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CHAPTER-1
INTRODUCTION
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IMPACT OF CAPITAL MARKET VOLATILITY ON BULLION
PRICES
INTRODUCTION
Financial markets are routed from the potential investment levels of households and
institutional investors who often prefer high risk return spectrum of investment avenues like
equity shares to optimize the portfolio benefits but the matrix of any portfolio is correlated with
the volatility rate provided the fundamentals of company are strong. The central problem among
the retail investors is that they dont have complete knowledge on the fundamentals due to which
they consider the market bench marks like NIFTY and SENSEX to construct their portfolios.
They are under the hypothesis that any decrease in the bench mark index leads to the steepdecline in speculative return which should be leveraged through another investment sources like
bonds, gold, and silver therefore fundamentally it is assumed that there is a negative correlation
between capital markets and bullion markets. This assumption shall be tested in this project work
with the following objectives.
OBJECTIVES OF THE STUDY
The main objectives of this project are
1. To understand the Indian capital market at glance.
2. To understand the Indian bullion market at glance.
3. To analyze the relation between capital and bullion markets.
4. To suggest whether bullion and capital markets can be equally prefer to construct an
investment portfolio.
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NEED FOR THE STUDY
This project is considered to be necessary owning to the following merits.
1. Bullion market functions on the parallel lines of capital market.
2. Bullion market impacts the circular flow of money which is in turn channelised into capital
markets.
3. Risk levels are assumed to be negligible in bullion market; therefore it can be suggested in
designing the edging strategies.
4. The volume of trade in bullion market is almost equal to that of capital market.
5. Investors have got equal access to both capital and bullion market in India.
6. The decision of government to allow forward trading in precious metals has unlegged the
propulsive sources of speculative trading in bullion market as well.
SCOPE OF THE OBJECTIVE
This prospect shall offer finite but practical scope owing to the following parameters.
The union budget 2011 has allowed Reserve Bank of India to grant licenses for new private
banks. Which will prefer investments in bullion markets has per the norms of Reserve Bank
of India and it quite obviously leads to the increase in bullion trade.
This project shall give much emphasis to silver with respect to bullion market, and it reflects
the unprecedented volatility rates of prices in the recent past.
The common prudent enables us to establish a diction that unleverage investments in capital
markets leads to the frazil consequences which can be avoided through bullion market.
RESEARCH METHADOLOGY
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1. The first and second objectives are preliminary to this project which shall be tested through
secondary data available from the websites of National Stock Exchange and Multi commodity
exchange.The third objective is the core of this project which shall be examined in the following
steps.
1. The closing values of NIFTY are considered to be variable `X`.
2. The closing prices of silver are considered to be variable `Y`.
3. Correlation test shall be conducted with the following formula.
CORRELATION COEFFICIENT (r) = covariance(X, Y)
X.Y
The above equation is formed on the premise of possible hypothesis.i.e.
NULL HYPOTHESIS H= The prices of silver are being increased due to the
volatility in capital markets.
ALTERNATE HYPOTHESIS H1=There is no significant relationship between capital market
volatility and silver prices.
SAMPLE SIZE
This project proposes to consider the sample size of 2 variables i.e., the daily closing values of S&P
NIFTY for 7 months 1st September 2010 to 31 march 2011.
The another variable comprises the daily closing prices of silver for the same time period of 7
months.
LIMITATIONS OF THE PROJECT
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1. This project is confined to a very limited time period of six months through which it is not
practically possible to generalize the conclusions.
2. This project accords much priority to silver although there are other precious metals like gold
and platinum impacting the bullion markets.
3. This project does not consider transactional cost or both capital and bullion markets though
they exhibit significance impact.
TENTATIVE CHAPERISATION
1. COMPANY PROFILE.
2. CAPITAL MARKET AT GLANCE
3. BULLION MARKET AT GLANCE
4. DATA ANALYSIS AND INTERPRETATION.
5. FINDING AND CONCLUSIONS.
6. BIBILOGRAPHY
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CHAPTER-2
COMPANY PROFILE
COMPANY PROFILE
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INTRODUCTION TO INDIABULLS
An India bull is Indias leading Financial and Real Estate Company with a wide presence
throughout India. They ensure convenience and reliability in all their products and services. An
Indiabull has over 640 branches all over India. The customers of Indiabulls are more than
4,50,000 which covers from a wide range of financial services and products from securities,
derivatives trading, depositary services, research & advisory services, consumer secured &
unsecured credit, loan against shares and mortgage & housing finance. The company employs
around 4000 Relationship managers who help the clients to satisfy their customized financial
goals. India bulls entered the Real Estate business in the year 2005 with its group of companies.
Large scale projects worth several hundred million dollars are evaluated by them.
India bulls Financial Services Ltd is listed on the National Stock Exchange (NSE), Bombay
Stock Exchange (BSE) and Luxembourg Stock Exchange. The market capitalization of
Indiabulls is around USD 2500 million (29 thDecember, 2006). Consolidated net worth of the
group is around USD 700 million. Indiabulls and its group companies have attracted USD 500
million of equity capital in Foreign Direct Investment (FDI) since March 2000. Some of the large
shareholders of Indiabulls are the largest financial institutions of the world such as Fidelity
Funds, Goldman Sachs, Merrill Lynch, Morgan Stanley and Farallon Capital.
Indiabulls Financial Services Limited was incorporated on January 10, 2000 as M/s Orbis
Infotech Private Limited at New Delhi under the Companies Act, 1956. The name of company
was changed to M/s. Indiabulls Financial Services Private Limited on March 16, 2001. In the
year 2004, Indiabulls came up with it own public issue & became a public limited company on
February 27, 2004. The name of company was changed to M/s. Indiabulls Financial Services
Limited.
The company was promoted by three engineers from IIT Delhi, and has attracted more than
Rs.700 million as investments from venture capital, private equity and institutional investors and
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has developed significant relationships with large commercial banks such as Citibank, HDFC
Bank, Union Bank, ICICI Bank, ABN Amro Bank, Standard Chartered Bank and IL&FS.
Mr. Rajiv Rattan
Co-Founder &
Vice Chairman
(Indiabulls Group)
Mr. Sameer Gelhaut
Chairman
(Indiabulls Group)
Mr. Saurabh K Mittal
Director
(Indiabulls Group)
The company headquarters are co-located in Mumbai and Delhi, allowing it to access the two
most important regions for Indian financial markets, The marketing and sales efforts are
headquartered out of Mumbai, with a regional headquarter in Delhi. Back office, risk
management, internal finances etc. are headquartered out of Delhi/NCR allowing the company to
scale these processes efficiently for the nationwide network.
Company is listed on:
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National Stock Exchange
Bombay Stock Exchange
Luxemburg Stock Exchange
Market capitalization:
USD 6,300 million (31st December, 2007)
Net worth
USD 905 million (31st December, 2007)
Highest Ratings from CRISIL CRISIL is India's leading Ratings, Research, Risk and Policy
Advisory Company
Vision statement:
To become the preferred long term financial partner to a wide base of customers whilst
optimizing stake holders value
Mission statement:
To establish a base of 1 million satisfied customers by 2014. We will create this by being a
responsible and trustworthy partner
Corporate action:
An Approach to Business that reflects Responsibility, Transparency and Ethical Behavior.
Respect for Employees, Clients & Stakeholder groups
TRADING PRODUCTS OF INDIA BULLS SECURITIES
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Indiabulls Securities provide three products for trading. They are
Cash Account
Intraday Account
Mantra Account
CASH Account: It provides the client to buy 4 times of cash balance in his trading account.
INTRADAY Account: It provides the client to buy 8 times of his cash balance in the trading
account.
MANTRA Account: Also called as margin trading, is a special account to buy on leverage for a
longer duration
INDIABULLS FINANCIAL SERVICES LIMITED
Indiabulls Financial Services Ltd. was incorporated in the year 2005.The Auditors of Indiabulls
Financial Services Ltd. are Deloitte, Haskins & Sells. The main activity of this company is in
relation to securities and stock brokerage. It was also responsible for setting up one of Indias
first trading platforms.
The subsidiaries of Indiabulls Financial Services Ltd. include:
Indiabulls Capital Services Ltd.
Indiabulls Commodities Pvt. Ltd.
Indiabulls Credit Services Ltd.
Indiabulls Finance Co. Pvt. Ltd
Indiabulls Housing Finance Ltd.
Indiabulls Insurance Advisors Pvt. Ltd.
Indiabulls Resources Ltd.
Indiabulls Securities Ltd.
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THE BANKERS OF INDIABULLS FINANCIAL SERVICES LTD
Andhra Bank
Bank of Maharashtra
Bank of Rajasthan Ltd.
Canara Bank
Citibank
Corporation Bank
Dena Bank
HDFC Bank Ltd
HSBC Ltd.
ICICI Bank Ltd.
IDBI Ltd
Industrial Bank Ltd.
ING Vysya Bank Ltd
Karnataka Bank
Punjab National Bank
Standard Chartered Bank
State Bank Of India
Syndicate Bank
Union Bank Of India
UTI Bank Ltd.
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CHAPTER-3
CAPITAL MARKET AT GLANCE
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CAPITAL MARKET AT GLANCE
INTRODUCTION
Capital market is a growing component of the financial system in india.Capital market contains
financial instruments of maturity period exceeding one year. It involves long-term transactions.
Capital market instruments are relatively less liquid in comparsion to the money market
instruments. Capital market in a broad sense encompasses all kinds of arrangements and
financial institutions involved in long term funding.
STRUCTURE OF INDAIN CAPITAL MARKET
Indian Capital Market System is the key structure to all Economic and Financial transaction in
India. This entry provides some simple and important organizational structure details ofCapital
Market Organization Structure of India.
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Source: internet
Capital Market System and Structure in India
Structure Institution
Government
Securities
Government securities market. Reserve Bank of India (RBI) controls all
transactions of government securities,
Industrial Securities Industrial securities divided into Primary market (New issues like IPO) and
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Secondary market (Market for trading the Equity shares through stock
exchange). Popular national level stock exchanges in India, National Stock
Exchange (NSE) and Bombay Stock Exchange (BSE).
Development
Financial Institutions
(DFI)
Financial institutions provide financial aid to develop special sectors.
Financial institutions like IFCI ( Industrial Finance Corporation of India ),
ICICI ( Industrial Credit and Investment Corporation of India), SFC ( State
Finance Corporations ), IDBI ( Industrial development Bank of
India ), UTI ( Unit Trust of India ), etc.
Financial
Intermediaries
All other state controlled finance intermediaries like, Merchant banking,
Mutual funds, Leasing finance companies, Venture capital funds, etc.
SEBI ( Securities Exchange Board of India )is the capital market regulator in India.
INSTRUMENTS STATED IN INDIAN CAPITAL MARKET
1. EQUITY SHARES
2. PREFERENCE SHARES
3. MUTUAL FUNDS
4. DEBENTURES
5. DERIVATIVES
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1. EQUITY SHARES
When the total capital of a company is divided into equal units, it is called share. For example,
the total capital of Rs. 10,000 of a company is divided into 1,000 units, the price of each unit
works out to Rs 10.This is what is called a share. The capital raised by issue of these shares is
called share capital. The person who subscribes to these shares and gets a allotment then the
person becomes the shareholder of that company.
Equity shares are regarded as corner stone of financial structure of a company without which a
company cannot be founded. Equity shareholders are considered as owners of the company.
They will be paid dividend after the claims of all other stockholders are satisfied. Similarly, at
the time of liquidation of the company they will be last to receive anything from out of the assets
of the company. If company earns sufficiently larger profits, they are the maximum beneficiaries.
Contrastly they are the worst loosers when company passes through financial crisis. They are
exposed to maximum risk. Therefore, this share capital is also known as risk capital.
2. PREFERENCE SHARES
As the name implies, preference shares represent that part of share capital of a company which
carry preferential rights and privileges with respect to income and assets over equity shareholder.
Section 85 of the Indian Companies Act, 1956 describes as one which fulfills two requirements.
With regard to dividends it carries a preferential right to be paid a fixed amount,
and
With regard to capital it carries a preferential right to be repaid.
Generally, the dividends on preference shares will be paid at a fixed rate while it is fluctuating in
case of equity shares.
TYPES OF PREFERENCE SHARES
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As per the provisions of the Articles of Association of Companies, they can issue different types
of preference shares as follows.
Cumulative preference shares; in any financial year, if a company fails to pay dividend to
this type of preference shareholders, the dividend gets accumulated. Therefore, these are
called cumulative preference shares. In subsequent years, whenever company pays dividends
out of the available profits, the dividend arrears will be paid to the shareholders.
Non-cumulative shares; dividend on these shares will not get accumulated. If in any
financial year, company does not pay dividends. In other words, no dividend arrears will be
paid to this type of shareholders.
Convertible preference shares; the shares which can be converted into equity shares after a
stipulated period are called convertible preference shares.
Non-convertible preference shares; If the Articles of Articles is silent about the
convertibility feature, these preference shares are deemed to be non-convertible throughout
the life of the company, these shares remain as preference shares only.
Redeemable preference shares; after a stipulated period, form the date of issue of
preference shares, or on demand or on the convenience of the company if the shareholders
are paid back their preference share capital they are called redeemable preference shares.
Again, the permission of articles of association of such companies is essential for the issue of
such redeemable preference shares. Generally these shares are issued subject to the following
conditions.
A separate capital redemption reserve account should be created to redeem such
redeemable preference shares. They can be redeemed out of the accumulated surplus profits
or out of the funds realized through the new issue of shares.
If at all, any premium is to be paid on redemption that can be tapped either from profits or
share premium account.
The details of such preference shares should be clearly disclosed in the prospectus and also
the balance sheet of the company.
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Irredeemable preference shares; the principal amount on these shares is not paid back
to the shareholders. It can be paid only on the event of liquidation of the company.
Participating preference shares; generally, the dividend on preference shares will be
paid at a fixed rate. But, when there is a clause relating to the participation, the
shareholders are entitled to a fixed dividend plus a fluctuating dividend along with equity
holders depending on the availability of excess profits. Similarly, at the time of winding
up of the company apart from their principal amount, they have got a claim over surplus
assets along the with equity shareholders.
Non-participating preference shares; a fixed rate of dividend is paid on all these
shares. These shareholders cannot have any claim on the surplus profits. When there is no
clause in the articles of association of the company, all the preference shares are to be
treated as non-participating preference shares only
3. MUTUAL FUNDS
Mutual fund is nothing but pooling of money collected from investors
like(individuals/corporate) by issuing units to them and is invested in marketable securities such
as Equity shares, Government securities Bonds, Debentures etc.., according to the investment
objective.
Types of mutual funds
1. By structure
Open-ended scheme
Close-ended scheme
2. By investment objective
Growth schemes
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Income schemes
Balanced schemes
3. Other schemes
Tax saving schemes
Index schemes
Sector specific schemes
Open ended schemes
Open ended schemes have no fixed duration. They will continue to exist till the fund decides
to terminate the scheme as per regulations with the consent of its investors.
Majority of the schemes offered these days are open ended schemes.
Like other mutual fund schemes open ended schemes have an intitial offer period when the
scheme is launched. I.e.., investor can subscribe to the scheme at face value at the time of
initial offer.
Close ended schemes
Close ended schemes have a fixed duration which will be specified at the time of the initial offer.
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The fund can change the duration with the consent of the investors, subject to relevant rules and
regulations.
Unlike open ended schemes close ended schemes are available for purchase only during the
initial offer period. The fund will not issue units to investors after the initial offer period.
Growth funds
Growth schemes aim to generate capital appreciation over the long term. Major portion of
their investments will be in equities which offer potentially superior returns than other
avenues of investment.
Generally growth funds are not pure equity schemes unless they are specified so. A smaller
portion of the portfolio is invested in fixed income securities like bonds. However it should
be specified in the scheme when it is launching.
Growth schemes offer potentially the best possible returns among all mutual fund schemes
but carry the highest risk as well.
Income schemes
Income schemes aim to return steady and regular income to investors. A large portion of their
investments would be in regular interest paying investments like ,
Government securities
Bonds issued by companies etc.
Income schemes carry the least risk among all mutual fund schemes.
Income funds also invest in equities, but the proportion of equities to the overall portfolio
would be relatively low.
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Balanced schemes
Balance schemes aim to strike a balance between the high returns of growth schemes and
better safety of income schemes. Therefore, both returns and risks would be between those
offered by growth and income schemes.
No specific asset class receives a higher weight in the targeted investment portfolio of a
balanced scheme. Most often, the portfolio will be equally balanced between equity and fixed
income securities.
Index funds
Index funds invest in all the stocks which form part of a stock market index.
A stock market is like a portfolio of stocks with different weights for each stock based on its
relative importance. Index funds invest in stocks in the same proportion of their relative
weights on the index.
Sector funds
Sector specific schemes invest in stocks belonging to a specific category, industry etc.
Such schemes aim to capitalize on the opportunities available in certain categories of stocks
which may have attracted or have the potential to attract market attention.
Such funds carry relatively high risks since the portfolio is not well diversified and it is
concentrated only on one sector or category.
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4. DEBENTURES
A debenture is an acknowledgement of debt or loan, issued by the company under its
seal. The debenture holders are considered as the creditors of the company. They are paid
interest at a fixed rate irrespective of the profits or losses incurred by the company. The
debenture amount will be paid to the debenture holder on the maturity period. At the time
of winding up of the company, debenture holders will have to be paid back their capital
first.
CLASSIFICATION OF DEBENTURS
. SECURED DEBENTURES; Secured debentures are those which are secured by some
charge on the property of the company. The charge or mortgage may be fixed or floating.
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The assets of the company on which charge is created cannot be sold under normal
course of time.
UNSECURED DEBENTURES; In case of unsecured debentures, no charge is created
the assets of the company. The holders of such debentures are just like ordinary creditors
of the company.
REGISTERED DEBENTURES; These debentures are registered in the debenture hold
register of the company. The regular interest payment and the principal amount maturity
will be made to the person whose name appears in the register.
BEARER DEBENTURES; These debentures are transferable by mere delivery. The
company is neither informed about their transfer nor it records any transfer. These are
similar to share warrants and interest is paid to the holder of these documents, on
production of interest coupon which are attached to them.
REDEEMABLE DEBENTURES; in case of redeemable debentures, the principal
amount is paid back either on fixed date or upon demand or notice.
IRREDAMABLE DEBENTURES; in this case, the issuing company does not fix any
date by which they should be redeemed and the holders of such debentures cannot
demand payment from the company, so long it is a going concern.
5. DERIVATIVES
A derivative is a tradeable financial instrument the value of which is determined on the basis of
its underlying asset.
Classification of derivatives in Indian capital market
1. FORWARD DERIVATIVES; Forward is the most conventional derivate drafted over the counter to
buy or sell the under lying asset at predetermined price known as striking price.
2. FUTURE DERIVATES; Future is also a forward contract but the only difference lies in the
following 2 important aspects.
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Forward is over the counter contract in which the rate of default risk is more where as future is an
exchange trader contract in which default risk is 0.
Forward contracts are preferred to settle the inter bank transactions where as futures are preferred to
settle tor retail transactions.
3. Options;Options It is a financial instrument which gives either to buy or sell the underlying
asset. Options may be of two types.
Call option; which gives the right to buy the underlying asset but not duty.
Put option; which gives the right to sell the underlying asset but not duty.
Securities exchange board of India acts as a regulatory body of capital market in india
Securities and Exchange Board of India
The Securities and Exchange Board of India even though established in the year 1988.
Received statutory powers only on 30th January 1992. Under the SEBI Act, a wide variety of
powers are vested in the hands of SEBI. SEBI has the powers to regulate the business of Stock
Exchanges, other security and mutual funds. Registration and regulation of market intermediaries
are also carried out by SEBI. It has responsibility to prohibit the fraudulent unfair trade practices
and insider dealings. Takeovers are also monitored by the SEBI has the multi pronged duty to
promote the healthy growth of the capital market and protect the investors.
National Stock Exchange
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The National Stock Exchange (NSE) of India became operational in the capital market
segment on third November 1994 in Mumbai. The genesis of the NSE lies in the
recommendations of the pertain committee (1991). Apart from the NSE, It had recommended for
the establishment of National Stock market System also. The committee pointed out some major
defects in the Indian stock market. The defects specified are.
Lack of liquidity in most of the markets in terms of depth and breadth.
Lack of ability to develop markets for debt.
Lack of infrastructure facilities and outdated trading system.
Lack of transparency in the operations that affect investors confidence.
Outdated settlement system that are inadequate to cater to the growing
volume, leading to delays.
Lack of single market due to the inability of various stock exchanges to
function cohesively with legal structure and regulatory framework.
These factors led to the establishment of the NSE.
The main objectives of NSE are as follows
To establish a nation wide trading facility for equities, debt and hybrid
instruments
To ensure equal access investors all over the country through appropriate
communication network.
To provide a fair, efficient and transparent securities market to investors
using an electronic communication network.
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To enable shorter settlement cycle and book entry settlement system.
To meet current international standards of securities market.
Promoters of NSE: IDBI, ICICI, IFCI, LIC, GIC, SBI, Bank of Baroda. Canara Bank,
Corporation Bank, Indian Bank, Oriental Bank of Commerce. Union Bank of India, Punjab
National Bank, Infrastructure Leasing and Financial Services, Stock Holding Corporation of
India and SBE capital market are the promoters of NSE.
NATIONAL STOCK EXCHANGE NIFTY
The National Stock Exchange has index called the NIFTY (officially called S&P CNX NIFTY).
This name can be credited to the 50 stocks that compose its index.
Isnt that a broader representation than the sensex? Youre right.
The Nifty has50 stocks covering 24 sectors, as against 30 stocks & 13 sectors for the sensex.
In case you are shaking your head about 50 also being too small a member, let me remind you
these 50 stocks account for around 60 percent of the market capitalization.
BOMBAY STOCK EXCHANGE
Bombay Stock Exchange limited is the oldest stock exchange in Asia with a rich heritage.
Popularly known as BSE it was established as The Native share & stock brokers Association
in 1875.l It is the first stock exchange in the country to obtain permanent recognition in 1956
from the Government of India under the securities contracts (regulation) Act, 1956.l The
exchanges pivotal and pre-eminent role on the development of the Indian capital market is
widely recognized and its index, SENSEX, is tracked worldwide. Earlier an Association of
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Persons (AOP) the exchange is now a demutualised and corporative entity incorporated under
the provisions of the companies act, 1956, pursuant to the BSE (Corporatisation and
Demutualization) Scheme, 2005 notified by the securities and Exchange board of India
(SEBI).With demutualization, the trading rights and ownership rights have been de-linked
effectively concerns regarding perceived and real conflicts of interest. The exchange is
professionally managed under the overall direction of the board of directors. The board
comprises eminent professionals, representatives of trading members and the Managing Director
of the Exchange. The board is inclusive and is designed to benefits form the participation of
market intermediaries.
In terms of organization structure, the board formulates larger policy issues and exercises
over-all control. The committees constituted by the broad-based. The day-to-day operation of
the exchange is managed by the Managing Director and a management team of professionals.
SENSEX
It is the benchmark index for the Indian Stock Market. It is the most frequently used indicator
while reporting ok the state of the market. The index has just one job. To capture the price
movement. So a stock index will reflect the price movement of the shares while a bond index
captures the manner in which bond prices go up or down.
If the sensex rises, it indicates the market is doing well since stocks are supposed to reflect what
companies expert to earn in the future, a rising index indicates investors expect better earnings
from companies. It is therefore, also a measure of the state of the Indian economy. If Indian
companies are expected to do well, obviously the economy should do well too.
In case you are wondering why as stock market index has a provocative term like sensex, let me
tell you it stands for something quite mundane.
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FACOTRS DERTMINING THE PERFORMANCE OF CAPITAL MARKET
Capital market is affected by a range of factors; some of the factors which influence capital
market are as follows
1. PERFORMANCE OF DOMESTIC COMPANIES;
The performance of the companys or rather corporate earnings is one of the factors which has
direct impact or effect on capital market in a country. Weak corporate earnings indicate that the
demand for goods and services in the economy is less due to slow growth in per capita income of
people. Because of slow growth in demand there is slow growth in employment which means
slow growth in demand in the near future. Thus weak corporate earnings indicate average or not
so good prospects for the economy as a whole in the near term. In such a scenario the investors(both domestic as well as foreign) would be wary to invest in the capital in the capital market and
thus there is bear market like situation. The opposite case of it would be robust corporate
earnings and its positive impact on the capital market and thus there is bear market like situation.
The opposite case of it would be robust corporate earnings and its positive impact on the capital
market.
2. MACRO ECONOMIC NUMBERS;
The macro economic number also influence the capital market, it includes index of Industrial
production (IIP) which is released every month, annual inflation number indicated by wholesale
price index (WIP) which is release every week, Export-Import numbers which are declared every
month, Core industries growth rate (it includes Six core industries coal, crude oil, refining,
power, cement and finished steel) which comes out every month, etc. These macro economic
indicators indicate the state of the economy and the direction in which the economy is headed
and therefore impacts the capital market in India.
3. GLOBAL CUES;
In this world of globalization various economies are interdependent and interconnected. An
event in one part of the world is bound to affect other parts of the world; however the magnitude
and intensity of impact would vary.
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Thus capital market in India is also affected by developments in other Parts of the world i.e.,
U.S, Europe, Japan etc.Global cues includes corporate earnings of MNCs consumer confidence
index in developed countries jobless claims in developed countries, global growth outlook given
by various agencies like IMF, economic growth of major economies, price of crude-oil, credit
rating of various economies given by Moodys S&P,etc.
4. POLITICAL STABILITY AND GOVERNMENT POLICIES;
For any economy to achieve and sustain growth it has to have political stability and pro-growth
government policies. This is because when there is political stability there is stability and
consistency in governments attitude which is communicated through various government
policies. The vice-versa is the case when there is no political stability. So capital market also
reacts to the nature of government, attitude of government, and various policies of the
government.
5. INVESTOR SENTIMENT AND RISK APPETITE;
Another factor which influences capital market is investor sentiment and their risk appetite. Even
if the investors have the money to invest but if they are not confident about the terms from their
investment, they may stay away from investment for sometime. At the same time if the investors
have low risk appetite, which they were having in global and Indian capital market some four to
five month back due to global financial meltdown and recessionary situation in U.S and some
parts of Europe, they may stay away from investment and wait for the right time to come.
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CHAPTER-4
BULLION MARKET AT GLANCE
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BULLION MARKET AT GLANCE
INTRODUCTION TO BULLION MARKET
A bullion market is a place where precious metals such as gold, silver, platinum and
palladium can be bought and sold. Price depends on supply and demand. These two factors drive
the underlying price which is then adjusted upwards or downwards depending on the form of the
precious metal. Modern bullion markets allow small, individual investors all the way up large
institutions to easily buy and sell precious metals. The bullion market generally offers one-
ounce, ten-ounce, and 1-kilo, 24-karat gold bars, and investors are hereby encouraged to
purchase
PURPOSE
Bullion markets exist for two types of customers.
The first type of customer is the producer of goods that require precious metals as
inputs. These customers are jewelry and electronics manufacturers as well as many other
companies in industries ranging from medicine to chemicals to glass. These companies are the
main drivers of demand and the reason precious metals have any value. These companies
participate in the bullion market so they can ensure a steady supply of precious metals to their
manufacturing facilities.
The second type of customer is the speculator. These are people who buy precious
metals because they think it will provide a hedge against inflation or that the price of the
precious metal will increase because demand will exceed supply. While the first type of
customer wants to take actual delivery of the precious metal, the speculator generally does not,which is why investment firms created precious metal derivative investments.
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Historical background
Silver and gold have been known and prized for at least six millennia. The two metals
commonly are found together in nature and were almost certainly the first metals known to man.
In streambed gravel deposits, from which they were first recovered, the gold invariably contains
silver, sometimes enough to form the natural alloy electrum, in which the silver content can
range from about 18 to 36 weight percent.
Silver was valued by the ancients because of its color (it is the whitest of all metals), its
brilliant luster, its noncorrodible nature, and the relative ease with which it can be worked. It still
is valued for those same characteristics today, but in addition, several other useful properties
have transformed it from being a decorative and monetary metal into a predominantly industrial
metal.
According to a fact sheet on gold on the IMF website, the yellow metal played a central role in
the international monetary system until the collapse of the Bretton Woods system of fixed
exchange rates in 1973. Since then, the role of gold has been gradually reduced. However, it is
still an important asset in the reserve holdings of a number of countries, and IMF remains one of
the largest official holders of gold in the world.
Nonmonetary Uses
Like gold, silver is soft, malleable, and ductile; in fact, it is the most ductile of metals.
These properties led to its being fashioned into items of personal adornment and decorative items
of various kinds. Thus, silver belt buckles, bracelets, brooches, chain necklaces, neck rings, and
other items of jewelry were developed early. Later, silver was used for such things as decorative
handles for daggers and swords, and eventually, in relatively modern times, eating utensils and
various items of tableware.
The industrial uses of silver (including photography), which today account for two-thirds
of world silver consumption, did not arise until the 19th and 20th centuries. A short list of some
of the important uses and the dates of their introduction follows:
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Silver and silver salts have been central to the development of photography since
its origins in the 1820s.
Silver-mercury dental amalgams have been used for tooth restorations since the
late 1830s.
Mirrors of polished silver were used by the Egyptians in the third millennium
B.C., and silvering of mirrors with lead, tin, or mercury was practiced in Europe
before and during the Renaissance. The large-scale production of silvered glass
mirrors through the chemical reduction of silver nitrate dates from Justus von
Liebigs 1835 invention of the process.
A patent for a process for the electroplating of silver was granted in 1840; it was
the first patent for the electroplating of any metal.
Although Alessandro Volta had used silver and zinc as the electrodes of his
electric pile, or battery, at the beginning of the 19th century, it was not until
military requirements in the 1940s created a demand for high-energy-density
batteries that the first two types of practical silver batteries were developed.
Silver sleeve bearings were developed in the 1940s for use in high-performance
military aircraft engines.
Silver catalysts for the large-scale production of formaldehyde and the oxidation
of ethylene are developments of the second half of the 20th century.
Although silver was known to be an excellent conductor of electricity in the 19th
century, its widespread use in switch and relay contacts and in conductors arose
gradually during the 20th century.
SIGNIFICANCE OF SILVER
Demand for silver is built on three main pillars: industrial uses, photography and jewelry &
silverware. Together, these three categories represent more than 95 percent of annual silver
consumption, in last couple of years we saw demand for silver is falling in photography, where
as industrial and jewellery demand is rising ever year and likely to rise for next couple of years
to come.
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World gross domestic product (GDP) is expected to increase by 4.6% in 2012. Recovery is
becoming self-sustained, with trade and investment gradually replacing fiscal and monetary
stimulus as the principal drivers of economic growth. Silvers use as an industrial metal is
growing particularly in electronics and thermal applications. Total silver fabrication last year
grew by 12.8 percent to a 10-year high of 878.8 million ounces, chiefly through the recovery in
industrial demand. Jewelry posted a gain of 5.1 percent, the first substantial rise since 2003,
primarily due to strong GDP gains in emerging markets and the industrialized worlds improving
economic picture. Silver price saw heavy correction in market last month on fund selling and less
investment demand from the biggest fund, MCX July contract closed with more than 18% at
Rs.57919 as on 31st may-2011. Silver for June delivery gained 44.6 cents, or 1.2%, to settle at
$38.303 a troy ounce. The most active contract, for July delivery, ended up 44.2 cents, or 1.2%,
at $38.305 a troy ounce. .
Global silver investment grew 40 percent last year to 279.3 million ounces, resulting in a net
flow into silver of $5.6 billion, almost doubling 2009s figure. Silver-based exchange traded
funds (ETFs) in 2010 reached 582.6 million ounces, an increase of 114.9 million ounces over the
total in 2009. The iShares Silver Trust accounted for almost 40 percent of the increase, with
significant gains achieved by Zurcher Kantonalbank, ETF Securities, and the Sprott Physical
Silver Trust.
Silver is a very versatile metal, it has extensive industrial application and is used to makejewellery and utensils.
Silver demand is on rise in India and china.
Industrial usage is expected to rise with growing industrialization.
Higher gold price has also shifted some people towards silver.
Investment interest has increased in silver also with introduction of more products.
The Silver market promises to be interesting over the next few years as there is likely to be a
change-over in the primary driver of demand. In recent years investor buying has been the swing-
factor that has driven prices higher, but demand for safe-havens is likely to wane in the years ahead.
However, a few new applications for Silver have the potential to become swing factors. In the short
term, the global economic situation remains uncertain and there may well be more turmoil in the
financial markets before a more sustainable economic recovery gets going. In this case Silver prices
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have potential to rise further. The longer term outlook for Silver is also interesting with demand
seeming likely to undergo a structural change as new technology (including Silver-zinc batteries)
emerges, some of which could consume meaningful amounts of Silver. This new technology could
substantially reduce Silvers recent dependence on investor off-take to balance supply and demand.
The prospects of this new technology are also likely to make investors even keener to own Silver,
although at the moment it maybe too early for them to do so. The biggest risk to Silvers bull market
is if investors start to reduce their exposure to safe-haven investments. Silver has been in a supply
surplus since 2003, so a lot of Silver has been bought by investors and now that prices are at levels
not seen for 30 years there may be increased interest in taking profits if investors feel that economic
growth will provide better investment opportunities elsewhere. The short-to-medium term outlook
therefore is very much dependent on how long such investors feel the need to keep, or even increase,
money invested in safe-havens. In turn, this will depend on how the global economy performs. New
technology promises a new era for Silver, but between now and when this technology takes-off is
likely to lead to some wild swings in Silver prices and hence produce numerous risks and trading
opportunities.
PARTICIPANTS OF BULLION MARKETS
1. Reserve bank of India
2. Bankers
3. Financial companies
4. speculators
5. Householders
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1. RESERVE BANK OF INDIA
Reserve bank of India is considered to be the central bank of India, reseve bank of india was
established on April,1935 as per the reseve bank act 1934.though originally private owned,it hasfully owned by the government of india since it was nationalised in 1949.among all the
particpants reseve bank is considerd to be the biggest particpant of these market.as rbi directly
will not enage in bullion market activites.but it will buy and sell bullion such as gold ,silver
which it will keep as a reserves.
In 1991, when India faced its worst ever balance of payment crisis, the country had to pledge 67
tones of gold to Union Bank of Switzerland and Bank of England to raise $605 million
(Rs2,843.5 crore today) to shore up its dwindling foreign exchange reserves, which were then
barely enough to buy two weeks of imports. Indias foreign exchange reserves were at $1.2
billion in January 1991 and by June, they were depleted by half. Currently, the Indian central
banks foreign exchange reserves stand at $285.5 billion.
The Reserve Bank of India, or RBI, as bought 200 tones of gold from the International Monetary
Fund (IMF), nearly half of what the fund plans to sell.
2. BANKERS
As per the norms of reserve bank of India every commercial bank as to keep certain part of its
funds in terms of gold, silver and other metal( these is known as statutory liquidity ratio) as a
result banks directly engage in the buying of precious metal like gold and silver.
Consider the following exceedingly simplified schematic diagram of how a bullion dealer trades
gold and silver.
Producer sells to bullion bank sells to jeweler
This is an extremely simplified explanation of how a bullion bank buys gold from a producer and
then sells it to a jeweler. In reality, a bullion dealer will have numerous purchases and sales it is
making at any given time, and several positions representing forward commitments to buy and
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sell; loans; swaps; repurchase agreements; metal held on an unallocated basis; metal owned or
committed to in the form of concentrates, dore, and scrap; and other positions in gold and silver
at any given time.
The collection of these positions is called the gold book run by that bullion bank. In the world of
banking accounting, many of these positions are gold-denominated assets, some of which the
bank can use as collateral for borrowings and lendings in gold or currencies.
Now, let us complicate the diagram by adding a gold loan.
Producer sells to Bullion Bank loans toProducer sells toBullion Bank
sells to Jeweler
In this example, the first producer sells gold to a bullion bank. The bank loans this gold to
another (or the same) producer in a gold loan. The producer then sells the gold to the bullion
bank, which sells the gold to a jeweler. In this way, the banker has made two transactions with
the same volume of gold. Instead of merely earning the very small margin available on spot gold
purchases and sales, the banker has managed to add to its fees for this gold the interest and
banking fees attached to a gold loan and a second purchase. In this way, the bank increases the
profitability of its bullion trading operation.
3. FINANCIAL COMPANIES
Financial companies also engage or participate in bullion markets such as MMTC Limited; (A
Govt. of India Enterprise) is Indias Premier bullion trader, handling more than 185 MTs of Gold
& 690 MTs of Silver during 2010-11. The Precious Metals Division has consistently contributed
considerable proportion of the total turnover of the Company.
MMTCs Precious Metals Division is in to a range of activities covering imports, exports and
domestic retail trade. It helps in promoting exports from India by holding exclusive foreign
exhibitions of gold and studded jewellery at chosen overseas locations.
MMTC is an authorized agency of the Government of India for import of gold, silver, platinum,
palladium, rough diamonds, emeralds, rubies and other semi-precious stones and supplies these
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items to jewellers in India for domestic sales and exports. It is one of the custodians of the
Diamond Plaza Customs Clearance Center in Mumbai. MMTC is also the custodian for import &
export of precious cargo at SEEPZ, SEZ Mumbai.
MMTC has a unit in New Delhi for manufacturing its own brand of gold and silver medallions
since the year 1996. Customized requirements for corporate/institutional orders are serviced from
here throughout the year. MMTC has retail jewellery & its own branded Sterling Silverware
(Sanchi) showrooms in all the major metro cities of India. MMTC also supplies branded
hallmarked gold and studded jewellerys.
4. SPECULATORS
Speculators are those people who participate in the market for the profits and are ready to face
the risk involved in the market. A speculator can be anyone roman individual who has a small
surplus income to treasury desks of banks and corporate.
5. HOUSEHOLDS
In India private holding of bullion has traditionally consisted of gold and silver jewelry of high
purity in the form of bangles, bracelets, anklets that may be worn and are conveniently portable.
In addition, gold and silver coins and bars are also accumulated, and whether as jewelry or as
bullion coins and bars, these two metals are viewed as a measure of true wealth.
How we treat gold and silver
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The bulk of the population living in villages and small towns tend
to accumulate gold and silver of high purity as a handy form of
investment-grade savings. Silver bullion in villages is the
preferred metal because it is more affordable and you can get
more weight of metal for your money. There you will find them
wearing this wealth on them in the form of chunky silver
bracelets, anklets and necklaces.
India bullion in towns and cities is slightly different. The urban dweller also looks at gold and
silver as an investment, but somewhat differently. Traditionally 22 carat (91.667% pure) gold
bangles, or sterling silver (92.5% pure) jewelry, tableware have been a form of everyday use
investment.
Today, the younger professionals and the older wealthy spenders prefer designer jewelry which
carries high premiums. The gold or silver value in such jewelry can be astonishingly low.
Commodity exchanges in India
National Commodity & Derivatives Exchange Limited (NCDEX)
Multi Commodity Exchanges of India limited (MCX)
All the exchanges have been set up under overall control of Forward Market Commission (FMC)
of Government of India.
National Commodity & Derivatives Exchange Limited (NCDEX)
National Commodity & Derivatives Exchange Limited (NCDEX) located in Mumbai is a
public limited company incorporated on April 23, 2003 under the companies act, 1956 and
had commenced its operations on December 15, 2003. This is the only commodity exchange
in the country promoted by national level institutions. It is promoted by ICICI bank limited,
life insurance Corporation of India (LIC), national bank for agriculture and rural
development (NABARD) and National Stock Exchange of India limited (NSE). It is a
professionally managed online multi commodity exchange. NCDEX is regulated by forward
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market commotion and is subjected to various laws of the land like the companies act. Stamp
act, contracts act, forward commission (Regulation) act and various other legislations.
Multi Commodity Exchange Of India Limited (Mcx)
Head quarters in Mumbai multi commodity exchange of India limited (MCX), is an
independent and de-mutualised exchange with a permanent recognition from government
bank of India. Key shareholders of MCX are financial technologies (India) ltd., state bank of
India, union bank of India and canara bank. MCX facilities online trading, clearing and
settlement.
All the exchanges have been set up under overall control of forward market commission
(FMC) of government of India.
Commodity exchange in India plays an important role where the prices of any commodity are
not fixed, in an organized way. Earlier only the buyer of produce and its seller in the market
judged upon the prices. Other never had a say. Today, commodity exchanges are purely
speculative in nature. Before discovering the price, they reach to the producers, end-users, and
even the retail investors, at a grassroots level. It brings a price transparency and risk management
in the vital market.
A big difference between a typical auction, where a single auctioneer announces the bids, and the
exchange is that people are not only competing to buy also to sell. By exchange rules and by law,
no one can bid under a higher bid, and no one can offer to sell higher than someone elses lower
offer. That keeps the market as possible, and keeps the traders on their toes to make no one gets
the purchases or sale before they do.
TRENDS OF SILVER
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Monthly Volumes of silver from 1st September 2010 to 31st march 2011.
Source; National Commodity & Derivatives Exchange Limited (NCDEX)
41
Month Year Quantity
(In 000's)
Volumes
(Rs. In Lakhs)
Traded Contracts
(in Lots)
Sep 2010 46800.275 35234292.32 2854405
Oct 2010 66681.03 45369543.94 4093266
Nov 2010 80631.725 54609767.33 5019135
Dec 2010 61699.85 44214032.96 3954385
Jan 2011 69653.005 50559290.38 4397911
Feb 2011 70534.009 49273860.01 4839644
Mar 2011 84614.611 64149416.11 7062883
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INTERPRETATIONS:
As it is clear from the above trend that volumes (values) are showing an increasing trend From
September to November with an increase in quantity by 72% and traded contracts increases to
76% the volumes in silver are showing an increasing trend. And from October to February these
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volumes are decreased showing a decline in volumes, and in the month of March it should an
tremendous increase in volumes quantity and contracts traded.
CHAPTER-5
DATA ANALYSIS AND INTERPRETATION
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DATA ANALYSIS;
The third objective is the core of this project which shall be examined in the following steps.
The closing values of nifty are considered to be variable X.
The closing values of silver are considered to be variable Y.
Correlation test shall be conducted with the following formula.
CORRELATION COEFFICIENT (r) = cov(X,Y)
X.Y
Date nifty
x
silver
y
1/9/2010 5471 30,74
0
2/9/2010 5486 30,74
0
3/9/2010 5479 30880
4/9/2010 5479 3111
0
5/9/2010 5479 3111
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0
6/9/2010 5576 3113
5
7/9/2010 5604 31217
8/9/2010 5607 3154
0
9/9/2010 5640 3144
5
10/9/201
0
5640 3144
5
11/9/201
0
5640 3144
5
12/9/201
0
5640 3144
5
13/9/201
0
5760 3133
5
14/9/201
0
5795 3187
8
15/9/201
0
5860 3207
0
16/9/201
0
5828 3234
8
17/9/201
5884 3242
45
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0 0
18/9/201
0
5884 3231
5
19/9/201
0
5884 3231
5
20/9/201
0
5980 3237
3
21/9/201
0
6009 32245
22/9/201
0
5991 3224
5
23/9/201
0
5959 3267
0
24/9/201
0
6018 3282
0
25/9/201
0
6018 3286
8
26/9/201
0
6018 3286
8
6035 3296
46
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27/9/201
0
7
28/9/201
0
6029 3257
1
29/9/201
0
5991 3330
5
30/9/201
0
6029 3356
0
1/10/20
10
6143 3318
5
2/10/201
0
6143 3318
5
3/10/201
0
6143 3318
5
4/10/201
0
6159 3338
0
5/10/201
0
6145 3373
0
6/10/201
0
6186 3462
5
7/10/201
0
6120 3507
0
8/10/201
0
6103 3385
8
47
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9/10/201
0
6103 3494
7
10/10/20
10
6103 3494
7
11/10/20
10
6135 3506
5
12/10/20
10
6090 3497
0
13/10/20
10
6233 3549
0
14/10/20
10
6177 3549
0
15/10/20
10
6062 3658
0
16/10/20
10
6062 3646
5
17/10/20
10
6062 3646
5
18/10/20
10
6075 3607
5
19/10/20
10
6027 3633
5
20/10/20
10
5982 3575
5
21/10/20
10
6101 3603
6
22/10/20
10
6066 3499
5
48
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23/10/20
10
6066 3539
0
24/10/20
10
6066 3539
0
25/10/20
10
6105 3578
0
26/10/20
10
6082 3554
0
27/10/20
10
6012 3583
5
28/10/20
10
5987 3608
5
29/10/20
10
6017 3592
0
30/10/20
10
6017 3719
8
31/10/20
10
6017 3750
0
1/11/201
0
6117 3718
0
2/11/201
0
6119 3742
0
3/11/201
0
6160 3772
0
4/11/201
0
6281 3772
0
5/11/201
0
6312 3772
0
49
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6/10/201
0
6312 3772
0
7/10/201
0
6312 3960
0
8/11/201
0
6273 4142
0
9/11/201
0
6301 4110
0
10/11/20
10
6275 4094
0
11/11/20
10
6194 4063
5
12/11/20
10
6071 3949
0
13/11/20
10
6071 3949
0
14/11/20
10
6071 3985
0
15/11/20
10
6121 3950
0
16/11/20
10
5988 3950
0
17/11/20
10
5988 4037
0
18/11/20
10
5998 4128
0
19/11/20
10
5890 4192
0
50
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20/11/20
10
5890 4192
0
21/11/20
10
5890 4213
0
22/11/20
10
6010 4194
0
23/11/20
10
5934 4223
0
24/11/20
10
5965 4210
0
25/11/20
10
5799 4193
0
26/11/20
10
5751 4132
0
27/11/20
10
5751 4132
0
28/11/20
10
5751 4149
0
29/11/20
10
5830 4207
5
30/11/20
10
5862 4370
0
1/12/201
0
5960 4375
0
2/12/201
0
6011 4380
0
3/12/201
0
5992 4465
0
51
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4/12/201
0
5992 4465
0
5/12/201
0
5992 4500
0
6/12/201
0
5992 4554
0
7/12/201
0
5976 4403
5
8/12/201
0
5903 4360
0
9/12/201
0
5766 4400
0
10/12/20
10
5857 4380
0
11/12/20
10
5857 4380
0
12/12/20
10
5857 4450
0
13/12/20
10
5907 4540
0
14/12/20
10
5944 4420
0
15/12/20
10
5892 4470
0
16/12/20
10
5948 4475
0
17/12/20
10
5948 4479
0
52
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18/12/20
10
5948 4479
0
19/12/20
10
5948 4497
5
20/12/20
10
5947 4472
5
21/12/20
10
6000 4473
0
22/12/20
10
5984 4475
0
23/12/20
10
5980 4485
0
24/12/20
10
6011 4485
0
25/12/20
10
6011 4485
0
26/12/20
10
6011 4480
0
27/12/20
10
5998 4495
0
28/12/20
10
5996 4612
5
29/12/20
10
6060 4675
0
30/12/20
10
6101 4625
0
31/12/20
10
6134 4650
0
53
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1/1/2011 6134 4650
0
2/1/2011 6134 4704
0
3/1/2011 6157 4678
5
4/1/2011 6146 4490
0
5/1/2011 6079 4500
0
6/1/2011 6048 4420
0
7/1/2011 5904 4465
0
8/1/2011 5904 4465
0
9/1/2011 5904 4435
0
10/1/201
1
5762 4490
0
11/1/201
1
5754 4540
0
12/1/201
1
5863 4492
5
13/1/201
1
5751 4420
0
5654 4400
54
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14/1/201
1
0
15/1/201
1
5654 4400
0
16/1/201
1
5654 4365
0
17/1/201
1
5654 4440
0
18/1/201
1
5724 4492
5
19/1/201
1
5691 4405
0
20/1/201
1
5711 4262
5
21/1/201
1
5696 4284
0
22/1/201
1
5696 4284
0
23/1/201
1
5696 4285
0
55
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24/1/201
1
5743 4170
0
25/1/201
1
5687 4170
0
26/1/201
1
5687 4252
5
27/1/2011
5604 4170
0
28/1/201
1
5512 4316
5
29/1/201
1
5512 4316
5
30/1/201
1
5512 4302
0
31/1/201
1
5505 4380
0
1/2/2011 5417 4380
0
2/2/2011 5432 4354
5
3/2/2011 5526 4440
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0
4/2/2011 5395 4481
0
5/2/2011 5395 44810
6/2/2011 5395 4470
0
7/2/2011 5396 4476
0
8/2/2011 5312 4587
5
9/2/2011 5253 4560
0
10/2/201
1
5225 4580
0
11/2/201
1
5310 4579
0
12/2/201
1
5310 4579
0
13/2/201
1
5310 4587
5
14/2/2S0
11
5456 4670
0
15/2/201
1
5481 4670
0
57
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16/2/201
1
5485 4640
0
17/2/201
1
5546 4770
0
18/2/201
1
5458 4830
0
19/2/2011
5458 4830
0
20/2/201
1
5458 4943
0
21/2/201
1
5518 4922
5
22/2/201
1
5469 4952
5
23/2/201
1
5437 5010
0
24/2/201
1
5262 4970
0
25/2/201
5303 5025
0
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1
26/2/201
1
5303 5025
0
27/2/201
1
5303 5030
0
28/2/201
1
5333 5115
0
1/3/2011 5522 51150
2/3/2011 5522 5170
0
3/3/2011 5536 5170
0
4/3/2011 5538 5315
0
5/3/2011 5538 5315
0
6/3/2011 5538 5470
5
7/3/2011 5463 5480
0
8/3/2011 5520 5450
0
9/3/2011 5531 5420
0
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10/3/201
1
5494 5270
0
11/3/201
1
5445 5430
0
12/3/201
1
5445 5430
0
13/3/201
1
5445 5440
0
14/3/2011
5531 5305
0
15/3/201
1
5449 5240
0
16/3/201
1
5511 5205
0
17/3/201
1
5446 5295
0
18/3/201
1
5373 5295
0
19/3/201
1
5373 5295
0
20/3/201
5373 5417
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1 5
21/3/201
1
5364 5420
0
22/3/201
1
5413 5490
0
23/3/201
1
5480 5640
0
24/3/201
1
5522 56000
25/3/201
1
5654 5570
0
26/3/201
1
5354 5570
0
27/3/201
1
5354 5515
0
28/3/201
1
5687 5515
0
29/3/201
1
5736 5607
5
5787 5650
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30/3/201
1
0
31/3/201
1
5833 5626
5
CORRELATION COEFFICIENT (r) = covariance(X, Y)
X.Y
r= -0.51705
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INTERPRETATION;
It is clear from the analysis that there exists a weak relation or negative relation between nifty
values(x) and silver values (y) i.e., if nifty values increases(decreases) then the corresponding
silver decreases(increases).
Here in the above graph silver values are showing a consistent increase from the 1st September
till the 31st march.
CHAPTER-6
FINDINGS AND CONCLUSIONS
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FINDINGS AND CONCULSIONS
It is found that investments in gold and silver are proliferated to unprecedented levels in
the time span of 2009-2011.
It is found that bullion market is also sending turbulent signals to short term investors due
to unpredictable volatility.
It is also evident from this study that increased conversions among the investment
instruments also led to the uncontroable volatility in bullion markets.
It is evident from the 3rd chapter of this project that conventional investors of financial
markets are not willing to insulate themselves from making investments in bullion
markets.
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Though there are many precious metal segments in Indian bullion market, it is found that
silver has been talking the lead in the recent past.
Silver is demanded not only by speculators but also by the industrial applicants who
started taking positions in the new methods like commodity futures which could have led
to the growth of silver prices with unimaginable profits to the traders.
It is feasible to conclude that Indian bullion markets more independent comparing to the
segments of financial markets because it is examined in the previous chapter that there is
no correlation or their exist a weak correlation between bullion and capital market.
It is also understand that performance of bullion markets should not be compared with
intersegmental investments. Because there is no variance between the spot prices of silverand that of equities replicated in the form of nifty.
Finally it is concluded that Indian bullion markets in the form of silver are emerged to be
the autonomous investments avenues for all kinds of investors in long-run.
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CHAPTER-7
SUGGESTIONS
SUGGESTIONS
1. It is suggested to short run investors to be away from silver segment in the present
condition of inflationary prices of 56,000-58,000 (appox).
2. It is the right time for speculators to take intraday positions in the silver market.
Therefore they are advised to diversify the line share of speculative portfolio to silver.
3. It is suggested to investors not to correlate the profitability levels of silver with other
investment sources, rather they are advised to construct efficient portfolio of both
bullion and equity investments to leverage their risks .
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4. It is advised to all the investors to be away from short selling strategies because the
prices of silver are expected to grow further.
5. Investors of silver are advised to make only institutional purchases such as
commodity exchanges and banks.
BIBILOGRAPHY
www.nseindia.com
www.rbi.org.in
www.mcxindia.com
www.ncdex.com
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http://www.nseindia.com/http://www.rbi.org.in/http://www.mcxindia.com/http://www.ncdex.com/http://www.nseindia.com/http://www.rbi.org.in/http://www.mcxindia.com/http://www.ncdex.com/7/28/2019 Impact of Capital Marekt Volatility
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www.silverinsitiute.org
BOOKS
Guide to Indian stock market - Jitendra Gala
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