Presentation Report on

Recession & its Impact on Indian Stock Market

Submitted by: - Ravi Garg (0601233908)

Submitted to: - Ms. Aradhana Chadha

Delhi Institute of Advanced Studies

Affiliated to GGSIP University, Delhi

Plot No.6, Sector-25, Rohini, Delhi-110085.

Page 1
 Table of Contents

Certificates

Acknowledgement

Student declaration

Executive Summary

Scope of Study

Chapter 1 Research study

Introduction
Research Objective
Research Methodology

Chapter 2 Industry Profile

 Introduction

 Bombay Stock exchange

 National Stock Exchange

 Securities and Exchange Board of India

 Basic Information Related to Stock market

Chapter 3 Company Profile

 History of company

 Milestones

 Company Structure

Page 2
  Management Team

Chapter 4 Literature Review

Causes of economic recession

Effects of recession
Impact on financial markets
List of major recessions till now
India and the financial crisis
FII’s – impact on Indian market
Sensex v/s fii’s
US$ v/s INR
India’s response to the crisis
Outlook for the Indian economy

Chapter 5 Analysis and Interpretation

Chapter 6 Conclusion

Chapter 7 Suggestion & Limitation

Bibliography

Annexure

 Questionnaire

Miscellaneous

 Appraisal Form

 Evaluation Sheet

 Attendance Sheet

Page 3
 ACKNOWLEDGEMENT

I wish to express my gratitude to INDIA INFOLINE LTD. for giving me an opportunity to be a part
of their esteem organization and enhance my knowledge by granting permission to do the summer
training project under their guidance.

I am grateful to Ms. ARADHANA CHADHA (Project Guide), for her invaluable guidance and
cooperation during the course of the project. She provided us with her assistance and support whenever
needed that has been instrumental in completion of this project.

Words are inadequate in expressing my profound sense of thankfulness to Mr. ROBIN ARORA (Sales
Manager), & his entire team (Mr. Ankit Tyagi, Mr. Vikrant Sharma, Mr. Naveen Sapre, Mr. Mohit kr.,
Mr. Sanjay Sethi), especially to Ms. GEETA LOMAS (Relationship Manager), for their excellent
guidance and support throughout the training. I am indebted to them for encouraging and initiating us
to undertake this project. I remain grateful for their invaluable support, guidance, encouragement,
inspiration and help rendered to us at both training and personal level. I am also thankful to the
employees of IIL for providing great support and help in completion of the training.

The learning during the project was immense & invaluable.

Regards,

Page 4
RAVI GARG

0601233908

STUDENT DECLARATION

I, Mr. RAVI GARG, do hereby declare that the project report titled “Recession and its impact on
Indian stock market” at “India infoline ltd.” is a genuine research work undertaken by me and it has
not been published anywhere earlier.

RAVI GARG

0601233908

Page 5
 EXECUTIVE SUMMARY

The world economy is engaged in a spiraled mortgage crisis, starting in the United States, which is
carving the route to the largest financial shock since the Great Depression.

A loss of confidence by investors in the value of securitized mortgages in the United States was the
beginning of a financial crisis that swept the global economy off its feet. The major financial crisis of
the 21st century involves esoteric instruments, unaware regulators, and nervous investors.

Starting in the summer of 2007, the United States experienced a startling contraction in wealth,
triggered by the subprime crisis, thereby leading to increase in spreads, and decrease in credit market
functioning. During boom years, mortgage brokers, enticed by the lure of big commissions, talked
buyers with poor credit into accepting housing mortgages with little or no down payment and without
credit checks. Higher default levels, particularly among less credit- worthy borrowers, magnified the
impact of the crisis in the financial sector.

The ability to raise cash, i.e. liquidity, is an essential component for the markets and for the economy
as a whole. The freezing liquidity has closed shops of a large number of credit markets. Interest rates
had been rising across the world, even rates at which banks lend to each other. The freezing up of the
financial markets eventually lead to a severe reduction in the rate of lending, followed by slow and
drastically reduced business investments, paving the way for a nasty recession in the overall economic
state of the globe.

A collapse of trust between market players has decreased the willingness of lending institutions to risk
money. The bursting of the housing bubble has caused a lot of AAA labeled investments to turn out to
be junk. Nervous investors have been sending markets plunging down. Markets all over the world
including those of Britain, Germany, and Asia, had to confront all-time low figures since the past
couple of years or more.

Britain also witnessed the so-called ―bursting of the Brown Bubble, in the form of the highest
personal debt per capita in the G7, combined with an unsustainable rise in housing prices. The longest
period of expansion, which Britain claimed to be undergoing, eventually revealed itself as an illusion.
The illusion of rising to prosperity had been maintained by borrowing to spend, often in the form of
equity withdrawal from increasingly expensive houses. The bubble ultimately burst, exposing Britain
to the most serious financial crisis since the 1920s. This brings a lot of misery to the home owners who
are set to see the cost of mortgages soar following the deepening of the banking crisis and the Libor –
the rate at which banks lend to each other.

The impact of the crisis is more vividly observable in the emerging markets which are suffering from
one of their biggest selloffs. Economies with disproportionate offshore borrowings (like that of

Page 6
Australia) are adversely affected by the western financial crunch. Globalization has ensured that none
of the economies of the world stay insulated from the financial crisis in the developed economies.

Contrary to the “decoupling theory”, emerging economies too have been hit by the crisis. According to
the decoupling theory, even if advanced economies went into a downturn, emerging economies would
remain unscathed because of their substantial foreign exchange reserves, improved policy framework,
robust corporate balance sheets, and a relatively healthy banking sector. In a rapidly globalizing world,
the “decoupling theory” was never totally persuasive.

The decoupling theory‘ stands totally invalidated today in the face of capital flow reversals, sharp
widening of spreads on sovereign and corporate debt and abrupt currency depreciations.

In the subsequent parts of the project, several issues will be discussed which will provide a detailed
account of the origin of the crisis and the ripple effect of economic downturn of the world‘s largest
economy which engulfed even the fast growing emerging economies into the crisis. The impact of the
crisis on the Indian economy will also be dealt with.

The main aim of the study is to find relevant answers to questions like why and how India has been hit
by the crisis and how the Indian economy and the Reserve Bank of India have responded to the crisis.
The recommendations include the outlook for the Indian economy in the wake of the economic
turmoil. The project concludes with an analysis of Entrepreneurship in times of the financial crisis and
a swift overview of the various aspects of entrepreneurship which can help in the revival of a
plummeting economy.

Page 7
 SCOPE OF THE STUDY
As the name of topic i.e. recession and its impact of Indian stock market, define itself about the impact
of recession on Indian stock market in current scenario.

In this project report the impact of FII’s on Indian stock market is described with the help of
relationship between SENSEX movement AND FII’s activity.

So one can get to know that fii’s activities that is selling and buying of stocks effect a sensex
significantly.

On the hand I have tried to find out the mindset of Indian investors towards Indian stock market and
fii’s activity and their faith in Indian banking system and covering of sensex to its high time ever
21000+ points.

So, with the help of this project report one will be able to derive the relationship between fii’s activity
and movement in sensex index and will invest accordingly.

Page 8
 RESEARCH OBJECTIVE
PRIMARY OBJECTIVE

To study the impact of recession on Indian stock market.

SECONDARY OBJECTIVE

 To Study the Impact of FII on the capital market in India.

 To quantify the relation between FII flows and their relationship with economic variables,
particularly with SENSEX.

 To analyze the perception of investors towards Indian banking system.

 To analyze the perception of investors towards Indian stock market.

 To analysis the impact of recession on Indian investor & stock market.

Page 9
 RESEARCH METHODOLOGY
For covering the Theoretical part I went through a lot of literature including books on FII & Capital
Market. Beyond this I was tracking the performance of FII through the help of internet.

To Study the major episodes of volatility in India, I visited various sites for their comments during that
period. For the study purpose, I took only SENSEX that is the Bombay Stock Exchange (BSE)
benchmark Index is considered. The daily index volatility and volatility in daily FII cash flows were
studied and daily FII volatility on the SENSEX volatility. Thus throughout the project I shall be making
use of secondary data.

Nature of Research

The research is Descriptive and Analytical in nature.

A Descriptive Research is one that is concerned with describing the characteristics of a particular
individual or group as it exists at present.

An analytical Research on the other hand, is one in which the researcher aims at finding solution to a
given problem.

Research Design

A research design is the arrangement of conditions for the collection and analyses of data in a manner
that aims to combine relevance to the research purpose with economy in procedure. The research

Page 10
design is the conceptual structure within which research is conducted; it constitutes the blueprint for the
collection, measurement and analyses of the data.

The research is based on “sampling design” which deals with the method of selecting items to be
observed for the given study.

SAMPLING

 Elements:

 The target population of the study included the general population above the age
of 25 yrs

 Sampling design and sampling unit are as follows:

 Sampling frame- Urban class in the Delhi (NCR) region

 Sample size: 100

Data Collection Methods

Data was collected through primary and secondary sources.

Primary Data

 A Primary Research has been conducted.

 The questionnaire was prepared for the investors to find out

 Investor’s profile

 What impact the Indian stock market.

 Their view on Indian banks.

 Their Positiveness for Indian stock market.

Secondary Data

Collection of data from various websites to understand the relationship between SENSEX, US
DOLLAR & FII’s.

Page 11
 INTRODUCTION TO SHARE MARKET

The Indian securities market has become one of the most dynamic and efficient securities market in
Asia today. The Indian market now conforms to international standards in terms of operation
efficiency.

At present there are twenty-three stock exchanges in the country. Four of them can be considered as
national level exchanges, namely, NSE, BSE, OTCEI, & ISE; the remaining nineteen are regional stock
exchanges (RSE’s) located important cities of the country.

List of Regional Stock Exchanges in India

Ahmadabad Stock Exchange

Bangalore Stock Exchange

Calcutta Stock Exchange

Cochin Stock Exchange

Page 12
Coimbatore Stock Exchange

Delhi Stock Exchange

Guwahati Stock Exchange

Hyderabad Stock Exchange

Jaipur Stock Exchange

Ludhiana Stock Exchange

Madhya Pradesh Stock Exchange

Madras Stock Exchange

Magadh Stock Exchange

Mangalore Stock Exchange

Meerut Stock Exchange

Pune Stock Exchange

Saurashtra Kutch Stock Exchange

Uttar Pradesh Stock Exchange

Vadodara Stock Exchange

Bombay Stock Exchange (BSE)

Page 13
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. 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).

The Exchange’s pivotal and pre-eminent role in the development of the Indian capital market is widely
recognized and its index, SENSEX, is tracked worldwide. Earlier an Association of persons (AOP), the
Exchange is now a demutualised and corporatized entity incorporated under the provisions of the
Companies Act, 1956, pursuant to the BSE (Corporatization 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 addressing 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 and a management team of professionals.

The Exchange has a nation –wide reach with a presence in 417 cities and towns of India.

VISION

“Emerge as the premier Indian stock exchange by establishing global benchmarks”

NATIONAL STOCK EXCHANGE (NSE)

Page 14
The National Stock Exchange of India Limited has genesis in the report of the High Powered Study
Group on Establishment of New Stock Exchanges, which recommended promotion of a National Stock
Exchange by financial institutions ( FIs ) to provide access to investors from al across the country on an
equal footing. Based on the recommendations, NSE was promoted by leading Financial Institutions at
the best of the Government of India and was incorporated in November 1992 as a tax-paying company
unlike other stock exchanges in the country.

On its recognition as a stock exchange under the Securities Contracts (Regulation) Act, 1956 in April
1993, NSE commenced operations in the Wholesale Debt Market ( WDM) segment in June 1994. The
Capital Market (Equities) segment commenced operations in Derivatives segment commenced in June
2000.

MISSION

NSE’s mission is setting the agenda for change in the securities markets in India. The NSE was set-up
with the main objectives of:

• establishing a nation –wide trading facility for equities , debt instruments and hybrids,
• ensuring equal access to investors all over the country through an appropriate communication
network,
• Providing a fair , efficient and transparent securities market to investors using electronic trading
systems,

Enabling shorter settlement cycles and book entry settlements systems, and Meeting the current
international standards of securities markets. The standards set by NSE in terms of market practices
and technologies have become industry benchmarks and are being emulated by other market
participants. NSE is more than a mere market facilitator. It’s that force which is guiding the industry
towards new horizons and greater opportunities.

Securities Exchange Board of India (SEBI)

Page 15
Securities and Exchange Board of India (SEBI) is a board (autonomous body) created by the
Government of India in 1988 and given statutory form in 1992 under the SEBI Act 1992. SEBI has
three functions rolled into one body: legislative, judicial and executive.

It drafts rules in its legislative capacity, it conducts enquiries and enforcement action in its executive
function and it passes rulings and orders in its judicial capacity.

SEBI has had a mixed history in terms of its success as a regulator. Though it has pushed systemic
reforms aggressively and successively (e.g. the quick movement towards making the markets electronic
and paperless), it seems to lack the legal expertise needed to sustain prosecutions/enforcement actions.

Headquarter

SEBI is headquartered at Mumbai.

Present Management
Mr. C.B. Bhave – Chairman, SEBI
Dr. K.P. Krishna – Joint Secretary – CM

The Securities and Exchange Board of India was established on April 12, 1992 in accordance with the
provisions of the Securities and Exchange Board of India Act, 1992.

PREAMBLE

The Preamble of the Securities and Exchange Board of India describes the basic functions of the
Securities and Exchange Board of India as

“…..to protect the interests of investors in securities and to promote the development of, and to
regulate the securities market and for matters connected therewith or incidental thereto”

Basic Information Related to Stock market

What is equity trading?

It is simply buying and selling of equities. However, unlike other commodities, equities are not traded
everywhere, and are traded only in special market places called exchanges

What is an exchange?

Page 16
An exchange is a mechanism through which buyers and sellers of equities are brought together. These
days, this is largely electronic and done with computers.

Investors cannot, however, participate directly in the exchange and can participate only through
members of the exchange, popularly referred to as brokers.

How does the exchange works?

An exchange has pre-specified timings. During that time, all the members of the exchange link up to a
central computer through their remote terminals. The members then place bids to buy equities, or make
offers to sell equities. Other members who can match the bid or the offer confirm their acceptance, and
the transaction is completed.

Members of stock exchanges place bids and offers on behalf of their clients, who are the investors.

Why are brokers required?

Investing in equities is quite risky. The broker is a professional, who knows the risk and can advise the
investor accordingly. Secondly, an exchange will become an unwieldy mechanism if the entire universe
of investors were to go and start making bids and offers. Reducing the number of individuals is a way
of keeping control.

Third, equity trading can also be abused. To prevent these abuses, exchanges as well as the
Government has a number of regulations in place. Restricting activity to the members of the exchange
will enable the regulations to be followed, preventing abuse of the system.

How are shares traded?

Like in any other buying or selling, once the broker confirms the trade, if you are buying the share, you
pay the broker the value of the shares and take delivery of the shares. If you are selling the shares, you
hand over the equities to the broker and the broker will pay you for your shares.

When settlement does happen?

Each exchange has its own settlement period within which the entire process of delivery and purchase
should be completed. Typically, the process is completed in a week to ten days time.

Which shares to Buy and sell?

Page 17
An index is an indicator of how the stock market is doing on the whole. An index comprises a basket of
stocks. The collective value of these stocks on a given date is taken and given a score of 100. From that
day onwards, the value of these stocks is tracked and its score relative to 100 is computed.

The stocks selected are based upon a number of parameters that the creators of the index decide.
Equally, the valuation is also done using complex mathematical principles. Periodically, the list of
shares used for computing the index also undergoes a change. These changes are decided by the index
creators based on the parameters they have set for the stocks for inclusion.

An index shows whether the stock market, on the whole, is appreciating in value or declining in value.

The movement of the index itself is no indicator for individual shares. You may find that a particular
share may be increasing in its price even when the index is down and vice versa. The index is only an
indicator of the general trend

The common indexes in Indian stock markets are the SENSEX, the index for stocks listed on the
Bombay Stock Exchange and Nifty, the index for stocks listed on the National Stock Exchange.

What is an index?

Buying and selling shares involve a fair amount of research. These involve assessing how well the
company is managed, how the company is performing compared to others in the industry, how the
industry itself is doing, the financial performance of the company, the interest of the lay public in the
company, etc.

It is best that you consult an expert in such analysis, before you decided to buy or sell a particular
share. Such investment advice is also provided by your share brokers.

How long to hold on the shares?

Historically, it has been demonstrated that investments in equities offer the best long term returns and
hence the highest opportunity to enhance your capital. Thus, the longer you stay invested in the equity
markets, the better will be your returns.

However, this holds true for the equity market as a whole, and not necessarily for shares of individual
companies. The value of shares of specific companies are subject to various pulls and pressures which
could cause a share that is highly valued one day, to drop its value overnight, as a result of
unpredictable factors ranging from Government policy to acts of omission and commission by the
management of the company.

Page 18
It is advisable that you periodically, at least once in a year, evaluate your holdings and decide whether
to continue with them or change them.

However, one very important thumb rule which the professionals offer is, never to get emotional about
a share. In other words, do not hold on to the share of a company whose value is declining, just because
its history has been very good!

Are investments in shares safe?

Any investment is prone to a certain degree of risk. Shares, as a class of investment have the highest
element of risk. The only services riskier than shares are lotteries and other games of chance.

These risks arise as a result of factors described earlier.

However, today there is strong legislation, procedures and a regulatory authority - Securities Exchange
Board of India (SEBI), which to a large extent prevents risk as a result of misleading the investing
public.

Page 19
COMPANY PROFILE

History of company

Milestones

Company Structure

Management Team

ABOUT INDIA INFOLINE LTD

Page 20
We are a one-stop financial services shop, most respected for quality of its advice, personalised service
and cutting-edge technology.

We were founded in 1995 by Mr. Nirmal Jain (Chairman and Managing Director) as an independent
business research and information provider. We gradually evolved into a one-stop financial services
solutions provider. Our strong management team comprises competent and dedicated professionals

We are a pan-India financial services organization across 1,361 business locations and a presence in
428 cities. Our global footprint extends across geographies with offices in New York, Singapore and
Dubai. We are listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE).

We offer a wide range of services and products comprising broking (retail and institutional equities and
commodities), wealth management, credit and finance, insurance, asset management and investment
banking.

We are registered with the BSE and the NSE for securities trading, MCX, NCDEX and DGCX for
commodities trading, CDSL and NSDL as depository participants. We are registered as a Category I
merchant banker and are a SEBI registered portfolio manager. We also received the FII license in IIFL
Inc. IIFL Securities Pte Ltd received approval from the Monetary Authority of Singapore to carry out
corporate advisory and dealing in securities operations. Two subsidiaries – India Infoline Investment
Services and Moneyline Credit Limited – are registered with RBI as non-deposit taking non-banking
financial services companies. India Infoline Housing Finance Ltd, the housing finance arm, is
registered with the National Housing Bank.
Vision Statement:

Our vision is to be the most respected company in the financial services space.

India Infoline Group:

The India Infoline group, comprising the holding company, India Infoline Limited and its wholly-
owned subsidiaries, straddle the entire financial services space with offerings ranging from Equity
research, Equities and derivatives trading, Commodities trading, Portfolio Management Services,
Mutual Funds, Life Insurance, Fixed deposits, GoI bonds and other small savings instruments to loan
products and Investment banking. India Infoline also owns and manages the websites
www.indiainfoline.com and www.5paisa.com The company has a network of 976 business locations
(branches and sub-brokers) spread across 365 cities and towns. It has more than 800,000 customers.

India Infoline Group subsidiaries:

 India Infoline Media and Research Services Limited

Page 21
  India Infoline Commodities Limited
 India Infoline Marketing & Services
 India Infoline Investment Services Limited
 IIFL (Asia) Pte Limited

Our Global Presence:

China, Brazil, Dubai, INDIA, Russia, Singapore, UK, USA

MILESTONES

Page 22
1995 Incorporated as an equity research and consulting firm with a client base that included
leading FIIs, banks, consulting firms and corporate.

1999 Restructured the business model to embrace the internet; launched

archives.indiainfoline.com mobilised capital from reputed private equity investors.

2000 Commenced the distribution of personal financial products; launched online equity
trading; entered life insurance distribution as a corporate agent. Acknowledged by Forbes as ‘Best of
the Web’ and ‘...must read for investors’.

2004 Acquired commodities broking license; launched Portfolio Management Service.

2005 Listed on the Indian stock markets.

2006 Acquired membership of DGCX; launched investment banking services.

2007 Launched a proprietary trading platform; inducted an institutional equities team; formed
a Singapore subsidiary; raised over USD 300 mn in the group; launched consumer finance business
under the ‘Moneyline’ brand.

2008 Launched wealth management services under the ‘IIFL Wealth’ brand; set up India
Infoline Private Equity fund; received the Insurance broking license from IRDA; received the venture
capital license; received inprinciple approval to sponsor a mutual fund; received ‘Best broker- India’
award from FinanceAsia; ‘Most Improved Brokerage- India’ award from Asiamoney.

2009 Received registration for a housing finance company from the National Housing Bank;
received ‘Fastest growing Equity Broking House - Large firms’ in India by Dun & Bradstreet.

COMPANY STRUCTURE

Page 23
India Infoline Limited is listed on both the leading stock exchanges in India, viz. the Stock Exchange,
Mumbai (BSE) and the National Stock Exchange (NSE) and is also a member of both the exchanges. It
is engaged in the businesses of Equities broking, Wealth Advisory Services and Portfolio Management
Services. It offers broking services in the Cash and Derivatives segments of the NSE as well as the
Cash segment of the BSE. It is registered with NSDL as well as CDSL as a depository participant,
providing a one-stop solution for clients trading in the equities market. It has recently launched its
Investment banking and Institutional Broking business.

A SEBI authorized Portfolio Manager; it offers Portfolio Management Services to clients. These
services are offered to clients as different schemes, which are based on differing investment strategies
made to reflect the varied risk-return preferences of clients.

India Infoline Media and Research Services Limited

Page 24
The content services represent a strong support that drives the broking, commodities, mutual fund and
portfolio management services businesses. Revenue generation is through the sale of content to
financial and media houses, Indian as well as global.

It undertakes equities research which is acknowledged by none other than Forbes as 'Best of the Web'
and '…a must read for investors in Asia'. India Infoline's research is available not just over the internet
but also on international wire services like Bloomberg (Code: IILL), Thomson First Call and Internet
Securities where India Infoline is amongst the most read Indian brokers.

India Infoline Commodities Limited.

India Infoline Commodities Pvt Limited is engaged in the business of commodities broking. Our
experience in securities broking empowered us with the requisite skills and technologies to allow us
offer commodities broking as a contra-cyclical alternative to equities broking. We enjoy memberships
with the MCX and NCDEX, two leading Indian commodities exchanges, and recently acquired
membership of DGCX. We have a multi-channel delivery model, making it among the select few to
offer online as well as offline trading facilities.

India Infoline Marketing & Services

India Infoline Marketing and Services Limited is the holding company of India Infoline Insurance
Services Limited and India Infoline Insurance Brokers Limited.

(a) India Infoline Insurance Services Limited is a registered Corporate Agent with the
Insurance Regulatory and Development Authority (IRDA). It is the largest Corporate
Agent for ICICI Prudential Life Insurance Co Limited, which is India's largest private
Life Insurance Company. India Infoline was the first corporate agent to get licensed
by IRDA in early 2001.

(b) India Infoline Insurance Brokers Limited is a newly formed subsidiary which will
carry out the business of Insurance broking. We have applied to IRDA for the
insurance broking licence and the clearance for the same is awaited. Post the grant of
license, we propose to also commence the general insurance distribution business.

India Infoline Investment Services Limited

Consolidated shareholdings of all the subsidiary companies engaged in loans and financing
activities under one subsidiary. Recently, Orient Global, a Singapore-based investment institution
invested USD 76.7 million for a 22.5% stake in India Infoline Investment Services. This will help
focused expansion and capital raising in the said subsidiaries for various lending businesses like
loans against securities, SME financing, distribution of retail loan products, consumer finance

Page 25
 business and housing finance business. India Infoline Investment Services Private Limited consists
of the following step-down subsidiaries.

(a) India Infoline Distribution Company Limited (distribution of retail loan products)

(b) Moneyline Credit Limited (consumer finance)

(c) India Infoline Housing Finance Limited (housing finance)

IIFL (Asia) Pte Limited

IIFL (Asia) Pte Limited is wholly owned subsidiary which has been incorporated in Singapore to
pursue financial sector activities in other Asian markets. Further to obtaining the necessary regulatory
approvals, the company has been initially capitalized at 1 million Singapore dollars.

MANAGEMENT TEAM

Page 26
Mr. Nirmal Jain

Chairman & Managing Director

India Infoline Ltd.

Nirmal Jain, MBA (IIM, Ahmedabad) and a Chartered and Cost Accountant, founded
India’s leading financial services company India Infoline Ltd. in 1995, providing
globally acclaimed financial services in equities and commodities broking, life
insurance and mutual funds distribution, among others. Mr. Jain began his career in
1989 with Hindustan Lever’s commodity export business, contributing tremendously to
its growth. He was also associated with Inquire-Indian Equity Research, which he co-
founded in 1994 to set new standards in equity research in India.

R Venkataraman,
Co-promoter and Executive Director
India Infoline Ltd.

R Venkataraman, co-promoter and Executive Director of India Infoline Ltd., is a B. Tech

(Electronics and Electrical Communications Engineering, IIT Kharagpur) and an MBA (IIM
Bangalore). He joined the India Infoline board in July 1999. He previously held senior managerial
positions in ICICI Limited, including ICICI Securities Limited, their investment banking joint venture
with J P Morgan of USA and with BZW and Taib Capital Corporation Limited. He was also Assistant
Vice President with G E Capital Services India Limited in their private equity division, possessing a
varied experience of more than 16 years in the financial services sector.

THE BOARDS OF DIRECTORS

Page 27
 Apart from Nirmal Jain and R Venkataraman, the Board of Directors of India Infoline Ltd. Comprises

Mr. Vikamsey, Board member since February 2005 - a practising Chartered Accountant and
partner (Khimji Kunverji & Co., Chartered Accountants), a member firm of HLB International, headed
the audit department till 1990 and thereafter also handles financial services, consultancy, investigations,
mergers and acquisitions, valuations etc; an ICAI study group member for Proposed Accounting
Standard — 30 on Financial Instruments — Recognition and Management, Finance Committee of The
Chamber of Tax Consultants (CTC), Law Review, Reforms and Rationalization Committee and
Infotainment and Media Committee of Indian Merchants’ Chamber (IMC) and Insurance Committee
and Legal Affairs Committee of Bombay Chamber of Commerce and Industry (BCCI). Mr. Vikamsey
is a director of Miloni Consultants Private Limited, HLB Technologies (Mumbai) Private Limited and
Chairman of HLB India.

Mr Sat Pal Khattar, - Board member since April 2001 - Presidential Council of Minority
Rights member, Chairman of the Board of Trustee of Singapore Business Federation, is also a life
trustee of SINDA, a non profit body, helping the under-privileged Indians in Singapore. He joined the
India Infoline board in April 2001. Mr Khattar is a Director of public and private companies in
Singapore, India and Hong Kong; Chairman of Guocoland Limited listed in Singapore and its parent
Guoco Group Ltd listed in Hong Kong, a leading property company of Singapore, China and Malaysia.
A Board member of India Infoline Ltd, Gateway Distriparks Ltd — both listed — and a number of
other companies he is also the Chairman of the Khattar Holding Group of Companies with investments
in Singapore, India, UK and across the world.

Mr. Kranti Sinha — Board member since January 2005 — completed his masters from the
Agra University and started his career as a Class I officer with Life Insurance Corporation of India. He
served as the Director and Chief Executive of LIC Housing Finance Limited from August 1998 to
December 2002 and concurrently as the Managing Director of LICHFL Care Homes (a wholly owned
subsidiary of LIC Housing Finance Limited). He retired from the permanent cadre of the Executive
Director of LIC; served as the Deputy President of the Governing Council of Insurance Institute of
India and as a member of the Governing Council of National Insurance Academy, Pune apart from
various other such bodies. Mr. Sinha is also on the Board of Directors of Hindustan Motors Limited,
Larsen & Toubro Limited, LICHFL Care Homes Limited, Gremach Infrastructure Equipments and
Projects Limited and Cinemax (India) Limited.

Mr. A.K. Purvar – Board member since March 2008 – completed his Masters degree in
commerce from Allahabad University in 1966 and a diploma in Business Administration in 1967. Mr.

Page 28
Purwar joined the State Bank of India as a probationary officer in 1968, where he held several
important and critical positions in retail, corporate and international banking, covering almost the entire
range of commercial banking operations in his illustrious career. He also played a key role in co-
coordinating the work for the Bank's entry into the field of insurance. After retiring from the Bank at
end May 2006, Mr. Purwar is now working as Member of Board of Governors of IIM-Lucknow, joined
IIM–Indore as a visiting professor, joined as a Hon.-Professor in NMIMS and he is also a member of
Advisory Board for Institute of Indian Economic Studies (IIES), Waseda University, Tokyo, Japan. He
has now taken over as Chairman of IndiaVenture Advisors Pvt. Ltd., as well as IL & FS Renewable
Energy Limited. He is also working as Independent Director in leading companies in Telecom, Steel,
Textiles, Autoparts, Engineering and Consultancy.

Company’s philosophy on Corporate Governance

The India Infoline Group is committed to placing the Investor First, by continuously striving to
increase the efficiency of the operations as well as the systems and processes for use of corporate
resources in such a way so as to maximize the value to the stakeholders. The Group aims at achieving
not only the highest possible standards of legal and regulatory compliances, but also of effective
management.

INTRODUCTION
Page 29
The Indian economy is experiencing a downturn after a long spell of growth. Industrial growth is
faltering, the current account deficit is widening, foreign exchange reserves are depleting, and the rupee
is depreciating.

The crisis originated in the United States but the Indian government had reasons to worry because there
was a potential adverse impact of the crisis on the Indian banks. Lehman Brothers and Merrill Lynch
had invested a substantial amount in Indian banks, who in turn had invested the money in derivatives,
leading to exposure of even the derivatives market to these investment bankers.

Public Sector Unit (PSU) banks of India like Bank of Baroda had significant exposure towards
derivatives. ICICI faced the worst hit. With Lehman Brothers having filed for bankruptcy in the US,
ICICI (India‘s largest private bank), survived a rumor during the crisis which argued that the giant bank
was slated to lose $80 million (Rs. 375 crores), invested in Lehman‘s bonds through the bank‘s UK
subsidiary. Even Axis Bank was affected by the meltdown.

The real estate sector in India was also affected due to Lehman Brother‘s real estate partner having
given Rs 7.40 crores to Unitech Ltd., for its mixed use development project in Santa Cruz. Lehman had
also signed a MoU with Peninsula Land Ltd, an Ashok Piramal real estate company, to fund the latter‘s
project amounting to Rs. 576 crores. DLF Assets, which holds an investment worth $200 million, is
another major real estate organization whose valuations are affected by the Lehman Brothers
dissolution.

The impact of the crisis on the Indian economy has been studied here forth and the study is chiefly
focused on 4 major factors which affect the Indian economy as a whole.

These are:

(i)Availability of global liquidity

(ii) Decreased consumer demand affecting exports

(iii) The Financial Crisis and the Indian IT Industry

(iv) The Financial Crisis and India‘s Financial Markets

Availability of Global Liquidity for India in times of Financial Crisis:

The main source of Indian prosperity had been Foreign Direct Investment (FDI). American and
European companies were bringing in truck-loads of dollars and Euros to get a piece of pie of Indian
prosperity. Less inflow of foreign investment will lead to a dilution of the element of GDP driven
growth. India is in no position to ever return this money because it has used the same in subsidizing the
petroleum products and building low quality infrastructure.

Page 30
Liquidity is the major driving force of the stock market performances observed in emerging markets.
Markets such as those of India are especially dependent on global liquidity and international risk
appetite. The initial stage of the crisis witnessed rising interest rates across global economies. Rising
interest rates tend to have a negative impact on global liquidity, and subsequently equity prices, as
funds may move into bonds or other money market instruments.Even though there are threats for the
Indian economy due to the global liquidity crunch, they are all oriented for the long term. Any short
term liquidity concern will be taken care of by the high rate of household and corporate savings in the
country. The Indian economy can certainly rely on its “piggy bank” to address its short-term liquidity
demands as the government is taking measures to channelize large sums of household savings lying
unused in physical assets into the more productive financial sector. Thus, the Indian economy will be
relatively unaffected by the global liquidity crunch.

Indian companies which had access to foreign funds for financing their trading activities are the worst
hit. Foreign funds will be available at huge premiums but will be limited to the blue-chip companies,
thus leading to

Reduced capacity of expansion leading to supply pressure

Increased interest rates which will affect corporate profitability

Increased demand for domestic liquidity which will put interest rates under pressure

Decreased consumer demand affecting exports:

Consumer demand has plummeted drastically in developed economies, leading to a reduced demand
for Indian goods and services, thus affecting Indian exports.

Export oriented units are the worst hit; thus impacting employment

Trade gap has been widening due to the reduced exports, leading to pressure on the rupee exchange rate

The Financial Crisis and Indian I.T. Industry

In India, IT companies, with nearly half of their revenues coming from financial and banking service
segments, are close monitors of the financial crisis across the world. The IT giants which had Lehman
Brothers and Merrill Lynch (ML) as their clients are Tata Consultancy Services (TCS), Wipro, Satyam,
and Infosys Technologies. HCL escaped the loss to a great extent because neither Lehman Brothers nor
ML was its client.

Impact on Financial Markets:

Page 31
The outflow of foreign institutional investment from the equity market has been the most immediate
effect of the crisis on India. Foreign Institutional Investors (FIIs) have been major sellers in Indian
markets as they need to retrench assets in order to cover losses in their home countries, thus being
forced to seek havens of safety in an uncertain environment.

Given the importance of FII investment in driving Indian stock markets and the fact the cumulative
investment by FIIs stood at $66.5 billion at the beginning of 2008, the pullout of $11.1 billion during
the first nine-and-a-half months of 2008 triggered a collapse in stock prices. The Sensex fell from its
closing peak of 20,873 on January 8, 2008, to less than 10,000 by October 17, 2008.

The withdrawal by FIIs also led to a sharp depreciation of the rupee. While this depreciation may be
good for the Indian exports which have been adversely affected by the slowdown in global markets, it
is not so good for those who have accumulated foreign exchange payment commitments.

The financial crisis has reinstated the notion that in the globalized world, no country can exist as an
island, insulated from the twists and turns of the global economy; growth prospects of emerging
economies have been undermined by the cascading financial crisis, though there certainly exist
significant variations across the countries.

UNDERSTANDING BUSINESS CYCLES

Page 32
Business Cycle or Economic Cycle refers to economy-wide fluctuations in production or economic
activity over several months or years. These cycles are characteristic features of market-oriented
economies – whether in the form of the alternating expansions and contractions which characterize a
classic business cycle, or the alternating speedups and slowdowns that mark cycles in growth.

A recession occurs when a decline – however initiated or instigated – occurs in some measure of
aggregate economic activity and causes cascading declines in the other key measures of activity.1
Thus, when a dip in sales causes a drop in production, triggering declines in employment and income,
which in turn feeds back into a further fall in sales, a vicious cycle results and a recession ensues. This
domino effect of the transmission of the economic weakness, from sales to output to employment to
income, feeding back into further weakness in all of these measures in turn, is what characterizes a
recessionary downturn.

The phases of the business cycle are characterized by changing employment, industrial productivity,
and interest rates.

In the Keynesian view, business cycles reflect the possibility that the economy may reach short- run
equilibrium at levels below or above full employment. If the economy is operating with less than full
employment, i.e., with high unemployment, then in theory monetary policy and fiscal policy can have a
positive role to play rather than simply causing inflation or diverting funds to inefficient uses.

WHAT IS ECONOMIC RECESSION

Page 33
 "Official economic recession"

When GDP growth is negative for two or more consecutive quarters. For all practical purposes
though, a recession starts when there are several quarters of slowing but still positive growth. The first
quarter of negative growth in a recession cycle is often followed by positive growth for several
quarters, and then another quarter of negative growth.

This definition is somewhat unpopular with many economists as it does not take into consideration
changes in other economic variables such as current unemployment rates or consumer confidence and
spending levels.

The official agency in charge of declaring that the economy is in a state of recession is the NATIONAL
BUREAU OF ECONOMIC RESEARCH. NBER'S defines recession as a "significant decline in
economic activity lasting more than a few months". For this reason, the official designation of
recession may not come until after we have been in one for a substantial amount of time.

It is actually quite natural for countries to experience mild economic recessions. This is a built-in factor
of societies economic cycle as spending and consumption are going to increase and decrease along with
prices.

Rarely, experiencing many of these factors simultaneously can evoke deep economic recession or
depression

DEFINITION OF RECESSION

Page 34
Recession is not to be confused with depression. Recession means a slow down or slump or temporary
collapse of a business activity. In its early stage it can be controlled in a methodical manner.
Experience helps to avert total collapse. Unchecked, it leads to severe depression. Depression is a dead
end. It is time to close shop completely. It is a total state of irrevocable economic failure. When a
country is doing well all round its Gross Domestic Product (GDP) is on the rise.

Overall economy is bullish; it is not only the stock exchanges that tell riches to rags stories but even
small businesses. It all adds to the national exchequer. An economist is likely to give a detailed,
comprehensive definition of recession. But for the layman who has been affected knows it only one
way-when he loses his job and has no money to pay his credit and loans. Recession is when the
consumer faces foreclosure and the banker comes knocking for his pound (or dollar) of flesh. Many
companies and whole countries go bankrupt for want of liquid funds and cash flow for even daily
requirements.

If you look at it from the point of view of a businessman, recession is a transitory phase. The
Business Cycle Dating Committee of the National Bureau of Economic Research has another
definition. It profiles the businesses that have peaked with their activity in one season and it falls
naturally in the next season. It regains its original position with new products or sales and continues to
expand. This revival makes the recession a mild phase that large companies tolerate. As the fiscal
position rises, there is no reason to worry. Recession can last up to a year. When it happens year after
year then it is serious.

Are we facing a recession or not? Yes, for the simple reason that not only our neighbors but our friends
are unemployed. There is less of business talk and more billing worries. Transitory recessions are good
for the economy, as it tends to stabilize the prices. It allows run away bullish companies to slow down
and take stock. There is a saying, ‘when it’s tough the tough get going’. The weaker companies will not
survive the brief recession also. Stronger companies will pull through its resources. So when is it time
to worry? When you are facing a foreclosure, when the chips are down and out and creditors file cases
for recovery.

WHAT CAUSES ECONOMIC RECESSION

Page 35
A recession is primarily caused by the actions taken to control the money supply in the economy.

The Federal Reserve is responsible for maintaining an ideal balance between money supply, interest
rates, and inflation. When The Federal Reserve loses balance in this equation, the economy is forced to
correct itself.

The Feds monetary policy of injecting tremendous amounts of money supply into the money market
has kept interest rates lower while inflation continues to rise. Inflation refers to a general rise in the
prices of goods and services over a period of time. The higher the rate of inflation, the smaller the
percentage of goods and services that can be purchased with the same amount of money. Inflation can
happen for reasons as varied as increased production costs, higher energy costs and national debt.

In an inflationary environment, people tend to cut out leisure spending, reduce overall spending and
begin to save more. As individuals and businesses curtail expenditures in an effort to trim costs, this
causes GDP to decline. Unemployment rates rise because companies lay off workers to cut costs. It is
these combined factors that cause the economy to fall into a recession.

These circumstances coupled with relaxed policies in lending practices making it extremely easy to
borrow money can result in unsustainable economic activity and the economy coming to a near halt.

It is also said that recession can be caused by factors that stunt short term growth in the economy, such
as spiking oil prices or war. However, these are mostly short term in nature and tend to correct
themselves in a quicker manner than the full blown recessions that have occurred in the past.

The Financial Crisis: How it happened the current crisis has been linked to the sub- prime mortgage
business, in which US banks give high-risk loans to people with poor credit histories.

These and other loans, bonds, or assets are bundles into portfolios or Collateralized Debt Obligations
(CDOs) and sold to investors across the globe.

Falling housing prices and rising interest rates led to high numbers of people who could not repay their
mortgages. Investors suffered losses and hence became reluctant to take on more CDOs. Credit markets
froze and banks became reluctant to lend to each other, not knowing how many bad loans and non-
performing assets could be on their rivals‘books.

The crisis began with the bursting of the United States housing bubble and high default rates on sub-
prime mortgages and adjustable rate mortgages (ARM). The foreclosures exceeded 1.3 million during
2007 up 79% for 2006 which increased to 2.3 million in 2008, an 81% increase over 2007.

Page 36
Financial product called mortgaged backed securities (MBS) which in turn derive their value from the
mortgage installment payments and housing prices had enabled financial institutions and investors
around the world to invest in U.S. housing markets. Major banks and financial institutions which had
invested in such MBS incurred losses of approximately US $ 435 billion as of July 2008 which has
mounted further and is now near to the value of US $ 1 trillion. The value of all outstanding residential
mortgage owed by US households was US$ 10.6 trillion as of Mid 2008 of which $ 6.6 trillion were
held by mortgaged pools Consisting of Collectivized debt obligation (CDO) already mortgage backed
securities (MBS) (CDO and MBS) and the remaining US$ 3.4 trillion by traditional depository
institutions.

The owners of stock in US corporation alone has suffered loss of about US$ 8 trillion between 1
January and 11 October 2008 as the value of their holding declined from US $ 20 trillion to US $ 12
trillion.

The first catastrophe took place when Bear Stearns was sold to JP Morgan at a throw away price in
April 2008.

The biggest adverse impact was on Fannie Mae (The Federal National Mortgage Association) and
Freddie Mac (the Federal Home Loan Mortgage Corporation); the two Government Sponsored
Enterprises (GSEs) were granted a very quick bailout package by the US Treasury. A record breaking
level of mortgage foreclosures took place for the subprime mortgages. This led to a sharp decline in the
value of securities which were based on these mortgages. Most of the investment bankers including
Fannie Mae and Freddie Mac reached to the brink of bankruptcy.

When homeowners default, the payments received by MBS and CDO investors decline and the
perceived credit risk rises. This has had a significant adverse effect on investors and the entire
mortgage industry. The effect is magnified by the high debt levels (financial leverage) households and
businesses have incurred in recent years. Finally, the risks associated with American mortgage lending
have global impacts, because a major consequence of MBS and CDOs is a closer integration of the
USA housing and mortgage markets with global financial markets.

Page 37
 EFFECTS OF RECESSION
An economic recession can usually be spotted before it happens. There is a tendency to see the
economic landscape changing in quarters preceding the actual onset. While the growth in GDP will still
be present, it will show signs of sputtering and you will see higher levels of unemployment, decline in
housing prices, decline in the stock market, and business expansion plans being put on hold. When the
economy sees extended periods of economic recession, the economy can be referred to as being in an
economic depression.
About the only good thing about a recession is that it will cure inflation. The balancing act the Federal
Reserve must pursue is to slow economic growth enough to prevent inflation without triggering a
recession. Currently, it must do this without the help of fiscal policy, which is generally trying to
stimulate the economy as much as possible through lowering taxes, spending on social programs and
ignoring current account deficits.

The global financial crisis is already causing a considerable slowdown in most developed countries.
Governments around the world are trying to contain the crisis, but many suggest the worst is not yet
over. Stock markets are down more than 40% from their recent highs. Investment banks have
collapsed, rescue packages are drawn up involving more than a trillion US dollars, and interest rates
have been cut around the world in what looks like a coordinated response. Leading indicators of global
economic activity, such as shipping rates, are declining at alarming rates.

The continuous development of the crisis had prompted fears of a global economic collapse. Retail
sales in the US have plunged to historic lows and business and consumer confidence are at their lowest
levels. Most of the companies have reported steep decline in sales due to the slackened demand in the
market. The rate of unemployment in the United States has skyrocketed to 8.9% with the loss of a total
of 539,000 jobs. US GDP shrunk 6.1% in the first quarter; the fall in GDP is recorded despite an
increase in consumer spending in the economy which is trying recuperating from the crisis. The fourth
quarter of the previous year had recorded the highest contraction in GDP since the past 25 years – the
economy contracted by 6.3%.

In the classical economics scheme of things, the free market economy is set to correct itself when it
verges away from full employment. This was proven to be untrue in the 1930‘s Great Depression when
up to a fourth of the workers in the US were out of work.

Quoting US Economist Paul Krugman, as noted in New York Times column,

1. The bursting of the housing bubble has led to a surge in defaults and foreclosures, which in turn has
led to a plunge in mortgage-backed securities – assets whose value ultimately comes from mortgage
payments.

2. These financial losses have left many financial institutions with too little capital – too few assets
compared with their debt. This problem is especially severe because everyone took on so much debt
during the bubble years.

Page 38
 3. Because financial institutions have too little capital relative to their debt, they haven‘t been able or
willing to provide the credit the economy needs.

4. Financial institutions have been trying to pay down their debt by selling their assets, including
those mortgage-backed securities, but this drives asset prices down and makes their financial condition
even worse. This vicious cycle is what some call the ‘paradox of deleveraging.

On October 11, 2008, the head of the International Monetary Fund (IMF) warned that the world
financial system was teetering on the "brink of systemic meltdown" The sequence of the event can be
summarized as below for understanding at a glance. Bear Stearns was acquired by J.P. Morgan Chase
in March 2008 for $1.2 billion. The sale was conditional on the Fed's lending Bear Sterns US$29
billion on a nonrecourse basis.

The Government Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac were both placed in
conservatorship in September 2008. The two GSEs have more than US$ 5 trillion in mortgage backed
securities (MBS) and other debt outstanding.

Merrill Lynch was acquired by Bank of America in September 2008 for $50 billion.

Scottish banking group HBOS agreed on 17 September 2008 to an emergency acquisition by its UK
rival Lloyds TSB, after a major decline in HBOS's share price stemming from growing fears about its
exposure to British and American MBSs. The UK government made this takeover possible by agreeing
to waive its competition rules.

Lehman Brothers declared bankruptcy on 15 September 2008, after the Secretary of the Treasury Henry
Paulson, citing moral hazard, refused to bail it out.

AIG received an $85 billion emergency loan in September 2008 from the Federal Reserve, which AIG
is expected to repay by gradually selling off its assets. In exchange, the Federal government acquired a
79.9% equity stake in AIG. Washington Mutual (WaMu) was seized in September 2008 by the USA
Office of Thrift Supervision (OTS). Most of WaMu's untroubled assets were to be sold to J.P. Morgan
Chase. British bank Bradford & Bingley was nationalized on bankruptcy in Q1 29 September 2008 by
the UK government. The government assumed control of the bank's £50 billion mortgage and loan
portfolio, while its deposit and branch network are to be sold to Spain's Grupo Santander.

In October 2008, the Australian government Germany sees GDP announced that it would make AU$4
billion available plunge 3.8%, worst to nonbank lenders unable to issue new loans. After drop in 40
years discussion with the industry, this amount was increased to AU$8 billion.

In November 2008, the U.S. government announced it was purchasing $27 billion of preferred stock in
Citigroup, a USA bank with over $2 trillion in assets, and warrants on 4.5% of its common stock. The
preferred stock carries an 8% dividend. This purchase follows an earlier purchase of $25 billion of the
same preferred stock using Troubled Asset Relief Program (TARP) funds.

Page 39
 IMPACT ON FINANCIAL MARKETS
The outflow of foreign institutional investment from the equity market has been the most immediate
effect of the crisis on India. Foreign Institutional Investors (FIIs) have been major sellers in Indian
markets as they need to retrench assets in order to cover losses in their home countries, thus being
forced to seek havens of safety in an uncertain environment.

Given the importance of FII investment in driving Indian stock markets and the fact the cumulative
investment by FIIs stood at $66.5 billion at the beginning of 2008, the pullout of $11.1 billion during
the first nine-and-a-half months of 2008 triggered a collapse in stock prices. The Sensex fell from its
closing peak of 20,873 on January 8, 2008, to less than 10,000 by October 17, 2008.

The withdrawal by FIIs also led to a sharp depreciation of the rupee. While this depreciation may be
good for the Indian exports which have been adversely affected by the slowdown in global markets, it
is not so good for those who have accumulated foreign exchange payment commitments.

The financial crisis has reinstated the notion that in the globalized world, no country can exist as an
island, insulated from the twists and turns of the global economy; growth prospects of emerging
economies have been undermined by the cascading financial crisis, though there certainly exist
significant variations across the countries.

Page 40
 LIST OF MAJOR RECESSIONS TILL NOW

Recession Recession Time Cause & Impact

Name Year Taken

Great 1929-1939 10 years Stock markets crashed worldwide, and a banking
collapse took place in the United States. This sparked a
Depression global downturn, including a second, more minor
recession in the United States, the Recession of 1937.
1937 Oil 1973–1975 2 years A quadrupling of oil prices by OPEC coupled with high
government spending due to the Vietnam War lead to
Recession stagflation in the United States
Early 1980’s 1980–1982 2 years The Iranian Revolution sharply increased the price of
Recession oil around the world in 1979, causing the 1979 energy
crisis. This was caused by the new regime in power in

Iran, which exported oil at inconsistent intervals and at a

lower volume, forcing prices to go up. Tight monetary
policy in the United States to control inflation lead to
another recession. The changes were made largely because
of inflation that was carried over from the previous decade
due to the 1973 oil crisis and the 1979 energy crisis.
Early 1990–1991 1 year Industrial production and manufacturing trade sales
decreased in early 1991.
1990’s

Recession
Early 2001– 2 years The collapse of the dot-com bubble, the September 11th
2003 attacks, and accounting scandals contributed to a relatively
2000’s mild contraction in the North American economy.
Recession

Early 2008’s 2008-so on Continui Let see what can be the impact of the 2008 recession of
ng US market on World.
Recession

INDIA AND THE FINANCIAL CRISIS

Page 41
The global financial crisis has not left India unscathed. Over the last seven months, growth has slipped
dramatically - to 5.3% in the last quarter of calendar year 2008 - from over 9% in the previous four
years. The contagion of the crisis has spread to India through all the channels – the financial channel,
the real channel, and importantly, as happens in all financial crises, the confidence channel.

The slowdown is likely to have a large and immediate impact on employment and poverty. Informal
surveys suggest significant job losses. Job creation is likely to remain a key concern as new entrants to
the labor force - relatively better educated and with higher aspirations - continue to put pressure on the
job market.

The country has the option of turning the crisis into an opportunity. The most binding constraints to
growth and inclusion will need to be addressed: improving infrastructure, developing the small and
medium enterprises sector, building skills, and targeting social spending at the poor. Systemic
improvements in the design and governance of public programs are crucial to get results from public
spending. Improving the effectiveness of these programs - that account for up to 8-10% of GDP - will
therefore be an important part of the challenge.

The impact of the crisis on the Indian economy has been studied here forth and the study is chiefly
focused on 4 major factors which affect the Indian economy as a whole.

These are:

(i) Availability of global liquidity

(ii) Decreased consumer demand affecting exports
(iii) The Financial Crisis and the Indian IT Industry
(iv)The Financial Crisis and India‘s Financial Markets

Global Liquidity Crunch and the Indian Economy

The Indian banking system was gauged as being relatively immune to the factors that had lead to the
turmoil in the global banking industry. The problems of the global banks arose mainly due to the sub-
prime mortgage lending and investments in complex collateralized debt obligations (CDOs) whose
values were sharply eroded. Confidence-related issues had also affected banks across the globe due to
the freeze in the inter-bank lending market. Indian banks had limited vulnerability on both counts.

The reasons for tight liquidity conditions in the Indian markets during the earlier stages of the crisis
were quite different from the factors driving the global liquidity crisis. Large selling by foreign
institutional investors (FIIs) and the subsequent interventions by the Reserve Bank of India (RBI) in the
foreign currency market, continuing growth in advances, and earlier increases in the Cash Reserve
Ratio (CRR) to contain inflation are some of the reasons that accelerated the Indian liquidity crunch.

Page 42
Thousands of investors, big and small, have been hurt by the downward plunge of the Indian stock
market. It will also have broader implications for India‘s financial system and the future savings and
investment patterns.

Cautious investors had started to diversify away from bank deposits and cash over the past few years,
and had moved to equities, mutual funds and insurance products. The current market turmoil is driving
them back to the safety of bank- deposits, reducing the amount of capital available to other instruments
and possibly retarding the growth of the financial-services industry as a whole.

India's high savings rate has been a crucial driver of its economic boom, providing productive capital
and helping to fuel a virtuous cycle of higher growth, higher income and higher savings. Since the
1990s, the gross domestic savings rate has risen steadily from an average of 23% to an estimated high
of 35% in the 2006/07 fiscal year (April-March). The latter rate compares very favorably not only with
developed economies (the US and the UK have savings rates of around 14%), but also with other
emerging economies—with a few exceptions such as Malaysia (38%) and Chile (35%).

Yet India's household sector (including some small businesses) continues to account for the lion's share
—some 70%—of savings. The last five years have seen a surge in corporate savings as companies
became more competitive and increased their profitability. That has been accompanied by a rise in
public-sector savings on the back of increased fiscal prudence. However, the current economic situation
is putting pressure on both corporate profitability and the public finances, ensuring that savings in these
two sectors are unlikely to grow as rapidly as in the past. Household savings will therefore remain
crucial to sustaining a strong savings rate.

India will be relatively unaffected by the global liquidity crisis because the large fund of India‘s
household savings which stood at Rs9.85trn (US$192bn) in 2006/07, will remain available to fuel
domestic growth. At an aggregate level, households in India had net savings of Rs 9, 53,212 crore in
financial and physical assets in 2007-08 or 19.9% of the GDP, estimated at current market prices.

In the preceding year, it was Rs 8, 24,493 crore, or 20.2% of the GDP. Thus, as GDP rose 14.4% at
current market prices, net savings of the households grew 15.6%.The Indian government is trying to
hasten the shift of India‘s physical savings, still locked up in unproductive physical assets such as
houses, durables, and jewellery, into financial assets. The household savings can be channelized into
the country‘s debt, equity, and infrastructure finance markets. This would not only deepen and stabilize
the financial markets but also reduce the government‘s social-security burden.

It is evident from the graph shown alongside that the ratio of gross domestic savings to the GDP of the
country has been increasing over the years.

Influx of these household savings into the country‘s debt, equity, and infrastructure finance markets
will certainly help in the deepening and stabilization of financial markets.

Gross National Savings also include all foreign remittances into India which add to the domestic
savings. A positive trend in the ratio further strengthens the fact that India is self- sufficient in the
short-term with regard to any immediate liquidity demand.

Page 43
India's savings rate and investment rate for FY08 shows that on both counts the country is well placed
not just relative to its own historical record, but also relative to other economies. India's savings rate at
present is higher than all other regions of the world, except developing Asia and Middle East. The
country's investment rate showed sharp acceleration during the period FY02-07 to surpass the average
of all major regions of the world in FY07.

However, according to a report5, factors which could weigh down the rate of domestic savings to a
moderate 33.0% and further to 32.8% during FY09 and FY10 respectively from around 37.7% in FY08
are:

Lower corporate profitability

Significant widening of fiscal deficit

Erosion in value of financial and physical assets

Most Asian economies have been models of prudence. While American and European households were
borrowing up to the hilt, Asian ones were tucking away their savings. While rich-country banks were
piling into ever-riskier assets, Asian banks kept their holdings of such assets small. And while America
and Britain were sucking up the world‘s savings, Asian governments piled up vast stocks of foreign
reserves.

The long-term trends in the savings of the country are a clear indicator of the fact that even if India’s
savings and investment rates undergo a cyclical reduction in FY09, by next fiscal (FY10) these rates
should still be around 30%, with 6% growth in the second half of FY10.

The Financial Crisis and India’s Financial Markets:

Despite the vanishing foreign institutional investors (FIIs), the Indian markets remained resilient and
stayed afloat. Investors‘sentiments have been significantly impacted by the US financial crisis. The
tendency of investors to withdraw from risky markets has resulted in significant capital outflows that
have led to a liquidity crunch putting pressure on the Indian stock market.

The Indian economy continues to show good health because of the strength of its domestic drivers, like
infrastructure projects, SME (small and medium enterprises) sector exports and good yielding from the
agricultural sector.

The cause behind US economy debacle is that the US investment banks are extremely over leveraged
and solely dependent on whole sale finances. This led to their demise. But such is not the case with
Indian Banks. The common man‘s deposits are more in India and they have the trust on the Banks,
because all most all the Banks are nationalized and the depositor‘s interest is highly protected by
Government of India.

Page 44
In the US, the investment banks are dependent on institutional investor‘s funds. These investments are
highly volatile and always search for high returns on their deposits. They look for Demand-based
investments and not time-based investments. Therefore, whenever the returns from one market start
dipping, they move their investment to re-invest in those markets which would offer a better return, or
take a defensive stance until the market regains momentum.

Domestic banking in India is generally secure, especially because nationalized banking remains at the
core of the system. Even so, there exist signs of fragility and inadequacy within the banking sector. The
effects of the global crisis have directly impacted some important macroeconomic variables. Three
such indicators stand out in terms of their sudden deterioration since the middle of last year:

(i) Decline in the foreign exchange reserves held by the Reserve Bank of India
(ii) Fall in the external value of the rupee, especially vis-à-vis the US dollar
(iii) Decline in the stock market indices

Measures taken by the RBI to stop depreciation of the Rupee led to a steep decline in its foreign
exchange reserves. Factors which also contributed to the decline were the revaluation in foreign
currencies and large scale pullout by foreign institutional investors.

Figure shows how the foreign exchange reserves, which had been increasing steadily over the past few
years, started declining after June 2008. Not that the earlier build-up of reserves reflected any great
macroeconomic strength, since unlike China it was not based on current account surpluses. Instead, the
Indian economy experienced an inflow of hot money, especially in the form of portfolio capital
investment of FII.

But that movement of FIIs was in turn related to the sudden collapse of the rupee. Early in March 2009
the rupee even breached the line of Rs 51 per dollar. There are those who argue that this depreciation is
positive since it will help exports, but conditions prevailing in the world trade market, with falling
export volumes and values, does not give rise to much optimism in that context.

India currently has a current account deficit, including a large trade deficit and also quite significant
factor payments abroad. The falling rupee implies rising factor payments (such as debt repayment and
profit repatriation) in rupee terms, which is not good news for many companies for the balance of
payments.

Associated with all this is the evidence of falling business confidence expressed in the stock market
indicators. The Sensex had reached historically high levels in the early part of 2008, capping an almost
hysterical rise over the previous three years in which it more than tripled in value. But it has been
plummeting since then, with high volatility around an overall declining trend such that its levels in
early March were below the levels attained in December 2005.

Page 45
 Role of Foreign Investors

The changes in total foreign investment, split up into direct investment and portfolio investment, over a
period since April 2007. It is evident that both have shown a trend of increase followed by decline. FDI
has been more stable with relatively moderate fluctuations (even though it does include some portfolio-
type investments that get categorized as. It peaked in February 2008 and thereafter it has been coming
down but is still positive.

Portfolio investment has been extremely volatile and largely negative (indicating net outflows) since
the beginning of 2008, and this has dominated the overall foreign investment trend.

As a result, as is evident from Figure 10, the cumulative value of stock of Indian equity held by FIIs
fell quite sharply, by 24% between May 2008 and February 2009. This is not likely to be due to any
dramatically changed investor perceptions of the Indian economy, since if anything GDP growth
prospects in India Figure 60: Cumulative FII Investments in Equity; remain somewhat higher than in
most other developed or emerging markets. Rather, it is because portfolio investors have been
repatriating capital back to the US and other Northern markets.

This reflects not so much as a flight to safety (for clearly US securities are not safe anymore either) as
the need to cover losses that have been incurred in sub-prime mortgages and other asset markets in the
North, and to ensure liquidity for transactions as the credit crunch began to bite.

Whatever the causes, the impact on the domestic stock market has been sharp and direct. Since the
Indian stock market is still relatively shallow, and FII activities play a disproportionately sharp role in
determining the movement of the indices, it is not surprising that this flow has been associated with the
overall decline in stock market valuations.

The Sensex has moved generally in the same direction as net FII inflows. In fact, movements in the
latter have been much sharper and more volatile, suggesting that domestic investors have played a more
stabilizing role over this period.

Overall foreign investment flows (including both FII and direct investment) have also played a role in
determining the level of external reserves shows the pattern in aggregate net foreign investment and
change in reserves since April 2007.

Once again, the two move together. However, in this case, foreign investment has been less volatile
than Figure 7: Foreign Investment and Change in Reserves; the change in reserves, suggesting that
other components of the balance of payments have been important as well. The changes in external
commercial borrowing are likely to be significant.

In addition, the possibilities of domestic investors moving their funds out should not be underestimated.
The recently liberalized rules for capital outflow by domestic residents have led to outflows that are not
insignificant, even if still relatively small.

Page 46
 FII’S – IMPACT ON INDIAN MARKETS
Who is a Foreign Institutional Investor? A foreign Institutional Investor (FII) is an institution
established or incorporated outside India which proposes to make investment in securities of companies
incorporated in India (“Indian Companies”) . FIIs seeking to invest in Indian Companies are required to
be registered with the Securities and Exchange Board of India (SEBI). They need to comply with the
provisions of the Guidelines for Foreign Institutional Investors and the Securities and Exchange Board
of India (Foreign Institutional Investors) Regulations, 1995 (the "SEBI Regulations"). The majority of
the foreign investment into the securities market in India comes from Mauritius, a member of
International Organisation of Securities Commissions (IOSCO), because of the existence of a favorable
tax treaty between the two countries. Nearly 30% of the FIIs trading on the Indian stock market operate
from Mauritius. As on June 27, 2008 the number of FIIs registered with the SEBI was 1403.

Regulation of FII’s

There are two main bodies regulating portfolio investment in India- SEBI and RBI (Reserve Bank of
India). Every FII is required to register with SEBI and shall comply with the Exchange Control
Regulations of RBI. SEBI (FII) Regulations, 1995 and Regulation 5(2) of FEMA regulates the FIIs.
Under the regulation of FEMA, RBI approval is also required in order to purchase or sell securities on
stock exchanges, open foreign currency and Indian Rupee accounts with a designated bank branch. The
permission from RBI is not required so long as the FIIs purchase and sell on recognized stock
exchange. All non-stock exchange sales/purchases require RBI permission.

The number of foreign institutional investors (FIIs) registered with the Securities and Exchange Board
of India (Sebi) crossed the 1,000 mark.

The total number of FIIs having their offices in India has now increased to 1,030. In the beginning of
calendar year 2006, the figure was 813.

As many as 37 foreign entities registered with the market regulator till December 28, highest ever
single month registrations by the FIIs since their entry into Indian market in 1993. In the last two
months, 57 new FIIs opened their offices, while the last six months’ figure was 102 as against 92 in
2005.

The net investments made by the institutions during 2006 were $9,185.90 million against $9,521.80
million in 2005.

In 1993, Pictet Umbrella Trust Emerging Markets’ Fund, an institutional investor from Switzerland,
was the only FII to enter the Indian market.

Page 47
While in 1994, no new registrations were reported, between 1995 and 2003, an average of 51 new FIIs
opened their shops in the country each year. The number of new registrations with the Sebi increased to
144 in 2004 and 209 in 2005. Out of 1,030 FIIs from 42 different countries, as many as 388 FIIs are
from the US, 167 from the Great Britain, 73 from Luxembourg, 51 from Singapore, 35 each from
Australia and Hong Kong, 32 from Canada, 29 from Ireland, 27 from Netherlands, 25 from Mauritius,
22 from Switzerland and 20 from France.

FOREIGN INSTITUTIONAL INVESTOR (FII)

FII is used to denote an investor - mostly of the form of an institution or entity, which invests money in
the financial markets of a country different from the one where in the institution or entity was originally
incorporated. FII investment is frequently referred to as hot money for the reason that it can leave the
country at the same speed at which it comes in. In countries like India, statutory agencies like SEBI
have prescribed norms to register FIIs and also to regulate such investments flowing in through FIIs.

· Pension Funds

· Mutual Funds

· Investment Trust

· Insurance or reinsurance companies

· Endowment Funds

· University Funds

· Foundations or Charitable Trusts or Charitable Societies

· Asset Management Companies

· Nominee Companies

· Institutional Portfolio Managers

· Trustees

· Power of Attorney Holders

· Bank

Page 48
SOURCES OF FII IN INDIA

The sources of these FII flows are varied. The FIIs registered with SEBI come from as many as 28
countries (including money management companies operating in India on behalf of foreign investors).
US-based institutions accounted for slightly over 41%; those from the UK constitute about 20% with
other Western European countries hosting another 17% of the FIIs. It is, however, instructive to bear in
mind that these national affiliations do not necessarily mean that the actual investor funds come from
these particular countries. Given the significant financial flows among the industrial countries, national
affiliations are very rough indicators of the ‘home’ of the FII investments. In particular institutions
operating from Luxembourg, Cayman Islands or Channel Islands, or even those based at Singapore or
Hong Kong are likely to be investing funds largely on behalf of residents in other countries.

Nevertheless, the regional breakdown of the FIIs does provide an idea of the relative importance of
different regions of the world in the FII flows.

Page 49
CAPITAL MARKET IN INDIA

The Bombay Stock Exchange (BSE), which began formal trading in 1875, is one of the oldest in Asia.
Over the last decade, there has been a rapid change in the Indian securities market, both in primary as
well as the secondary market. Advanced technology and online-based transactions have modernized the
stock exchanges. In terms of the number of companies listed and total market capitalization, the Indian
equity market is considered large relative to the country’s stage of economic development. Currently,
there are 40 mutual funds, out of which 33 are in the private sector and 7 are in the public sector.
Mutual funds were opened to the private sector in 1992. Earlier, in 1987, banks were allowed to enter
this business, breaking the monopoly of the Unit Trust of India (UTI), which maintains a dominant
position. Before 1992, many factors obstructed the expansion of equity trading. Fresh capital issues
were controlled through the Capital Issues Control Act. Trading practices were not transparent, and
there was a large amount of insider trading. Recognizing the importance of increasing investor
protection, several measures were enacted to improve the fairness of the capital market. The Securities
and Exchange Board of India (SEBI) was established in 1988. There have been significant reforms in
the regulation of the securities market since 1992 in conjunction with overall economic and financial
reforms.

In 1992, the SEBI Act was enacted giving SEBI statutory status as an apex regulatory body. And a
series of reforms was introduced to improve investor protection, automation of stock trading,
integration of national markets, and efficiency of market operations. India has seen a tremendous
change in the secondary market for equity. Among the processes that have already started and are soon
to be fully implemented are electronic settlement trade and exchange-traded derivatives.

Before 1995, markets in India used open outcry, a trading process in which traders shouted and hand
signaled from within a pit. One major policy initiated by SEBI from 1993 involved the shift of all
exchanges to screen-based trading, motivated primarily by the need for greater transparency. The first
exchange to be based on an open electronic limit order book was the National Stock Exchange (NSE),
which started trading debt instruments in June 1994 and equity in November 1994. In March 1995,
BSE shifted from open outcry to a limit order book market. Before 1994, India’s stock markets were
dominated by BSE. In other parts of the country, the financial industry did not have equal access to
markets and was unable to participate in forming prices compared with market participants in Mumbai
(Bombay). As a result, the prices in markets outside Mumbai were often different from prices in
Mumbai. These pricing errors limited order flow to these markets. Explicit nationwide connectivity and
implicit movement toward one national market has changed this situation. NSE has established satellite
communications which give all trading members of NSE equal access to the market. Similarly, BSE
and the Delhi Stock Exchange are both expanding the number of trading terminals located all over the
country.

The arbitrages are eliminating pricing discrepancies between markets. The Indian capital market still
faces many challenges if it is to promote more efficient allocation and mobilization of capital in the
economy.

 First, market infrastructure has to be improved as it hinders the efficient flow of

information and effective corporate governance.
 Second, the trading system has to be made more transparent.
Page 50
  Third, India may need further integration of the national capital market through
consolidation of stock exchanges.
 Fourth, the payment system has to be improved to better link the banking and securities
industries.

The capital market cannot thrive alone; it has to be integrated with the other segments of the financial
system. The global trend is for the elimination of the traditional wall between banks and the securities
market. Securities market development has to be supported by overall macroeconomic and financial
sector environments. Further liberalization of interest rates, reduced fiscal deficits, fully market-based
issuance of Government securities and a more competitive banking sector will help in the development
of a sounder and a more efficient capital market in India.

FII REGISTERED IN INDIA

Let’s look at some of the data to get an idea about the trend of FIIs in India, and also to see the future
direction of their movement. India had 528 FIIs were registered with SEBI by end of 2001 and by end
of Feb-2008 the number increased to1303. The trend in the number of registered FIIs has been
consistently on the rise as can be seen from the table; showing the significant amount of confidence that
Indian Capital market has developed in the last few years.

Not only has been the number increasing on a consistent basis, but the amount of inflow into Indian
market has also seen a manifold increased. The gross purchase, sales and net investment figure on an
annual basis gives a fair idea about the consistency of their investments in our country.

Page 51
 INVESTMENTS BY FOREIGN INSTITUTIONAL INVESTORS

India, which is the second fastest growing economy after China, has lately been a major recipient of
foreign institutional investor (FII) funds driven by the strong fundamentals and growth opportunities.
According to analysts, the late revival of monsoon, upward revision of economic growth from 5.8 per
cent to 6.1 per cent, better-than-expected performance of companies in the quarter ended-June 30, the
new direct taxes code, leading to savings in the tax payer’s money, and the trade policy with an
ambitious target of US$ 200 billion exports for 2010-11 have all revived the confidence of FIIs
investing in India. Both consumption and investment-led industries linked to domestic demand, such as
auto, banking, capital goods, infrastructure and retail, are likely to continue attracting FII funds.

FIIs have made net investments of US$ 10 billion in the first six months (April to September) of 2009-
10. Major portion of these investments have come through the primary market, more than through
buying via secondary markets.

Earlier, FIIs’ net investments in Indian equities crossed the US$ 8 billion-mark in calendar 2009, the
first time in this year, with foreigners buying stocks worth US$ 274 million on August 28, 2009. With
FIIs holding 16 per cent of India's biggest 500 companies and increasing growth of the economy, the
FII sentiment is expected to remain positive towards India. At the end of July 2009, net inflows from
FIIs stood at US$ 7.3 billion.

With FIIs increasingly investing in the country's construction sector, the market capitalisation of FII
investment in construction has gone up by a substantial 422 per cent in the past six months. Further, till
September 8, FIIs registered a net investment of US$ 8.38 billion in the domestic stock market. The
total FII market cap in 13 leading sectors was US$ 92.5 billion.

Private equity (PE) and venture capital (VC) investments increased nearly 10 times from US$ 30
million in 2006 to US$ 300 million by 2008, says a report by Ernst and Young. It further said that PE /
VC players had invested US$ 527 million in the construction sector—24 per cent of the total
transaction value in India for the period January 2005 and July 21, 2009.

Along with construction, the market cap of FII investment in infrastructure and heavy engineering has
also risen, largely due to higher government spending and leveraged investment by companies in these
sectors. In heavy engineering, FII market cap has gone up 202 per cent and in steel, it was up 274 per
cent in the past six months.

In the previous April-June quarter, initial signs of recovery in world economies, a stable government in
New Delhi and the positive impact of its stimulus packages substantially improved the sentiments of
FIIs. Real estate, banking and finance, engineering and oil and gas—garnered almost three-fourths of
the money invested by FIIs. These four sectors accounted for over 71 per cent of the total FII
investment at US$ 4.55 billion during the quarter.

Page 52
 REASONS FOR GROWTH IN FII INVESTMENTS

Global liquidity is, of course, the primary cause of the recent surge in Asian markets including India.
Also low interest rate regime has led foreign investors to look for fresh avenues to invest. This has
resulted in most emerging markets seeing heavy inflows. FII’s see India as a good destination to invest
in and make money. They are happy with the Indian government's commitment to economic reforms.
They are also looking closely at sectors (and companies within these sectors) which they think have
potential. In fact, the growing competitiveness of Indian companies is an enticing factor.

Long-Term Capital Gains Tax: which is the tax an investor pays when he sells his shares after more
than a year -- has been abolished; thus one can sell his shares without having to pay the government
any kind of tax.

Rupee Appreciation: The dollar has been falling in value vis-a-vis other currencies. As a result, FIIs
don’t find the thought of investing in the US market all that attractive. They know they will make more
money if they invest elsewhere.

Economic Growth: As mentioned earlier we witnessed a GDP growth rate of about 8.5% last year.
Our industries like Telecom, Banking etc are doing relatively well.

All these make our country very attractive to invest in. The sheer size of India and the relative stability
the country offers are other obvious plus points. Whatever the case may be, a perception is gaining
momentum that foreign investors are here to stay at least in the short-term.

FOREIGN INSTITUTIONAL INVESTMENT: A COST BENEFIT ANALYSIS

The role of foreign investment over the years can’t be ignored. It certainly has had an impact on the
Indian stock market with a lot of benefits but along with these benefits there are a few costs attached
with it. Therefore it is useful to summarize the benefits and costs for India of having foreign inflows.

BENIFITS

a) Reduced cost of equity

FII inflows augment the sources of funds in the Indian capital markets. FII investment reduces the
required rate of return for equity, enhances stock prices, and fosters investment by Indian firms in the
country. The impact of FIIs upon the cost of equity capital may be visualized by asking what stock
prices would be if there were no FIIs operating in India.

b) Stability in the balance of payment

For promoting growth in a developing country such as India, there is need to augment domestic
investment, over and beyond domestic saving, through capital flows. The excess of domestic

Page 53
investment over domestic savings result in a current account deficit and this deficit is financed by
capital flows in the balance of payments. Prior to 1991, debt flows and official development assistance
dominated these capital flows. This mechanism of funding the current account deficit is widely
believed to have played a role in the emergence of balance of payments difficulties in 1981 and 1991.
Portfolio flows in the equity markets, and FDI, as opposed to debt-creating flows, are important as safer
and more sustainable mechanisms for funding the current account deficit.

c) Knowledge flows

The activities of international institutional investors help strengthen Indian finance. FIIs advocate
modern ideas in market design, promote innovation, development of sophisticated products such as
financial derivatives, enhance competition in financial intermediation, and lead to spillovers of human
capital by exposing Indian participants to modern financial techniques, and international best practices
and systems.

d) Strengthening corporate governance

Domestic institutional and individual investors, used as they are to the ongoing practices of Indian
corporate, often accept such practices, even when these do not measure up to the international
benchmarks of best practices. FIIs, with their vast experience with modern corporate governance
practices, are less tolerant of malpractice by corporate managers and owners (dominant shareholder).
FII participation in domestic capital markets often lead to vigorous advocacy of sound corporate
governance practices, improved efficiency and better shareholder value.

e) Improving market efficiency

A significant presence of FIIs in India can improve market efficiency through two channels.

First, when adverse macroeconomic news, such as a bad monsoon, unsettles many domestic investors,
it may be easier for a globally diversified portfolio manager to be more dispassionate about India's
prospects, and engage in stabilizing trades. Second, at the level of individual stocks and industries, FIIs
may act as a channel through which knowledge and ideas about valuation of a firm or an industry can
more rapidly propagate into India. For example, foreign investors were rapidly able to assess the
potential of firms like Infosys, which are primarily export-oriented, applying valuation principles that
prevailed outside India for software services companies.

COSTS

a) Hedging and positive feedback training

There are concerns that foreign investors are chronically ill informed about india, and this lack of sound
information may generate herding (a large number of FIIs buying or selling together) and positive
feedback (buying after positive returns, selling after negative returns).These Kinds of behavior can
exacerbate volatility ,and push prices away from fair values.

b) Balance of payment vulnerability

Page 54
There are concerns that in an extreme event, there can be a massive flight of foreign capital out of
India, triggering difficulties in the balance of payments front. India's experience with FIIs so far,
however, suggests that across episodes like the Pokhran blasts, or the 2001 stock market scandal, no
capital flight has taken place. A billion or more of US dollars of portfolio capital has never left India
within the period of one month. When juxtaposed with India's enormous current account and capital
account flows, this suggests that there is little vulnerability so far.

c) Possibility of takeovers

While FIIs are normally seen as pure portfolio investors, without interest in control, portfolio investors
can occasionally behave like FDI investors, and seek control of companies that they have a substantial
shareholding in. Such outcomes, however, may not be inconsistent with India's quest for greater FDI.
Furthermore, SEBI's takeover code is in place, and has functioned fairly well, ensuring that all
investors benefit equally in the event of a takeover.

DETERMINANTS OF FOREIGN INSTITUTIONAL INVESTMENT

After the initiation of economic reforms in the early 1990s, the movement of foreign capital flow
increased very substantially. There are a lot of factors that determine the nature and cause of foreign
institutional investment in a country a few of them being inflation exchange rate equity returns,
government policies, price earring ratio and risk. Now if we try to analyze the relation of each of these
factors with the level of foreign inflow in the country, we might have a better understanding. let us
broadly classify the factors into inflation, risk and stock market returns and understand the basic
principle behind the inflows.

a) Equity returns- An increase in the return in the foreign market will induce investors to withdraw
from the Indian (domestic) stock market to invest in the foreign market. Investors are believed to
follow a higher return, hence when the return in the domestic market increases, FII flows to the
domestic market. While the flows are highly correlated with equity returns in India, they are more
likely to be the effect than the cause of these returns. . It is assumed that the equity returns have a
positive impact on the FII inflow but foreign investors can also get involved in profit booking. They
can buy financial assets when the prices are declining, thereby jacking-up the asset prices and sell when
the asset prices are increasing and hence be the cause of such returns so making it more of a bi-
directional relationship.

b) Risk- Investors are considered to be risk averse, hence when risk in the domestic market increases
they will withdraw from the domestic market, when risk in the foreign market increases, investors will
withdraw from the foreign market and invest in the Indian (domestic) market. Investments, either
domestic or foreign, depend heavily on risk factors. Hence, while studying the behavior of FII, it is
important to consider the risk variable. Risk can be divided into ex-ante and unexpected risk. While the
ex-ante risk certainly has an inverse relation with the foreign investment nothing can be clearly said
about the unexpected risk.

c) Inflation- The inflation no doubt has an inverse relation with the foreign investment inflow as the
investor would keep in mind the purchasing power of the funds invested and as inflation increase i.e.

Page 55
the purchasing power declines the investor is most likely to withdraw his money. When inflation in the
domestic country increases, the purchasing power of the funds invested declines, hence investors will
withdraw from the domestic market. Similarly, when inflation in the foreign country increases, the
purchasing power of funds invested in the foreign country declines, causing institutional investors to
withdraw from the foreign market and make investment in the domestic (Indian) market.

d) Exchange rate –When the value of the home currency is stronger the FII investments will also
increase as the percentage of returns the FII get automatically increases and visa versa So it can be said
that the inflation and risk in the domestic country and return in the foreign country adversely affect the
FII flowing to the domestic country, whereas inflation and risk in the foreign country and return in the
domestic country have a favorable effect on the flow of FII.

ROLE OF INSTITUTIONAL INVESTORS IN CAPITAL MARKET IN INDIA

As the Indian capital market opened its gates for the foreign institutional investors. With time there has
been an increasing trend of their participating in the capital market. With this increasing participation
there has been a lot of effect on many parameters of the Indian capital market. The major effect of the
increasing participation of the institutional investors has been observed in the following areas.

Liquidity: Market liquidity is a business, economics or investment term that refers to an asset's ability
to be easily converted through an act of buying or selling without causing a significant movement in the
price and with minimum loss of value. An act of exchange of a less liquid asset with a more liquid asset
is called liquidation. Liquidity also refers both to that quality of a business which enables it to meet its
payment obligations, in terms of possessing sufficient liquid assets; and to such assets themselves.

A liquid asset has some or more of the following features. It can be sold

(1) Rapidly,

(2) With minimal loss of value,

(3) Anytime within market hours.

The essential characteristic of a liquid market is that there are ready and willing buyers and sellers at all
times. An elegant definition of liquidity is also the probability that the next trade is executed at a price
equal to the last one. A market may be considered deeply liquid if there are ready and willing buyers
and sellers in large quantities. This is related to a market depth, where sometimes orders cannot
strongly influence prices. The liquidity of a product can be measured as how often it is bought and sold;
this is known as volume. Often investments liquid markets such as the stock exchange or futures
markets are considered to be more liquid than investments such as real estate, based on their ability to
be converted quickly.

Some assets with liquid secondary markets may be more advantageous to own, are willing to pay a
higher price for the asset than for comparable assets without a liquid secondary market.

Page 56
Price building mechanism: With the increasing participation of the institutional investors in the
capital market, it has also helped the different companies to raise funds for their use through the capital
market in India. Earlier the companies use to go for debt financing which a cost has attached to it and
also in those days the cost of issuing an IPO was higher as compared to the funds that were being
generated by the companies. With the help of FII the market has become more competitive.

Role of speculation: Generally people transact for three reasons hedging speculating and arbitraging
Hedgers are those to intend to hedge their risk. Speculation may be defined as the purchase or sale of a
good with a view to resale or repurchase at a later date, where the motive behind such action is the
expectation of changes in the prices.

Speculation is one of the most watched activity in any capital market its importance varies in different
countries in countries like in US it forms an integral part of the market whereas in developing countries
like India its taken as a threat. It is often believe that speculators even out the price fluctuation by due
to change in demand and supply condition but the concerns about the adverse effects of speculation
come from two sources. First, the possibility that speculation, instead of evening out price fluctuations,
may end up exacerbating such fluctuations. Second, is the problem of speculation destabilizing rather
than stabilizing prices and hence affecting resource allocation. Through speculation, future expected
price not only depends on, but also has an impact on the spot price.

The market for shares is subject to much larger fluctuations than the market for bonds or even
commodities. Shares represent a share in the expected future profits of a company. When fortunes of
companies – both in the short run as well as in the medium to long run – fluctuate, so do share prices.
Uncertainty regarding the future leads to heavy discounting of future profits, and to focus on short-
period expectations about capital value rather than long-period prospects of the company.

The effect of foreign speculative activity in emerging markets can be particularly beneficial if in the
emerging market, liquidity is poor First, the potential of market manipulation is acute in small
emerging markets and liquidity is often poor. Although there are many policy initiatives that could
increase liquidity and reduce the degree of collusion among large traders, there may not be a sufficient
mass of domestic speculators to ensure market liquidity and efficiency. Second, opening the market to
foreign speculators may increase the valuation of local companies, thereby reducing the cost of equity
capital.

Volatilty: Volatility most frequently refers to the standard deviation of the change in value of a
financial instrument with a specific time horizon. It is often used to quantify the risk of the instrument
over that time period. Volatility is typically expressed in annualized terms, and it may either be an
absolute number ($5) or a fraction of the mean (5%).

Volatility is often viewed as a negative in that it represents uncertainty and risk. However, volatility
can be good in that if one shorts on the peaks, and buys on the lows one can make money, with greater
money coming with greater volatility. The possibility for money to be made via volatile markets is how
short term market players like day traders hope to make money, and is in contrast to the long term
investment view of buy and hold. In today's markets, it is also possible to trade volatility directly,
through the use of derivative securities such as options and variance swaps. Foreign institutional
investment is certainly volatile in nature and its volatility has certainly posed some threats to the Indian
Page 57
stock market considering its influence on the market. Given the presence of foreign institutional
investors in Sensex companies and their active trading behavior, small and periodic shifts in their
behavior lead to market volatility. Such volatility is an inevitable result of the structure of India’s
financial markets as well. Markets in developing countries like India are thin or shallow in at least three
senses. First, only stocks of a few companies are actively traded in the market. Thus, although there are
more than 8,000 companies listed on the stock exchange, the BSE Sensex incorporates just 30
companies, trading in whose shares is seen as indicative of market activity. Second, of these stocks
there is only a small proportion that is routinely available for trading, with the rest being held by
promoters, the financial institutions and others interested in corporate control or influence. And, third
the number of players trading these stocks is also small.

In such a scenario investment by the foreign institutional investors leads to a sharp price increase this
provides incentives to FII investment and enhances investment and when the correction in the stock
prices begins it would have to be a pull out by the FII and can result in sharp decline in the prices. The
other reason for volatility is that the foreign institutional investors are attracted to a market by the
expectation of price increase that tend to be automatically realized, the inflow of foreign capital can
result in an appreciation of the rupee vis-a-vis the dollar This increases the return earned in foreign
exchange, when rupee assets are sold and the revenue converted into dollars. As a result, the
investments turn even more attractive triggering an investment spiral that would imply a sharper fall
when any correction begins. Apart from that the growing realization by the FIIs of the power they
wield in what are shallow markets, encourages speculative investment aimed at pushing the market up
and choosing an appropriate moment to exit. This manipulation of the market would certainly enhance
the volatility and in volatile markets even the domestic investors try to manipulate the market when the
prices are really high. Overall the foreign institutional investors have been bullish on the Indian stocks
but the problem is that this bullish nature might be a result of the activities outside the Indian market it
might be due to the performance of their equity market or their non equity returns. Therefore they seek
out for best returns and diversified geographical portfolio in order to hedge their risk and when they
make some adjustments in their portfolio and make shifts in favor or against a country it borings about
sharp changes.

Page 58
SENSEX V/S FII

Page 59
 US $ V/S Rupee

BAIL-OUT PACKAGES AND RBI INITIATIVES

Financial markets in the United States and around the world are in a state of dire emergency and they
require urgent and decisive action. Some key parts of the credit market were on the verge of a
deadlock, resulting not just in the collapse of major financial institutions but also in credit disruption
that has been severely weakening the long-term prospects of non-financial companies.

There was a need for swift action to deal with the toxic‘mortgage-backed securities that had been
causing credit markets to seize up. The Federal government‘s effort to support the global financial
system have resulted in significant new financial commitments, with the U.S. government having
pledged more than $11.6 trillion on behalf of American taxpayers over the past 20 month, far in excess
of the aggregate of the several bailout packages announced or doled out in the past, as may be evident
from the following figures:

Page 60
Past Event

US$ billion Invasion of Iraq 597 Life Time Budget of NASA 851 S & L Bailouts of 1980s 256
Louisiance Purchase 217 Korean War 454

The U.S. Treasury also added $200 billion to its support commitment for Fannie Mae and Freddie Mac,
the country‘s two largest mortgage-finance companies.

The Government of China had also announced a financial package of US$ 585 billion to pump prime
the economy by making huge public investment and by providing subsidies to protect domestic
economy which is otherwise exposed to external market and is likely to be severely affected because of
the cuts in imports by all the major importing countries.

India’s response to the Crisis

As the contagion of the financial system collapse across the world spread towards India, and into it, the
government and the Reserve Bank of India (RBI) responded to the challenge in close coordination and
consultation. The main plank of the government‘s response was fiscal stimulus while the RBI‘s action
comprised monetary accommodation and counter cyclical regulatory forbearance.

The RBI‘s policy response was to keep the domestic money and credit markets functioning normally
and see that the liquidity stress did not trigger solvency cascades. RBI‘s targets can be classified into 3
prime directions: (P Subbarao, Governor)

(i) To maintain a comfortable rupee liquidity position

(ii) To augment foreign exchange liquidity
(iii) To maintain a policy framework that would keep credit delivery on track so as to arrest
the moderation in growth

The previous period has forced RBI to adopt tightened monetary policies in response to heightened
inflationary pressures. However, the RBI changed its approach to handle the current scenario and
eased monetary constraints in response to easing inflationary pressures and moderation in growth in
the current cycle.

The following were the conventional measures of the RBI:

(i) Reduced the policy interest rates aggressively and rapidly

(ii) Reduced the quantum of bank reserves impounded by the central bank
(iii) Expanded and liberalized the refinance facilities for export credit

To manage Foreign Exchange, the RBI

Page 61
(i) Made an upward adjustment on interest rate ceiling on the foreign currency deposits by
non-resident Indians
(ii) Substantially relaxed the External Commercial Borrowings (ECB) regime for corporate
(iii) Allowed access to foreign borrowing to non-banking financial companies and housing
finance companies

RBI also took unconventional measures as a response to the liquidity scenario:

(i) Indian banks were given the rupee-dollar swap facility to give them comfort in managing
their short-term funding requirements
(ii) An exclusive refinance window, as also a special purpose vehicle, was made available for
supporting non-banking financial companies
(iii) The lendable resources available to apex finance institutions for refinancing credit
extended to small industries, housing and exports, was expanded

The Central Government‘s Fiscal Responsibility and Budget Management (FRBM) Act, enacted to
bring in fiscal discipline by imposing limits on fiscal and revenue deficit, proved to be the road map to
fiscal sustainability at the time of the crisis. The emergency provisions of the FRBM Act were invokes
by the central government to seek relaxation from the fiscal targets and two fiscal stimulus packages
were launched in December 2008 and January 2009.

These fiscal stimulus packages, together amounting to about 3% of GDP, included:

Additional public spending, particularly capital expenditure, government guaranteed funds for
infrastructure spending

Cuts in indirect taxes,

Expanded guarantee cover for credit to micro and small enterprises, and

Additional support to exporters.

These stimulus packages came on top of an already announced expanded safety-net for rural poor, a
farm loan waiver package and salary increases for government staff, all of which too should stimulate
demand.

The cumulative amount of primary liquidity potentially available to the financial system through these
measures is over US$ 75 billion or 7% of GDP.

Taking the signal from the policy rate cut, many of the big banks have reduced their benchmark prime
lending rates. Bank credit has expanded too, faster than it did last year.

Page 62
 OUTLOOK FOR THE INDIAN ECONOMY

India is witnessing a mixed result with respect to its growth prospects in the wake of the global
economic downturn. Real GDP growth has moderated to 6.6% and is projected to grow at the same
rate in 2009-10.

The Services sector too, which accounts for 57% of India‘s GDP, and has been the country‘s prime
growth engine for the last five years, is slowing, mainly in construction, transport and communication,
trade, hotels and restaurants sub-sectors.

According to recent data, demand for bank credit has been slackening despite sufficient liquidity in
the system.

India‘s exports, which account for 15% of the economy, grew 3.4% to $168.7 billion in the fiscal year
ended March 31, missing a $200 billion target set by the government.

Corporate margins have been dented due to higher input costs and dampened demand; business
confidence has been affected by the uncertainty around the economic condition. The Index of
Industrial production has been showing a negative growth and the demand for investment is
decelerating.

India, though, certainly has some advantages in addressing the fallout of the crisis:

(i) Headline inflation, as measured by the wholesale price index, has fallen sharply; inflation
has declined faster than expected. Key factors behind the disinflations have been
commodity prices and a part of it is contributed by slowing domestic demand.
(ii) Decline in inflation should prove to be positive for reviving consumer demand and
reducing input costs for corporate
(iii) Fiscal space will open up for infrastructure spending as the decline in global crude prices
and naphtha prices will reduce the amount of subsidy given to the oil and fertilizer
companies
(iv) Imports are expected to shrink more than exports; this will keep the current account
deficit at modest levels
(v) India‘s sound banking system has helped to sustain the financial market stability to a
large extent -well capitalized and prudently regulated
(vi) Overseas investors are confident about the Indian economy due to comfortable levels of
foreign reserves

Page 63
 (vii) The negative impact of the wealth loss effect in the capital markets that have plagued the
advanced countries will not affect India because majority of Indians stay away from
asset and equity markets
(viii) Institutional credit for agriculture will also remain unaffected because of India‘s
mandated priority sector lending
(ix) Agriculture sector of India will be further insulated from the crisis due to the
government‘s farm waiver package
(x) India‘s development of social safety programs over the years (e.g. the rural employment
guarantee program), will protect the poor and migrant classes from the ill effects of the
global crisis

Therefore, once the global economy begins to recover, India‘s turn around will be sharper and swifter,
backed by its strong financial system and regulatory norms.

The present global crisis has taken the shape of the Great depression of 1929 at least in US and Japan.
The biggest losers will be US, Japan and China. The biggest gainers may be India, Brazil and few other
developing countries with their own domestic savings and domestic market. The world will have to
undergo the impact in different forms, somewhere it will be economic slowdown, somewhere recession
and somewhere depression.

Page 64
 Analysis & Interpretation
1) You hold the stocks for how much time period?
1. 1-2 days

2. 3-4 weeks

3. 3-6 months

4. 10-12 months

5. More than 1 year

Page 65
Interpretation:

As 62% respondent invest only for a very short period of time, only 9% invest for very long period of
time, with this we can conclude that they are speculators and invest only to gain because of fluctuation
in the prices of stocks.

2) According to you what significantly affect the Indian stock

market?
A. FII’s activities

B. Govt. policies

C. Election

D. Terrorist activities

Page 66
 Interpretation:

As 46% respondents says that FII’s are only main significant factor that affect the Indian stock market
followed by govt. policies (37%).

Election carries and terrorist attack carries 14% and 3% respectively.

3) To whom you blame for losses you have incurred in capital

market?
A. FII’s

B. Greed to quick return

C. Your broker

Page 67
 D. Others

Greed to quick return

Interpretation:

53% respondents blame FII’s, 41% to their greed to quick return and 6% to their broker for losses
they have incurred in stock market

4) Will you stay invested in the Indian stock market?

A. Yes

B. No

Page 68
Interpretation:

With this answer of their 100% staying with stock market we can conclude that they are very positive
towards Indian stock market.

5) Which one is your most preferred stocks in which do you

want to invest?
A. Diversified portfolio

Page 69
 B. Infrastructure

C. FMCG

D. POWER

Interpretation:

On asking the question to know to their portfolio in which they are interested to invest majority i.e.,
83% of the respondent want to invest in diversified portfolio to get a good rate of return on their
investment.

Page 70
6) Which bank do you prefer for your savings/deposits?
A. PSU’S

B. PRIVATE

C. Does not matter

Interpretation:

Page 71
 In the bid to know their view regarding indian financial/banking system, 89% of the respondent says
that it doesn’t matter at all to them whether they invest in psu or private bank.

With this we can conclude that after failing so many banks in America, indian have their faith in
indian banking system.

7) Where do you invest?

A. CASH

B. DERIVATIVES

C. BOTH A&B

Page 72
 Interpretation:

In a bid to know where they invest mostly, most of the respondent i.e. 59% invest their money in cash
market rather than derivative market because of less knowledge of derivative market.

8) Where do you see BSE SENSEX one year from now?

A. Below 16k

B. 16k-21k

C. 21k+

Page 73
 Interpretation:

In a bid to know their faith in Indian stock market to find out where they SENSEX one year from
now, 57% respondents think that it will cross 21000.

While 39 % think that it will be in between 16000-21000, and the rest 4% thinks that it will remain
below 16000 points.

9) When BSE SENSEX will reach its all time high of 21k+?
Page 74
 A. Within 1 year

B. 1-2 year

C. 2+ year

Interpretation:

On asking to find out according to them when will SENSEX will touch it all time high of 21000+
point, 53% responds that it will touch it within 1 year itself while 30% says that it will be within 1-2
years and rest 17% says that it will take nearly more than 2 years.

Page 75
 CONCLUSION
After analyzing the nature of FII in the past it would be safe enough to say that the foreign funds is
certainly one of the most important cause of volatility in the Indian stock market and has had a
considerable influence on it. Although it would not be fair enough to come to any conclusion as there
are a lot of other factors beyond the scope of the study that effect returns and risks .it is not easy to
predict the nature of the macroeconomic factors and their behavior but it has a great significance on any
economy and its elements. Although generally a positive relation has been seen between the stock
market returns and the FII inflows it is not easy to say which the cause is & which is the effect and
strange behavior has also been noticed in the past

Recession has a huge impact on Indian stock market.

According to investors FII’S are the main factor in fluctuation in indices of Indian stock market.

Respondents basically invest their money for a short period of time.

They don’t have much knowledge of derivative market.

They are not fearful regarding their deposits in any Indian bank.

Indian investors have positive mindset regarding Indian stock market.

Foreign investment certainly are influencing the Indian stock market but the extent of this influence
cannot be determined or rather the extent of India’s dependence on the FIIs is a subjective issue as on
no clear grounds can we see a permanent relationship between the stock market returns and the Foreign
inflows. But to generalize they have shown a positive relation most of the time apart from a few
occasions where the behavior of their relation was difficult to explain.

Page 76
 SUGGESTIONS & LIMITATIONS
After analyzing the nature and behavior of the foreign institutional investment in the past and its
influence on the Indian stock market it would be safe enough to say that foreign funds are one of the
most volatile instruments floating in the market and needs to be handled cautiously. Government
should certainly encourage foreign institutional investment but should keep a check on the volatility
factor. Long term funds should be given priority and encouraged some of the actions that could be
taken to ensure stability are

Strengthening domestic institutional investors

 SEBI must do something regarding FII’S.

 SEBI must take some steps to educate Indian investors so that they will invest after doing
proper fundamental & technical analysis of stocks.
 Investors must invest for long period and invest in various sector(portfolio
diversification) to minimize their risk.

The participation of domestic pension funds in the equity market would augment the diversity of views
on the market and hence the domestic pension funds must be encouraged.

Broad basing of eligible entities In order to address the market integrity concerns arising out of
allowing some entities, which do not have reputational risk or are unregulated, there is merit in
prohibiting such entities from getting registered.

Operational flexibility to impart stability to the market

Page 77
The stability of foreign investment in India will be enhanced if FIIs are able to switch between equity
and debt investments in India, depending on their view about future equity returns. SEBI can make
such policies. Knowledge activities and research programs.

There must be a lot of research programs and studies conducted by the economic affairs regulators in
India.

 The sample size is limited to 100 only.

 The respondents are only from Delhi-NCR region only.
 Respondents could be biased.
 Most of the respondents are speculators, which provide wrong information.
 Time span is for research is very less.

BIBLIOGRAPHY

Websites
www.moneycontrol.com

www.indiainfoline.com

www.insvestopedia.com

www.wikipedia.com

www.bseindia.com

www.nseindia.com
Page 78
www.sebi.gov.in

www.indiabulls.com

www.sharekhan.com

www.google.com

Page 79
 QUESTIONNAIRE

1) For how much time period you hold/invest in the stock?

A 1-2 days

B 3-4 weeks

C 3-6 months

D 10-12 months

E More than 1 year

2) According to you what significantly affect the indian stock market?

A FII’s activities

B Govt. policies

C Election

D Terrorist activities

3) To whom you blame for losses you have incurred in capital market?
A FII’s

B Greed to quick return

C Your broker

Page 80
D Others

4) Will you stay invested in the indian stock market?

A Yes

B No

6) Which one is your most preferred stocks in which do you want to

invest?
A Diversified portfolio

B Infrastructure

C FMCG

D POWER

6) Which bank do you prefer for your savings/deposits?

A PSU’S

B PRIVATE

C Does not matter

7) Where do you invest?

A CASH

B DERIVATIVES

C BOTH A&B

8) Where do you see BSE SENSEX one year from now?

A Below 16k

B 16k-21k

C 21k+

Page 81
9) When BSE SENSEX will reach its all time high of21k+?

A Within 1 year

B 1-2 year

C 2+ years

Page 82
 DELHI INSTITUTE OF ADVANCED STUDIES

EVALUATION SHEET FOR PROJECT REPORT

STUDENTS’S NAME :______________________________

ROLL NO. :______________________________

EVALUATOR’S FEEDBACK : ______________________________

___________________

DID THE STUDENT CONTACT YOU

REGULARLY FOR DISCUSSION? : YES/NO (Please tick)

Page 83
REPORT IS APPROVED / DISAPPROVED:

(To be ticked by Evaluator)

MARKS AWARDED : _______________________________

(Out of 40)

SIGNATURE OF EVALUATOR

NAME:

DATE:

*In case report is disapproved, student has to resubmit the report after incorporating the
suggestions given on the feedback form. Revised report should be submitted along with the
feedback form.

DELHI INSTITUTE OF ADVANCED STUDIES

ATTENDANCE FOR FINAL PROJECT REPORT

Page 84
 NAME OF THE STUDENT : RAVI GARG

CLASS : MBA III A

ROLL NO : 0601233908

NAME OF THE SUPERVISOR : Ms. ARADHANA CHADHA

S. NO. DATE TIME PROGRESS OF REPORT SIGNATURE SIGNATURE OF

SUPERVIOSR
REMARKS OF STUDENT

Page 85
4

10

Page 86
*Minimum (8 out of 10) 80% attendance required.

Co-ordinator

Page 87