Dr. H. S.

Gour Central University

SUMMER INTERNSHIP PROGRAM

A REPORT ON FACTORS AFFECTING EQUITY MARKET

karvy stock broking ltd

A REPORT ON FACTORS AFFECTING EQUITY MARKET

A report submitted in partial fulfillment of the requirement of MBA program of Dr. H. S. Gour Central University
Submitted to:

RESEARCH METHODOLOGY
TITLE OF THE STUDY :-

Factor affecting equity market

DURATION OF THE PROJECT

:-

45 days

OBJECTIVE OF STUDY

To know the basic terminology of stock market. To make the investor aware about the factors which may affect their investment. To get the knowledge of other markets such as commodity market and derivatives. To know the ups and downs of stock market of last two years. To forecast or predict the future trend of stock market which helps in investment. To know the effect of these fluctuation on the Indian economy.

TYPE OF RESEARCH
Research
Research is defined as human activity based on intellectual application in the investigation of matter. The primary purpose for applied research is discovering, interpreting, and the development of methods and systems for the advancement of human knowledge on a wide variety of scientific matters of our world and the universe. Research can use the scientific method, but need not do so. Scientific research relies on the application of the scientific method, a harnessing of curiosity. This research provides scientific information and theories for the explanation of the nature and the properties of the world around us. It makes practical applications possible. Scientific research is funded by public authorities, by charitable organizations and by private groups, including many companies. Scientific research can be subdivided into different classifications according to their academic and application disciplines.9In this project the research type used is descriptive because this research is the most commonly used and the basic reason for carrying out descriptive research is to identify the cause of something that is happening. For instance, this research could be used in order to find out what age group is buying a particular brand of cola, whether a company s market share differs between geographical regions or to discover how many competitors a company has in their marketplace. However, if the research is to return useful results, whoever is conducting the research must comply with strict research requirements in order to obtain the most accurate figures/results possible.

DESCRIPTIVE RESEARCH
Descriptive research is used to obtain information concerning the current status of the phenomena to describe "what exists" with respect to variables or conditions in a situation. The methods involved range from the survey which describes the

status quo, the correlation study which investigates the relationship between variables, to developmental studies which seek to determine changes over time. Descriptive research can be of two types: i. Quantitative descriptive research emphasizes on what is, and makes use of quantitative methods to describe, record, analyze and interpret the present conditions. Qualitative descriptive research also emphasizes on what is, but makes use of non-quantitative research methods in describing the conditions of the present.

SCOPE OF STUDY

Derivatives Sebi Stock exchange Commodity market Stock market Securities Day trading Factor affecting Indian stock market Effect on Indian economy

LIMITATIONS
Limitations are the limiting lines that restrict the work in some way or other. In this research study also there were some limiting factors; some of them are as under:

1. Data Collection:
The most important constraint in this study was data collection as Secondary data was selected for study. Secondary data means data that are already available i.e. they refer to the data which have already been collected and analyzed by someone else.

2. Time Period:
Time period was one of the main factor as only one and half month was allotted and the topic covered in research has a wide scope. So, it was not possible to cover it in a short span of time.

3. Reliability:
The data collected in research work was secondary data, so, this puts a question mark on the reliability of this data, which a very important factor of this study as conclusion has been derived from this secondary data only.

4. Accuracy:
The facts and findings of the data cannot be accepted as accurate to some extent as firstly, secondary data was collected. Secondly, for doing descriptive research time needed to be more, because in short period you cannot cover each point accurately.

INTRODUCTION OF STOCK MARKET

Stock markets refer to a market place where investors can buy or sell stocks. The price at which each selling and buying transaction takes is determined by the market forces (i.e. demand and supply for a particular stock) and the Indian security market has become one of the most dynamic and efficient security markets in Asia today. The Indian market now conforms to international standards in terms of operating efficiency. During the latter half of 19th century, shares of companies used to be floated in India occasionally. There were share brokers in Bombay who assisted in the floatation of shares of companies. A small group of stock brokers in Bombay joined together in 1875 to form an association called Natives Share & Stockbrokers Association. The association drew up codes of conduct for brokerage business and mobilizes private funds for investment in the corporate sectors. It was this association which later became the Bombay Stock Exchange, Mumbai or BSE Later on in 1894 the brokers of Ahmadabad formed the Ahmadabad Stock Exchange, the second stock exchange of the country. During the 1900s Kolkata became another major center of share trading and as a result Kolkata Stock Exchange was formed in 1908. Later on Chennai Stock Exchange was started in 1920. However, by 1923, it ceased to exist. Then the Madras Stock Exchange was started in 1937. Three more stock exchanges were established before independence, at Indore in 1930, at Hyderabad in 1943 and at Delhi in 1947. Thus along with the increase in number of stock exchanges, the number of listed companies and the capital of listed companies grown tremendously after 1985 which results into growth and development of stock market in India.

HISTORY OF SECURITY MARKET

Evolution
Indian Stock Markets are one of the oldest in Asia. Its history dates back to nearly 200 years ago. The earliest records of security dealings in India are meagre and obscure. The East India Company was the dominant institution in those days and business in its loan securities used to be transacted towards the close of the eighteenth century. By 1830's business on corporate stocks and shares in Bank and Cotton presses took place in Bombay. Though the trading list was broader in 1839, there were only half a dozen brokers recognized by banks and merchants during 1840 and 1850. The 1850's witnessed a rapid development of commercial enterprise and brokerage business attracted many men into the field and by 1860 the number of brokers increased into 60. In 1860-61 the American Civil War broke out and cotton supply from United States of Europe was stopped; thus, the 'Share Mania' in India begun. The number of brokers increased to about 200 to 250. However, at the end of the American Civil War, in 1865, a disastrous slump began (for example, Bank of Bombay Share which had touched Rs 2850 could only be sold at Rs. 87). At the end of the American Civil War, the brokers who thrived out of Civil War in 1874, found a place in a street (now appropriately called as Dalal Street) where they would conveniently assemble and transact business. In 1887, they formally established in Bombay, the "Native Share and Stock Brokers' Association" (which is alternatively known as " The Stock Exchange "). In 1895, the Stock Exchange acquired a premise in the same street and it was inaugurated in 1899. Thus, the Stock Exchange at Bombay was consolidated.

Other leading cities in stock market operations

Ahmadabad gained importance next to Bombay with respect to cotton textile industry. After 1880, many mills originated from Ahmadabad and rapidly forged ahead. As new mills were floated, the need for a Stock Exchange at Ahmadabad was realized and in 1894 the brokers formed "The Ahmedabad Share and Stock Brokers' Association". What the cotton textile industry was to Bombay and Ahmedabad, the jute industry was to Calcutta. Also tea and coal industries were the other major industrial groups in Calcutta. After the Share Mania in 1861-65, in the 1870's there was a sharp boom in jute shares, which was followed by a boom in tea shares in the 1880's and 1890's; and a coal boom between 1904 and 1908. On June 1908, some leading brokers formed "The Calcutta Stock Exchange Association". In the beginning of the twentieth century, the industrial revolution was on the way in India with the Swadeshi Movement; and with the inauguration of the Tata Iron and Steel Company Limited in 1907, an important stage in industrial advancement under Indian enterprise was reached. Indian cotton and jute textiles, steel, sugar, paper and flour mills and all companies generally enjoyed phenomenal prosperity, due to the First World War. In 1920, the then demure city of Madras had the maiden thrill of a stock exchange functioning in its midst, under the name and style of "The Madras Stock Exchange" with 100 members. However, when boom faded, the number of members stood reduced from 100 to 3, by 1923, and so it went out of existence. In 1935, the stock market activity improved, especially in South India where there was a rapid increase in the number of textile mills and many plantation companies were floated. In 1937, a stock exchange was once again organized in Madras Madras Stock Exchange Association (Pvt) Limited. (In 1957 the name was changed to Madras Stock Exchange Limited).

Lahore Stock Exchange was formed in 1934 and it had a brief life. It was merged with the Punjab Stock Exchange Limited, which was incorporated in 1936.

Indian Stock Exchanges - An Umbrella Growth

The Second World War broke out in 1939. It gave a sharp boom which was followed by a slump. But, in 1943, the situation changed radically, when India was fully mobilized as a supply base. On account of the restrictive controls on cotton, bullion, seeds and other commodities, those dealing in them found in the stock market as the only outlet for their activities. They were anxious to join the trade and their number was swelled by numerous others. Many new associations were constituted for the purpose and Stock Exchanges in all parts of the country were floated. The Uttar Pradesh Stock Exchange Limited (1940), Nagpur Stock Exchange Limited (1940) and Hyderabad Stock Exchange Limited (1944) were incorporated. In Delhi two stock exchanges - Delhi Stock and Share Brokers' Association Limited and the Delhi Stocks and Shares Exchange Limited - were floated and later in June 1947, amalgamated into the Delhi Stock Exchnage Association Limited.

Post-independence Scenario
Most of the exchanges suffered almost a total eclipse during depression. Lahore Exchange was closed during partition of the country and later migrated to Delhi and merged with Delhi Stock Exchange. Bangalore Stock Exchange Limited was registered in 1957 and recognized in 1963. Most of the other exchanges languished till 1957 when they applied to the Central Government for recognition under the Securities Contracts (Regulation) Act, 1956. Only Bombay, Calcutta, Madras, Ahmedabad, Delhi, Hyderabad and Indore, the well established exchanges, were recognized under the Act. Some of the members of the other Associations were required to be admitted by the recognized stock

exchanges on a concessional basis, but acting on the principle of unitary control, all these pseudo stock exchanges were refused recognition by the Government of India and they thereupon ceased to function. Thus, during early sixties there were eight recognized stock exchanges in India (mentioned above). The number virtually remained unchanged, for nearly two decades. During eighties, however, many stock exchanges were established: Cochin Stock Exchange (1980), Uttar Pradesh Stock Exchange Association Limited (at Kanpur, 1982), and Pune Stock Exchange Limited (1982), Ludhiana Stock Exchange Association Limited (1983), Gauhati Stock Exchange Limited (1984), Kanara Stock Exchange Limited (at Mangalore, 1985), Magadh Stock Exchange Association (at Patna, 1986), Jaipur Stock Exchange Limited (1989), Bhubaneswar Stock Exchange Association Limited (1989), Saurashtra Kutch Stock Exchange Limited (at Rajkot, 1989), Vadodara Stock Exchange Limited (at Baroda, 1990) and recently established exchanges - Coimbatore and Meerut. Thus, at present, there are totally twenty one recognized stock exchanges in India excluding the Over The Counter Exchange of India Limited (OTCEI) and the National Stock Exchange of India Limited (NSEIL). The Table given below portrays the overall growth pattern of Indian stock markets since independence. It is quite evident from the Table that Indian stock markets have not only grown just in number of exchanges, but also in number of listed companies and in capital of listed companies. The remarkable growth after 1985 can be clearly seen from the Table, and this was due to the favouring government policies towards security market industry.

Trading Pattern of the Indian Stock Market

Trading in Indian stock exchanges are limited to listed securities of public limited companies. They are broadly divided into two categories, namely, specified securities (forward list) and non-specified securities (cash list). Equity shares of dividend paying, growth-oriented companies with a paid-up capital of atleast Rs.50 million and a market capitalization of atleast Rs.100 million and having more than

20,000 shareholders are, normally, put in the specified group and the balance in non-specified group. Two types of transactions can be carried out on the Indian stock exchanges: (a) spot delivery transactions "for delivery and payment within the time or on the date stipulated when entering into the contract which shall not be more than 14 days following the date of the contract" : and (b) forward transactions "delivery and payment can be extended by further period of 14 days each so that the overall period does not exceed 90 days from the date of the contract". The latter is permitted only in the case of specified shares. The brokers who carry over the outstandings pay carry over charges (cantango or backwardation) which are usually determined by the rates of interest prevailing. A member broker in an Indian stock exchange can act as an agent, buy and sell securities for his clients on a commission basis and also can act as a trader or dealer as a principal, buy and sell securities on his own account and risk, in contrast with the practice prevailing on New York and London Stock Exchanges, where a member can act as a jobber or a broker only. The nature of trading on Indian Stock Exchanges are that of age old conventional style of face-to-face trading with bids and offers being made by open outcry. However, there is a great amount of effort to modernize the Indian stock exchanges in the very recent times.

Over The Counter Exchange of India (OTCEI)

The traditional trading mechanism prevailed in the Indian stock markets gave way to many functional inefficiencies, such as, absence of liquidity, lack of transparency, unduly long settlement periods and benami transactions, which affected the small investors to a great extent. To provide improved services to investors, the country's first ringless, scripless, electronic stock exchange - OTCEI was created in 1992 by country's premier financial institutions - Unit Trust of India, Industrial Credit and Investment Corporation of India, Industrial Development

Bank of India, SBI Capital Markets, Industrial Finance Corporation of India, General Insurance Corporation and its subsidiaries and CanBank Financial Services. Trading at OTCEI is done over the centres spread across the country. Securities traded on the OTCEI are classified into:
y

Listed Securities - The shares and debentures of the companies listed on the OTC can be bought or sold at any OTC counter all over the country and they should not be listed anywhere else Permitted Securities - Certain shares and debentures listed on other exchanges and units of mutual funds are allowed to be traded Initiated debentures - Any equity holding atleast one lakh debentures of a particular scrip can offer them for trading on the OTC.

OTC has a unique feature of trading compared to other traditional exchanges. That is, certificates of listed securities and initiated debentures are not traded at OTC. The original certificate will be safely with the custodian. But, a counter receipt is generated out at the counter which substitutes the share certificate and is used for all transactions. In the case of permitted securities, the system is similar to a traditional stock exchange. The difference is that the delivery and payment procedure will be completed within 14 days. Compared to the traditional Exchanges, OTC Exchange network has the following advantages:
y

OTCEI has widely dispersed trading mechanism across the country which provides greater liquidity and lesser risk of intermediary charges. Greater transparency and accuracy of prices is obtained due to the screenbased scripless trading. Since the exact price of the transaction is shown on the computer screen, the investor gets to know the exact price at which s/he is trading.

y y

Faster settlement and transfer process compared to other exchanges. In the case of an OTC issue (new issue), the allotment procedure is completed in a month and trading commences after a month of the issue closure, whereas it takes a longer period for the same with respect to other exchanges.

Thus, with the superior trading mechanism coupled with information transparency investors are gradually becoming aware of the manifold advantages of the OTCEI.

National Stock Exchange (NSE)

With the liberalization of the Indian economy, it was found inevitable to lift the Indian stock market trading system on par with the international standards. On the basis of the recommendations of high powered Pherwani Committee, the National Stock Exchange was incorporated in 1992 by Industrial Development Bank of India, Industrial Credit and Investment Corporation of India, Industrial Finance Corporation of India, all Insurance Corporations, selected commercial banks and others. Trading at NSE can be classified under two broad categories: (a) Wholesale debt market and (b) Capital market. Wholesale debt market operations are similar to money market operations institutions and corporate bodies enter into high value transactions in financial instruments such as government securities, treasury bills, public sector unit bonds, commercial paper, certificate of deposit, etc. There are two kinds of players in NSE: (a) trading members and (b) participants.

Recognized members of NSE are called trading members who trade on behalf of themselves and their clients. Participants include trading members and large players like banks who take direct settlement responsibility. Trading at NSE takes place through a fully automated screen-based trading mechanism which adopts the principle of an order-driven market. Trading members can stay at their offices and execute the trading, since they are linked through a communication network. The prices at which the buyer and seller are willing to transact will appear on the screen. When the prices match the transaction will be completed and a confirmation slip will be printed at the office of the trading member. NSE has several advantages over the traditional trading exchanges. They are as follows:
y y

NSE brings an integrated stock market trading network across the nation. Investors can trade at the same price from anywhere in the country since inter-market operations are streamlined coupled with the countrywide access to the securities. Delays in communication, late payments and the malpractice s prevailing in the traditional trading mechanism can be done away with greater operational efficiency and informational transparency in the stock market operations, with the support of total computerized network.

Unless stock markets provide professionalised service, small investors and foreign investors will not be interested in capital market operations. And capital market being one of the major source of long-term finance for industrial projects, India cannot afford to damage the capital market path. In this regard NSE gains vital importance in the Indian capital market system.

Bombay stock exchange [BSE]

The Bombay Stock Exchange (BSE) is known as the oldest exchange in Asia. It traces its history to the 1850s, when stockbrokers would gather under banyan

trees in front of Mumbai s Town Hall. The location of these meetings changed many times, as the number of brokers constantly increased. The group eventually moved to Dalal Street in 1874 and in 1875 became an official organization known as The Native Share & Stock Brokers Association . In 1956, the BSE became the first stock exchange to be recognized by the Indian Government under the Securities Contracts Regulation Act.

The Bombay Stock Exchange developed the BSE Sensex in 1986, giving the BSE a means to measure overall performance of the exchange. In 2000 the BSE used this index to open its derivatives market, trading Sensex futures contracts. The development of Sensex options along with equity derivatives followed in 2001 and 2002, expanding the BSE s trading platform.

Historically an open-cry floor trading exchange, the Bombay Stock Exchange switched to an electronic trading system in 1995. It took the exchange only fifty days to make this transition.

TYPES OF MARKET
There are two types of market:y Primary market y Secondary market.

Primary market
The primary market is that part of the capital market that deals with the issuance of new securities. Companies, governments or public sector institutions can obtain funding through the sale of a new stock or bond issue. This is typically done through a syndicate of securities dealers. The process of selling new issues to investors is called underwriting. In the case of a new stock issue, this sale is an initial public offering (IPO). Dealers earn a commission that is built into the price of

the security offering, though it can be found in the prospectus. Primary markets create long term instruments through which corporate entities borrow from capital market. Features of primary markets are:
y

This is the market for new long term equity capital. The primary market is the market where the securities are sold for the first time. Therefore it is also called the new issue market (NIM). In a primary issue, the securities are issued by the company directly to investors. The company receives the money and issues new security certificates to the investors. Primary issues are used by companies for the purpose of setting up new business or for expanding or modernizing the existing business. The primary market performs the crucial function of facilitating capital formation in the economy. The new issue market does not include certain other sources of new long term external finance, such as loans from financial institutions. Borrowers in the new issue market may be raising capital for converting private capital into public capital; this is known as "going public." The financial assets sold can only be redeemed by the original holder.

Methods of issuing securities in the primary market are:

y y y

Initial public offering; Rights issue (for existing companies); Preferential issue.

Secondary market
The secondary market, also called aftermarket, is the financial market where previously issued securities and financial instruments such as stock, bonds, options, and futures are bought and sold. Another frequent usage of "secondary market" is to refer to loans which are sold by a mortgage bank to investors. The term "secondary market" is also used to refer to the market for any used goods or assets, or an alternative use for an existing product or asset where the customer base is the second market (for example, corn has been traditionally used primarily for food production and feedstock, but a "second" or "third" market has developed for use in ethanol production). With primary issuances of securities or financial instruments, or the primary market, investors purchase these securities directly from issuers such as corporations issuing shares in an IPO or private placement, or directly from the federal government in the case of treasuries. After the initial issuance, investors can purchase from other investors in the secondary market. The secondary market for a variety of assets can vary from loans to stocks, from fragmented to centralized, and from illiquid to very liquid. The major stock exchanges are the most visible example of liquid secondary markets - in this case, for stocks of publicly traded companies. Exchanges such as the New York Stock Exchange, Nasdaq and the American Stock Exchange provide a centralized, liquid secondary market for the investors who own stocks that trade on those exchanges. Most bonds and structured products trade over the counter, or by phoning the bond desk of one s broker-dealer. Loans sometimes trade online using a Loan Exchange.

Function of security market

Secondary marketing is vital to an efficient and modern capital market. In the secondary market, securities are sold by and transferred from one investor or

speculator to another. It is therefore important that the secondary market be highly liquid (originally, the only way to create this liquidity was for investors and speculators to meet at a fixed place regularly; this is how stock exchanges originated, see History of the Stock Exchange). As a general rule, the greater the number of investors that participate in a given marketplace, and the greater the centralization of that marketplace, the more liquid the market. Fundamentally, secondary markets mesh the investor's preference for liquidity (i.e., the investor's desire not to tie up his or her money for a long period of time, in case the investor needs it to deal with unforeseen circumstances) with the capital user's preference to be able to use the capital for an extended period of time. Accurate share price allocates scarce capital more efficiently when new projects are financed through a new primary market offering, but accuracy may also matter in the secondary market because: 1) price accuracy can reduce the agency costs of management, and make hostile takeover a less risky proposition and thus move capital into the hands of better managers, and 2) accurate share price aids the efficient allocation of debt finance whether debt offerings or institutional borrowing.

Various factors affecting stocks market

Many kinds of factors affect the stock market. Social unrest can cause the market to drop, while a company discovering a new source of renewable energy can cause stock market prices to soar. Several economic factors affect the stock market that every investor should be aware of before getting involved in market investing.

Inflation and Deflation

Inflation can have an adverse affect on the stock market, according to the article titled "Forces that Move Stock Prices" as published on the financial website Investopedia. Inflation is the rate at which the price of goods and services increases. It is the result of several factors, including a rise in the cost of

manufacturing, transporting and selling goods. When inflation is at a low rate, the stock market responds with a surge in selling. High inflation causes investors to think that companies may hold back on spending; this causes an across the board decrease in revenue and the higher cost of goods coupled with the drop in revenue causes the stock market to drop. Deflation is when the cost of goods drops. While deflation sounds like it should be welcomed by investors, it actually causes a drop in the stock market because investors perceive deflation as the result of a weak economy.

. .

Demand and Supply

One of the major factors affecting stock price is demand and supply. The trend of the stock market trading directly affects the price. When people are buying more

stocks, then the price of that particular stock increases. On the other hand if people are selling more stocks, then the price of that stock falls.

Earning/Price Ratio
Another important factor affecting stock price is the earning/price ratio. This gives you a fair idea of a company s share price when it is compared to its earnings. The stock becomes undervalued if the price of the share is much lower than the earnings of a company. But if this is the case, then it has the potential to rise in the near future. The stock becomes overvalued if the price is much higher than the actual earning

Market Cap
Never try to guess the worth of a company simply by comparing the price of the stock. You should always keep in mind that it is not the stock but the market capitalization of the company that determines the worth of the company. So market cap is another factor that affects stock price.

Foreign Markets
Economic trends in foreign markets can have an effect on the stock market in the United States, according to the article titled "Riding the Economic Roller Coaster" published in "Inc." magazine. When the economies in foreign countries are down, American companies cannot sell as many goods overseas as they used to. This causes a drop in revenue, and that can show up as a drop in the stock market. Foreign stock exchanges also have an effect on the American stock market. If foreign exchanges start to fail or experience sharp drops, then that kind of activity can cause American investors to anticipate a ripple effect, resulting in a drop in the United States stock exchange.

Interest Rates
Interest rates as established by the Federal Reserve Board and individual banks can have an affect on the stock market, according to an informational pamphlet titled "What Drives Stock Prices" published by the New York Stock Exchange. Higher interest rates mean that money becomes more expensive to borrow. To compensate for the higher interest costs, companies may have to cut back spending or lay off workers. Higher interest rates also mean that a company's

money cannot borrow as much as it used to, and this has an adverse affect on company earnings. All of this adds up to a drop in the stock market

News
When you get positive news about a company then it can increase the buying interest in the market. On the other hand, when there is a negative press release, it can ruin the prospect of a stock. In this case you should remember that news should not matter much but the overall performance of the company matters more. So, news is another factor affecting stock price.

For example recent news of L&T:-

L&T builds on strong flow of orders

Jun 24, 2011 11:27 The company announced the new orders during trading hours today, 24 June 2011.Meanwhile, the BSE Sensex was up 249.93 points, or 1.41%, to 17,977.42.On BSE, 49,323 shares were traded in the counter as against an average daily volume of 2.83 lakh shares in the past one quarter. The stock hit a high of Rs 1699 and a low of Rs 1675.65 so far during the day. The stock had hit a 52-week high of Rs 2212 on 4 November 2010 and a 52-week low of Rs 1463.05 on 10 February 2011. The large-cap stock had outperformed the market over the past one month till 23 June 2011, gaining 3.43% compared with the Sensex's 1.48% fall. The scrip had also outperformed the market in past one quarter, rising 8.84% as against 2.63% decline in the Sensex. Larsen & Toubro, India's biggest engineering & construction firm in terms of outstanding order book, has equity capital of Rs 122 crore. Face value per share is Rs 2. Larsen & Toubro (L&T) said a major portion of the orders bagged by the metallurgical & material handling unit pertains to the Kalinga Nagar project of Tata

Steel in Orissa. L&T will construct the entire coke oven and by-product plant. It will also provide detailed engineering and supply of balance of plant. L&T has also secured an order worth Rs 240 crore from Indiabulls Power for civil & structural works for coal handling plants & ash handling plant for Amravati & Nashik thermal power projects in Maharashtra. The company's bulk material handling business unit will execute this order. The project is to be executed within 23 months. L&T had on Wednesday, 22 June 2011, said its building & factories unit, a part of construction division of the company, secured orders aggregating Rs 4100 crore in Q1 June 2011 for construction of airport expansion, hospital, commercial, residential buildings including factories. On the same day, the company's special purpose vehicle (SPV) signed a Rs 2600-crore concession agreement with National Highways Authority of India for four laning road project in the state of Rajasthan. The project is scheduled to be executed within a period of 30 months. With this project, L&T currently has 16 projects in its BOT road portfolio with a total project book size of Rs 15800 crore, L&T said. L&T's net profit rose 17.3% to Rs 1686.21 crore on 12.7% increase in net sales to Rs 15078.39 crore in Q4 March 2011 over Q4 March 2010. L&T said at the time of announcing Q4 March 2011 results last month that the completion of several expansion projects underway will strengthen its position of pre-eminence in its various businesses. The company also said that intense competition and spiraling input costs may exert some pressure on the operating margin going forward. L&T said it is well positioned to sustain the revenue growth momentum in the medium term given its excellent execution capabilities, presence in diverse sectors of the economy, a healthy order book and leadership position in most of the sectors where it operates. As on 31 March 2011, L&T's order book stood at Rs 130217 crore, which is almost 3 times its net sales of Rs 43495.93 crore for the year ended March 2011, giving strong revenue visibility. The company's order inflow rose 27% in Q4 March 2011.

Affect Of Rising Price of Crude Oil on Stock Market

For the last few years it has been seen time and again that increase in the price of the crude oil had a direct impact on the stock market. Though it is hard to imagine buy it is fact that a rise in the oil price has negative effect on the stock prices at the stock exchanges all over the world. The main reason behind this is the fear of the investors that the profit margin of the companies will decrease because of the increase in the oil price. As an increase in the oil price directly increases the operational cost, fuel cost, transportation cost

of the companies, it is quite natural that the profit margin of these companies will decrease. This is the reason that the buyers become susceptible about the future of the companies that are hugely dependent on oil. This uncertainty restricts the buyers to invest in these companies and as a result the price of the stocks falls that ultimately has a negative effect on the overall market scenario. But this phase is temporary as the companies adjust in the price level to make up for the increased price in the oil and maintain the profit margin. All said and done this fear for the fall in the profit margin is not practical according to the theory. In practice the effect of the price increase in the profit margin of the companies takes time. Before that could actually happen the companies take adequate measure to avoid the loss. Therefore, the influence of the rise in the price of crude oil on the stock market is basically triggered of the panic of investors rather than actual impact. But still it is always wise to wait and watch after a rise in the oil prices takes place to make investments. In this phase it comparative safer to invest in sectors that are not really dependent on oil such as software industry, banking sector, financial companies.

Role of Volume In Stock Market

Volume of a stock is the number of shares that are traded in the stock exchange within a given period of time. Volume plays an important role in the buying and selling of the stocks. In fact it is the second most important parameter to judge the potential of a stock after the price level. Most investors combine the volume with the price of the stock to take the buying and selling decision. Let us see why volume of the stock is so important in judging the potential of a stock.

Volume reveals the numbers of shares traded in the market. Investors compare the volume of a stock on particular day with the average trading volume for that particular stock. For example if the price of a particular stock has risen to a significant level and broken an upper limit, it is generally thought that the stock will rise further. But if the volume of the stock is way too lower than the average trading volume that means the stock cannot go further up. This is simply because

as the volume indicates, there is not much buyer for that stock in the market. Especially the bigger buyers like mutual funds, foreign investors and financial organizations are not trading in that stock. There may be so many reasons behind this. The buyers can be susceptible about the stock and resign from buying that particular stock even if the price is increasing. This typical situation when the price is rising above average and the volume is lower than the average, might create panic among the investors and they can sell the stock in fear of downfall, that will result in further fall in the price of the stock. This is also true when the price of a stock is falling the volume is lower than the average. Therefore, it is always wise to compare the trading volume along with the price level to decide whether to buy a stock or not.

Economic Factors That Affect the Stock Market