therefore the Stock Exchange provides the opportunity for small investors to own shares

of the same companies as large investors.

8.Government capital-raising for development projects

Governments at various levels may decide to borrow money in order to finance infrastructure

projects such as sewage and water treatment works or housing estates by selling another

category ofs ecur iti es known asbon d s . These bonds can be raised through the Stock Exchange

whereby members of the public buy them, thus loaning money to the government. The issuance

of such bonds can obviate the need to directly tax the citizens in order to finance development,

although by securing such bonds with the full faith and credit of the government instead of with

collateral, the result is that the government must tax the citizens or otherwise raise additional

funds to make any regular coupon payments and refund the principal when the bonds mature.

9.Barometer of the economy

At the stock exchange, share prices rise and fall depending, largely, on m arket forces. Share

prices tend to rise or remain stable when companies and the econo m y in general show signs of

stability and growth. An econo mi c rece ss ion, depression, orf inanc ial cr is is could eventually lead

to a s tock m arket cra s h. Therefore the movement of share prices and in general of the s tock

indexes can be an indicator of the general trend in the economy.

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Bombay Stock Exchange

Introduction

Bombay Stock Exchange is the oldest stock exchange in Asia with a rich heritage, now spanning

three centuries in its 133 years of existence. What is now popularly known as BSE was

established as "The Native Share & Stock Brokers' Association" in 1875.

BSE is the first stock exchange in the country which obtained permanent recognition (in 1956)

from the Government of India under the Securities Contracts (Regulation) Act 1956. BSE's

pivotal and pre-eminent role in the development of the Indian capital market is widely

recognized. It migrated from the open outcry system to an online screen-based order driven

trading system in 1995. Earlier an Association Of Persons (AOP), BSE is now a corporatisedand demutualised entity incorporated under the provisions of the Companies Act, 1956, pursuant

to the BSE (Corporatisation and Demutualisation) Scheme, 2005 notified by the Securities and

Exchange Board of India (SEBI). With demutualisation, BSE has two of world's best exchanges,

Deutsche Brse and Singapore Exchange, as its strategic partners.

Over the past 133 years, BSE has facilitated the growth of the Indian corporate sector by

providing it with an efficient access to resources. There is perhaps no major corporate in India

which has not sourced BSE's services in raising resources from the capital market.

Today, BSE is the world's number 1 exchange in terms of the number of listed companies and

the world's 5th in transaction numbers. The market capitalization as on December 31, 2007 stood

at USD 1.79 trillion . An investor can choose from more than 4,700 listed companies, which for

easy reference, are classified into A, B, S, T and Z groups.

The BSE Index, SENSEX, is India's first stock market index that enjoys an iconic stature , and istracked worldwide. It is an index of 30 stocks representing 12 major sectors. The SENSEX is

constructed on a 'free-float' methodology, and is sensitive to market sentiments and market

realities. Apart from the SENSEX, BSE offers 21 indices, including 12 sectoral indices. BSE has

entered into an index cooperation agreement with Deutsche Brse. This agreement has made

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SENSEX and other BSE indices available to investors in Europe and America. Moreover,

Barclays Global Investors (BGI), the global leader in ETFs through its iShares brand, has

created the 'iShares BSE SENSEX India Tracker' which tracks the SENSEX. The ETF

enables investors in Hong Kong to take an exposure to the Indian equity market.

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

to the investors a trading tool that can be easily used for the purposes of investment, trading,

hedging and arbitrage. SPIcE allows small investors to take a long-term view of the market.

BSE provides an efficient and transparent market for trading in equity, debt instruments and

derivatives. It has a nation-wide reach with a presence in more than 359 cities and towns of

India. BSE has always been at par with the international standards. The systems and processes

are designed to safeguard market integrity and enhance transparency in operations. BSE is the

first exchange in India and the second in the world to obtain an ISO 9001:2000 certification. It is

also the first exchange in the country and second in the world to receive Information Security

Management System Standard BS 7799-2-2002 certification for its BSE On-line Trading System

(BOLT).

BSE continues to innovate. In recent times, it has become the first national level stock exchange

to launch its website in Gujarati and Hindi to reach out to a larger number of investors. It hassuccessfully launched a reporting platform for corporate bonds in India christened the ICDM or

Indian Corporate Debt Market and a unique ticker-cum-screen aptly named 'BSE Broadcast'

which enables information dissemination to the common man on the street.

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

Reporting System) to facilitate information flow and increase transparency in the Indian capital

market. While the Directors Database provides a single-point access to information on the

boards of directors of listed companies, the ICERS facilitates the corporates in sharing with BSE

their corporate announcements.

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

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Investor Services: The Department of Investor Services redresses grievances of investors. BSE

was the first exchange in the country to provide an amount of Rs.1 million towards the investor

protection fund; it is an amount higher than that of any exchange in the country. BSE launched a

nationwide investor awareness programme- 'Safe Investing in the Stock Market' under which

264 programmes were held in more than 200 cities.

The BSE On-line Trading (BOLT): BSE On-line Trading (BOLT) facilitates on-line screen

based trading in securities. BOLT is currently operating in 25,000 Trader Workstations located

across over 359 cities in India.

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

based Internet trading system, BSEWEBX.com. This initiative enables investors anywhere in

the world to trade on the BSE platform.

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

price movements, volume positions and members' positions and real-time measurement of

default risk, market reconstruction and generation of cross market alerts.

BSE Training Institute: BTI imparts capital market training and certification, in collaboration

with reputed management institutes and universities. It offers over 40 courses on various aspects

of the capital market and financial sector. More than 20,000 people have attended the BTI

programmes

Awards

The World Council of Corporate Governance has awarded the Golden Peacock Global CSRAward for BSE's initiatives in Corporate Social Responsibility (CSR).

The Annual Reports and Accounts of BSE for the year ended March 31, 2006 and March

31 2007 have been awarded the ICAI awards for excellence in financial reporting.

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The Human Resource Management at BSE has won the Asia - Pacific HRM awards for

its efforts in employer branding through talent management at work, health management

at work and excellence in HR through technology

Drawing from its rich past and its equally robust performance in the recent times, BSE will

continue to remain an icon in the Indian capital market.

History

For the premier stock exchange that pioneered the securities transaction business in India, over a

century of experience is a proud achievement. A lot has changed since 1875 when 318 persons

by paying a then princely amount of Re. 1, became members of what today is called Bombay

Stock Exchange Limited (BSE).

Over the decades, the stock market in the country has passed through good and bad periods. The

journey in the 20th century has not been an easy one. Till the decade of eighties, there was no

measure or scale that could precisely measure the various ups and downs in the Indian stock

market. BSE, in 1986, came out with a Stock Index-SENSEX- that subsequently became the

barometer of the Indian stock market.

The launch of SENSEX in 1986 was later followed up in January 1989 by introduction of BSE

National Index (Base: 1983-84 = 100). It comprised 100 stocks listed at five major stock

exchanges in India - Mumbai, Calcutta, Delhi, Ahmedabad and Madras. The BSE National Index

was renamed BSE-100 Index from October 14, 1996 and since then, it is being calculated taking

into consideration only the prices of stocks listed at BSE. BSE launched the dollar-linked version

of BSE-100 index on May 22, 2006.

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

larger market capitalization and the new industry sectors, BSE launched on 27th May, 1994 two

new index series viz., the 'BSE-200' and the 'DOLLEX-200'. Since then, BSE has come a long

way in attuning itself to the varied needs of investors and market participants. In order to fulfill

the need for still broader, segment-specific and sector-specific indices, BSE has continuously

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been increasing the range of its indices. BSE-500 Index and 5 sectoral indices were launched in

1999. In 2001, BSE launched BSE-PSU Index, DOLLEX-30 and the country's first free-float

based index - the BSE TECkIndex. Over the years, BSE shifted all its indices to the free-float

methodology

National Stock Exchange of India

National Stock Exchange Limited

Type S tock E xchange

Location M umbai , India

Coordinates19337N 725135 E & #20 ;/& #20 ;19.06028N

72.85972E/ 19.06028; 72.85972

Owner National Stock Exchange of India Limited

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

Currency I N R

No. of listings 1587

MarketC ap US$ 1.46 trillion (2006)

Indexes

S & P C N X N if ty

C N X N if ty J un ior

S&P CNX 500

Website http://www .ns e- india.com/

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

and The National Stock Exchange of India Limited (NSE), is a M u m ba i -based s tock

exchang e . It is the largest stock exchange in Ind ia in terms of daily turnover and number of

trades, for both equities and derivative trading.[1]. Though a number of other exchanges exist,

NSE and the Bo m bay S tock E xchange are the two most significant stock exchanges in India, and

between them are responsible for the vast majority of share transactions. The NSE's key index is

the S & P C N X N if ty , known as the Nifty, an index of fifty major stocks weighted by market

capitalisation.

other financial intermediaries in India but its ownership and management operate as separate

entities. There are at least 2 foreign investors NYSE Euronext and Goldman Sachs who have

taken a stake in the NSE. As of 2006[upda te ] , the NSE V S A T terminals, 2799 in total, cover

more than 1500 cities across India . In October 2007, the equity m arket cap it a l iza t ion of thecompanies listed on the NSE was U S$ 1.46 tr illi o n , making it the second largest stock exchange

in Sou th As ia . NSE is the third largest Stock Exchange in the world in terms of the number of

trades in equities. It is the second fastest growing s tock exchange in the world with a recorded

growth of 16.6%.

Origins

NSE building at B K C

The National Stock Exchange of India was promoted by leading

F inanc ial in s tit u ti ons at the behest of the G overn m ent of Ind ia , and

was incorporated in November 1992 as a tax-paying company. In

April 1993, it was recognized as a s tock exchange under the

Secur iti es Con trac ts (Regu la ti on) A c t , 1956. NSE commenced operations in the Wholesale D ebt

M arket (WDM) segment in June 1994. The Cap it al M arket ( E qu iti e s ) segment of the NSE

commenced operations in November 1994, while operations in the D er iva ti ves segment

commenced in June 2000.

Innovations

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NSE has remained in the forefront of modernization of India's capital and financial markets, and

its pioneering efforts include:

Being the first national, anonymous, electronic limit order book (LOB) exchange to trade

securities in India. Since the success of the NSE, existent market and new market

structures have followed the "NSE" model.

Setting up the first clearing corporation "National Securities Clearing Corporation Ltd."

in India. NSCCL was a landmark in providing innovation on all spot equity market (and

later, der iva ti ves m arke t)trades in India.

Co-promoting and setting up of National Securities Depository Limited, first depository

in India[2].

Setting up of S & P C N X N if ty.

NSE pioneered commencement of Internet Trading in February 2000, which led to thewide popularization of the NSE in the broker community.

Being the first exchange that, in 1996, proposed exchange traded derivatives, particularly

on an equity index, in India. After four years of policy and regulatory debate and

formulation, the NSE was permitted to start trading equity derivatives

Being the first and the only exchange to trade GOLD ETFs (exchange traded funds) in

India.

NSE has also launched the NSE-CNBC-TV18 media centre in association with C N BC-

T V 18, it is the one of the most important stock exchange in the world.

S&P CNX Nifty

S&P CNX Nifty is a well diversified 50 stock index accounting for 21 sectors of the economy. Itis used for a variety of purposes such as benchmarking fund portfolios, index ba s ed der iva ti ves

and index fund s .

S&P CNX Nifty is owned and managed by Ind ia Index Serv ices and Produc ts Lt d. (IIS L ) , which

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is a joint venture between NSE and CRISIL. IISL is India's first specialised company focused

upon the index as a core product. IISL has a Marketing and licensing agreement with Standard &

Poor's (S&P), who are world leaders in index services.

The total traded value for the last six months of all Nifty stocks is approximately 65.68%

of the traded value of all stocks on the NSE

Nifty stocks represent about 65.34% of the total market capitalization as on Mar 31,

2009.

I m pact co s t of the S&P CNX Nifty for a portfolio size of Rs.2 crore is 0.16%

S&P CNX Nifty isprofe ss iona ll y m a in ta in ed and is ideal for derivatives trading

Sensex & the Nifty

The Sensex is an "index". What is an index? An index is basically an indicator. It gives you a

general idea about whether most of the stocks have gone up or most of the stocks have gone

down.

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

If the Sensex goes up, it means that the prices of the stocks of most of the major companies on

the BSE have gone up. If the Sensex goes down, this tells you that the stock price of most of the

major stocks on the BSE have gone down.

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

the NSE.

Just in case you are confused, the BSE, is the Bombay Stock Exchange and the NSE is the

National Stock Exchange. The BSE is situated at Bombay and the NSE is situated at Delhi.

These are the major stock exchanges in the country. There are other stock exchanges like the

Calcutta Stock Exchange etc. but they are not as popular as the BSE and the NSE.Most of the

stock trading in the country is done though the BSE & the NSE.

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Besides Sensex and the Nifty there are many other indexes. There is an index that gives you an

idea about whether the mid-cap stocks go up and down. This is called the BSE Mid-cap Index.

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

Stock prices change every day because of market forces. By this we mean that stock prices

change because of supply and demand. If more people want to buy a stock (demand) than sell

it (supply), then the price moves up!

Conversely, if more people wanted to sell a stock than buy it, there would be greater supply than

demand, and the price would fall. (Basics of economics!)

Understanding supply and demand is easy. What is difficult to understand is what makes people

like a particular stock and dislike another stock. If you understand this, you will know what

people are buying and what people are selling. If you know this you will know what prices go up

and what prices go down!

To figure out the likes and dislikes of people, you have to figure out what news is positive for a

company and what news is negative and how any news about a company will be interpreted by

the people.

The most important factor that affects the value of a company is its earnings. Earnings are the

profit a company makes, and in the long run no company can survive without them. It makes

sense when you think about it. If a company never makes money, it isn't going to stay in

business. Public companies are required to report their earnings four times a year (once each

quarter).

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

earnings projection.

If a company's results are better than expected, the price jumps up. If a company's results

disappoint and are worse than expected, then the price will fall.

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debt and financing through equity. When you buy a debt investment such as a bond, you are

guaranteed the return of your money (the principal) along with promised interest payments.

This isn't the case with an equity investment. By becoming an owner, you assume the risk of

the company not being successful - just as a small business owner isn't guaranteed a return,

neither is a shareholder. Shareholders earn a lot if a company is successful, but they also

stand to lose their entire investment if the company isn't successful.

Stock Picking Having understood all the basics of the stock market and the risk involved, now

we will go into stock picking and how to pick the right stock. Before picking the right stock

you need to do some analysis.

There are two major types of analysis:

1. Fundamental Analysis

2. Technical Analysis

Fundamental analysis is the analysis of a stock on the basis of core financial and economic

analysis to predict the movement of stocks price.

On the other hand, technical analysis is the study of prices and volume, for forecasting of future

stock price or financial price movements.

Simply put, fundamental analysis looks at the actual company and tries to figure out what the

company price is going to be like in the future. On the other hand technical analysis look at

the stocks chart, peoples buying behavior etc. to try and figure out what the stock price is

going to be like in the future.

In this article we will go into the basics of fundamental analysis. Technical analysis is a little

more complicated. It is much more of an "art" than a science. It depends more on experience

and involves some statistics and mathematics, so explaining technical analysis is out of the

scope of this article.

Calculation of BSE SENSEX

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This article explains how the value of the BSE Sensex or sensitive index is calculated. If you

are not sure what we mean by the Sensex or what the Sensex is all about, you can find this

out by reading our H ow to make money in the s tock market ? article.

The Sensex has a very important function. The Sensex is supposed to be an indicator of the

stocks in the BSE. It is supposed to show whether the stocks are generally going up, or

generally going down.

To show this accurately, the Sensex is calculated taking into consideration stock prices of 30

different BSE listed companies. It is calculated using the free-float market capitalization

method. This is a world wide accepted method as one of the best methods for calculating a

stock market index.

Please note: The method used for calculating the Sensex and the 30 companies that are taken

into consideration are changed from time to time. This is done to make the Sensex an

accurate index and so that it represents the BSE stocks properly.

3 important things you must know and follow as an new investor!

You need to KNOW some unforgettable basics before you enter the world of investing in

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

place. :

Don't even consider "tips" that tell you about "hot stocks". Consider the source: There are many

people in the market who put in all their time and effort in promoting certain stocks. They do

this because they have their money invested in those stocks. If they can get enough people to

buy the stock and they can get the stock price to rise, they will sell the stock for a huge price,

the stock price will crash and they will walk off to promote another stock.

Always use your own brain: It's extremely important. You must always use your own brain.

Relying on the advice of others, no matter how well intentioned it may be, is almost always a

complete disaster. Make sure you dig in and really examine the "facts about the companies"

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before you invest. Ignore press releases which have very little substance, and rely on "hype" to

tell the company's story.

And finally the most important tip!!!

Only invest money you can afford to lose!! Sure this is a basic point, but many many peoplemiss it. You should only invest money that you can honestly afford to lose!! Everyone enters

into investments with the idea of earning big profits, but in many cases, this never works.

(Especially if you are new to investing in the stock market!)

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

market you do not need to follow these rules anymore. But if you are a new investor, you MUST

follow these rules. They are for your own safety.

But then again, nothing comes free. Everything has a price. You will have to loose some money,

make some bad decisions and then only will you really understand the market. You cannot

understand the market by just looking at it from far. By following these rules, you will basically

not loose too much!

Derivatives

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

Derivatives.

In more simpler form, derivatives are financial security such as an option or future whose value

is derived in part from the value and characteristics of another security, the underlying asset.

It is a generic term for a variety of financial instruments. Essentially, this means you buy a

promise to convey ownership of the asset, rather than the asset itself. The legal terms of a

contract are much more varied and flexible than the terms of property ownership. In fact, its this

flexibility that appeals to investors

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.

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

currency. He bet that the value derived from the underlying asset will increase or decrease by a

certain amount within a certain fixed period of time.

Futures and options are two commodity traded types of derivatives. An options contract

gives the owner the right to buy or sell an asset at a set price on or before a given date. On the

other hand, the owner of a futures contract is obligated to buy or sell the asset.

The other examples of derivatives are warrants and convertible bonds (similar to shares in that

they are assets). But derivatives are usually contracts. Beyond this, the derivatives range is only

limited by the imagination of investment banks. It is likely that any person who has fundsinvested, an insurance policy or a pension fund, that they are investing in, and exposed to,

derivatives wittingly or unwittingly.

Shares or bonds are financial assets where one can claim on another person or corporation; they

will be usually be fairly standardised and governed by the property of securities laws in an

appropriate country.

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

contract details may not be standardized.

Derivatives securities or derivatives products are in real terms contracts rather than solid as it

fairly sounds.

India Commodity Market

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The vast geographical extent of India and her huge population is aptly complemented by the size

of her market. The broadest classification of the Indian Market can be made in terms of the

commodity market and the bond market. Here, we shall deal with the former in a little detail.

The commodity market in India comprises of all palpable markets that we come across in our

daily lives. Such markets are social institutions that facilitate exchange of goods for money. The

cost of goods is estimated in terms of domestic currency . India Commodity Market can be

subdivided into the following two categories:

Wholesale Market

Retail Market

Let us now take a look at what the present scenario of each of the above markets is like.

The traditional wholesale market in India dealt with whole sellers who bought goods from the

farmers and manufacturers and then sold them to the retailers after making a profit in the

process. It was the retailers who finally sold the goods to the consumers. With the passage

of time the importance of whole sellers began to fade out for the following reasons:

The whole sellers in most situations, acted as mere parasites who did not add any value to

the product but raised its price which was eventually faced by the consumers.

The improvement in transport facilities made the retailers directly interact with the

producers and hence the need for whole sellers was not felt.

In recent years,the extent of the retail market (both organized and unorganized) has evolved in

leaps and bounds. In fact, the success stories of the commodity market of India in recent years

has mainly centered around the growth generated by the Retail Sector. Almost every

commodity under the sun both agricultural and industrial are now being provided at well

distributed retail outlets throughout the country.

Moreover, the retail outlets belong to both the organized as well as the unorganized sector. The

unorganized retail outlets of the yesteryears consist of small shop owners who are price takers

where consumers face a highly competitive price structure. The organized sector on the other

hand are owned by various business houses like Pantaloons, Reliance, Tata and others. Such

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markets are usually sell a wide range of articles both agricultural and manufactured, edible and

inedible, perishable and durable. Modern marketing strategies and other techniques of sales

promotion enable such markets to draw customers from every section of the society. However

the growth of such markets has still centered around the urban areas primarily due to

infrastructural limitations.

Considering the present growth rate, the total valuation of the Indian Retail Market is

estimated to cross Rs. 10,000 billion by the year 2010. Demand for commodities is likely to

become four times by 2010 than what it presently is.

Money Market

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

Although the stock market is associated with high risks and high returns , many are risk averse

and prefer to invest in the more secure money market .

The money market deals with very short term debt securities that mature in less than a year.

Since the money market is extremely safe, it yields very low returns unlike the bond market.

The money market securities that are issued by the government or financial institutions or large

corporations are very liquid. Since the money market securities trade at very high denominations

it becomes very difficult for the individual investors to have access to it.

The money market is a type of a dealer market where firms purchase securities in their own

account by assuming the risks themselves. Unlike the stock exchanges the money market

securities do not operate in exchanges or through brokers. Transactions take place overphone or

the electronic system.

One may browse through the following links to have a more detailed information about money

market.

Money Market D ef in it ion

Money Market Definition is simply meant as the short-term debt market. Treasury Bills and

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certificate of deposits are regarded as the instruments in the money market.

Wor ld Money Market

World Money Market has been providing origination, trading and the distribution of short-term

debt instruments across different regions over the world. Find detailed on the world money

market.

Money Market I ndex Money Market Index is a true indicator of the prevailing money market,

which renders a clear-cut idea on making investment.

Money Market R atesMoney Market Rates can be simply defined as the market rates including the broker call loan rate,

federal funds rate, rates on bankers' acceptance etc. Get the method of finding the money market

rates.

Major Factors That Affect Stock Price in stock market globally

When you wish to invest in the stock market, then you should always make a good survey of the

whole market. As you know that you cannot predict the stock market, so in that case you need toknow the functioning of the market. There are some major factors that affect stock price. So

let us discuss about the different factors affecting the stock price in this article.

Demand AND SUPPLY

One of the major factors affecting stock price is demand and supply. The trend of the stock

market trading directly affects the price. When people are buying more stocks, then the price of

that particular stock increases. On the other hand if people are selling more stocks, then the priceof that stock falls. So, you should be very careful when you decide to invest in the Indian stock

market.

Market Cap

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

should always keep in mind that it is not the stock but the market capitalization of the company

that determines the worth of the company. So market cap is another factor that affects stock

price.

"Market Capitalization"?

You probably think that you have never heard of the term market capitalization before. You

have! When you are talking about mid-cap, small-cap and large-cap stocks, you are

talking about market capitalization!

Market cap or market capitalization is simply the worth of a company in terms of its shares! To

put it in a simple way, if you were to buy all the shares of a particular company, what is the

amount you would have to pay? That amount is called the market capitalization!

To calculate the market cap of a particular company, simply multiply the current share price

by the number of shares issued by the company! Just to give you an idea, ONGC, has a market

cap of Rs.170,705.21 Cr (when this article was written)

Depending on the value of the market cap, the company will either be a mid-cap or large-

cap or small-cap company! Now the question is, how do YOU calculate the market cap of a

particular company? You dont! Just go to a website like M oneyCon tro l.com and look up thecompany whose market cap you are interested in finding out! The figure in front of Mkt. Cap

will be the market cap value.

News

When you get positive news about a company then it can increase the buying interest in the

market. On the other hand, when there is a negative press release, it can ruin the prospect of astock. In this case you should remember that news should not matter much but the overall

performance of the company matters more. So, news is another factor affecting stock price.

Earning/Price Ratio

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Another important factor affecting stock price is the earning/price ratio. This gives you a fair

idea of a companys share price when it is compared to its earnings. The stock becomes

undervalued if the price of the share is much lower than the earnings of a company. But if this is

the case, then it has the potential to rise in the near future. The stock becomes overvalued if the

price is much higher than the actual earning.

So, these are the major factors that affect stock price.

Day Trading

Day trading (and trading in general) is the buying and selling of various financial instruments,

such as fu ture s ,op ti on s , currenc ie s , and s tocks, with the goal of making a profit from the

difference between the buying price and the selling price. D ay trad ing differs slightly from other

styles of trading in that positions are rarely (if ever) held overnight or when the market being

traded is closed.

Day trading was originally only available to financial companies (such as banks), because only

they had access to the exchanges and market data. But with recent technology such as the

Internet, individual traders now have direct access to the same exchanges and market data, andcan make the same trades at very low cost.

Trading Styles

There are several different styles of day trading, suited to different day trader personalities. The

styles range from s hort term trad ing such as scalping where positions are only held for a few

seconds or minutes, to longer term s w ing and p o s iti on trad ing where a position may be held

throughout the trading day. Most day trading systems have a lot of flexibility, and can have open

positions for anywhere from a few minutes to a few hours, depending upon how the trade is

doing (whether it is in profit). Some day traders will trade multiple styles, but most traders will

choose a single style and only take that type of trade.

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Day trading also has different types of trade, such as trend trades, counter-trend trades, and

ranging trades. Trend trades are trades in the direction of the current price movement (i.e. buying

if the price is moving up), and counter-trend trades are trades against the direction of the current

price movement (i.e. selling if the price is moving up). Ranging trades are trades that go back

and forth between two prices, and are used when the market is moving sideways. Most day

traders will choose a single type of trade, but some traders will take different types, and choose

which one to trade depending upon the current condition of the market.

In addition to the style and type of day trading, there are other variances between day traders.

Some day traders like to make many trades throughout the trading day, while others prefer to

wait for what they consider the best conditions for their trade, and perhaps only make one trade

per day. However many trades are made, the trading process that is used, and the desired goal of

making a profit, are the same.

Current State of the Indian Economy:

Capital Inflows

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

$ 15,545 million. The foreign direct investment (FDI) stood at US $ 27,426 million, while

the portfolio investment stood at US $ -11,881 million.

Monthly trends in foreign investments

MonthsForeign direct

investmentsPortfolio investments

($ million)

Total foreign

investments

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

08(P)2008-09(P)

April 1643 3749 1974 -880 3617 2869

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June 1238 2392 3664 -3010 4902 -618

July 705 2247 6713 -492 7418 1755

August 831 2328 -2875 593 -2044 2921

September 713 2562 7081 -1403 7794 1159

October 2027 1497 9564 -5243 11591 -3746

November 1864 1083 -107 -574 1757 509

December 1558 1362 5294 30 6852 1392

January 1767 2733 6739 -614 8506 2119

February 5670 - -8904 - -3234 -

April-

January- 27426 - -11881 - 15545

Source: Reserve Bank of India (RBI)

Stock Market Trends

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

BSE Sensitive Index

Documents

fluctuation indian stock mkt