EXECUTIVE SUMMARY: This study investigates volatility in Indian stock markets.

Specifically, it looks for the possible volatility transmission channel for Indian stock market from the Indian sectoral developments as well as developments in the global market. SENSEX is used as the Indian market index and its response to overseas market indices like NASADQ, FTSE, SGX, NYSE; further the relationship between SENSEX and domestic sectoral indices have also been examined. Investors experience lot of fluctuations in their stock, once the sensex falls or dips by few points is it advisable for the investor to hold or sell their stocks within the next 11 days after the sensex has fallen, this issue has been entailed.

INTRODUCTION: BSE Limited is the oldest stock exchange in Asia What is now popularly known as the BSE was established as "The Native Share & Stock Brokers' Association" in 1875.Over the past 135 years, BSE has facilitated the growth of the Indian corporate sector by providing it with an efficient capital raising platform.

Today, BSE is the world's number 1 exchange in the world in terms of the number of listed companies (over 4900). It is the world's 5th most active in terms of number of transactions handled through its electronic trading system. And it is in the top ten of global exchanges in terms of the market capitalization of its listed companies (as of December 31, 2009). The companies listed on BSE command a total market capitalization of USD Trillion 1.28 as of Feb, 2010.

BSE is the first exchange in India and the second in the world to obtain an ISO 9001:2000 certification. It is also the first Exchange in the country and second in the world to receive Information Security Management System Standard BS 7799-2-2002 certification for its BSE On-Line trading System (BOLT). Presently, we are ISO 27001:2005 certified, which is a ISO version of BS 7799 for Information Security.

The BSE Index, SENSEX, is India's first and most popular Stock Market benchmark index. Exchange traded funds (ETF) on SENSEX, are listed on BSE and in Hong Kong. Futures and options on the index are also traded at BSE.

The security market has two interdependent and inseparable segments, the new issues (Primary market) and the stock (secondary market). The primary market provides the

channel for sale of new securities while secondary market deals in securities previously issued. There are so many script or stock traded in Indian stock market and all stocks are distributes in Small cap, Mid cap, Sensex, Nifty 50, Bse 200, Bse 500 and Bse 100.

BSE INDICES:

For the premier stock exchange that pioneered the securities transaction business in India, over a century of experience is a proud achievement. A lot has changed since 1875 when 318 persons by paying a then princely amount of Re. 1, became members of what today is called BSE Limited

Over the decades, the stock market in the country has passed through good and bad periods. The journey in the 20th century has not been an easy one. Till the decade of eighties, there was no measure or scale that could precisely measure the various ups and downs in the Indian stock market. BSE, in 1986, came out with a Stock Index-SENSEX- that subsequently became the barometer of the Indian stock market.

The launch of SENSEX in 1986 was later followed up in January 1989 by introduction of BSE National Index (Base: 1983-84 = 100). It comprised 100 stocks listed at five major stock exchanges in India - Mumbai, Calcutta, Delhi, Ahmedabad and Madras. The BSE National Index was renamed BSE-100 Index from October 14, 1996 and since then, it is being calculated taking into consideration only the prices of stocks listed at BSE. BSE launched the dollar-linked version of BSE-100 index on May 22, 2006.

BSE disseminates information on the Price-Earnings Ratio, the Price to Book Value Ratio and the Dividend Yield Percentage on day-to-day basis of all its major indices.

The values of all BSE indices are updated on real time basis during market hours and displayed through the BOLT system, BSE website and news wire agencies.

All BSE Indices are reviewed periodically by the BSE Index Committee. This Committee which comprises eminent independent finance professionals frames the broad policy guidelines for the development and maintenance of all BSE indices. The BSE Index Cell carries out the day-to-day maintenance of all indices and conducts research on development of new indices.

Vision "Emerge as the premier Indian stock exchange by establishing global benchmarks"

SWOT ANALYSIS Strengths:

All the branches are interconnected which give the unique facility of anywhere investment.

All operations of the tradind are carried on with the help of computers thus transaction are carried with greater efficiency.

High number of executives which make the work of customers very convenient. Share market funds provide same-day liquidity, allowing investors to redeem their shares.

Corporate cash managers must have daily liquidity in order to manage accounts payable and payrolls.

Share market funds offer investors market-based yields.

Share market funds provide a low-cost cash management vehicle for retail and institutional investors. In part, stock market funds achieve low cost through economies of scalepooling the investments of hundreds to thousands of retail investors, sometimes with the large balances of institutional investors.

Weakness:

No guarantee of and investors are explicitly warned that money market funds seek to offer investors return of principal may not always be possible.

Less awareness among general masses about the different services provided by agencies.

Dissatisfaction among customers due to improper and lack of after investing in stock market services.

Inflation and Deflation rate is high. Lot of black money deposit in foreign banks. India too much depend on foreign direct investment (FDI). India is facing financial pain despite healthy banks.

Opportunities:

Opportunity to remind funds that purchases of illiquid securities. This could give the Board the opportunity to question the most knowledgeable people directly and to confirm that the Adviser is dedicating sufficient resources to credit analysis.

The recent market events, although painful, afford the money market fund industry the opportunity to assess the regulations that govern its operations, and the more

stringent practices adopted by some money market funds that go beyond those regulations.

Threats:

Reorganization of agencies of stock market structure. The all agency have started to redefine their objective to attract customers attention.

A few stock markets have been permitted to increase their number of branches and its entry has taken directly solve out the problems of investors.

NEED FOR THIS STUDY

1. The study covers BSE index with specific reference to market condition. 2. The study shows the profit enhancement and risk reduction in capital market. 3. The study shows the Volatility calculation for the purpose of measuring the market fluctuation. 4. The study stated that how the BSE index react with other countries indices like NASDQ, NYSE ,SGX, etc. 5. The study also shows that how the companys share price react with regardonices. 6. The study shows that how the listed companys share affected by its to regarding sectorial indices.

OBJECTIVES:

A. To measure market movements. B. Benchmark for funds performance.

C. To understand the supply and demand which affect the market and create the volatility in the Market. D. Bullish and Bearish factors affecting the stock market.

DEFINITION: Volatility, It is a very small word but its meaning was very big, it means a fluctuation. The fluctuation is not one side movement it can be go anywhere either bullish, bearish or flat. Here we discuss about the Volatility in the Indian Stock Market. Volatility is the word define itself a fluctuation in the capital market.

THE ANALYSIS: The study selects BSE SENSEX as the market index. BSE SENSEX is a "Market Capitalization-Weighted" index of 30 stocks representing a sample of large, well-established and financially sound companies in India. Other sectors of the economy namely, capital goods sector, consumer durables, fast moving consumer goods sector, healthcare sector and information technology sector have been selected to test for the existence of dynamic interlinkage within the economy.

These sectors are represented by sectoral indices such as BSECG, BSECD, BSEFMCG, BSEHC and BSEIT, etc introduced by the Mumbai stock exchange. All these sectorial indices are calculated and displayed on the BOLT system on the real time basis. To test for the existence of dynamic inter-linkage among the different markets, this study will use some selected market indexes of the world. It takes NASDAQ composite and NYSE composite from US, SGX index from Singapore stock exchange, FTSE from London Stock Exchange and SZSE from China.

Indices from developed financial market have been selected to trace out developed country impact on Indian stock market. The study selects a period of 5 year from 2006 July to 2011 June . Although Indian economy has begun to open up itself since 1991, better trade and financial integration have been made possible over this period, particularly after the information and communication technology revolution. The study uses daily price data for all these indices. Data for each countrys stock index have been collected from the official website of that countrys stock exchange. BSE market index from 2006 July to 2011 June , increasing and decreasing range is presented below: Increasing Range

Year 2006 2007 2008 2009 2010 2011

0-200 7 96 48 79 105 37

200-300 7 24 19 25 17 11

300-400 3 11 16 14 11 4

400-500 -4 11 12 3 3

Above 500 -8 17 5 1 2

Based on this data every year the SENSEX points have been varying, may be increase or decrease. The increasing trend has been from 0-200 points,200 to 300 points,300 to 400 points , 400 to 500 points and more than 500 points. It has been represented in the above table.

Decreasing trend Year 2006 2007 2008 2009 2010 2011 0 to -200 39 75 56 66 89 44 -200 to 300 3 11 21 21 13 12 -300 to -400 3 07 20 13 05 06 -400 to -500 2 04 11 05 08 04 Less -500 08 28 03 01

The decreasing trend has been from 0 to-200 points, -200 to -300 points , -300 to -400 points , -400 to -500 points and more than 500 points. It has been represented in the above table.

CORRELATION: Indian stock market indices (BSE 30) have been correlated with global market indices like NASDQ, NYSE, SGX, FTSE and SZSE . The correlation result shows that correlation between BSE and NASDAQ is 0.716, BSE and SGX is 0.701, BSE and FTSE is 0.466,BSE and NYSE is 0.361,BSE and SZSE is 0.702 .This reveals us the positive correlated indices of the global market along with Indian stock market (BSE) indices, that is NASDAQ, SGX, FTSE, NYSE and SZSE.

Indian stock market indices (BSE 30) have been correlated along with global market indices NASDAQ, NYSE, SGX, SZSE and FTSE, based on their days closing points of various indices for the last 5 years.

SGX 0.701

FTSE 0.466

NYSE 0.361

NASDAQ 0.716

SZSE 0.702

SGX, SZSE and NASDAQ are very much positively correlated with BSE indices, which implies that they a greater bearing on the Indian stock market (BSE) indices. The change that take place in SGX, SZSE and NASDAQ, be it increase or decrease happen the same in BSE indices.

Based on the analysis of the data, monthly fluctuation in global indices along with Sensex has been identified. The NYSE and SZSE has been negatively correlated for one month and positively correlated for 5 months with Sensex during the year 2006 (Jul to Dec). FTSE, SGX and NASDAQ has been positively correlated for six month with Sensex during the year 2006 (Jul to Dec). FTSE and NYSE has been negatively correlated for one month and positively correlated for 11 months with Sensex during the year 2007. SGX and NASDAQ has been negatively correlated for two month and positively correlated for 10 months with Sensex during the year 2007. SZSE has been negatively correlated for 3 month and positively correlated for 9 months with Sensex during the year 2007.

SZSE and NASDAQ has been negatively correlated for two month and positively correlated for 10 months with Sensex during the year 2008. NYSE has been negatively correlated for one month and positively correlated for 11 months with Sensex during the year 2008. SGX and FTSE are positively correlated with Sensex for the whole year (12 months).

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NASDAQ, NYSE and FTSE are positively correlated with Sensex for the whole year (12 months). SGX has been negatively correlated for one month and positively correlated for 11 months with Sensex during the year 2009. SZSE has been negatively correlated for 3 month and positively correlated for 9 months with Sensex during the year 2009.

NYSE and NASDAQ has been negatively correlated for 3 month and positively correlated for 9 months with Sensex during the year 2010. SGX has been negatively correlated for 4 months and positively correlated for 8 months with Sensex during the year 2010. FTSE has been negatively correlated for two month and positively correlated for 10 months with Sensex during the year 2010. SZSE has been negatively correlated for 5 month and positively correlated for 7 months with Sensex during the year 2010.

SGX and FTSE are positively correlated with Sensex for the year 2011 (Jan to Jun ). NYSE and SZSE has been negatively correlated for one month and positively correlated for 4 months with Sensex during the year 2011(6 months). NASDAQ has been negatively correlated for 2 month and positively correlated for 4 months with Sensex during the year 2011.

SECTORIAL INDEX WITH THEIR RELATED STOCK

Among the BSE 30 companies, samples are taken based on the consistency of the stock after listing. Seventeen stocks have been taken and correlated with the relevant sector.

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THE RESULTS OF THE ABOVE ARE AS FOLLOWS:

In power sector, NTCP has been considered, which tell us that correlation of this company along with the power indices is 0.765, that is positively correlated . NTCP have higher impact because of the fluctuation in power indices that is the increasing or decreasing trend in the power indices are very much reflected in the stock quotes of NTCP.

In Oil and gas sector Reliance industries share prices are highly correlated of 0.765 but that of ONGC are very low correlated of 0.356.

In the way of TECNK sector Airtel ltd is positively correlated with their sectorial indices of 0.535.

In BSEIT three companies Infosys, TCS and Wipro have been considered ,which tell that correlation of these three companies along with the BSEIT indices are 0.695, 0.550 and 0.700 and respectively, that is positively correlated . Wipro ltd and Infosys ltd have higher impact because of the fluctuation in BSEIT indices , that is the increasing or decreasing trend in the BSEIT indices are very much reflected in the stock quotes of Wipro ltd and Infosys ltd. In BSE BANKEX four banks HDFC bank, HDFC, ICICI and SBI have been considered, which tell us that correlation of these four bank along with the BANKEX indices are 0.818, 0.367 ,0.926 and 0.613 respectively, that is positively correlated . HDFC and ICICI have higher impact because of the fluctuation in BANKEX indices , that is the increasing or decreasing trend in the BANKEX indices are very much reflected in the stock quotes of HDFC and ICICI BANK Ltd.

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In BSECG two companies BHEL ltd and L&T ltd have been considered, which tell that correlation of these two companies along with the BSECG indices are. 0.652, 0.653 respectively that is positively correlated. BHEL and L&T ltd has higher impact because of the fluctuation in BSECG indices , that is the increasing or decreasing trend in the BSECG indices are very much reflected in the stock quotes of L&T ltd and BHEL ltd. In METAL sector TATA steel and Hindalco ltd have been considered, which tell that correlation of these two companies along with metal indices are 0.897 and 0.806 respectively that is positively correlated. And finally considering BSEAUTO four companies TATA MOTOR, MARUTI SUZUKI have been considered ,which tell us that correlation of these two companies along with the BSEAUTO indices are 0.7488 and 0.5267 respectively, that is positively correlated TATA MOTOR ,MARUTI SUZUKI have higher impact because of the fluctuation in BSEIT indices , that is the increasing or decreasing trend in the BSEAUTO indices are very much reflected in the stock quotes of TATA MOTOR and MARUTI SUZUKI. PRICING ANALYSIS When the event of Sensex falling between 200 to 300 points occurs each shares get affected in various manner. Then the fall in Sensex points between 200 to 300 is calculated for the next 11 days and its average in percentage is also looked upon. Based on the analysis the results tell us that during 2006,2007,2008,2009,2010 and 2011 when the Sensex fell between 200 to 300 points on a particular day, In the next 11 days stock quotes have been negative to the extent of 49%,46%,53%,45%,47% and 47% respectively and the stock quotes have been positive to the extent of 51%,54%,47%,55%,53% and 53% respectively. The overall average of the stock quotes for the past 5 years has been

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negative to the extent of 48% and positive to the extent of 52%.these results are based on 17 stocks which have been consistently performing. When the Sensex fell between 300 to 400 points on a particular day during 2006,2007,2008,2009,2010 and 2011 , In the next 11 days stock quotes have been negative to the extent of 50%,53%,58%,46%,47% and 55% respectively and the stock quotes have been positive to the extent of 50%,47%,42%,54%,53% and 45% respectively. The overall average of the stock quotes for the past 5 years has been negative to the extent of 51% and positive to the extent of 49%. When the Sensex rallied between 400 to 500 points on a particular day during 2006,2007,2008,2009,2010 and 2011 , In the next 11 days stock quotes have been negative to the extent of 48%,42%,56%,41%,48% and 54% respectively and the stock quotes have been positive to the extent of 52%,58%,44%,59%,52% and 46% respectively. The overall average of the stock quotes for the past 5 years has been negative to the extent of 48% and positive to the extent of 52%. When the Sensex collapsed more than 500 points on a particular day during

2007,2008,2009 and 2011 , In the next 11 days stock quotes have been negative to the extent of 45%,51%,49% and 47% respectively and the stock quotes have been positive to the extent of 55%,49%,51% and 53%respectively. The overall average of the stock quotes for the past 5 years has been negative to the extent of 48% and positive to the extent of 52%.Sensex has not fallen more than 500 points a day during the years 2006 and 2010. Based on the analysis the results tell us that during 2006,2007,2008,2009,2010 and 2011 when the Sensex climbed between 200 to 300 points on a particular day, In the next 11 days stock quotes have been negative to the extent of 46%,47%,56%,50%,46% and 52% respectively and the stock quotes have been positive to the extent of 54%,53%,44%,50%,54%

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and 48% respectively. The overall average of the stock quotes for the past 5 years has been negative to the extent of 50% and positive to the extent of 50%.these results are based on 17 stocks which have been consistently performing. When the Sensex jumped up 300 to 400 points on a particular day during 2006,2007,2008,2009,2010 and 2011 , In the next 11 days stock quotes have been negative to the extent of 51%,49%,55%,46%,46% and 60% respectively and the stock quotes have been positive to the extent of 49%,51%,45%,54%,54% and 40% respectively. The overall average of the stock quotes for the past 5 years has been negative to the extent of 51% and positive to the extent of 49%. When the Sensex growth a day was between 400 to 500 points during

2007,2008,2009,2010 and 2011 , In the next 11 days stock quotes have been negative to the extent of 48%,52%,47%,50% and 52% respectively and the stock quotes have been positive to the extent of 52%,48%,53%,50% and 48% respectively. The overall average of the stock quotes for the past 5 years has been negative to the extent of 50% and positive to the extent of 50%. Sensex has not increased between 400 to 500 points a day during the year 2006. When the Sensex bombarded more than 500 points on a particular day during 2007,2008,2009 and 2011 , In the next 11 days stock quotes have been negative to the extent of 49%,54%,53%,44% and 63% respectively and the stock quotes have been positive to the extent of 51%,46%,47% ,56% and 37%respectively. The overall average of the stock quotes for the past 5 years has been negative to the extent of 53% and positive to the extent of 47%.Sensex has not grown more than 500 points a day during the years 2006.

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Conclusion: Sensex affected by global cues, SGX, SZSE , NASDAQ ,FTSE and NYSE, all have the most bearing on the Sensex in the above mentioned order . This is substantiated by finding of correlation percentage. The percentage of correlation of global indices SGX, FTSE, NYSE, NASDAQ are above 80 (90%,90%, 88%, and 85% ) respectively, whereas SZSE is less than 80 (76%). These percentages have been calculated on an monthly basis.BSE Sensex is now more impacted by the movements in SGX, SZSE and FTSE rather than the movements of NASDAQ and NYSE. This statement describes the weakening of US stock markets and tells that Sensex which was once more based on US stock markets is now based on European and Asian stock market. Sectorial indices play a vital role in fluctuation of share prices. When the sectorial indices come down their related company share price also come down in the market. Capital sectorial indices fluctuation is highly reflected in its related company stock price. Based on the correlation results more or less 9 companies are very much positively correlated with their sectorial indices out of 17 companies and remaining companies have been less correlated . So the investor should always watch not only the company share price but also the sectorial indices. Whatever fluctuation happen in the stock market it also reflects companies share price and their related sectorial indices also. Based on the findings when Sensex falls between 200 to 300 points investors can hold their shares for the next 11 days because the probability of securing profit on selling of share is 52% and chances of suffering loss on sale of share is 48%.When the Sensex slipped 300 to 400 points investor can either hold or go for sale whichever is beneficial, because the probability of securing profit on selling of share is 49% and chances of suffering loss on sale of share is 51%.when the Sensex rallied 400 to 500 points investors can hold their shares for the next 11 days because probability of securing profit on selling of share is 52% and

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chances of suffering loss on sale of share is 48%. when the Sensex collapsed more than 500 points investors can hold their shares for the next 11 days because probability of securing profit on selling of share is 52% and chances of suffering loss on sale of share is 48%. when the Sensex climbed between 200 to 300 points, the investor can either hold or sell the share because the probability of securing profit and suffering loss, both are same. When the Sensex jumped up 300 to 400 points, the investor can hold their shares for the next 11 days because probability of securing profits on selling of share is 49% and chances of suffering loss on sale of share is 51%. When the Sensex growth a day was between 400 to 500 points, the investor can either hold or sell the share because the probability of securing profit and suffering loss, both are same. When the Sensex bombarded more than 500 points ,the investor can sell their shares because probability of securing profits on selling of share is 49% and chances of suffering loss on sale of share is 51%. But, all these findings cant overcome the market risk.

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