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8/3/2019 An Analysis of Volatility in Stock Market (With Reference to 100 Scripts of NSE & BSE From Jan 1999 to June 2009)
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A
PROJECT REPORT
ON
“An Analysis of Volatility in Stock Market (with reference to 100
Scripts of NSE & BSE from Jan 1999 to June 2009)”
Supervisor:
Name: Mr. Amit GogiaDesignation: Sales Manager
Religare Security Kaithal
Submitted by:
Name of Student:Vikash Bhanwala
Roll No.-1009004
SARSWATI INSTITUTE
OF
MANAGEMENT & TECHNOLOGY
TEEK (KAITHAL)
COURSE- MBA
SESSION-2009-2011
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1.1Preface
For any management course, summer training is essential and important part of
curriculum of MBA degree. It is an exposure to corporate environment and help MBA
aspirants to get acquainted with organizational norms, procedure, practices, ethics, and
culture. It also gives an insight of actual functioning of the organization. It helps the
student to understand and to correlate with theoretical aspect with practical reality.
It was the great experience to work with RELIGARE SECURITIES Ltd. During my
summer project which has helped me to improve my communication and interpersonal
skills and also give me the better understanding of the subject Demat Account.
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1.2 Acknowledgement
I am grateful to make this report under my summer project for duration of two months in
course of “Master In Business Administration”. I have done my project work in
“RELIGARE SECURITIES Ltd.” at ‘KAITHAL’.
I would like to express my gratitude toward “RELIGARE” company for giving me this
opportunity to work on a project at one of the prestigious and professional organization.
I would like to thank all the people who directly or indirectly helped me during my
summer project and helped me in making this report. Mr. BHARAT KHURANA, Branch
Manager, Religare Securities Ltd. Kaithal :- He has given me valuable information about
stock market and depositaries. Mr.Amit Gogia, Relationship Manager, Religare
Securities Ltd. :- He helped me in my marketing research and other part of project. Prof.
Pooja Bansal, Prof. Nidhi garg has given their valuable guidance in making of this
report.
In the last, I would like to thank all my colleagues in Religare Securities Ltd, College
who has helped in making of this report. Without the help of above mentioned people
making of this report could be very difficult for me.
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1.3 Declaration
I hereby declare that this report on “An analysis of volatility in stock market(with
reference to 100 scripts of NSE & BSE from Jan 1999 to June 2009)” has been written
and prepared by me during the academic year 2008-2010. This project was done under
the able guidance and supervision of Mr. Bharat Khurana, Branch Manager, Mr. Amit
Gogia, Sales Manager, Religare Securities Ltd., Kaithal) and Prof. Pooja Bansal.,
Faculty, Saraswati Institute of Management & Technology. I also declare that this project
is the result of my own effort and has not been submitted to any other institution.
8/3/2019 An Analysis of Volatility in Stock Market (With Reference to 100 Scripts of NSE & BSE From Jan 1999 to June 2009)
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Contents
1. An introduction to Religare Securities
2. An over view of Capital Market
3. Objective of the Project
4. Role and importance of Stock Exchange
• Functions of Stock Market
• Development and trend of Indian Stock Market
• Globalization on Indian Stock Market
5. Securities Exchange Board of India(SEBI) and functions
6. Concept of Risk & Return and Beta
7. Overview and reasons of Volatility
8. Review of related literature
9. Research Methodology
10. Analysis and Results
10. Conclusion
11. Bibliography
8/3/2019 An Analysis of Volatility in Stock Market (With Reference to 100 Scripts of NSE & BSE From Jan 1999 to June 2009)
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INTRODUCTION TO RELIGARE SECURITIESLTD.
Religare, a Ranbaxy promoter group company, is one of India’s largest and fastest
growing integrated financial services institutions. The company offers a large and diverse
bouquet of services ranging from equities, commodities, insurance broking, to wealth
advisory, portfolio management services, personal finance services, Investment banking
and institutional broking services. The services are broadly clubbed across three key
business verticals- Retail, Wealth management and the Institutional spectrum. Religare
Enterprises Limited is the holding company for all its businesses, structured and
being operated through various subsidiaries.
Religare’s retail network spreads across the length and breadth of the country with its
presence through more than 900 locations across more than 300 cities and towns.
Having spread itself fairly well across the country and with the promise of not resting on
its laurels, it has also aggressively started eyeing global geographies
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Recently, Religare has also partnered with AEGON, one of the largest insurance and
pension companies globally, to offer Life Insurance and Mutual Fund products in India.
The venture shall combine the international expertise of AEGON with the distribution
strength of Religare.
Vision & Mission of Religare Securities Ltd.
Vision:-
To build Religare as a globally trusted brand in the financial Services domain and present
it as the ‘investment of India`
Mission:-
Providing financial care driven by the core values of diligence and transparency.
Brand Essence:-
Providing financial service care
Management profile:-
Mr. Sunil Godhwani- CEO & Managing director,
Religare Enterprises Ltd. He is also a director in subsidiary business including
Religare Securities Ltd., Religare Commodities Ltd. and Religare Insurance Broking Ltd.
Mr. Anil Saxena:-Group chief operating officer, Religare Enterprises Ltd.
Mr. Anil Saxena (Group Chief Finance Officer),
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Aged 38 years, carries the overall responsibility for management and supervision of our
group and has played a key role in driving its growth. He joined RSL on August 1, 2001.
RSL, at that relevant point of time, was a subsidiary of Fortis Financial Services Limited,
our Promoter Group Company. He received a bachelor’s degree in commerce from the
University of Delhi.
He is a member of the Institute of Chartered Accountants of India as well as the Institute
of the Cost and Works Accountants of India. Prior to joining us, he was at Kotak
Securities Limited as their Vice-President. In the past, he has also worked with Fortis
Financial Services Limited and R. Singhania & Co. He has over 15 years of experience in
the financial services industry.
Board of Directors - Religare Enterprises Limited
Mr. Malvinder Mohan Singh - Chairman (Non Executive)
Mr. Sunil Godhwani - CEO & Managing Director
Mr. Shivinder Mohan Singh - Non Executive Director
Mr. Harpal Singh - Non Executive Director
Mr.Deepak Ramchand Sabnani - Independent Director
Mr.Padam Bahl - Independent Director
Mr.J.W. Balani - Independent Director
Mr. Baldev Singh Johal - Independent Director
Mr. R. K. Shetty - Alternate to Mr. J. W. Balani
Capt.G.P.S.Bhalla - Alternate to Mr. Deepak Sabnani
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Establishment of Religare Securities Ltd.:-
Religare Enterprises Limited establish on may 2006 by Ranbaxy Promoter group
company .
The group include following:
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T h e G r o u T h e G r o u
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G R O U P E N T I T I
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8/3/2019 An Analysis of Volatility in Stock Market (With Reference to 100 Scripts of NSE & BSE From Jan 1999 to June 2009)
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O u r B
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A d d r eA d d r e s
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R e s e a r cR e s e a r c – – MM
D a i l y & W e
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C u s t oC u s t o d
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P o r t f o l i oP o r t f o l i oD i s c r e t i o
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C o r p o r a t eC o r p o r a t e
S p e c i a l i z e i np l a n n i n g , m o d
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C o m m
C o m m o dC o m m o d
R e s e a r c hR e s e a r c h
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S o m e F aS o m e F a
MM
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T h e R eT h e R e
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T he R eligT he R elig
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T h e RT h e R
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Brand Identity
Name:-
Religare is a Latin word that translates as 'to bind together'. This name has been chosen to
reflect the integrated nature of the financial services the company offers. The name is
intended to unite and bring together the phenomenon of money and wealth to co-exist and
serve the interest of individuals and institutions, alike.
Symbol:-
The Religare name is paired with the symbol of a four-leaf clover. The four-leaf clover is
used to define the rare quality of good fortune that is the aim of every financial plan. It
has traditionally been considered good fortune to find a single four leaf clover
considering that statistically one may need to search through over 10,000 three-leaf clovers to even find one four leaf clover
Each leaf of the four-leaf clover has a special meaning in the sphere of Religare.
1st Leaf :-
The first leaf of the clover represents Hope. The aspirations to succeed the dream of
becoming, Of new possibilities. It is the beginning of every step and the foundations on
which a person reaches for the stars.
2nd Leaf :-
The second leaf of the clover represents Trust. The ability to place ones own faith in
another. To have a relationship as partners in a team. To accomplish a given goal with the
balance that brings satisfaction to all not in the binding but in the bond that is built.
3rd Leaf:-
The third leaf of the clover represents Care. The secret ingredient that is the cement in
every relationship. The truth of feeling that underlines sincerity and the triumph of
diligence in every aspect. From it springs true warmth of service and the ability to adapt
to evolving environments with consideration to all.
4th Leaf:-
The fourth and final leaf of the clover represents Good Fortune. Signifying that rare
ability to meld opportunity and planning with circumstance to generate those often
looked for remunerative moments of success.
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Investment Banking
We provide innovative, integrated and best-fit solutions to our corporate customers. It is
our continuous endeavor to provide value enhancement through diverse financial
solutions on an ongoing basis, through offerings like Corporate Debt, Private Equity,
IPO, ECB, FCCB, GDR/ADR etc.
Investment Banking with Religare offers the following services:-
Corporate Finance:-
We focus on finding right and relevant partners for our clients, who not only help in
adding value but also improve the future valuation of the organization. We specialize in
structured financing and providing advisory services related to financial planning,
modeling and advising on financial requirements.
Corporate finance products offered by us:-
Placement of Debt
Syndication of Domestic Loan / Foreign Currency Loan
Securitization
Debt Swap & Loan Restructuring
Short Term Corporate Debt
Working Capital (Cash Credit & Short term Loan)
Capital Market Instruments
Overseas Acquisition
Placement of Equity (Private Equity)
Both for listed and unlisted companies
Merchant Banking
IPO/FPO/RIGHTSMergers & Acquisitions
Corporate Advisory Services
ADR/GDR/FCCB
BUY BACK OF SHARES
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R-ALLY
Trading in Equities with Religare truly empowers you for your investment needs. A
highly process driven, diligent approach backed by powerful Research & Analytics and
one of the “best in class” dealing rooms ensures that you have a superlative experience.
Further, Religare also has one of the largest retail networks, with its presence in more
than 900 locations across more than 320 towns & cities. This means, you can walk into
any of these branches and connect to our highly skilled and dedicated relationship
managers to get the best services. You could also choose to enjoy the freedom to execute
your own trade through our online mechanism.
International Advisory
International Advisory Fund Management Services (AFMS)
- A new horizon for international investments
We provide our wealth clients an opportunity to invest in international financialinstruments (currently limited to the US). Equities, Mutual Funds and Debts are
some of the key instruments available and the clients have the option to choose
from various asset allocation modules.
Why Invest Overseas?
Avenues for enhancing returns, minimizing risk and portfolio diversification
Global outreach of opportunities Pre-approved route for resident individuals to invest
(Healthy Govt. Patronage and favorable regulatory developments)
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ON LINE TRADING BY RELIGARE SECURITIES
LTD.
On line investing will never be the same .Trade rewards at Religare on line .A unique 360
degree portal that offers not just an enriched investment experience but also reward each
time you invest
.
Now can reward points each time you trade in Equities and Commodities or invest in
mutual funds and your favorite IPO’s with us through our highly sophisticated and
customized trading platform R-ACE (Religare Advanced Client Engine) .You can start
redeeming your reward points against our list of attractive Gift Vouchers and Offers . So
join the revolution! Enrich your experience of investing online and open yourself to a
whole new world of rewards and goodies.
All this with a host of revolutionary features, will surely change the way you invest
online.
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PORTFOLIO MANAGEMENT SERVICE (PMS)
Religare offers PMS to address varying investment preferences. As a focused service,
PMS pays attention to details, and portfolios are customized to suit the uniquerequirements of investors.
Religare PMS currently extends five portfolio management schemes, viz Panther,
Tortoise, Elephant, Caterpillar and Leo. Each scheme is designed keeping in mind the
varying tastes, objectives and risk tolerance of our investors.
Investment Philosophy
We believe that our investors are better served by a disciplined investment approach,
which combines an understanding of the goals and objectives of the investor with a fine
tuned strategy backed by research.
• Stock specific selection procedure based on fundamental research for making
sound investment decisions.
• Focus on minimizing investment risk by following rigorous valuation disciplines.
• Capital preservation.
• Selling discipline and use of Derivatives to control volatility.
• Overall to enhance absolute return for investors.
Our Schemes:-
Panther:-
The Panther portfolio aims to achieve higher returns by taking aggressive positions across
sectors and market capitalizations. It is suitable for the “High Risk High Return” investor
with a strategy to invest across sectors and take advantage of various market conditions.
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Tortoise:-
The Tortoise portfolio aims to achieve growth in the portfolio value over a period of time
by way of careful and judicious investment in fundamentally sound companies havinggood prospects. The scheme is suitable for the “Medium Risk Medium Return” investor
with a strategy to invest in companies which have consistency in earnings, growth and
financial performance.
Elephant:-
The Elephant portfolio aims to generate steady returns over a longer period by investing
in Securities selected only from BSE 100 and NSE 100 index. This plan is suitable for the“Low Risk Low Return” investor with a strategy to invest in blue chip companies, as
these companies have steady performance and reduce liquidity risk in the market.
Caterpillar:-
The Caterpillar portfolio aims to achieve capital appreciation over a long period of time
by investing in a diversified portfolio. This scheme is suitable for investors with a high
risk appetite. The investment strategy would be to invest in scrips which are poised to get
a re-rating either because of change in business, potential fancy for a particular sector in
the coming years/months, business diversification leading to a better operating
performance, stocks in their early stages of an upturn or for those which are in sectors
currently ignored by the market.
Leo:-
Leo is aimed at retail customers and structured to provide medium to long-term capital
appreciation by investing in stocks across the market capitalization range. This scheme is
a mix of moderate and aggressive investment strategies. Its aim is to have a balanced
portfolio comprising selected investments from both Tortoise and Panther. Exposure to
Derivatives is taken within permissible regulatory limits.
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The Religare Edge:-
We serve you with a diligent, transparent & process driven approach and ensure that your
money gets the care it deserves.
No experts, only expertise:-
Religare PMS comes to you from Religare, a Ranbaxy promoter group company with a
solid reputation for an ethical and scientific approach to financial management. While we
offer you the services of a Dedicated Relationship Manager who is at your service 24x7,
we do not depend on individual expertise alone. For you, this means lower risk, higher
dependability and unhindered continuity. Moreover, you are not limited by a particular
individual’s investment style.
No Hidden profits :
We ensure that a part of the broking at Religare Portfolio Management Services is
through external broking houses. This means that your portfolio is not churned
needlessly. Using more broking firms gives us access to a larger number of reports and
analysis, enabling us to make better, more informed decisions. Furthermore, your
portfolio is customised to suit your investment objectives.
Daily disclosures:
Religare Portfolio Management Services gives you daily updates on your investment.
You can pinpoint where your money is being invested, 24x7, instead of waiting till the
end of the month to keep track.
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What is on Line Share Trading or internet trading?On line trading is a service offered on the internet for purchase and sale of share. In thereal world, you place order on your stock broker either verbally (personally or
telephonically) or in a return form (Fax). In on Line Trading, you will access a stock
broker’s website through your internet enabled PC and place orders through the broker’s
internet – based trading engine .These orders are routed to the stock Exchange either outmanual intervention and executed there on in a matter of a few second.
How Online Trading Is Done
Computer at NSE via VSAT at NSE’s office. A message relating to the order activity is
broadcast to the respective member. The order confirmation message is immediately
displayed on the PC of the broker. This order matches with the existing passive order(s),
otherwise it waits for the active orders to enter the system. On order matching, a message
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is broadcast to the respective member. The trading system operates on a strict price time
priority. All orders received on the system are sorted with the best priced order getting
the first priority for matching i.e., the best buy orders match with the best sell order.
Similar priced orders are sorted on time priority basis, i.e. the one that came in early gets
priority over the later one. Orders are matched automatically by the computer keeping the
System transparent, objective and fair. Where an order does not find a match, it remains
in the system and is displayed to the whole market, till a fresh order comes in or the
earlier order is cancelled or modified. The trading system provides tremendous flexibility
to the users in terms of kinds of orders that can be placed on the system. Several time-
related (good till cancelled, good till day, immediate or cancel), price-related (buy/sell
limit and stop loss orders) or volume related (all or none, minimum fill, etc) conditions
can be easily built into an order. The trading system also provides complete market
information on-line. The market screens at any point of time provide complete
information on total order depth in a security, the five best buys and sells available in the
market, the quantity traded during the day in that security, the high and the low, the last
traded price, etc. Investors can also know the fate of the orders almost as soon as they are
placed with the trading members. Thus the NEAT system provides an Open Electronic
Consolidated Limit Order Book (OECLOB). Limit orders are orders to buy or sell shares
at a stated quantity and stated price. If the price quantity conditions do not match, the
limit order will not be executed. The term “limit order book” refers to the fact that only
limit orders are stored in the book and all market orders are crossed against the limit
orders sitting in the book. Since the order book is visible to all market participants, it is
termed as an ‘Open Book’.
Let us start with the United States. A brief set of information consisting of Stock
Exchanges functioning, online share broking firms, and the latest technology they are
offering for hassle -tree service for their customers etc.
Why Online Share Trading?
What about security of my money, demat shares and my transaction documents?
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Isn't trading through the Internet a difficult and cumbersome process?
But I am not comfortable with Internet, or with finance, how can online trading be easyfor me?
Isn't trading through the Internet a costly affair?
I am pretty satisfied with my present broker who serves me off line. Why should I choose
to go online to trade shares?
How frequently is the price updated at all these online trading sites?
How can I be sure that I shall be trading at a price I want to or at a ricpe appearing in thewebsite?
Is trading through the Internet safe?
The safety of transactions on the Internet depends on the encryption system used. The better this transaction system, the more difficult it is for any person to hack the site.
Firstly:
Internationally, the best system available today, is the 128-bit encryption, a system,
which even the Pentagon uses. ICICIdirect.com is one of the few online share-tradingsites in the country equipped with this 128-bit encryption.
Secondly:
you too can ensure the safety of the transactions online. You normally get a secured user
id and password, the secrecy of which is to be maintained entirely by you.
Thirdly:
If the transaction system requires no manual intervention, you further improve the safety
in the transactions. Among Indian sites, ICICIdirect.com is one of the very few fullyintegrated online trading sites. This enables the elimination of the possibility of any
manual intervention. Which means orders are directly sent to the exchange ensuring that
you get the best and right price?
No charge till you profit
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So sure are we of our approach to Portfolio Management that we do not charge you for
our services, until your investments start showing profit. With customized investment
options Religare Portfolio Management Services invites you to invest across five broad
portfolios to suit your investment needs. Except fixed administrative charges.
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An overview of capital market
The term capital market refers to the institutional arrangements for facilitating the
borrowing and lending of long term funds. In widest sense, it consists of a series
of channels through which savings the community are available for industrial and
commercial enterprises and public authorities.
The major functions performed by a capital market are:
1. Mobilization of financial resources on a nation wide scale.
2. Securing the foreign capital and know how to fill up the deficit in the requiredresources for economic growth at a faster rate.
3. Effective allocation of the mobilized financial resources, by directing the same
to projects yielding highest yield or to the projects needed to promote balanced
economic development.
Intermediaries:
Intermediaries are institutional or individual agencies who assist in the process of
transforming savings into investment. The major intermediaries in the capital
market are:
1. Merchant banker,
2. Under-writers,
3. Registrars,
4. Brokers,
5. Depositories,
6. Collecting agents,
7. Agents,
8. Stock brokers and sub brokers.
9. Mutual funds.
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Market Types
The Capital Market system has four types of market.
(a) Normal Market Normal market consists of various book types wherein orders are segregated as
Regular Lot Orders, Special Term Orders, Negotiated Trade Orders and Stop Loss
Orders depending on their order attributes.
(b) Odd Lot Market
Pursuant to the directive of SEBI to provide an exit route for small
investors holding physical shares in securities mandated for
compulsory dematerialized settlement, the Exchange has
provided a facility for such trading in physical shares not
exceeding 500 shares. This market segment is referred to as
'Limited Physical Market' (small window). The Limited Physical
Market was introduced on June 7, 1999.
(c) RETDEBT Market
Trading in the Retail Debt Market takes place in the same manner
in which the trading takes place in the equities (Capital Market)
segment. The RETDEBT Market facility on the NEAT system of
Capital Market Segment is used for entering transactions in RDM
session. Trading Members who are registered members of NSE in
the Capital Market segment or Wholesale Debt Market segment
are allowed to trade in Retail Debt Market (RDM) subject to
fulfilling the capital adequacy norms.
(d) Auction Market
In the Auction market, auctions are initiated by the Exchange on behalf of trading
members for settlement related reasons. Auctions are initiated by the
Exchange on behalf of trading members for settlement related
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reasons. The main reasons are Shortages, Bad Deliveries and
Objections. There are three types of participants in the auction
market.
(a) Initiator: The party who initiates the auction process is calledan initiator.
(b) Competitor: The party who enters on the same side as of the
initiator is called a competitor.
(c) Solicitor: The party who enters on the opposite side as of the
initiator is called a solicitor.
Other types of Capital Market
These are of two types:
a) Primary Market or New Issue Market
b) Secondary Market or Stock Market
Primary and Secondary Market
In the primary market, securities are offered to public for subscription for the
purpose of raising capital or fund. Primary market is where a company makes its
first contract with the public at large in search of capital.
Secondary market is an equity trading avenue in which already existing/pre-
issued securities are traded amongst investors. The secondary market refers to the
stock market where the long term financial instruments which are used for raising
capital are traded.
Stock Exchange: An Overview
To stock exchange is basically a market place where buyers and sellers
transact business through agents called broker. That is why stock exchange is
often referred to a stock market or share market. The term security is a broad
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genetic term covering equity shares, preference shares, debentures and loans.
Floated by Govt. and any other instrument prescribed by Govt. as a security.
In a layman’s language you can define stock exchange as legally
recognized place where the brokers can sell and purchase securities as the
described by the common public.
In a stock exchange only the member can transact in securities according to
the rules and regulations, laws and by the laws of the stock exchange. Those
members are at liberty to act either as jobber’s brokers.
The stock exchange is an institution of paramount importance in economic
life of a country. In fact in the absence of the stock it would be impossible to
mobilize the resources from investors to the new projects as the ownership right
i.e. share will not via bought and sold. This is the stock exchange that provides
liquidity to the private investment in corporate enterprises.
The past decade in many ways has been remarkable for securities market in
India. It has grown exponentially as measured in terms of amount raised from the
market, number of stock exchanges and other intermediaries, the number of listed
stocks, market capitalization, trading volumes and turnover on stock exchanges,
and investor population. Along with this growth, the profiles of the investors,
issuers and intermediaries have changed significantly. The market has witnessed
several institutional changes resulting in drastic reduction in transaction costs and
significant improvements in efficiency, transparency, liquidity and safety. In a
short span of time, Indian derivatives market has got a place in list of top global
exchanges. In single stock futures category, the Futures Industry Association
(FIA) placed NSE in second position in the year 2000.
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Reforms in the securities market, particularly the establishment and
empowerment of SEBI, market determined allocation of resources, screen based
nation-wide trading, dematerialization and electronic transfer of securities, rolling
settlement and ban on deferral products, sophisticated risk management and
derivatives trading, have greatly improved the regulatory framework and
efficiency of trading and settlement. Indian market is now comparable to many
developed markets in terms of a number of qualitative parameters.
Management of stock exchange is done by an elected body of members.
These bodies are known by different names in different stock exchange for
example, Bombay, Indore,, Ahemdabad stock exchange are managed by a
Governing board, the madras stock exchange is managed by a committee while
other stock exchanges are managed by board of directors.
These governing bodies are powerful bodies enjoying extensive
administrative power of management and control over their respective stock
exchange; the day to day functions of the stock exchanges are executed by the sub-
committee like the defaulters committee, listing committee, settlement committee
etc.
The stock exchanges are the important segments of their capital market. If
the stock exchange is well organized and regulated and work smoothly then it is an
indicator of healthy capital market. If the state of the stock exchange is good then
overall capital market will grow and otherwise it can suffer a great set back which
is not good for the country. The stock market and the capital market are controlled
by the government at various stages.
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A capital market comprises of financial assets excluding coins and
currency. The majority of financial assets include banking accounts, pension,
provident funds, mutual funds, insurance policies, shares and securities.
Financial assists are the claim of holders over issuer (business firms and
government). They enter in the different segments of financial market, those
having short maturities are non transferable like bank savings, and current
accounts set the identifications for the monetary financial assets. This market is
known as money market, equity, preferential shares and bonds and debentures
issued by the companies and bond securities issued by the government constitute
the financial assets which are traded in the capital market Both money market and
financial market constitute the financial market. Capital market generally known
as stock exchange. This is an institution around which every activity of national
capital market resolves.
Through the medium of stock exchange the investors gets on impetus and
motivation to invest in securities. Without stock exchange they would not able to
make the liquidity in their securities. If there will no stock exchange then they
could not be able to get so much return on their investment. The stock exchange
provides the opportunities to the investors for continuing trading in securities.
Origin and Growth
The first stock exchange was set up in India under the name of Native share and
stock broker’s association of Bombay (known as Mumbai stock exchange) in
1875. The stock exchanges in India had made a phenomenal growth since World
War II. During this period, numerous stock exchanges were set up at Ahmedabad,
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Kanpur, and Hydrabad and at Delhi. In 1951 the government prepared a draft bill
for stock exchange regulation and referred it to an expert committee under the
chairmanship of A.D.Gorwala.
On the recommendations of the committee, the government passed the securities
contracts (regulation) act, 1956.
The principal objectives of this act are:
1. To regulate stock market practices.
2. To create efficient securities market.
3. To ensure fair dealing and protection to investors.
4. To improve the working of stock exchange.
So far govt. of India has recognized 23 stock exchanges which are as follows:
U.P. stock exchange, Kanpur.
Vadodara stock exchange, Vadodara.
Koyambtour stock exchange, Coimbatore.
Meerut stock exchange, Meerut.
Mumbai stock exchange, Mumbai.
Over the counter exchange of India, Mumbai.
National stock exchange, Mumbai.
Ahmedabad stock exchange, Ahmedabad.
Bangalore stock exchange, Bangalore.
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Bhuvaneshwar stock exchange, Bhuvneshwar.
Calcutta stock exchange, Calcutta
Cochin stock exchange, Cochin.
Delhi stock exchange, Delhi.
Guwahati stock exchange Guwahati.
Hydrabad stock exchange, Hydrabad.
Jaipur stock exchange, Jaipur.
Canara Stock exchange, Mangalore.
Ludhiana stock exchange, Ludhiana.
Chennai stock exchange, Chennai.
M.P. stock exchange, Indore.
Magadh stock exchange, Patna.
Pune stock exchange, Pune.
Saurashtra stock exchange, Rajkot.
So there are 21 stock exchanges in India (excluding NSE and OTCI), the largest
among them being the Bombay stock exchange (BSE). BSE alone accounts for
over 80% of the total volume of transactions in shares. Typically, a stock
exchange is governed by a board consisting of directors largely elected by the
member brokers, and a few is nominated by the government. Government
nominees include representatives of the Ministry of Finance, as well as some
public representatives, who are expected to safeguard the public interest in the
functioning of the exchanges. The board is headed by a president, who is an
elected member, usually nominated by the government from the elected members.
The Executive director, who is usually appointed by stock exchange with
government approval, is the operational chief of the stock exchange. His duty is to
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ensure that the day to day operations of the stock exchange are carried out in
accordance with the various rules and regulations governing its functioning. The
overall development and regulation of the securities market has been entrusted to
the Securities and Exchange Board of India(SEBI) by an act of parliament in 1992.
OBJECTIVES OF THE STUDY
1. To study the investor’s perception towards Stock Market.
2. To study the awareness level about Stocks.
3. To study the preference of investment of investors.
4. To study the market share of particular Stock.
5. To study the volatility of Stock market.
6. To study the awareness of Stocks at different different time.
:
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Role and Importance of Stock Exchange
The stock exchange plays a vital role in the economic functions of any
country. Its role can be elaborated as under :
• Liquidity and price continuity : The stock exchange provides a liquidity
and continuous market where investors can convert their money in to
securities in to money quickly with little variations in current market price
during the trading hours by making bids and offer as it is open auction
market where buyer and sellers compete among each other. The free market
operation provides marketability, stability and continuity in prices.
• Safety to investors : The transactions in the stock market are susceptible to
fraud and manipulation by the speculators and members. To come over this,
the central government has been provided wide powers by SCRA, 1956 and
1957. There are well defined by laws rules and regulations to admission of
members, share trading practices, listing securities, continuous disclosure of
material information by a listed company, penalties etc. to curb the
unhealthy and speculative practices..
• Evaluation of securities : Stock exchange like any other market, provides
a mechanism for fixing the prices of securities through the inter play of
demand and supply. It provides the mean for continuous process of
evaluation of securities in term of their real worth in the market as close as
possible to investment values, based on present and future earnings
capacity, growth potential etc. The prices quoted on the stock market are
given wide publicity and coverage through financial dailies like The
Economic Times, Financial Express, Business Standard and websites also
like www.nseindia.com, www.bseindia.com, www.timesofmoney.com.
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• Mobilization of savings : stock market mobilizes the saving of individuals
and institutions and directs its flows into the most productive channels so as
to serve in the best possible manner the interest of investors and economy.
In prosperous and growing industries, the share price exhibits a rising trendand more flows of funds takes place. While in declining and sick industries,
it shows declining trend and restricts the flow of funds these industries. The
price movement on the stock exchange governs the flow of funds into a
particular industry; thereby a well regulated stock exchange is of immense
importance to economic development.
• Widening share-ownership base : In a democratic developing economy,
the fruits of growth in the national income should be shared by as many
people as possible. The diffused ownership of the means of production
helps in reducing the income disparities and checking the concentration of
wealth in a few hands. In this endeavor, it becomes the duty of the security
market to educate the masses in the art investment in securities in general
and especially in developing countries where majority of people lives in the
villages, uneducated and adequate up-to-date information is not available.
Functions of Stock Market
• Maintaining active trading : Shares are traded on the stock exchange.
Enabling the investors to buy and sell securities. The prices may vary from
transaction to transaction. A continuous trading increases the liquidity or
marketability of share traded on the stock exchange.
• Fixation of prices : Prices is determined by the transaction that flow from
investor’s demand and supplier’s preference. Usually the traded prices are
made known to public this help the investor to make better decision.
• Ensure safe and fair dealing : The rules regulations and bye-laws of the
stock exchange provide a measure of safety to the investors. Transactions
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are conducted under competitive conditions enabling the investors to get a
fair deal.
• Aids in financing the industry : A continuous market for share provides a
favorable climate for raising capital. The negotiability and transferability of the securities helps the companies to raise long term funds. When it is easy
to trade the securities investors are willing to subscribe to initial public
offering. This stimulates the capital formation.
• Dissemination of information : Stock exchange provides the information
through various publications. They publish the share prices traded on daily
basis along with the volume traded. Directory of corporate information is
useful for the investor’s assessment regarding the corporate handout,
handbooks and pamphlets provide information regarding the functioning of
stock exchange.
• Performance induces : The price of stock reflects the performance of the
traded companies. This makes the corporate more concerned with its public
image and tries to maintain good performance.
• Self-regulation organization : The stock exchange monitors the integrity
of the member’s brokers, listed companies and clients. Continuous internal
audit safeguards the investors against unfair trade practices; it settles the
disputes between member brokers, investors and brokers.
Developments and Trends of Indian Stock Market
The post independent India has seen many radical changes in the stock
market. With the rapid industrialization and increased pressure for economic
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development, the government has taken many steps to promote the health of the
Indian stock market. This is the evidence from the number of legislation’s that
have come up after independence. The increase in the number and scope of
development banks, growth in the underwriting business, rise in the number of stock exchanges and the emergence of full fledged regulatory body like the
Controller of capital issue (now abolished) and the Securities and Exchange Board
of India (SEBI) indicate the amount of efforts that has gone into creating a strong
and well developed capital market.
With the growing financial needs of the economy in general, and corporate
and individual investors in particular, the Indian capital market has witnessed the
emergence of newer type of organizations like Mutual Funds and Asset
Management Companies, Merchant Bankers, specialist services like Financial
Advertisement, Credit Rating, Custodial and Depository services etc. even the
working of stock exchange has made a departure from conventional floor trading
to online and a much more transparent system of trading with the establishment of
new variant of stock exchanges like National Stock Exchange (NSE) and Over the
Counter Exchange of India (OTCEI). With an intention to promoting investors
convenience and physical shares have given way to dematerialized scripts, where
an investor is saved from the botheration of handling and safeguarding physical
certificates.
Globalization on Indian Securities Market
In view of the globalization and the policy of liberalization, the Indian stock
market is getting increasingly integrated with the rest of the world. Indian
companies have been permitted to resources from abroad through issue of ADRs,
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GDRs, FCCBs and EDBs. Indian companies are permitted to list their securities
on foreign stock exchanges by sponsoring ADR/GDR issues against block
shareholding. Further NRIs and OCBs are allowed to invest in Indian companies.
FIIs have been permitted to invest in all type of securities, including governmentsecurities. The investment by FIIs enjoys full capital account convertibility with
the evidence of the globalization, the quest for funds has broken the national
frontiers and issues of securities have expanded their investor base in other
countries also. Many new instruments have been issued overseas to raise capital
from abroad like the floating rates notes (FRNs), the fixed rate bonds, Resurgent
Indian Board etc. In the international debt market, the most commonly, important
and widely accepted instruments has been, however the GDRs. This is the
evidence from the fact that since the financial year 1993 to financial year 1997, the
amount raise through GDRs has increased with the only drop in the year 1996
when it showed an decrease. There has been no dearth of instrument floating by
Indian companies in the international capital market, foreign currency, convertible
bonds, Yankee bonds etc are few examples of this category.
Securities and Exchange Board of India (SEBI)
SEBI was initially constituted on 12 April 1988 as a non statutory
body through a resolution of the government for dealing with all matters relating
to development and regulation of securities market and investor protection and to
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advise the government on all these matters. SEBI was given statutory status and
power through an ordinance promulgated on January 30, 1992.
SEBI is managed by six members-one chairman (nominated by
central government), two members (officers of central ministers), one member from RBI and remaining two members are nominated by central government. The
office of SEBI is situated at Mumbai with its regional offices at Calcutta, Delhi
and Chennai. In 1988 the initial capital of SEBI was Rs. 7.5 crore which are
provided by its promoters (IDBI, ICICI, IFCI). This amount was invested and with
its interest amount day to day SEBI are met. All statutory power for regulating
Indian capital market are vested with SEBI itself.
Functions of SEBI
1. To safeguard the interests of investors and to regulate capital market with
suitable measures.
2. To regulate the business of stock exchanges and other securities market.
3. To regulate the working of stock brokers, sub-brokers, share transfer
agents, trustees, merchant bankers, underwriters, portfolio managers etc. and also
to make their registration.
4. To register and regulate collective investment plans of mutual funds.
5. To encourage self regulatory organizations.
6. To eliminate malpractices of security markets.
7. To train the persons associated with security markets and also to encourage
investors’ education.
8. To check insider trading of securities.
9. To supervise the working of various organizations trading in security market
and also to ensure systematic dealings.
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10. To promote research and investigations for insuring the attainment of above
objectives.
The following departments of SEBI take care of the activities in the secondary
market.
Sr.No. Name of the
Department
Major Activities
1. Market
Intermediaries
Registration and
Supervision
department (MIRSD)
Registration, supervision, compliance
monitoring and inspections of all market
intermediaries in respect of all segments of the
markets viz. equity, equity derivatives, debt
and debt related derivatives.
2. Market Regulation
Department (MRD)
Formulating new policies and supervising the
functioning and operations (except relating to
derivatives) of securities exchanges, their
subsidiaries, and market institutions such as
Clearing and settlement organizations and
Depositories (Collectively referred to as
‘Market SROs’.)
3. Derivatives and New
Products Departments
(DNPD)
Supervising trading at derivatives segments of
stock exchanges, introducing new products to
be traded, and consequent policy changes
Two main stock exchanges of India:
1. National stock exchange (NSE).
2. Bombay stock exchange (BSE).
NSE :
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The National Stock Exchange of India Limited has genesis in the report of
the High Powered Study Group on Establishment of New Stock Exchanges, which
recommended promotion of a National Stock Exchange by financial institutions
(FIs) to provide access to investors from all across the country on an equal footing.Based on the recommendations, NSE was promoted by leading Financial
Institutions at the behest of the Government of India and was incorporated in
November 1992 as a tax-paying company unlike other stock exchanges in the
country.
On its recognition as a stock exchange under the Securities Contracts (Regulation)
Act, 1956 in April 1993, NSE commenced operations in the Wholesale Debt
Market (WDM) segment in June 1994. The Capital Market (Equities) segment
commenced operations in November 1994 and operations in Derivatives segment
commenced in June 2000.
BSE :
The Stock Exchange, Mumbai, is now Bombay Stock Exchange Limited.
The Exchange has a new name, and an entirely new perspective. A perspective
born out of corporatization and demutualization. Bombay Stock Exchange Limited
is Asia’s oldest stock exchange. It carries within itself the depth of knowledge of
capital markets acquired since its inception in 1875. Located in Mumbai, the
financial capital of India, it has been the backbone of the country’s capital
markets.
Concept of Risk & Return
Whenever we talk about investments, there is always some risk associated with all
of them. Risk is the most dreaded word in all the financial markets across the
globe. Any person, who is operating in the financial markets, in whatever capacity,
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has to face risk. So the question in most minds is, what exactly this RISK is?
What does it mean?
In general terms, risk means any deviation from expectations. In Financial
parlance, risk means any deviation from the expected returns. More specifically,
the probability that the returns from any asset will differ from the expected yields
is the risk inherent in that asset.
Risk inherent in equity investments
Equity investment is the most risky investment in all the financial markets. So one
needs to have an understanding of risks associated with equity investments.Broadly, there are two types of risks associated with equity investments, viz.,
systematic risk and unsystematic risk. Lets have an understanding of these two
types of risks.
Systematic Risk Or Market Risk
Systematic risk can be defined as that portion of total risk, which is caused by factors that
are uncontrollable, external and broad in their effect. These factors can be attributed to
the investor’s reaction to tangible as well as intangible events.
Tangible events include economic, political and sociological changes that occur
within a particular country. Intangible events are subjective and depend on the
psyche of the investor. Change in share price is the result of the investor’s
response to external events. For example, the investor’s reaction to excessive
selling could push the prices down much below its fundamental value. Or fear that
a particular government may collapse could also adversely affect the stock market,
as the investor may be pessimistic about the overall economy of the country.
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Interest rate and Inflation are integral forces behind market risk and a part of the
larger category of systematic or market risk.
Interest Rate Risk
The deviation of the actual income from the expected income due to fluctuations
in interest rates is known as interest rate risk. The rate of return on various
securities is benchmarked with the rate of return on government securities, which
are considered risk-free by investors. For example, if the interest rate on
government securities changes from 9% to 9.5% p.a, then the market prices of all
the securities yielding 9% return will decline. The increase in interest rates will
cause the price of securities price to fall or vice-versa. Changes in interest rate can
influence the purchase of stocks to be more or less attractive, in terms of margin.
Changes in interest rate will affect a firm whose capital structure contains a major
portion of debt and also, financial institutions whose main area of business is
lending. As the interest rate increases, a major portion of the income of these firms
(with high debt) will go towards paying interest on borrowed capital. This will
result in lower earnings, dividends and ultimately share prices. Increasing interest
rate will also impact the lending institutions but in positive way. Increase in
interest will increase the revenue of these financial institutions by way of interest
received on loans. So, for these institutions higher earning will lead to increase in
dividend payment and hence increase in share prices.
Purchasing-Power Risk
Purchasing Power risk can be defined as changes that occur in investor purchasing
power as a result of changes in the general price level. Rising prices of goods and
services is referred to as inflation, while declining prices of goods and services is
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known as deflation. Both inflation and deflation affect the purchasing power of the
customer. Any rational investor should include in their estimates, future changes
in general price levels. As the interest rate risk affects prices of bonds and stocks,
in the same way changes in price levels also affect the prices of stocks. Supposethe consumer index hovers around 3.5% and gradually increases to 4.5 %, then the
required rate of return will shift upward, affecting Government bonds as well as
stocks. Interest rate risk can be defined as uncertainties in terms of money
received, and purchasing power risk in terms of goods and services that can be
purchased with the money received.
Measurement of Market Risk
Systematic risk of a portfolio is measured by Beta (ß). An index of systematic
risk. It measures the sensitivity of a stock’s return to changes in returns on the
market portfolio. The beta of a portfolio is simply a weighted average of the
individual stock betas in the portfolio. Beta (ß) is simply the slope (i.e. the change
in excess return on the stock over the change in excess return on the market
portfolio) of the characteristic line. If the slope is 1.0, it means the stock has the
same systematic risk as the market as a whole. A slope greater than 1.0 means that
the stock’s excess return varies more than proportionally with the excess return of
the market portfolio. This type of stock is often called as aggressive investment.
Calculation of Beta (ß)
ß is expressed as (R j) and the Rate of return on market portfolio i.e. R m divided by
the Standard deviation of the return on market portfolio.
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ß = Cov (R j,`R m)/ sm2
Advantages of Beta
To followers of CAPM, beta is a useful measure. A stock's price variability is
important to consider when assessing risk. Indeed, if you think about risk as the
possibility of a stock losing its value, beta has appeal as a proxy for risk.
Intuitively, it makes plenty of sense. Think of an early-stage technology stock with
a price that bounces up and down more than the market. It's hard not to think that
stock will be riskier than, say, a safe-haven utility industry stock with a low beta.
Besides, beta offers a clear, quantifiable measure, which makes it easy to work
with. Sure, there are variations on beta depending on things such as the market
index used and the time period measured, but broadly speaking, the notion of beta
is fairly straightforward to understand. It's a convenient measure that can be used
to calculate the costs of equity used in a valuation method that discounts cash
flows.
Disadvantages of Beta
However, if you are investing in a stock's fundamentals, beta has plenty of
shortcomings.
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For starters, beta doesn't incorporate new information. Consider the electrical
utility company American Electric Power (AEP). Historically, AEP has been
considered a defensive stock with a low beta. But when it entered the merchant
energy business and assumed high debt levels, AEP's historic beta no longer captured the substantial risks the company took on. At the same time, many
technology stocks, such as Google, are so new to the market they have insufficient
price history to establish a reliable beta.
Another troubling factor is that past price movements are very poor predictors of
the future. Betas are merely rear-view mirrors, reflecting very little of what lies
ahead.
Furthermore, the beta measure on a single stock tends to flip around over time,
which makes it unreliable. Granted, for traders looking to buy and sell stocks
within short time periods, beta is a fairly good risk metric. But for investors with
long-term horizons, it's less useful.
What Is Volatility?
People speak of volatility without defining what they mean by the term. In
financial terms, volatility is:
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The degree to which the price of a security, commodity, or market
rises or falls within a short-term period.
There are several things to note about this definition. Most importantly, the
definition specifically mentions price increases and decreases. People are usually
most concerned about volatility during periods when prices decrease or go through
a “correction.” During an extreme bull market, no one (with the possible
exception of investors with short positions) seems to care that the markets are
exhibiting volatility. Also, most people use volatility and risk interchangeably.
However, volatility has to do with variability while risk has to do with variability
that is unpredictable or uncertain.
Different investors in different market sectors may have different characteristics
with respect to risk. Because of this, different sectors may have different
volatilities. Therefore, looking at the volatility of a market really means looking at
the volatility of the indices of the securities within the market. For each individual
security, its beta measures the security’s volatility relative to the market as a
whole, but if beta stays the same, and the market’s risk increases, then the risk
associated with a given security will increase.
What Causes Volatility?
There are a number of things that cause volatility. Arbitrage causes volatility.
Arbitrage is the simultaneous or almost simultaneous buying and selling of an
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asset to profit from price discrepancies. Arbitrage causes markets to adjust prices
quickly. This has the effect of causing information to be more quickly assimilated
into market prices. This is a curious result because arbitrage requires no more
information than the existence of a price discrepancy. Another obvious reason for market volatility is technology. This includes more timely information
dissemination, improved technology to make trades and more kinds of financial
instruments. The faster information is disseminated, the quicker markets can react
to both negative and positive news. Improved trading technology makes it easier
to take advantage of arbitrage opportunities, and the resulting price alignment
arbitrage causes. Finally, more kinds of financial instruments allow investors
more opportunity to move their money to more kinds of investment positions
when conditions change.
Unsystematic risk
Unsystematic risk is specific to particular company or an industry. It is that
portion of the total risk that arise due to the factors which effects the internal
working of the firm. Factors like, management capability, consumer preferences,
labor strikes and stages in product life cycle can affect the firm’s variability in
return.
Business Risk
Business risk is faced by the firm due to the operating conditions prevailing within
a firm and also the extent to which these conditions effects the operating income
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and expected dividend variability of the firm. Business risk can be divided into
two categories: Internal and External. Internal business risk signifies the internal
competency or efficiency of the firm to effectively operate in the environment
imposed on it. Every business firm is faced with internal risk and the degree towhich these risk are minimized are reduce or minimized depends on the efficiency
of the firm. External business risk arises from the circumstances imposed by the
operating environment, which are beyond the control of the firm.
Financial Risk
The ways and means by which company finances their activity constitutes
financial risk. The degree of financial risk can be inferred from the capital
structure of the firm. The amount of debt or borrowed capital in the financial
structure signifies interest payment by the firm to the debt holders or preference
shareholders. Financial risk can be avoidable to the extent to which the
management has the freedom to decide whether to borrow money or not. A debt
free firm has no financial risk.
Return
The objective of any investor is to maximize expected returns from his
investments, subject to various constraints, primary risk. Return is the motivating
force, inspiring the investor in the form of rewards, for undertaking the
Investment. The importance of returns in any investment decision can be traced to
the following factors:
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• It enables investors to compare alternative investments in terms of what
they have to offer the investor.
• Measurement of historical returns enables the investors to assess how well
they have done.• Measurement of historical returns also helps in estimation of future returns.
This reveals that there are two types of returns- Realized or Historical return and
expected return.
Realized Return
This is ex-post return or return that was or could have been earned.
Expected Return
This is return from an asset that investors anticipate or expect to earn
over some future period. The expected return is subject to uncertainty, or risk, and
may or may not
Risk and return trade off:
Risk and return are the primary ingredients in making investment choices.
Expected return must be compared to risk. As risk increases, so must the return to
compensate for the greater uncertainty. This is called the risk-return trade-off;
Namely, that there is greater risk in investment classes that offer potential of
higher returns and vice-versa. Therefore, an investor has to choose between higher
returns with higher risk versus lower risk accompanied, alas, by lower returns. The
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risk/return trade-off is crucial. A new business may involve a lot of risk, but may
offer higher return. On the other hand, government securities have minimal risk,
so a low return is appropriate.
Risk/Return Trade-Offs for Various Investment Vehicles
Risk and return trade off
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CHAPTER – 2
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Review of the Literature
Review of Related Studies
Several research studies have been carried out to observe the stock market
volatility. Volatility of stock returns has been mainly studied in the developed
economies. After the seminal work of Engel(1982) on the autoregressive
conditional Heteroscedasticity(ARCH) model and its generalized form(GARCH)
by Bollerslev(1986), much of the empirical work has been used these models and
their extensions. There is relatively less empirical research on stock return
volatility in the emerging markets.
In the Indian context, Roy and Karmakar (1995) focused on the measurement of
the average level of volatility as the sample standard deviation and examined
whether volatility has increased in the early 1990s; Goyal (1995) used conditional
volatility estimates as suggested by Schwert (1989) to study the nature and trend
of stock return volatility and the impact of carry forward system on the level of
volatility; Reddy (1997-98) analyzed the effects of market microstructure, e.g.,
establishment of the NSE and the introduction of Bombay Stock Exchange Online
Trading (BOLT) system on the stock return volatility measured as the sample
standard deviation of the closing prices.
Harvinder Kaur’s study describes the extent and pattern of volatility in the Indian
stock market during the last decade of the previous millennium i.e. from 1990-
2000 the market is represented by the two most prominent spot prices indices viz.
BSE Senses and S & P CNX Nifty.
It is found that the stock market volatility was the highest during 1992 followed by
1990 and 2000, in that order. It fell sharply after 1992 until 1995, after which it
started increasing again. Among the months, April has been the most volatile
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followed by March and February. Another study by Harvinder Kaur on Time
varying Volatility in the Indian stock market describes that asymmetrical GARCH
models outperform the conventional OLS models and symmetrical GARCH
models. By the application of asymmetrical GARCH models EGARCH (1,1) tosenses and TARCH (1,1) to Nifty returns, it is shown that day of the week effect
or the weekend effect and the January effect are not present while the return and
volatility do show intra week and intra year seasonality. The return and volatility
on various weekdays have somewhat changed after the introduction of Rolling
settlements.
The paper of Golaka C nath and Manoj Dalvi tries to search for a suitable
volatility measure for Indian stock market using tick level data and estimates six
different kind volatility measures and compare them to understand which one
performs best. The realized volatility estimates using the sum of squared returns
from high frequency data performs better than the currently used IGARCH model
by stock exchanges. The result is in agreement with the findings from developed
markets.
The aim of paper of Madhusudan Karmakar was to estimate conditional volatility
models in an effect to capture the salient features of the stock market volatility in
india and evaluates the models in terms of out of sample forecast accuracy. The
estimation of volatility is made at macro level on two major market indices,
namely, S &P CNX Nifty and BSE Senses. The fitted model is then evaluated in
terms of its forecasting accuracy on these two indices.
In addition, 50 individual companies share prices included in S & P CNX Nifty
are used to examine the heteroskedastic behavior of Indian stock market at the
micro level. The vanilla GARCH (1,1) model has been fitted to both the market
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indices and it is found that there is a strong evidence of time varying volatility, a
tendency of the periods of high and low volatility to cluster, a high persistence and
predictability of volatility. While turning to 50 individual underlying shares, it is
observed that the GARCH (1,1) model has been fitted for almost aa companies.only eight out of 50 shares show significant leverage effects and really need an
asymmetric GARCH model such as EGARCH to capture their volatility clustering
which is left for future research.
Prof. Turan and Dr. Bodla (2004) made a study of risk return analysis and
correlation analysis for the select Asian stock markets. The study had brought out
that the stock markets of Hong Kong and India have generated the highest return
amongst select Asian countries, in terms of dollar and local currency respectively.
Both risk and return are found lowest in case of Japan. Moreover, the Indian stock
market shows the highest potential for inclusion in the international portfolio of
equity securities as the correlation coefficients of it with other Asian markets are
found lowest. Further, no significant difference is observed between different
investment horizons as annualized returns are concerned. In other words, both
active and passive investment strategies have yielded the similar level of
return/risk irrespective of the country under consideration. Although the stock of
Hong Kong and Singapore move more closely, the correlation between the returns
of Asian countries is substantially less than unity. It implies that the Asian market
offers a good opportunities for equity portfolio diversification.
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CHAPTER – 3
Research Methodology
The procedure adopted for conducted the research requires a lot of attention as it
has direct bearing on accuracy, reliability and adequacy of results obtained. It is
due to this reason that research methodology, which we used at the time of
conducting the research, needs to be elaborated upon. Research methodology is a
way of systematically study & solve the research problems. If a researcher wants
to claim his study as a good study, he/she must clearly state the methodology
adopted in conducting the research so that it may be judged by the reader whether
the methodology of work done is sound or not.
The research methodology here includes-
• Introductory
• Population
• Sampling Technique
• Sample size
• Data Collection
• Statistical Technique
• Limitation
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Introductory
The main aim of my project is to find the stock market volatility in context of
Indian stock market.. The volatility is measured by risk return pattern and for this
purpose I have selected 100 companies and an index for achieving the abovementioned objective I have undertaken the following procedure:
Sampling Technique
The sample has been selected on the basis of availability of required data. In other
words convenient sampling method is adopted.
Sample Size
From all the listed companies and indices of NSE, 100 companies and S&P CNX
Nifty index is selected. The list of the sample companies:
Company Name Symbol
1 Andhra sugars Ltd ANDHRSUGAR
2 Aarti industries Ltd AARTIIND
3 ABB Ltd ABB
4 Associated Cement Co. Ltd. ACC
5 Alfa Laval India Ltd ALFALAVAL
6 Apollo Tyres Ltd. APOLLOTYRE
7 Arvind Mills Ltd. ARVINDMILL
8 Ashok Leyland Ltd ASHOKLEY
9 Asian paints Ltd ASIANPAINTTable
3.
1
10 Balrampur Chini Mills Ltd BALRAMCHIN
11 Basf India Ltd. BASF
12 Bharat gears Ltd BHARATGEAR
13 Bharat Petroleum Corporation Ltd BPCL
14 Birla Ericsson Optical Ltd BIRLAERIC
15 Birla Global Finance Ltd BGFL
16 Bajaj Auto Ltd BAJAJAUTO
17 Bajaj Hindustan Ltd BAJAJHIND
18 Bombay Dyeing & Mfg Co. Ltd BOMDYEING
19 Can Fin Homes Ltd CANFINHOME
20 Carborundam Universal Ltd CARBORUNIV
21 Ceat Ltd. CEAT
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22 Century Enka Ltd CENTENKA
23 Chambal Fertilisers & Chemicals Ltd CHAMBLFERT
24 Ciplal Ltd CIPLA
25 Cochi Refineries Ltd COCHINREFN
26 Dhampur Sugar Mills Ltd DHAMPURSUG
27 EIH Ltd EIHOTEL28 Escorts Ltd ESCORTS
29 Essar Oil Ltd ESSAROIL
30 The Fedral Bank Ltd FEDERALBNK
31 Flex Industries Ltd FLEX
32 GIC Housing Finance Ltd GICHSGFIN
33 Godfrey Phillips India Ltd GODFRYPHLP
34 Goetz(India) Ltd GOETZEIND
35 Grasim Industries Ltd GRASIM
36 GTC Industries Ltd GTCIND
37 Gujrat State Fertilisers & Chemicals GSFC38 Housing Development Finance Corp. HDFC
39 HDFC Bank Ltd HDFCBANK
40 Hindustan Motors Ltd HINDMOTOR
41 Hindustan Lever Ltd HLL
42 Hotel Leela Venture Ltd HOTELEELA
43 Industrial Development Bank Of India IDBI
44 IFB Industries Ltd IFBIND
45 IFCI Limited IFCI
46 Indian Hotels Co. Ltd INDHOTEL
47 Infosys Technologies Ltd INFOSYSTCH48 Indian Oil Corporation Ltd IOC
49 Indian Petrochemicals Corpn. Ltd IPCL
50 IPCA Laboratories Ltd IPCALAB
51 ITC Ltd ITC
52 Jay Bharat Maruti Ltd JAYBARMARU
53 Jayshree Tea & Industries Ltd JAYSREETEA
54 Laxmi Machine Works Ltd LAXMIMACH
55 Liberty Shoes Ltd LIBERTSHOE
56 LML Ltd LML
57 Mahindra & Mahindra Ltd M & M
58 Maharashtra Scooters Ltd MAHSCOOTER
59 Mastek Ltd MASTEK
60 MRF Ltd MRF
61 Mysore Cements Ltd MYSORECEM
62 Nagarjuna Fertilisers & Chemicals Ltd NAGARFERT
63 Navneet Publications Ltd NAVNETPUBL
64 Nirma Ltd NIRMA
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65 Oil & Natural Gas Corpn Ltd ONGC
66 Oudh Sugar Mills Ltd OUDHSUG
67 Parkash Industries Ltd PRAKASH
68 Pidilite Industries Ltd PIDILITIND
69 Punjab Tractors Ltd PUNJABTRAC
70 Rajasthan Spg. & Wvg. Mills Ltd RAJASSPG71 Rajsree Sugars & Chemicals Ltd RAJSREESUG
72 Rama Newsprint and Papers Ltd RAMANEWSPR
73 Ranbaxy Laboratories Ltd RANBAXY
74 Raymond Ltd RAYMOND
75 Reliance Capital Ltd RELCAPITAL
76 Reliance Industries Ltd RELIANCE
77 Reliance Industrial Infrastructure Ltd RIIL
78 S.kumars Nationwide Ltd SKUARSYNF
79 Steel Authority of India Ltd SAIL
80 Sakhti Sugars Ltd SAKHTISUG81 Salora International Ltd SALORAINTL
82 State Bank of India SBIN
83 Siemens Ltd SIEMENS
84 Sirpur Paper mills Ltd SIRPAPER
85 Shree Cements Ltd SHREECEM
86 Sun Pharmaceuticals Industries Ltd SUNPHARMA
87 Supreme Industries Ltd SUPREMEIND
88 Surya Roshni Ltd SURYAROSNI
89 Sutlej Industries Ltd SUTLEJINDS
90 Swaraj Engines Ltd SWARAJENG91 Tamilnadu Newsprint & Papers Ltd TNPL
92 Tata Power Co. Ltd TATAPOWER
93 TIL Ltd TIL
94 Universal Cables Ltd UNIVCABLES
95 Videocon Appliances Ltd VDOCONAPPL
96 Voltas Ltd VOLTAS
97 Videsh Sanchar Nigam Ltd VSNL
98 Wipro Ltd WIPRO
99 Zodiac Clothing Company Ltd ZODIACLOTH
100 Zuari Industries Ltd ZUARIAGRO
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Data Collection
The data regarding the selected companies is obtained from website of National
Stock Exchange and India Infoline. The prices of the equity shares, NSE indexfigures have been collected from the Website of NSE. Data for the project is
collected from secondary sources like newspapers, books, journals etc.
Study Period
In this study, study period is of 9 years from Jan 1997 to Dec 2005. Daily data of
security and stock index have been collected from the website of NSE.
Statistical Techniques
No. of statistical techniques are used in project for achieving the desired objective. The
daily rate of return is calculated for all the 100 scrips during the study period. So the
techniques used in the project are:
Return
R = (Pt-Pt-1)/Pt-1
Where
R is daily return
Pt is the current day’s closing price
Pt-1 is the previous day’s closing price
Standard Deviation
Estimates standard deviation based on a sample. The standard deviation is a measure of
how widely values are dispersed from the average value (the mean).
STDEV uses the following formula:
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Variance
Estimates variance based on a sample. In addition to numbers, text and logical values
such as TRUE and FALSE are included in the calculation.
VARA uses the following formula
Skew ness
Returns the skew ness of a distribution. Skew ness characterizes the degree of asymmetry
of a distribution around its mean. Positive skew ness indicates a distribution with an
asymmetric tail extending toward more positive values. Negative skew ness indicates a
distribution with an asymmetric tail extending toward more negative values.
• The equation for skew ness is defined as:
where
n = no. of observation
xi = values
s = standard deviation
Kurtosis
Returns the kurtosis of a data set. Kurtosis characterizes the relative peaked ness or
flatness of a distribution compared with the normal distribution. Positive kurtosis
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indicates a relatively peaked distribution. Negative kurtosis indicates a relatively flat
distribution.
Kurtosis is defined as
where:
s is the sample standard deviation.
Limitations of the Study
However I have tried my best in collecting the relevant information. Yet there are
always present some limitations under which researcher has to work. Here
following are some limitations under which I had to work as shown below:
Sample Size
The prime limitation of the study is the size of the sample. The sample consists of
100 scrips, which are specified, in the National Stock Exchange. A larger sample,
including more number of scrips would be a right choice. However, in general, a
sample of carefully selected 100 scrips is considered as a larger sample. Since the
sample scrips are selected randomly from the specified group shares, it is
considered that the above sample would be sufficient for the purpose of analysis.
Time Constraint
We had a limited time for conducting this analysis report, which was of three four
months only. So some shortfalls may be present.
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Based on secondary source
Data is collected from secondary sources so authenticity of data depends on the
authenticity of the sources from which the data is collected.
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Chapter 4Analysis and Results
Return & risk Statistics for S & P CNX Nifty and 100 NSE listed
companies for period commencing from Jan 1999 to June 2009
Table 4.1
Mean S.D. Var Skew KurtNo. of
S&P CNX Nifty 0.00064 0.01610 0.00026 -0.2230 4.9533 2256Aandhra Sugar 0.00150 0.04047 0.00164 0.4479 3.4985 1975
Aarti Industries 0.00165 0.03675 0.00135 -2.5419 50.5802 2009
ABB 0.00056 0.02491 0.00062 -0.0144 3.3209 2256
ACC 0.00053 0.03653 0.00133 -7.4277 186.1596 2256
Alfa Laval 0.00126 0.02904 0.00084 0.3976 1.8251 2236
Apollo Tyre 0.00100 0.03605 0.00130 0.7316 3.0446 2256
Arvind Mill 0.00063 0.03630 0.00132 0.9495 3.9726 2256
Ashok Leyland 0.00059 0.04082 0.00167 -5.0370 118.4198 2256
Asian Paint 0.00032 0.02269 0.00051 -3.9980 77.6867 2256
Bajaj Hindustan 0.00267 0.04503 0.00203 -4.1125 87.2412 1814
Bajaj Hotel 0.00038 0.02415 0.00058 -1.0456 19.2264 2256
Balrampur Chini 0.00150 0.02912 0.00085 0.5084 1.8135 2255
BASF 0.00042 0.02728 0.00074 -0.0815 7.7111 2237
Bharat Gear 0.00241 0.06672 0.00445 8.0156 176.1557 1710
Bharat Petrol 0.00082 0.03405 0.00116 -1.4314 24.2277 2253
Birla Eric 0.00100 0.04284 0.00184 1.0001 3.6914 2251
Birla Global 0.00245 0.04734 0.00224 -1.4780 35.3938 1863
Bombay Dyeing 0.00097 0.03584 0.00128 0.5477 2.7793 2256
Can Fin Home 0.00099 0.02779 0.00077 1.1211 10.8599 2225
Carborundam 0.00087 0.03481 0.00121 -5.6816 137.0795 2165
Ceat 0.00067 0.03785 0.00143 0.5245 1.7343 2254Century Enka 0.00021 0.03923 0.00154 -5.5839 133.9161 2230
Chambal Fertiliser 0.00089 0.02536 0.00064 1.1761 14.0711 1935
Cipla 0.00066 0.03447 0.00119 -9.2054 200.3654 2256
Cochi Refinary 0.00099 0.03376 0.00114 -0.6616 25.3624 2256
Dhampur 0.00152 0.04611 0.00213 0.9170 5.8465 2132
Eih Hotel 0.00008 0.02398 0.00057 0.2993 2.2389 2254
Escorts 0.00050 0.03446 0.00119 0.4682 2.4433 2256
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Essar Oil 0.00131 0.04315 0.00186 1.7684 13.0071 2197
Federal Bank 0.00110 0.03738 0.00140 -2.3276 49.9083 1935
Flex 0.00088 0.04746 0.00225 0.6658 3.6863 2255
GIC Housing 0.00074 0.03591 0.00129 0.6965 5.6132 2171
Godfrey Phillip 0.00136 0.03117 0.00097 0.5154 2.6547 2175
Goetz 0.00117 0.03142 0.00099 0.7620 2.7336 2235Grasim 0.00098 0.02886 0.00083 0.2149 2.0167 2256
GTC 0.00273 0.06864 0.00471 2.6111 30.6058 2164
Gujrat stat 0.00077 0.03712 0.00138 0.7300 3.6157 2254
HDFC 0.00052 0.03334 0.00111 -11.1489 284.2803 2256
HDFC Bank 0.00161 0.02674 0.00071 0.6340 7.8185 2256
Hindustan Motor 0.00133 0.04663 0.00217 1.9639 11.7272 2218
HLL 0.00022 0.02861 0.00082 -13.5299 428.4556 2256
Hotel Leela 0.00091 0.03483 0.00121 1.0264 5.3425 2170
IDBI 0.00068 0.03499 0.00122 0.1567 10.3853 2256
IFB 0.00297 0.08609 0.00741 1.6802 17.1110 1877
IFCI 0.00041 0.04033 0.00163 1.4708 7.2762 2256
Indian Hotel 0.00014 0.02311 0.00053 0.0716 3.3235 2256
Infosys 0.00164 0.04226 0.00179 -5.0763 75.3539 2256
IOC 0.00035 0.03016 0.00091 -2.2754 39.1808 2172
IPCA Lab 0.00167 0.03394 0.00115 0.2569 1.5236 2253
IPCL 0.00075 0.03300 0.00109 -0.0509 8.2825 2256
ITC 0.00098 0.02501 0.00063 0.1208 2.5586 2256
Jai Bharat Maruti 0.00195 0.04759 0.00226 -0.0748 7.9374 1784
Jai Sree Tea 0.00062 0.03522 0.00124 -0.6680 19.4248 2180
Laxmi Machine 0.00126 0.03503 0.00123 -1.3008 20.6714 2047
Liberty 0.00107 0.03336 0.00111 0.7831 3.3706 2123LML 0.00070 0.03653 0.00133 0.6102 2.3805 2152
M&M 0.00074 0.03117 0.00097 0.0654 1.6496 2256
Maharashtra Scot. 0.00065 0.03595 0.00129 -0.0700 19.4435 2194
Mastek 0.00198 0.05230 0.00274 -1.1547 11.7912 2236
MRF 0.00036 0.02752 0.00076 0.8112 4.8589 2193
Mysore Cement 0.00165 0.05624 0.00316 0.9132 4.0422 2214
Nagarjun 0.00044 0.03213 0.00103 1.3837 7.5287 2256
Navneet 0.00127 0.03555 0.00126 -3.9836 86.6597 1771
Nirma 0.00040 0.02557 0.00065 0.6821 4.1648 2222
ONGC 0.00121 0.02866 0.00082 0.4435 3.7120 2254
Oudh Sugar 0.00227 0.06872 0.00472 1.2917 57.1374 1669
Parkash 0.00360 0.09076 0.00824 2.6628 28.7117 1563
Pidilite 0.00080 0.02613 0.00068 -2.3476 47.6701 2248
Punjab Tractors 0.00008 0.02874 0.00083 -5.6578 138.8020 2206
Rajasthan Spinning 0.00128 0.04011 0.00161 0.6822 3.4385 1998
Rajsree Sugar 0.00152 0.04581 0.00210 1.8444 14.3287 2203
Rama Newsprint 0.00231 0.06027 0.00363 1.4500 7.0477 2254
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Ranbaxy 0.00082 0.02827 0.00080 -3.4658 58.8981 2256
Raymond 0.00097 0.03205 0.00103 0.4810 1.6071 2256
Reliance Capital 0.00105 0.03443 0.00119 0.1713 1.4417 2256
Reliance Ind. 0.00088 0.02765 0.00076 -2.4000 48.7777 2256
RIIL 0.00092 0.03147 0.00099 0.6777 3.2315 2230
S.kumar 0.00220 0.06063 0.00368 2.8438 32.3337 1779SAIL 0.00144 0.04340 0.00188 1.2409 8.2761 2256
Sakhti Sugar 0.00198 0.05576 0.00311 0.8238 3.7497 2150
Salora 0.00328 0.08052 0.00648 20.5876 706.9379 2015
SBI 0.00082 0.02618 0.00069 0.1106 2.3040 2256
Siemens 0.00096 0.02861 0.00082 0.2248 2.1910 2256
Sirpur Paper Mill 0.00148 0.04139 0.00171 0.5865 4.6941 1848
Sree Cement 0.00225 0.03701 0.00137 0.5075 2.0463 1933
Sun Pharma 0.00126 0.03785 0.00143 -4.7604 78.6828 2254
Supreme 0.00054 0.03230 0.00104 0.3075 1.2816 2237
Surya Roshni 0.00109 0.04301 0.00185 0.7756 6.3195 2143
Sutlej 0.00111 0.04010 0.00161 -1.1597 15.9793 1267
Swaraj Engine 0.00042 0.02528 0.00064 0.2211 1.6889 2196
Tamilnadu Newsprint 0.00071 0.03815 0.00146 0.6023 2.7820 2253
Tata Power 0.00096 0.02840 0.00081 0.1355 4.1597 2256
Til Ltd 0.00358 0.07461 0.00557 9.2363 208.2372 1463
Universal Cable 0.00267 0.06430 0.00413 1.3216 11.4994 1657
Videocon Appliances 0.00106 0.04755 0.00226 1.5711 8.5168 2206
Voltas 0.00146 0.03444 0.00119 0.6107 1.9305 2255
VSNL 0.00034 0.03962 0.00157 -2.5416 42.6803 2047
Wipro 0.00193 0.04743 0.00225 -4.6166 71.7315 2212
Zodiac 0.00188 0.04182 0.00175 -0.4373 12.3605 1843Zuari 0.00013 0.03846 0.00148 -0.5453 12.7290 2214
It is obvious from Table 4.1 that Parkash industries shows the highest daily return
(0.00360) followed by TIL ltd (0.00358) and Salora International (0.00328). The
bottom three companies on the basis of daily returns are Punjab tractors (0.00008)
followed by EIH (0.00008) and Zuari (0.00013).
Standard deviation, which is a measure of total risk, turns highest in case of Park
ash industries (0.09076) followed by IFB (0.08609) and Salora (0.08052). on the
other hand the least risky companies are Asian paints (0.02269), Indian hotel
(0.02311), EIH hotel (0.02398). From this result it is clear that Parkash industry
which has highest return have highest standard deviation (risk).
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Variance turns highest in case of Prankish (0.00824) followed by IFB (0.00741)and Salora (0.00648).on the other hand the least variance companies are Asian
paints (0.00051), Indian hotel (0.00053), EIH hotel (0.00057). A relatively small
variance means a high degree of uniformity in the data, with smaller overall
divergence of individual observations from their mean. A high variance, on the
other hand, indicates a greater degree of diversions of individual observations
from the mean. This helps decide which of the two sets of data with the same
mean value, is represented more adequately by their respective means.
Skew ness turns highest in case of Salora (20.587) followed by TIL Ltd. (9.236)
and Bharat Gear (8.016).on the other hand the least Skew ness companies are HLL
(-13.509), HDFC (-11.148), CIPLA (-9.205).
Kurtosis turns highest in case of Salora (706.937) followed by HLL (428.455) and
HDFC (284.280).on the other hand the least Kurtosis companies are Supreme
(1.282), Reliance Capital (1.442), IPCA Lab (1.524).
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Beta values for S&P CNX Nifty and 100 NSE listed companies.
Table 4.2
Company Name Beta
Aadhra Sugar 0.03431
Aarti Industries 0.00810
ABB 0.62292
ACC 1.09619
Alfa Laval 0.10934
Apollo Tyre 1.04259
Arvind Mill 1.12732
Ashok leyland 0.96628
Asian Paint 0.44250
Bajaj Auto 0.69746
Bajaj Hindustan 0.14165
Balrampur Chini 0.59786
BASF Ltd 0.00234
Bharat Gear 0.06554
Bharat Petrol 0.01757
Birla Eric 0.27088
Birla Global Finance -0.01391
Bombay Dyeing 0.98667
Can Fin Home 0.07757
Carborundam 0.06871
Ceat 0.56924
Century Enka 0.01010
Chambal Fertiliser 0.34149
Ciplal 0.66500
Cochi Refinery 0.84474
Dhampur 0.26662
EIH 0.16927
Escorts 1.07750
Essar Oil 0.71525
Fedral Bank 0.63226
Flex 0.38597
GIC Housing 0.21024
Godfrey Phillip 0.01994
Goetz 0.04292
Grasim 0.82831
GTC Ind -0.00452
gujrat stat 0.03687
HDFC 0.53807
HDFC Bank 0.80053
Hindustan Motor 0.96057
HLL 0.75212
Hotel Leela Venture 0.86140
0.94941
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IDBI
IFB 0.22829
IFCI 1.03814
Indian Hotel 0.60624
Infosys 1.16071
IOC -0.04145
IPCA lab 1.11427IPCL 0.10375
ITC Ltd 0.90269
Jai Bharat Maruti 0.06528
Jai Sree Tea -0.03041
Laxmi Machine 0.03902
Liberty -0.02087
LML 1.17448
M&M 1.01084
Maharashtra Scooter 0.07726
Mastek -0.08402
MRF 0.03778
Mysore Cement 0.04619
Nagarjun 0.79566
Navneet -0.02692
Nirma -0.01429
ONGC 0.09634
Oudh Sugar -0.13635
Parkash 0.57034
Pidilite 0.14562
Punjab Tractors 0.06091
Rajasthan Spinning -0.01007
Rajsree Sugar 0.10523
Rama News 0.33767
Ranbaxy 0.73960
Raymond 0.89132
Reliance capital 1.41422
Reliance Ind. 1.11119
RIIL 0.23334
S&P CNX Nifty 1.00000
S.kumar 0.03396
Sail 1.31575
Sakhti Sugar 0.05445
Salora 0.06053
SBI 1.11604
Shree Cement 0.16493
Siemens 0.81697
Sirpur Paper Mill -0.02731
Sun Pharma -0.00501
Supreme -0.01129
Surya Roshni 0.03010
Sutlej 0.02592
Swaraj Engine 0.01365
Tamilnadu Newsprint 0.02810
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Tata Power 0.99190
TIL -0.01970
Universal Cable 0.03910
Videocon Appliances 0.85453
Voltas 0.71012
VSNL -0.02144
Wipro -0.02959Zodiac -0.03225
Zuari 0.02341
It is obvious from the table 4.2, that the lowest Beta is of Oudh Sugar (-0.136) and
followed by Mastek (-0.080) and IOC (-0.041). On the other hand the highest Beta
company is Reliance Capital (1.414) followed by SAIL (1.316) and LML (1.174).
It means these companies have beta higher then the index which is one. Reliance
capital has the highest beta but the highest return security is Park ash Industries.
Mean Daily Return of Various Months for S&P CNX Nifty (Jan 1999 to June
2009).
Return
Table 4.3
1999 2000 2002 2004 2005 2006 2007 2008 2009 Avera
Jan 0.00381 -0.00529 0.00487 0.00248 0.00381 0.00071 -0.00207 -0.00158 -0.00045 0.0006
Feb 0.00140 0.00512 0.00090 0.00340 -0.00063 0.00312 0.00112 -0.00014 0.00113 0.0017
Mar -0.00106 0.00258 0.00439 -0.00359 -0.00733 -0.00051 -0.00411 -0.00062 -0.00143 -0.0012
Apr 0.00588 0.00200 -0.00434 -0.00403 -0.00083 -0.00179 -0.00222 0.00077 -0.00330 -0.0008
May -0.00126 -0.00444 0.00721 -0.00052 0.00173 -0.00231 0.00360 -0.00819 0.00425 0.0000Jun 0.00607 -0.00506 0.00226 0.00301 -0.00243 0.00145 0.00573 0.00077 0.00272 0.0016
Jul 0.00119 -0.00031 0.00459 -0.00455 -0.00141 -0.00421 0.00199 0.00376 0.00207 0.0003
Aug -0.00489 -0.00427 0.00350 0.00210 -0.00084 0.00254 0.00686 0.00003 0.00145 0.0007
Sep 0.00081 0.00279 0.00012 -0.00439 -0.00679 -0.00238 0.00214 0.00310 0.00422 -0.0000
Oct -0.00163 -0.00440 -0.00285 -0.00373 0.00301 -0.00055 0.00418 0.00122 -0.00452 -0.0010
Nov -0.00293 -0.00030 0.00192 0.00366 0.00476 0.00523 0.00195 0.00463 0.00566 0.0027
Dec 0.00249 0.00366 0.00342 -0.00080 -0.00033 0.00197 0.00696 0.00265 0.00311 0.0025
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Return
-0.002000
0.000000
0.002000
0.004000
1 2 3 4 5 6 7 8 9 10 11 12
Months
Series1
Mean Daily Risk (S.D.) of Various Months for S&P CNX Nifty (Jan 1999 to
June 2009).
S.D.
Table 4.4
1999 2000 2002 2004 2005 2006 2007 2008 2009Avera
ge
Jan 0.0220 0.0149 0.0202 0.0256 0.0121 0.0099 0.0080 0.0218 0.0167 0.0168
Feb 0.0130 0.0100 0.0182 0.0184 0.0158 0.0148 0.0089 0.0169 0.0078 0.0138
Mar 0.0350 0.0161 0.0153 0.0199 0.0290 0.0118 0.0109 0.0148 0.0108 0.0181
Apr 0.0160 0.0167 0.0326 0.0351 0.0223 0.0110 0.0136 0.0140 0.0123 0.0193
May 0.0080 0.0149 0.0217 0.0264 0.0090 0.0135 0.0075 0.0421 0.0068 0.0167
Jun 0.0090 0.0306 0.0135 0.0148 0.0127 0.0113 0.0094 0.0146 0.0073 0.0136
Jul 0.0140 0.0184 0.0159 0.0176 0.0101 0.0101 0.0105 0.0129 0.0094 0.0132
Aug 0.0150 0.0162 0.0139 0.0107 0.0057 0.0085 0.0151 0.0099 0.0098 0.0117
Sep 0.0090 0.0140 0.0130 0.0204 0.0252 0.0072 0.0181 0.0083 0.0119 0.0142
Oct 0.0300 0.0239 0.0205 0.0159 0.0121 0.0084 0.0153 0.0097 0.0151 0.0168
Nov 0.0170 0.0118 0.0168 0.0144 0.0125 0.0069 0.0130 0.0068 0.0095 0.0121
Dec 0.0140 0.0146 0.0143 0.0142 0.0122 0.0096 0.0097 0.0074 0.0109 0.0119
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Risk
0.0000
0.0050
0.0100
0.0150
0.0200
0.0250
1 2 3 4 5 6 7 8 9 10 11 12
Series1
Mean Daily Coefficient of variation of various Months for S&P CNX Nifty
(Jan 1999 to June 2009).
Coefficient of Variation
Table 4.5
1999 2000 2002 2004 2005 2006 2007 2008 2009A
e
Jan 0.1734 -0.3550 0.2410 0.0971 0.3148 0.0720 -0.2589 -0.0723 -0.0269 Feb 0.1080 0.5124 0.0492 0.1847 -0.0397 0.2106 0.1254 -0.0083 0.1446
Mar -0.0303 0.1604 0.2872 -0.1807 -0.2527 -0.0435 -0.3771 -0.0417 -0.1320 -
Apr 0.3673 0.1197 -0.1332 -0.1148 -0.0371 -0.1627 -0.1630 0.0552 -0.2695 -
May -0.1574 -0.2982 0.3325 -0.0197 0.1923 -0.1709 0.4806 -0.1944 0.6296
Jun 0.6743 -0.1653 0.1674 0.2035 -0.1915 0.1284 0.6096 0.0530 0.3705
Jul 0.0848 -0.0171 0.2886 -0.2585 -0.1397 -0.4168 0.1897 0.2916 0.2206
Aug -0.3257 -0.2638 0.2518 0.1958 -0.1473 0.2986 0.4540 0.0030 0.1475
Sep 0.0898 0.1996 0.0090 -0.2146 -0.2694 -0.3301 0.1184 0.3739 0.3537
Oct -0.0543 -0.1840 -0.1388 -0.2340 0.2484 -0.0655 0.2734 0.1255 -0.2995 -
Nov -0.1721 -0.0251 0.1145 0.2540 0.3808 0.7585 0.1503 0.6764 0.5938
Dec 0.1779 0.2508 0.2394 -0.0565 -0.0271 0.2055 0.7177 0.3573 0.2865
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Coefficient of Variation
-0.1000
0.0000
0.1000
0.2000
0.3000
0.4000
1 2 3 4 5 6 7 8 9 10 11 12
Series1
Table 4.3 summarizes the volatility of daily returns in each month for the period of
study. It can be seen from table 4.3 that volatility has varied across months in a
year and across years. November has been the most volatile month followed by
December and February. The higher volatility in the month of February may be
due to the most significant economic event in a year namely the presentation of the
Union Budget, which is usually presented on the last day of the month. Volatility
in November and December is higher due to the effect of half year results declared
by various companies. It can be seen from the table 4.4 that S.D. is highest in the
month of April followed by March and January. This may be due to the reason that
new financial year is started and there are always some new policies of Govt.
related to the corporate sector. Annual reports of various companies are also
published in this month. From table 4.3, we can see that the most volatile year is
2006.
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Chapter 5
Conclusion
The measure findings of the study are listed below:
Lowest ten and top ten companies according to the return are as follows:
Lowest return securities Highest return securitiesPunjab Tractors 0.00008 Rama Newsprint 0.00231Eih Hotel 0.00008 Bharat Gear 0.00241Zuari 0.00013 Birla Global 0.00245Indian Hotel 0.00014 Universal Cable 0.00267Century Enka 0.00021 Bajaj Hindustan 0.00267HLL 0.00022 GTC 0.00273Asian Paint 0.00032 IFB 0.00297VSNL 0.00034 Salora 0.00328IOC 0.00035 Til Ltd 0.00358MRF 0.00036 Parkash 0.00360
Lowest ten and top ten companies according to the S.D. are as follows:
Lowest S.D. securities Hghest S.D. securities
Asian Paint 0.02269 Rama Newsprint 0.06027Indian Hotel 0.02311 S.kumar 0.06063Eih Hotel 0.02398 Universal Cable 0.06430Bajaj Hotel 0.02415 Bharat Gear 0.06672ABB 0.02491 GTC 0.06864ITC 0.02501 Oudh Sugar 0.06872Swaraj Engine 0.02528 Til Ltd 0.07461Chambal Fertiliser 0.02536 Salora 0.08052Nirma 0.02557 IFB 0.08609Pidilite 0.02613 Parkash 0.09076
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Lowest ten and top ten companies according to the Variance are as follows:
Lowest VAR. securities Highest VAR. securities
Asian Paint 0.00051RamaNewsprint 0.00363
Indian Hotel 0.00053 S.kumar 0.00368Eih Hotel 0.00057 Universal Cable 0.00413Bajaj Hotel 0.00058 Bharat Gear 0.00445ABB 0.00062 GTC 0.00471ITC 0.00063 Oudh Sugar 0.00472
Swaraj Engine 0.00064 Til Ltd 0.00557Chambal Fertiliser 0.00064 Salora 0.00648Nirma 0.00065 IFB 0.00741Pidilite 0.00068 Parkash 0.00824
Lowest ten and top ten companies according to the Skewness are as follows:
Lowest SKEW securities Highest SKEW securities
HLL -13.52991 IFB 1.68023HDFC -11.14893 Essar Oil 1.76843Cipla -9.20537 Rajsree Sugar 1.84443ACC -7.42768 Hindustan Motor 1.96390Carborundam -5.68162 GTC 2.61110Punjab Tractors -5.65784 Parkash 2.66277Century Enka -5.58385 S.kumar 2.84381Infosys -5.07629 Bharat Gear 8.01556Ashok Leyland -5.03697 Til Ltd 9.23631Sun Pharma -4.76043 Salora 20.58760
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Lowest ten and top ten companies according to the Kurtosis are as follows:
Lowest KURT securities Highest KURT securitiesSupreme 1.28157 Century Enka 133.9161Reliance Capital 1.44170 Carborundam 137.0795IPCA Lab 1.52358 Punjab Tractors 138.8020Raymond 1.60713 Bharat Gear 176.1557M&M 1.64959 ACC 186.1596Swaraj Engine 1.68887 Cipla 200.3654Ceat 1.73431 Til Ltd 208.2372
Balrampur Chini 1.81345 HDFC 284.2803Alfa Laval 1.82508 HLL 428.4556Voltas 1.93051 Salora 706.9379
Lowest ten and top ten companies according to the Beta are as follows:
Lowest beta securities Highest beta securitiesOudh Sugar -0.13635 Escorts 1.07750Mastek -0.08402 ACC 1.09619IOC -0.04145 Reliance Ind. 1.11119Zodiac -0.03225 IPCA lab 1.11427Jai Sree Tea -0.03041 SBI 1.11604Wipro -0.02959 Arvind Mill 1.12732Sirpur Paper Mill -0.02731 Infosys 1.16071Navneet -0.02692 LML 1.17448VSNL -0.02144 Sail 1.31575Liberty -0.02087 Reliance capital 1.41422
Months with Highest Return Months with Highest S.D.November December February
AprilMarch
January
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Bibliography
1. www.nseindia.com
2. www.nsdl.co.in
3. www.cdsl.co.in
4. www.religaresecurities.com
5. www.reliancemoney.com
6. www.uniconinvestment.com
7. www.moneycontrol.com
8. www.bseindia.com
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OBJECTIVES OF THE STUDY
1. To study the investor’s perception towards Stock Market.
2. To study the awareness level about Stocks.
3. To study the preference of investment of investors.
4. To study the market share of particular Stock.
5. To study the volatility of Stock market.
6. To study the awareness of Stocks at different different time.
Basically there are some objectives of every study. The main objectives of my studyare as follow:
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SWOT Analysis
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investing process.
Distribution Network:-
Religare with almost 900 location spread across 300 cities beefed up by comprehensive
online research, advice and transaction services. In near future expect to make 200000+
retail customers being serviced through centralized call centre / web solution,
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60 branches/semi branches servicing affluent/aggressive traders through highly skilled
financial advisors, 250 independent investment managers/franchisees servicing 50000
highly valued clients, strong advisory role through Fundamental & technical research and
new initiatives are being made in Portfolio Management Services & Commodities
trading.
Products:-
Company’s product line is quite flexible in the sense that there is a product for every kind
of investors. Also all the products cover all the loop holes of all the products offered by
the other competitors like low cost, user friendly online trading services etc.
Branch Network :-
Branch network is a strength of the company.
Performing Organization:-
In stage of evaluation Religare is going to be a “Performing Organization from a
Learning Organization ”
Weakness
Customer Satisfaction:-
As far as customer satisfaction goes Religare has to tighten their socks. Many broking
house catering to heavy investors or small segment of the market can afford to and does
provide relationship managers for their customers, who can understand the trading needs
of individual customers, and advise accordingly. However, a broking house like Religare,
that caters to the mass segment, is in no position to provide relationship managers for
individual customers.
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Branding:-
Though the company has a efficient products but large part of investment interested
population does not know the company. The most basic expectation for a trader or
investor when one begins trading is that one must get timely delivery of shares and
proceeds from sale of shares. Also ones cash balances with the broker must be safe and
secure. Though this confidence in the broker comes with time and experience, good and
transparent practices also play a major role in imbibing confidence in traders.
Competition from banks:-
Most of the banks due to good branding have the faith of the customers of their banking
database. So they enjoy the liberty of huge database and customers find it more reliable to
trade there rather than with a unknown broker. Also banks like HDFC Bank and ICICI
Bank have the advantage of linking the trading accounts of their customers to saving
accounts. This makes trading easier, and at the same time a trader withdraws exactly as
much money from his account as is needed to complete the trade. Similarly sales
proceeds are credited directly to saving account.
Limited exploration of potential market.
Less market awareness about full product range.
Low customer confident in the quality of services.
Religare Securities has less number of brokers.
Religare Securities has less number of branches.
Religare Securities has less number of employees.
Religare Securities is in evolution stage.
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Opportunities:-
The external environment analysis may reveal certain new opportunities for profit and
growth.
Ever-increasing market:-
After the NSE brought the screen based trading system stock markets are now more
secured which has attracted lot of retail investors and the demand is increasing day by
day. This has resulted in improved liquidity and heavy volumes on transactions. Religare
is one of the early entrants here. As to how much it will roar and how swift it can swoop
on the market, the future alone can answer such queries. Religare has been a mega player
and is known for being a mover of stocks. It is also known for putting big deals through
and enjoys good networking with the FIIs.
Improving Technology:-
In country like India technology is always improving which gives the company a chance
to keep on improving their product with time whereas for the small players like local
brokers it will be difficult to keep the same pace as the changing technology. Also with
SEBI lying down some strict guidelines small brokers are finding it harder to retain the
customers with no research department and small capital. The traditional business model
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A lot of new competitors are trying to enter the market in this bullish run to taste the
flavor of this cherry. This is creating a lot of competition for large players like Religare
and it is creating little confusion in the minds of the customers about the services
provided by the broker. Also many banking firms are entering into the market with huge
investment. Competitors like ICICI, KOTAK, HDFC, 5-PAISA etc. are posing a lot of
threats to the company.