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EXECUTIVE SUMMARY
Speculators are the risk takers who are inclined to invest all their money into one
risky investment and hope it pays off. Instead of putting all their eggs in one basket more
risk- adverse investors try to reduce their exposure to risk by purchasing a diversified list of
different investments called a portfolio.
In pure financial terms, volatility is defined as ‘the degree to which the price of a
security, commodity or market rises or falls within a short period time’. As is evident from
the definition, volatility relates to the variability in the price of a security. In the context of
the stock market volatility of the market refers to the volatility of the indices of the
securities within the market. In India, for instance the National stock Exchange index Nifty
would be one of the relevant indices to look into for examining stock market volatility.
The study is carried out in two parts. Under first part an attempt is made to test the
performance of selected securities in comparison with the market index nifty, to identify
whether investors can invest in securities by tracing the market indices. The secondary data
is used for the study and is extracted from the available sources such as websites of the
company, NSE, textbooks and magazines, stock brokers. For the purpose of the research the
nifty index is selected as the market index and three companies each under five industries
are selected for the study. Weekly closing price of securities and weekly closing value of
national stock exchange index (nifty) are considered for the study purpose. Testing of
performance of selected securities in comparison with market index is done by using
correlation analysis.
Under second part, a study is conducted to know the relationship in between nifty
and some of the selected economic factors such as net Foreign Institutional Investment (FII)
flows in India, gold prices and Rupee-Dollar exchange rate. Here also for the study purpose
secondary data is used. Here also weekend values of the selected economic factors are used
for the study purpose. Testing of performance of nifty with the selected economic factors is
done by using statistical tools correlation and regression analysis.
From the study conducted it was found that the selected securities are moving with
the market index in all the sectors except one company under telecommunication sector
which is showing negative correlation and also there exists the relationship in between the
nifty and the selected economic factors.
INTRODUCTION
INTRODUCTION
Financial markets are the centers or arrangements that provide facilities for buying
and selling of financial claims and services. Corporations, financial institutions, individuals
and government trade in financial products on these markets either directly or through
brokers and dealers through an organized exchange or off-exchange.
Capital markets
The capital market is the market for securities, where companies and governments
can raise long-term funds. The capital market includes the stock market and the bond
market. Through the capital market large amounts of money (capital) are raised by
companies, governments and other organizations for long term use and the subsequent trade
of the instruments issued in recognition of such capital.
The capital markets consist of primary markets and secondary markets. Newly issued
securities are bought or sold in the primary markets. Secondary markets allow investors to
sell securities that they hold or buy existing securities.
Primary Market
The primary markets are where investors can get first crack at a new security
issuance. The issuing company or group receives cash proceeds from the sale, which is
then used to fund operations or expand the business. Exchanges have varying levels
of requirements which must be met before a security can be sold.
Once the initial sale is complete, further trading is said to be conducted on the
secondary market, which is where the bulk of exchange trading occurs each day. Primary
markets can see increased volatility over secondary markets because it is difficult to
accurately gauge investor demand for a new security until several days of trading have
occurred.
Secondary Market
A market where investors purchase securities or assets from other investors, rather
than from issuing companies themselves. The national exchanges - such as the National
Stock Exchange and the NASDAQ are secondary markets.
Secondary markets exist for other securities as well, such as funds, investment banks,
or entities such as Fannie Mae purchase mortgages from issuing lenders. In any secondary
market trade, the cash proceeds go to an investor rather than to the underlying
company/entity directly.
BSE is the first stock exchange in the country which obtained permanent recognition
(in 1956) from the Government of India under the Securities Contracts (Regulation) Act
1956. BSE's pivotal and pre-eminent role in the development of the Indian capital market is
widely recognized. It migrated from the open outcry system to an online screen-based order
driven trading system in 1995. Earlier an Association of Persons (AOP), BSE is now a
corporatized and demutualised 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, BSE
has two of world's best exchanges, Deutsche Börse and Singapore Exchange, as its strategic
partners.
The National Stock Exchange of India Limited has its genesis in the report of the
High Powered Study Group on Establishment of New Stock Exchanges, which
An index is used to give information about the price movements of products in the
financial, commodities or any other markets. Financial indexes are constructed to measure
price movements of stocks, bonds, T-bills and other forms of investments. Stock market
indexes are meant to capture the overall behavior of equity markets. A stock market index is
created by selecting a group of stocks that are representative of the whole market or a
specified sector or segment of the market. An index is calculated with reference to a base
period and a base index value.
Stock market indexes are useful for a variety of reasons. Some of them are:
About nifty 50
The S&P CNX Nifty (Nifty 50 or simply Nifty) is a composite of the top 50 stocks
listed on the National Stock Exchange (NSE), representing 20 different sectors of the
economy. It is a simplified tool that helps investors and ordinary people alike, to understand
what is happening in the stock market and by extension, the economy. If the Nifty Index
performs well, it is a signal that companies in India are performing well and consequently
that the country is doing well.
Nifty has been used to represent S&P CNX Nifty, owned and managed by India
Index Services and Products Ltd. (IISL), a joint venture between NSE and CRISIL.
Nifty index can be used by individuals to track market movements and compare
performance of individual companies’ vis-à-vis market performance.
Derivative trading - Investors can use Nifty indices for hedging their exposures in
the equity markets.
The stock market and the economy are deeply intertwined so that when something
happens to one it affects the other. It is said that stock market declines have a wide ranging
effect on many sectors of the economy; therefore, the health of the stock market is seen as
an indicator of the general economic health. A drop in the stock market often translate into
decreased networth for both households and business, thereby, decreasing consumer
spending and confidence, which damages the economy.
The Indian growth story has attracted global majors like CLSA, HSBC, Citigroup,
Merrill Lynch, Crown Capital, Fidelity, Goldman Sachs, Morgan Stanley, UBS, T Rowe
Price International, Capital International and ABN Amro among others to enter the Indian
financial market.
• Goldman Sachs and Macquarie have acquired a 20 per cent stake each in PTC India
Financial services Ltd.
• Temasek Holdings, Investment Corporation of Dubai, Goldman Sachs, Macquarie, AIF
Capital, Citigroup and India Equity Partners (IEP) have picked a combined stake of 10 per
cent in Bharti Infratel.
• An entity of Merrill Lynch has picked up 49 per cent stake in seven residential projects of
real estate major, DLF.
• Blackstone has taken up a 26 per cent stake in MTAR Technologies.
• Citigroup, Morgan Stanley, Goldman Sachs and BSMA have picked up a combined stake
of over seven per cent in Gitanjali Gems.
• Fidelity Investments International has picked up close to seven per cent equity in
Transport Corporation of India (TCI).
FIIs are allowed to invest in the primary and secondary capital markets in India
through the portfolio investment scheme (PIS). Under this scheme, FIIs can acquire
shares/debentures of Indian companies through the stock exchanges in India.
The ceiling for overall investment for FIIs is 24 per cent of the paid up capital of the
Indian company. The limit is 20 per cent of the paid up capital in the case of public sector
banks, including the State Bank of India. The ceiling of 24 per cent for FII investment can
be raised up to sectorial cap/statutory ceiling, subject to the approval of the board and the
general body of the company passing a special resolution to that effect. To further increase
FII participation in the Indian market, the Government and Sebi have agreed to allow
foreign individuals, corporate and other investors to register directly as foreign institutional
investors - a move designed to increase transparency and reduce transaction costs for these
investors.
Overseas investors have infused US$ 816.69 million into the stock market in the
first trading week of 2010, reflecting a positive start for the year after record inflows in the
last year. Foreign institutional investors (FIIs) were gross buyers of shares worth US$ 3.03
billion, and sold equities valued worth US$ 2.2 billion, resulting in a net investment of US$
823.74 million, according to the capital market regulator, Securities and Exchange Board of
India (SEBI). FIIs were net investors of US$ 973.22 million in debt instruments in the first
trading week of the year, according to data released by SEBI.
According to SEBI, FIIs transferred a record US$ 17.46 billion in domestic equities
during the calendar year 2010. This FII investment in 2010 proved to be the highest ever
inflow in the country in rupee terms in a single year, breaking the previous high of US$
14.96 billion parked by foreign fund houses in domestic equities in 2007. FIIs infused a net
US$ 1.05 billion in debt instruments during the said period. During the October-December
period in 2009-10, FIIs made a net buy of shares worth US$ 5.19 billion, according to data
compiled from market regulator, the Securities and Exchange Board of India (SEBI).
In the quarter, December attracted the highest inflow of US$ 2.2 billion, followed by
October US$ 1.95 billion and November US$ 1.18 billion. FIIs poured a net US$ 1.26
billion in debt instruments during the said period.
The trend of strong FII inflows to the tune of about US$ 6.3 billion witnessed during
April-June quarter gained further during the September quarter of current fiscal with an
infusion of US$ 7.2 billion.
The number of FIIs who registered themselves with SEBI this year was higher by 7
per cent over 2008. Data sourced from the SEBI shows that number of registered FIIs stood
at 1706 and number of registered sub-accounts rose to 5,331 as of December 31, 2009.
A number of market and equity analysts indicate that a large part of FII inflows have
come from long-only funds, signaling that the quality of foreign investment is good.
India has in fact, emerged the most lucrative markets for short and medium-term
investments. The US is once again at the top of the list of foreign investors in the Indian
stock market, as per data presented in the Lok Sabha by the Finance Ministry. According to
the latest data, till mid-November 2009, US-based foreign institutional investors (FIIs) had
net investments of about US$ 4.46 billion in the Indian markets, as compared with US$
702.37 million in 2006. They are followed by the US$ 2.57 billion net investments routed
through Luxembourg. These two countries are further followed by France, Mauritius and
the UK.
FIIs appear to be betting big on the primary market rather than the secondary market,
says Mr Anoop Bhaskar, Head of Equities at UTI Mutual Fund. Roughly US$ 9 million-
US$ 10 million came in the primary issuance – through qualified institutional placements
(QIPs) or preferential allotment or initial public offerings (IPOs).
Private equity firms invested US$ 1.4 billion over 84 deals in India during October-
December quarter of 2009, taking the annual investment numbers to US$ 3.82 billion over
232 deals, according to a study by Venture Intelligence, a research service focused on
private equity (PE) and merger and acquisition (M&A) transactions.
B. Gold
Eternally attractive to mankind, gold has found its principal use as a store of value. Its
beauty has made it popular in decoration. Gold has also become an increasingly important
industrial metal. Because of its rarity and its durability, gold has been almost universally
acceptable as money for thousands of years. Gold is the most prominent of the noble metals
(gold, silver, platinum, and other platinum group metals), so termed because of their
inertness, or reluctance to enter into chemical reactions. Gold will not react with common
acids. Gold, the most famous of all precious metals, is widely sought after throughout the
world for both its investment qualities and industrial properties. Indeed, gold traditionally
has served three functions: as a monetary instrument, as a financial asset, and as a raw
material primarily used in jewellery and decorative objects.
As an investment, gold typically is viewed as a financial asset that will maintain its
value during times of political, social, or economic distress. As such, gold can provide
individual and institutional investors alike with a portfolio safety net against sharp
downward spikes in complementary assets such as stocks and bonds. While investment
demand is important, the largest use for gold is in jewellery, with the majority of use
occurring in the United States, Japan, Italy, India, China, and Thailand. Jewellery
production has been growing at a robust pace in the developing countries of Southeast Asia
and the Middle East since 1988. Gold also is used in electronic connectors and dental
alloys. Gold is mined in more than 76 countries around the world, with the large number of
development projects in these countries expected to keep production growing well into the
next century. Currently, South Africa is the largest gold producing country, followed by the
United States, Australia, and Canada. Millions of people all over the world continue to use
gold as a hedge against inflation and as a basic form of savings and a reliable store of value
during times of economic uncertainty or political upheaval.
level have left investors with limited alternative investment avenues. The spectre of even a
moderate increase in inflation levels, fuelled by the spurt in commodity prices, would
further squeeze the real rate of return on debt investments. This has forced investors to look
for a relatively risk-free investment option. In these circumstances, there has been a rush
towards gold as it is an eternal asset with an intrinsic value. For long, dollar-denominated
instruments were considered the favourite assets for central banks and institutional
investors.
Despite recent hiccups, gold is an important and popular investment for many
reasons:
In many countries gold remains an integral part of social and religious customs,
besides being the basic form of saving. Shakespeare called it .the saint-seducing
gold. Superstition about the healing powers of gold persists. Ayurvedic medicine in
India recommends gold powder and pills for many ailments.
Gold is indestructible. It does not tarnish and is also not corroded by acid except by
a mixture of nitric and hydrochloric acids.
Gold has aesthetic appeal. Its beauty recommends it for ornament making above all
other metals.
Gold is so malleable that one ounce of the metal can be beaten into a sheet covering
nearly a hundred square feet.
Gold is so ductile that one ounce of it can be drawn into fifty miles of thin gold wire.
Gold is an excellent conductor of electricity.
Gold is so dense that all the 90,000 tonnes estimated to have been mined through
The purpose of the foreign exchange market 'Forex' is to assist international trade and
investment. The foreign exchange market allows businesses to convert one currency to
another foreign currency. For example, it permits a U.S. business to import European goods
and pay Euros, even though the business's income is in U.S. dollars. Some experts,
however, believe that the unchecked speculative movement of currencies by large financial
institutions such as hedge funds impedes the markets from correcting global current account
imbalances. This carry trade may also lead to loss of competitiveness in some countries.
Unlike a stock market, the foreign exchange market is divided into levels of access.
At the top is the inter-bank market, which is made up of the largest commercial banks and
securities dealers. Within the inter-bank market, spreads, which are the difference between
the bid and ask prices, are razor sharp and usually unavailable, and not known to players
outside the inner circle. The top-tier inter-bank market accounts for 53% of all transactions.
After that there are usually smaller banks, followed by large multi-national corporations
(which need to hedge risk and pay employees in different countries), large hedge funds, and
even some of the retail FX-metal market makers. According to Galati and Melvin, “Pension
funds, insurance companies, mutual funds, and other institutional investors have played an
increasingly important role in financial markets in general, and in FX markets in particular,
since the early 2000s.” (2004) In addition, he notes, “Hedge funds have grown markedly
over the 2001–2004 period in terms of both number and overall size” Central banks also
participate in the foreign exchange market to align currencies to their economic needs.
[5]
Top 10 currency traders
% of overall volume, May 2010
Ran Market
Name
k Share
2 UBS AG 14.58%
Royal Bank of
4 8.19%
Scotland
5 Citi 7.32%
6 JPMorgan 5.43%
7 HSBC 4.09%
RESEARCH DESIGN
Abstract.
The Indian economy has been growing rapidly encouraging a bull run in the stock
markets. Index like the S&P CNX NIFTY has shown an impressive 38% annualized returns
from April 2003 (See NIFTY chart below). These unprecedented returns and growing
interest of international investment community in the Indian markets have given a further
boost to the markets resulting in increased volatility. An increase in volatility implies
increasing opportunities for traders and investors1, if they have a forecast of the volatility
ahead. At I-Peritus we use quantitative techniques to study and forecast market. These
forecasts allow investors to understand the behavior of the markets and time their
investment tactics. In this paper we outline our approach for modeling a rolling 5 day
volatility forecast. The paper lists out the span of data used, model implemented and the
accuracy of the technique employed.
Topic name: Investigating causal relationship between stock return with respect to
exchange rate and FII: evidence from India
By,Kumar , Sundaram Birla Institute of Technology & Science Pilani
Abstract
OTHERS
Fama (1981) said that stock prices reflect these variables such as inflation, exchange
rate, interest rate and industrial production. Later, Maysami and Koh (2000) and Choi et al.
(1992) examined the impacts of the interest rate and exchange rate on the stock returns and
showed that the exchange rate and interest rate are the determinants in the stock prices.
Frank and Young (1972) investigated the relationship between stock prices and
exchange rates by employing six different exchange rates and concluded no statistically
significant underlying relationship. Solnik (1987) gave positive as well as negative
relationship between real stock returns and real exchange rate movements for different time
frames. Ma and Kao (1990) found a negative relationship whereas Oskooe and Sohrabian
(1992) claimed a bidirectional Granger causality with no long-term relationship.
Rajput and Thaker state that no long run positive correlation exists between exchange
rate and Stock Index in Indian context except for year 2002 and 2005. FII and Stock Index
show positive correlation, but fail to predict the future value. Takeshi (2008) reports
unidirectional causality from stock returns to FII flows irrelevant of the sample period in
India where as the reverse causality works only post 2003. The structural break of 2003 as
suggested by him and some other researchers was introduced in the current model and
hence analyzed.
A. STATEMENT OF PROBLEM
Several investors have gained as well as lost in the stock market. There are two way
of determining the stock price, one is fundamental analysis, which believes that the price of
stock is determined by certain basic economic factors and economic fundamentals and
other way is technical analysis, which involves a methodology for forecasting fluctuations
in prices of individual securities or portfolios of securities.
It is said that market index is mirror image of the economy i.e., market index reflects
the performance of different securities and economic factors.
So the statement of problem is to identify whether security moves with the market
index and is there any relationship in between nifty and selected economic factors such as
Net FII Investment, Gold prices and RE-$ exchange rate.
stock exchange. Other than that economic factors selected for the study purpose are Net
Foreign Institutional Investment, gold prices and Re-$ exchange rates.For the study purpose
weekend figures of the above mentioned factors are taken from Jan 20010 to Dec 20010.
C.SAMPLING DESIGN
Sample size
Sectors selected- 5
Total economic factors selected- 3 (Net FII investment, Gold prices, Re-$ exchange rate).
52 weekend figures for the year 2010 of the above mentioned variables are taken for the
study.
Selection of sample
Three companies are selected from five different sectors. These companies are
selected on the basis of total traded volume during the year 2010. Also three economic
factors namely fIIs, gold prices and RE-$ exchange rate are selected.
Collection of data
The data required for understanding are collected from secondary source. They are
collected through stock brokers websites, newspapers and journals.
D. RESEARCH OBJECTIVE
The main objective of the study is to test the performance of selected securities and
selected economic factors in comparison with market index nifty. The research is to know
whether security prices are the reflection of market index and whether any relationship
exists between market index and economic factors. With this, the research deals with
following objectives:-
To find out any relationship exists between market index and selected
economic factors.
Correlation
Regression analysis.
Correlation:
The Correlation is a statistical tool which studies the relationship between two
variables and Correlation Analysis involves various methods and techniques used for
studying and measuring the extent of the relationship between the two variables.
• Positive Correlation: If the values of the two variables deviate in the same direction
i.e., if the increase in the values of one variable results in a corresponding increase in
the values of the other variable or vice versa is referred to as Positive Correlation.
• Negative Correlation: If the values of the two variables moves in the opposite
direction i.e., the increase in the values of one variable results in a corresponding
decrease in the values of the other variables. Or vice versa is referred to as Negative
Correlation.
• r =1 / n ∑( x −x )( y − y ) / σ xσ y
Regression analysis
Regression analysis is a technique used for the modeling and analysis of numerical
data consisting of values of a dependent variable (response variable) and of one or more
independent variables (explanatory variables). The dependent variable in the regression
equation is modeled as a function of the independent variables, corresponding parameters
("constants"), and an error term. The error term is treated as a random variable. It represents
unexplained variation in the dependent variable. The parameters are estimated so as to give
a "best fit" of the data. Most commonly the best fit is evaluated by using the least squares
method, but other criteria have also been used. Data modeling can be used without there
being any knowledge about the underlying processes that have generated the data, in this
case the model is an empirical model. Moreover, in modelling knowledge of the probability
distribution of the errors is not required. Regression analysis requires assumptions to be
made regarding probability distribution of the errors. Statistical tests are made on the basis
of these assumptions. In regression analysis the term "model" embraces both the function
used to model the data and the assumptions concerning probability distributions. Regression
can be used for prediction (including forecasting of time-series data), inference, hypothesis
testing, and modeling of causal relationships. These uses of regression rely heavily on the
underlying assumptions being satisfied. Regression analysis has been criticized as being
misused for these purposes in many cases where the appropriate assumptions cannot be
verified to hold. One factor contributing to the misuse of regression is that it can take
considerably more skill to critique a model than to fit a model.
Underlying assumptions:
The sample must be representative of the population for the inference prediction.
The dependent variable is subject to error. This error is assumed to be a random variable,
with a mean of zero. Systematic error may be present but its treatment is outside the scope
of regression analysis.
The independent variable is error-free. If this is not so, modelling should be done using
Errors-in-variables model techniques.
The predictors must be linearly independent, i.e. it must not be possible to express any
predictor as a linear combination of the others..
The errors are uncorrelated, that is, the variance-covariance matrix of the errors is diagonal
and each non-zero element is the variance of the error.
The variance of the error is constant (homoscedasticity). If not, weights should be used. The
errors follow a normal distribution. If not, the generalized linear model should be used
.
F. LIMITATION
This study has restricted its sample size to 15 companies and hence cannot be
applied for the entire 50 companies in nifty.
The research work considers only equities, other types of securities are neglected
such as debentures, derivatives etc.
Research is restricted only to three economic factors namely net FII flows, Gold
prices and RE-$ exchange rate.
Only weekend gold prices are taken i.e., average of the week is not considered
Only weekend Re-$ exchange rates are taken i.e., average of the week is not
considered.
CHAPTER 1: INTRODUCTION
This chapter gives an introduction to financial scenario in Indian context and various
financial markets and their behavior
This chapter contains a profile of the company profile and also the profile of various 15
companies which I have selected from various sectors of industry
This chapter represents research design. It covers various areas such as statement of
problem, scope of the study, objectives of the study, tools and technique of data collection
and organization.
This chapter gives the analysis and tabulation of data collected for the purpose of the study.
BIBLIOGRAPHY
INDUSTRY/COMPANY PROFILE.
INTRODUCTION
They were originally incorporated on October 18, 1995 as Probity Research and
Services Private Limited at Mumbai under the Companies Act, 1956 with Registration
No.11 93797. They commenced their operations as an independent provider of information,
analysis and research covering Indian businesses, financial markets and economy, to
institutional customers. They became a public limited company on April 28, 2000 and the
name of the Company was changed to Probity Research and Services Limited. The name of
the Company was changed to India Infoline.com Limited on May 23, 2000 and later to
India Infoline Limited on March 23, 2001.In 1999, they identified the potential of the
Internet to cater to a mass retail segment and transformed their business model from
providing information services to institutional customers to retail customers. Hence they
launched their Internet portal, www.indiainfoline.com in May 1999 and started providing
news and market information, independent research, interviews with business leaders and
other specialized features.
In May 2000, the name of their Company was changed to India Infoline.com Limited
to reflect the transformation of their business. Over a period of time, they have emerged as
one of the leading business and financial information services provider in India. In the year
2000, they leveraged their position as a provider of financial information and analysis by
diversifying into transactional services, primarily for online trading in shares and securities
and online as well as offline distribution of personal financial products, like mutual funds
and RBI Bonds. These activities were carried on by their wholly owned subsidiaries. Their
broking service was launched under the brand name of 5paisa.com through their subsidiary.
India Infoline Securities Private Limited and www.5paisa.com, the e-broking portal, was
launched for online trading in July 2000. It combined competitive brokerage rates and
research, supported by Internet technology. Besides investment advice from an experienced
team of research analysts, we also of real time stock quotes, market news and price charts
with multiple tools for technical analysis.
KEY MILESTONES
· Acquired 100% equity of Marchmont Capital Advisors Pvt Ltd in December 2005
through which we have Merchant Banking.
· DSP Merrill Lynch Capital subscribed to convertible bonds aggregating Rs. 80
crores in December 2005. their current stake in India Infoline is a little over 14% as
on 31st March 2007.
· Bennett Coleman & Co Ltd (BCCL) invested Rs. 20 crores in India Infoline by way
of preferential allotment in December 2005.
· Become a Depository participant of CDSL in June 2006.
· Merger of India Infoline Securities Private Limited with India Infoline Limited in
January 2007.
· IRDA license for Insurance Broking in April 2007.
BANKING SECTOR
Without a sound and effective banking system in India, there cannot be a healthy
economy. The banking system of India should not only be hassle free but it should be able
to meet new challenges posed by technology and any other external and internal factors
For the study purpose three banks are selected for research. The three banks are Axis
bank, ICICI bank, and State Bank Of India.
Axis Bank was the first of the new private banks to have begun operations in 1994,
after the Government of India allowed new private banks to be established. The Bank was
promoted jointly by the Administrator of the specified undertaking of the Unit Trust of
India (UTI - I), Life Insurance Corporation of India (LIC) and General Insurance
Corporation of India (GIC) and other four PSU insurance companies, i.e. National
Insurance Company Ltd., The New India Assurance Company Ltd., The Oriental
Insurance Company Ltd. and United India Insurance Company Ltd. The Bank today is
capitalized to the extent of Rs. 358.56 crores with the public holding (other than promoters)
at 57.60
ICICI Bank is India's second-largest bank with total assets of Rs. 3,997.95 billion
(US$ 100 billion) at March 31, 2008 and profit after tax of Rs. 41.58 billion for the year
ended March 31, 2008. ICICI Bank is second amongst all the companies listed on the Indian
stock exchanges in terms of free float market capitalization. The Bank has a network of
about 1,308 branches and 3,950 ATMs in India and presence in 18 countries.
Securities business
India’s largest online trading platform with about 1.4 million customers
Ranked first in terms of amount raised through domestic offerings during CY2007
India’s largest online trading platform with about 1.4 million customers
Ranked first in terms of amount raised through domestic offerings during CY2007
State Bank of India (SBI) was nationalized in July 1955 under the SBI Act of 1955.
The seven subsidiary banks of SBI were nationalized on 19th July, 1960. The State Bank
of India is India's largest commercial bank and is ranked as one of the top five banks
worldwide. It serves 90 million customers through a network of 9,000 branches and it
offers either directly or through subsidiaries a wide range of banking services.
Commanding unsurpassed respect and legacy in the Indian financial expanse, the
SBI is committed to offering financial solutions that extract maximum value from business
and market situations.
While the bank is strongly positioned to structure financial packages that anticipate
the changing business environment, its vast network in the world ensures delivery channels
of unmatched reach, both in India and abroad.
PARMACEUTICAL SECTOR
For the study purpose three pharmaceutical companies are selected for research. The
three pharmaceutical companies are Cipla Ltd, Ranbaxy Laboratories Ltd, Sun
Pharmaceutical Industries Ltd.
Cipla
Sun Pharmaceutical
Sun Pharmaceutical (or Sun Pharmaceutical Industries Limited) (BSE: 524715 and
scrip ID SUNPHARMA) is an international pharmaceutical company based in Mumbai,
India. It makes many generic and brand name drugs that are distributed in the United States,
Europe, Asia and worldwide.[1] Sun manufactures both pharmaceuticals and active
pharmaceutical ingredients (API), in essence, ingredients to be used in finished
pharmaceutical products. Its products are in several therapeutic areas, including psychiatry,
neurology, cardiology, diabetology, gastroenterology, respiratory, and orthopedics.
Established in 1983, Sun Pharma was a start-up company with five products. Since
1996, Sun has grown largely through a combination of internal growth, and acquisition of
other pharmaceutical companies. For example, it bought US-based Caraco Pharm Labs, and
ICN Hungary.
POWER SECTOR
Power development is the key to the economic development. The power sector has been
receiving adequate priority ever since the process of planned development began in 1950.
The power sector has been getting 18-20% of the total public sector outlay in the initial plan
periods. Remarkable growth and progress have led to extensive use of electricity in all the
sectors of economy in the successive five years plans.
For the study purpose three power sector companies are selected for research. The three
companies in the power sector are NTPC, Reliance Power Ltd, Power Grid Corporation Ltd.
NTPC
NTPC Limited is the largest power generating company of India. A public sector
company, it was incorporated in the year 1975 to accelerate power development in the
country as a wholly owned company of the Government of India. At present, Government
of India holds 89.5% of the total equity shares of the company and the balance 10.5% is
held by FIIs, Domestic Banks, Public and others. Within a span of 32 years, NTPC has
emerged as a truly national power company, with power generating facilities in all the
major regions of the country.
Top line (total income) growth by 20.59%, rising to Rs. 353,807 million from Rs.
293,393 million in the previous year.
Bottom line (net profit after tax) growth of 17.95%, reaching Rs. 68,647 million
from Rs. 58,202 million in the previous year.
Strong cash flow with 100% realization of billing for the 4th consecutive year.
Contribution of about 29% of the total power generation in the country, with about
20% of the country's installed capacity; the Company emerges as the fourth largest
generating Company in Asia after Tokyo Electric Power Company, Korea Electric
Power Company and Taiwan Power.
Highest ever generation of 188.674 billion units, an increase of 10.41% over the
previous year's generation of 170.880 billion units.
The company was incorporated in January 1995 as Bawana Power Private Limited
and changed its name to Reliance Delhi Power Private Limited in February 1995. Later, it
changed its name to Reliance EGen Private Limited in January 2004, to Reliance Energy
Generation Limited in March 2004, and to Reliance Power Limited in July 2007.[1]
TELE-COMMUNICATION SECTOR
In 1994 the Government of India issued its National Telecommunications Policy. The
policy was issued in recognition of the "urgent need" to provide universal access to basic
telecommunications services by 1997 and offers guidelines for entry of the private sector
into basic telecommunications services. To facilitate private-sector participation, licensing
procedures were established in the Department of Telecommunications in India, and equity
participation for companies registered in India
For the study purpose three tele-communication companies are selected for research.
The four Tele communication companies are BHARTI AIRTEL, IDEA CELLULAR,
RELAINCE COMMUNICATION.
Bharti Airtel
The businesses at Bharti Airtel have been structured into three individual strategic
business units (SBU’s) - mobile services, telemedia services (ATS) & enterprise services.
The mobile services group provides GSM mobile services across India in 23 telecom
circles, while the ATS business group provides broadband & telephone services in 94 cities.
The enterprise services group has two sub-units - carriers (long distance services) and
services to corporates. All these services are provided under the Airtel brand.
The equity shares of Bharti Airtel are currently listed on National Stock Exchange of
India Limited (NSE) and The Stock Exchange, Mumbai, (BSE). Bharti Airtel offered
185,336,700 equity shares in the initial public offering (IPO) and raised Rs 8,340.15 million
through this process. The shares were oversubscribed 2.56 times.
Idea Cellular
IDEA Cellular is part of the Aditya Birla Group, a US$ 24 billion corporation with a
market capitalization of US$ 31.5 billion and in the league of Fortune 500. Anchored by an
extraordinary force of over 100,000 employees belonging to 25 different nationalities, over
50% of its revenues flow from its overseas operations. The Group has been adjudged ‘The
Best Employer in India and among the Top 20 in Asia' by the Hewitt-Economic Times and
Wall Street Journal Study 2007. IDEA Cellular is a publicly listed company, having listed
on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) in March
2007.
The Big Three -- TCS [ Get Quote ], Infosys [ Get Quote ] and Wipro [ Get Quote ]
led the way for Indian IT sector during the last quarter by posting net profits growth of over
50 per cent and hiring more than 14,000 people, giving indications that the software sector
is going through one of its most successful phases in recent times.
Companies selected under this sector are Infosys, Tata Consultancy Services and wipro
Infosys
Infosys Technologies Limited (BSE: 500209, NASDAQ: INFY) is an information
technology services company headquartered in Bangalore, India. Infosys is one of the
largest IT companies in India with 113,796 employees (including subsidiaries) as of 2010.[2]
It has offices in 22 countries and development centers in India, China, Australia, UK,
Canada and Japan.[3]
Tata Consultancy Services (TCS) (BSE: 532540) is a software services and consulting
company headquartered in Mumbai, India. TCS is the largest provider of information
technology and business process outsourcing services in India.[1] The company is listed on
the National Stock Exchange and Bombay Stock Exchange of India.
TCS is a subsidiary of one of India's largest and oldest conglomerates, the Tata
Group, which has interests in areas such as energy, telecommunications, financial services,
manufacturing, chemicals, engineering, materials, government and healthcare.[2][3]
Wipro
In this study, an attempt is made to test the responsiveness of the selected securities
to the market index (NSE, NIFTY). For this purpose, 15 major companies are considered
from five different sectors (banking, computer-software, pharmaceutical, power and tele-
communication) .
Also an attempt is made to know the relationship in between Nifty and selected
economic factors and also how and to what extent each economic factor has an impact on
the nifty.
Company Industry
TELECOMMUNICATION –
Bharti Airtel Ltd. SERVICES
TELECOMMUNICATION –
Idea Cellular Ltd. SERVICES
TELECOMMUNICATION –
Reliance Communications Ltd. SERVICES
BANKING SECTOR
Table No 3: Price movement of AXIS BANK shares and NIFTY index in 2010
Ho: There is no correlation between price movement of AXIS bank shares and NIFTY
index.
Hl: There is correlation between price movement of AXIS bank shares and NIFTY index
Interpretation: The correlation between AXIS shares and NIFTY index is => r=0.9814, it
means price of AXIS shares and NIFTY index are highly positively correlated.
5700
5400
5100
4800
4500
4200
3900
3600
3300
3000 AXIS
2700 NIFTY
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Table No 4: Price movement of ICICI BANK shares and NIFTY index in 2010
Ho: There is no correlation between price movement of ICICI bank shares and NIFTY
index.
Hl: There is correlation between price movement of ICICI bank shares and NIFTY index
Interpretation: The correlation between ICICI shares and NIFTY index is => r=0.9819, it
means price of ICICI shares and NIFTY index are highly positively correlated.
Table No 5: Price movement of State Bank Of India shares and NIFTY index in 2010
Ho: There is no correlation between price movement of SBI bank shares and NIFTY index.
Hl: There is correlation between price movement of SBI bank shares and NIFTY index
Interpretation: The correlation between State Bank of India shares and NIFTY index is =>
r=0.9624, it means price of State Bank of India shares and NIFTY index are highly
positively correlated.
POWER SECTOR
Table No 6: price movement of NTPC Ltd. shares and NIFTY index in 2010
Ho: There is no correlation between price movement of NTPC LTD shares and NIFTY
index.
Hl: There is correlation between price movement of NTPC LTD shares and NIFTY index
Interpretation: The correlation between NTPC shares and NIFTY index is => r=0.9160, it
means price of NTPC shares and NIFTY index are highly positively correlated.
Table No 7: Price movement of Reliance Power Ltd. shares and NIFTY index in 2010
Ho: There is no correlation between price movement of Reliance Power Ltd shares and
NIFTY index.
Hl: There is correlation between price movement of Reliance Power Ltd shares and NIFTY
index
Interpretation: The correlation between Reliance Power Ltd. shares and NIFTY index is
=> r=0.8428, it means price of Reliance Power Ltd. shares and NIFTY index are highly
positively correlated.
5700
5400
5100
4800
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4200
3900
3600
3300
3000 Rel Power
2700 NIFTY
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Graph No 5: Graph showing price movement of Reliance Power Ltd. Shares and
NIFTY index in 2010
Table No 8: Price movement of Power Grid shares and NIFTY index in 2010
Ho: There is no correlation between price movement of Power Grid shares and NIFTY
index.
Hl: There is correlation between price movement Power Grid shares and NIFTY index
Interpretation: The correlation between Power Grid shares and NIFTY index is =>
r=0.7937, it means price of Power Grid shares and NIFTY index are highly positively
correlated.
5700
5400
5100
4800
4500
4200
3900
3600
3300
3000 Power Grid
2700 NIFTY
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COMPUTERS-SOFTWRAE SECTOR
Table No 9: Price movement of Infosys Technologies Ltd. shares and NIFTY index in
2010
Ho: There is no correlation between price movement of Infosys shares and NIFTY index.
Hl: There is correlation between price movement Infosys shares and NIFTY index
Interpretation: The correlation between Infosys shares and NIFTY index is => r=0.9504, it
means price of Infosys shares and NIFTY index are highly positively correlated.
Table no 10: Price movement of Tata consultancy Services Ltd. shares and NIFTY
index in 2010.
Ho: There is no correlation between price movement of TCS shares and NIFTY index.
Hl: There is correlation between price movement TCS shares and NIFTY index
Interpretation: The correlation between TCS shares and NIFTY index is => r=0.4738, it
means price of TCS shares and NIFTY index are highly positively correlated.
Table No 11:Price movement of Wipro Ltd. shares and NIFTY index in 2010.
Ho: There is no correlation between price movement of Wipro shares and NIFTY index.
Hl: There is correlation between price movement Wipro shares and NIFTY index
Interpretation: The correlation between Wipro shares and NIFTY index is =>
r=0.9515, it means price of Wipro shares and NIFTY index are highly positively
correlated.
PHARMACEUTICALS SECTOR
Table No 12: Price movement of Cipla Ltd. shares and NIFTY index in 2010
Ho: There is no correlation between price movement of Cipla Ltd shares and NIFTY index.
Hl: There is correlation between price movement Cipla Ltd shares and NIFTY index
Interpretation: The correlation between Cipla shares and NIFTY index is => r=0.8890, it
means price of Cipla shares and NIFTY index are highly positively correlated.
Table no 13: Price movement of Ranbaxy Laboratories Ltd. shares and NIFTY index
in 2010
Ho: There is no correlation between price movement of Ranbaxy shares and NIFTY index.
Hl: There is correlation between price movement Ranbaxy shares and NIFTY index
Interpretation: The correlation between Ranbaxy shares and NIFTY index is => r=0.8552,
it means price of Ranbaxy shares and NIFTY index are highly positively correlated.
Table No 14: Price movement of Sun Pharmaceutical Industries Ltd. shares and
NIFTY index in 2010
Ho: There is no correlation between price movement of Sun Pharma shares and NIFTY
index.
Hl: There is correlation between price movement Sun Pharma shares and NIFTY index
Interpretation: The correlation between Sun Pharma shares and NIFTY index is =>
r=0.8323, it means price of Sun Pharma shares and NIFTY index are highly positively
correlated.
TELECOMMUNICATION-SERVICES SECTOR
Table No 15: Price movement of Bharti Airtel Ltd. shares and NIFTY index in 2010
Ho: There is no correlation between price movement of Bharti Airtel shares and NIFTY
index.
Hl: There is correlation between price movement Bharti Airtel shares and NIFTY index
Interpretation: The correlation between Bharti Airtel shares and NIFTY index is => r=
-0.5633, it means price of Bharti Airtel shares and NIFTY index are highly negatively
correlated.
Table No 16: Price movement of Idea Cellular Ltd. shares and NIFTY index in 2010
Ho: There is no correlation between price movement of Idea Cellular shares and NIFTY
index.
Hl: There is correlation between price movement Idea Cellular shares and NIFTY index
Interpretation: The correlation between Idea Cellular shares and NIFTY index is =>
r=0.5734, it means price of Idea Cellular shares and NIFTY index are highly positively
correlated.
Hl: There is correlation between price movement Reliance Communications Ltd. shares and
NIFTY index
Interpretation: The correlation between Reliance Communications Ltd. shares and NIFTY
index is => r=0.4435, it means price of Reliance Communications ltd. shares and NIFTY
index are positively correlated.
ICICI 0.9819
Wipro 0.9515
Infosys 0.9504
NTPC 0.9160
Cipla 0.8890
Ranbaxy 0.8552
The above table shows the correlation in between nifty and selected securities.
Almost all the securities are positively correlated except Bharti Airtel. Among them only
two securities TCS and Reliance Communications have low degree of positive correlation
with nifty and all others have high degree of correlation.
This shows that, with the increase in the value of these securities nifty value also
increases and with the decrease in the value of these securities nifty value also decreases.
But in case of Bharti Airtel this is opposite, with the increase in its share value nifty value
decreases and vice-versa.
4.2 RELATIONSHIP BETWEEN NIFTY AND SELECTED ECONOMIC
FACTORS
Gold price
Table No 19: Weekend figures of nifty and different economic factor for the year 2010.
Nifty
Graph no 16: Weekly fluctuations in Nifty from Jan 2010 to Dec 2010.
Gold Price
Graph no 18: Weekly fluctuations in gold price from Jan 2010 to Dec 2010.
Correlations
Correlations
N 53 53 53 53
N 53 53 53 53
N 53 53 53 53
N 53 53 53 53
Therefore from the above we can interprete that change in FII flows have 21.99%
effect on the nifty values.
To illustrate if net FII investment increases then nifty value may increase by
21.99%.
There is a significant relationship between nifty and gold price at 0.01 level
Therefore from the above we can interprete that change in gold prices have 40.7%
effect on the nifty values.
To illustrate if gold prices increases then nifty value may increase by 40.7%.
There is a significant relationship between nifty and Re-$ Exchange rate at 0.01
level
If it is interpreted further it shows that, when nifty value increases, RE-$ exchange
rate (in absolute figures) decreases. Decrease in Re-$ exchange rate means rupee is
strengthening against the dollar. From this we can say that if rupee strengthens
against the dollar then nifty value increases.
Therefore from the above we can interprete that change in Re-$ exchange rate have
72.59% effect on the nifty value.
To illustrate if Re strengthens against the dollar then the nifty value may increase
by 72.59%.
There is no significant relationship between FII and gold price because significant
level is not less than 0.05.
There is a significant relationship between FII and Re-$ Exchange rate at 0.05 level
There is a significant relationship between gold price and Re-$ Exchange rate at
0.01 level
Regression Analysis
Variables Entered/Removedb
Variables Variables
Model Entered Removed Method
1 RE-$ Ex rate,
FII(week avg), . Enter
Gold pricea
Independent variables: Net FII investment, gold prices, Re-$ exchange rate
Model Summary
ANOVAb
Total 4.0957 52
Sig .000 indicates that model taken for the regression is the correct one.
This indicates that 79% of change in nifty is because of variables Net FII
investment, gold prices and Re-$ exchange rate and remaining 21% is due to other
variables.
Coefficientsa
Standardized
Unstandardized Coefficients Coefficients
Beta figures of Net FII(0.229) and gold price(0.214) indicates that, net FII
investment has high impact on nifty than gold price
FINDINGS
Findings:
RECOMMENDATIONS:
Investor can analyse the performance of securities which are usually traded at high
volume, by observing the market index.
The investor can decide whether to invest in the particular securities by checking the
movement of the market index.
It is recommended that since the Net FII investment has a positive effect on share
prices and nifty the government should encourage their investment which inturn
boost the economy.
Rupee-dollar exchange rate have a positive effect on the share prices and nifty. But
the correlation in between these two is negative. So these factors need to be
considered while making investment in shares.
If FII starts selling shares it is better to exit and vice-versa.
Re-Dollar exchange rate affect the share market the most which inturn affected by
FII flows. So close examination of these factors have to be made while making
investment.
Investors should consider other factors also while investing in the stock market apart
from the macro-economic factors while are discussed in the project work.
CONCLUSION
Conclusion:
From the study conducted, it is found that almost all the share prices show high
positive correlation with the nifty index. Observing over all performances an investor who
wants to buy shares can track the NIFTY index and do so.
The present study examines the relationship between nifty and economic factors.
During the past one year there have been several ups and downs in the Indian stock market
and foreign portfolio investment patterns.
FIIs are more attracted for investing' (they buy heavily). The reverse happens (FIIs
sell heavily) when market capitalization is low. When FII s are net buyers, prices and
trading volume both go up thereby increasing the market capitalization. On the other hand
heavy selling by FIIs brings down the market capitalization by reduced trading volume
and/or share prices.
Likewise gold prices and Re-$ exchange rate have high degree of relationship with
market index nifty. But these factors are also indirectly affected by other factors. So those
factors are also to be considered while making investment.
Finally it can be concluded that volatility of nifty is due to the changes in the share
prices of different securities and movement of different economic factors. So an investor
while making investment has to consider all these factors.
BIBLIOGRAPHY
BOOKS
I.M. PANDAY
PRASANNA CHANDRA
FRANK J. FABOZZI
FUNDAMENTAL OF STATISTICS ––3rd EDITION, HIMALAYA PUBLICATION
S.C. GUPTA
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