MC Shri Final

Fluctuations In Banking Stocks

1

EXECUTIVE SUMMARY

India has a well developed banking system. Most of the banks in India were founded

by Indian entrepreneurs and visionaries in the pre-independence era to provide

financial assistance to traders, agriculturists and budding Indian industrialists. Indian

banks have played a significant role in the development of Indian economy by

inculcating the habit of saving in Indians and by lending finance to Indian industry.

CNX Bank Index is an index comprised of the most liquid and large capitalized

Indian Banking stocks. It provides investors and market intermediaries with a

benchmark that captures the capital market performance of Indian Banks. The index

will have 12 stocks from the banking sector which trade on the National Stock

Exchange.

The project titled “Fluctuations In Banking Stocks” deals with the study of the

analysis and the performance of the listed companies of Bankex.

The Banking Companies are –

Bank of India

HDFC

ICICI

State Bank of India (SBI)

Canara Bank

The information regarding the same was collected through various sources like

website, books and internet sources.

The performance and the behavior of share price movements for the period of 2nd Jan

2006 to 29th Dec the companies under the above mentioned Banking Companies are

analyzed using the Technical analysis, there Beta and Alpha testing, Five days

Moving average and simple charts and smooth line graphs.


2

Design of the Study

Introduction

The project titled “Fluctuations In Banking Stocks” deals with the study of the

analysis and the performance of the listed companies of Bankex.

Analyzing the performance of each company. It will also be helpful for retail investor

and trader in a company’s shares.

Objectives of the study

To know the variations in Banking Stocks.

Effect of Banking Index on these Banking Stocks.

Forecasting of these on the basis of our study.

To carry our Technique analysis.

Outcomes and Benefit of the Study:

As my study is “Fluctuations in Banking Stocks” it’s related to some

listed companies which are regularly traded on CNX Bankex and also an

Bankex effect on these Banking companies.

Out of five scripts which are studied and analyzed, three are performing well

(Bank of India, SBI, Canara Bank) and other banks show (ICICI, HDFC)

volatility in prices they can be considered good for Speculation.


3

LIMITATIONS

As for as possible I have put in my best efforts to collect the data in the course of the

entire study.

Throughout the study, I found some of limitations, which are

� The study is restricted to the period of one year.

� The Study has been done by selected sectors.

� The stocks are not traded all the trading days hence the analysis may not give

100% clear picture.

Methodology of data Collection


4

Source of Data

As my study is mainly depend on past data’s the availability of information is mostly secondary data.

� Primary data: the information thus gathered is an unstructured

interview which is going to ask to brokers.

� Secondary data: all the information is collected thru internet sources

and news paper.

Tools and Techniques of Data Collection

� Internet

� Broachers of the companies

� News papers

Introduction


5

Investment is the sacrifice of certain present value for the uncertain future

reward. An investment decision is a trade-off between risk and return. All investment

choices are made at points of time in accordance with the personal investment ends and

in contemplation of an uncertain future. Since investment in securities are revocable,

investment ends are transient and investment environment is fluid, the reliable bases for

reasoned expectations become more and more vague as one conceives of the distant

future. Investments in securities will, therefore from time to time, re-appraise and

re-evaluate their various investment commitments in the light of new information,

changed expectations and ends.

There are basically 3 concepts of investment:

1. Economic investment- That is, an economist’s definition of investment.

2. Investment in a more general or extended sense, which is used by the

“common man”. 3. Financial investment-means an exchange of financial claims-stocks and bonds

(which are collectively called securities), real estate etc.

Stock exchanges are intricately inter-woven in the fabric of nations economic life. Of

all the modern service institutions, stock exchanges are perhaps the most crucial agent

and facilitators of entrepreneurial progress. After the industrial revolution, as the size of

business enterprises grew, it was no longer possible for proprietors or even partnerships

to raise large amounts of money required for undertaking entrepreneurial ventures, such

huge requirement of capital could only be met by the participation of very large number

of investors; their number running into hundreds, thousands and millions, depending on

the size of the business ventures.

It is not always possible to find buyers of an entire business or even a part of business,

just when one wishes to sell it. Similarly, it is not easy for some one with savings,

especially with a small amount of savings, to readily find an appropriate business

opportunity, or a part there of, for investment. This implies that ownership in business

has to be “Broken up” into a large number of small units, such that each unit may be


6

independently and easily bought and sold without hampering the business activities as

such.

This end is achieved in a modern business through the mechanism of shares. A

share represents the smallest recognized fraction of ownership, represented in form of a

certificate, known as the share certificate. The breaking up of the total ownership of a

business into small units, each unit represented by a share certificate, enables them to

be easily bought and sold. The institution where this buying and selling of shares takes

place is called the stock exchange.

By enabling the convertibility of ownership in product market into financial assets

namely shares, stock exchanges bring together buyers and sellers of fractional

ownerships of companies. These activities relating to stock exchanges and its variations

are appropriately known as stock market or security market.

EARLY HISTORY AND DEVELOPMENTS OF THE INDIAN

STOCK MARKETS:

The earliest records of security dealings in India are meager and obscure. Towards

the close of the 18th century, the East India Company was the dominant institution and

business in its loan securities used to be transacted. The beginning of 19th century saw a

perceptible increase in the nature of business in corporate stocks and shares. However

the main importance to the stock business came in 1856 when the companies act

providing for limited liability of members was enacted. This was followed by a period

of boom and crisis and formation of organized stock exchanges.

SHARE MANIA OF 1861-65:

MARKETS:

The American civil war (1860-61) resulted in the share mania of 1861-65

during which the number of brokers increased to about 200-250 and they became

possessed of great influence, authority and wealth. Like the south sea bubble and tulip

mania of the 18th century in Europe, the share mania of 1861-65 caused undesired

desolation at the end of the American civil war . Very few companies were solvent in

Mumbai. The depression was long and severe, but the share mania had certain lasting


7

effects. The brokers organized an informal association in 1875 which was later on

formally established in Mumbai on 3rd December 1887 as society to be called the

“Native shares and stock brokers” association”. The expansion of liquid capital and the

establishment of a regular market in securities helped to take Mumbai what it is today-

“The chief center of the money and capital markets” and “The financial capital of

India”.

The cotton textile industry which established the primacy of Mumbai also

contributed to the development of the Ahmedabad share and stockbrokers’ association

in 1894.The stock exchanges at Mumbai and Ahmedabad were well set up properly

organized associations of the 20th century, but the Calcutta stock exchange was not so

constituted despite the fact that stock business in an organized way had been existing

since 1830.

INTER-WAR PERIOD

On the eve of the worldwar-1, the stock market in India consisted of 3 stock

exchanges at Mumbai, Calcutta and Ahmedabad as hostilities developed, the import of

manufacturers into India stopped almost completely as Europe ceased to produce any

manufactured articles except those required for the war. As a result Indian

manufacturers were able to penetrate the home market. It was a period of phenomenal

prosperity. The stock exchange soon became the centre of attraction for all. Rival stock

exchange in Mumbai and Ahmedabad an 1917 and 1920 respectively were formed but

could not survive long as they could not obtain official recognition under the provisions

of the Mumbai securities contracts control act in 1925. Futile attempts to establish stock

exchange in Madras and northern India were also made.

The boom petered out in 1921 and Indian stock market went

through a lean period. The improvement in business conditions and in stock market

activity in 1935 was marked by growing public interest in stocks, shares and securities.

There was a rapid increase in textile mills and many new plantation companies were

floated in south India. To cater to this expanding trade in plantation and mill shares, a


8

stock exchange was organized in Madras on 4th September 1937 under the name and

style of the ‘Madras stock exchange association (private) limited’.

WORLD WAR II AND AFTER:

A period of unprecedented prosperity to the stock exchanges was ushered in

world war II. Many new associations were constituted. In Ahmedabad, as many as four

new stock exchanges were set up one after another. Similarity in Lahore, which

witnessed a great expansion of monetary income during the war, four new exchanges

were established. Calcutta and Delhi had two stock exchanges besides the existing

ones. In 1940, two stock exchanges, namely the U.P. stock Exchange Ltd & the Nagpur

stock exchange Ltd, were established in Kanpur and Nagpur, respectively. In 1944, the

Hyderabad stock Ltd, was incorporated in Hyderabad recognized under the Hyderabad

securities contacts control act. A small stock exchange was also set up in Bangalore

city.

The mushroom growth of stock exchanges during the war time

suffered a total depression. The exchanges in Lahore closed down. Most of the others

stock exchanges withered a way when they applied to the Central Government for

recognition under the securities contacts (Regulation) Act, 1956. only the old

established stock exchanges in Mumbai, Calcutta, Madras, Ahmedabad ,Delhi,

Hyderabad and Indore were recognized under this Act. The Bangalore stock exchange

Ltd was registered subsequently in 1957 and recognized 1963.

ORGANISATION OF INDIAN STOCK EXCHANGES

The recognized stock exchanges in India vary from voluntary no-profit

making organizations (as in Mumbai, Ahmedabad and Indore) to joint stock companies

Ltd by shares (as in Calcutta, Delhi and Bangalore) and companies Ltd by guarantee (as

in Madras and Hyderabad) since the rules or articles of association defining the

constitution of the recognized stock exchanges are approved by the Central

Government. The Mumbai stock exchange was the first to get permanent recognition

followed by Calcutta, Delhi, Madras, Ahmadabad, Hyderabad, Indore and Bangalore.

At present there are 21 stock exchanges in India (excluding NSE and OTCEI) the


9

largest being the Bombay stock exchange (BSE). The prominent ones are-Mumbai,

Calcutta, Madras, Delhi and Ahmedabad. The overall development and regulation of

the securities market has been entrusted to the SECURITIES EXCHANGE BOARD

OF INDIA (SEBI) by an Act of parliament in 1992.

MEMBERSHIP

The regulations governing the admission of members the recognized stock

exchanges are uniform in terms of the provisions of securities contracts (Regulations)

rules, 1956.

These statutory rules provide that no person shall be eligible to be elected as a

member if he is-

I. Less than 21 yrs of age.

II. Not an Indian citizen.

III. Adjudged bankrupt.

IV. Convicted for offence involving fraud or dishonesty.

V. Engaged as principal or employee in any business other than that of securities.

VI. Member of any other association in India where dealing in securities are carried on.

VII. Director or employees of company whose principal business is that of dealing in

securities.

Members of the exchange are entitled to work either as individual entities, or in

partnership, or as representative members transacting business on the floor of the

market not in their own name but in the name of the appointing members who assume

the market responsibility for the business so transacted.

Members are entitled to appoint attorneys to supervise their stock exchange

business. Such persons satisfy in all respects the conditions of eligibility prescribed for

membership of the exchange and their appointment must be approved by the Governing

body.

Role of SEBI in Security Market

The Security and Exchange Board of India, is the national regulatory body for

the security market, set-up under the Security and Exchange Board of India Act, 1992,


10

to “protect the interest of investors in securities and promote the development of, and to

regulate, the securities market and for matters connected there with or incidental to”.

SEBI has its head office in Bombay and it is in the process of setting up

regional offices in the metropolitan cities of Calcutta, Madras and Delhi. The board of

SEBI comprises a chairman, two members from the central government representing

the ministries of finance and law, One member from the R.B.I. and two other members

appointed by central government.

As per the SEBI Act 1992, the powers and functions of the board the

regulations of the stock exchanges and other securities market; registration and

regulation of the working of stock brokers, sub-brokers, bankers to an issue (a public

offer), trusties of trust deeds. Registers to an issue, underwriters and such other

intermediaries whom may be associated with stock market in any way; promotion and

regulation of self regulatory organizations; prohibiting fraudulent and unfair trade

practices and insider trading in securities markets; regulating substantial acquisition of

shares and takeover of companies; undertaking inspection, conducting inquiries and

audits of stock exchanges; performing such function and exercising such powers as

contained in the provisions of the capital issues Act 1947 and the securities contracts

(regulations) Act,1956, laving various fees and other charges, conducting necessary

research for above purposes and performing such other functions as may be prescribed

from time to time.

Over the Counter Exchange of India (OTCEI)

With a view to facilitate low capital companies as well as protecting the

investors, an OVER THE COUNTER MARKET (OTC Market) has been setup jointly

by the UNIT TRUST OF INDIA (UTI) and the Industrial Credit and Investment

Corporation of India (ICICI). The naming of this organization never posed a

challenges. It was over the counter exchange of India.

The purpose of the OTCEI which is nothing but another stock exchange of

sorts is to have the small new companies spend a period of internship at the OTC

market for some time, before being allowed to be listed in a stock exchange. As per the

current norms, no company can be simultaneously listed in the OTCEI and a stock

exchange.


11

NATIONAL STOCK EXCHANGE (NSE)

The NSE is a fully computerized stock exchange. To being with, only corporate

dept instruments and government securities were traded in the NSE. In due course,

however, other securities were included to provide them a National Market. The most

significant features of the NSE is the market makers will be allowed to deal on or off

the “Trading Ring” so that the restricts on trading hours will disappear. Instead,

transaction will be carried out continuously on the computers based on automated

quotations system. The real-time prices of all the listed securities (in the NSE) will be

displayed on the computer screen and the system will be able to cope with enormous

volume of transactions in a very short time, thereby speeding up the entire mechanism.

STOCK HOLDING CORPORATION OF INDIA LIMITED (SHCIL)

As the name suggests, it is a corporation holding stock on behalf of investors.

To begin with the corporations activities were limited to the holding of financial

institutions, banks and mutual funds only. However, presently even individual investors

are proposed to be covered through the broker. The National Clearance Depository

System (NCDS) operated by the SHCIL is aimed at improving the operation of the

Indian Stock Market.

The manual system of clearing and settlement of transactions, transfer and

registration of securities etc. have become increasingly sluggish in the face of the

phenomenal growth in the capital markets in the last few years. These systems, which

have served well, have now gone weak. The market is so increasingly being subjected

to delays, frauds, defaults and various other infractions of large proportions that the

systemic risk in the market has gone up substantially in recent times. We cannot hope

to join the mainstream of world markets without dated systems. These compulsions

have triggered the need for the National Clearance And Depository System, a full

computerized system of clearing, settlement, which will not only do away with the

manual systems, but also dispense with the antiquated system of physical transfer of

shares; which itself is the primary cause of much of our stock market malady. NUDS,


12

when operational, it is hope that, it will bring down the cost of clearing and settlement

of transactions and transfer of shares; speed up the processes manifold; reduce the

systemic risk associated with the clearing and settlement processes in our capital

market; meet international standards; provide credibility to the Indian Stock Market in

the world markets; pave the way for other related financial services to develop and all

in all hasten the overall development of the Indian Capital Market. The exact modalities

of its operation will be known only after the system become fully operational. Broadly

however, the SHCIL in due course is expected to result in centralization of all clearing.

Settlement and share registration and transfer functions at one point, much in the

manner of a bank acting as a central clearing house for cheques.

PROSPECTUS

A prospectus is a document that must accompany the application forms of all

public issue of securities, whether ordinary shares, preference shares or debentures. It

contains the terms and conditions of the issue, along with specific features of the

security, the purpose for which issue is being made, the company track record, the risks

inherent for which the capital is being raised and so on. It may also contain information

such as the date of conversion, exercise price, redemption, interest rate and so on. SEBI

has laid out certain guidelines for the information content of a prospectus. Misleading

or false information in the prospectus can attract penal actions.

WHY OF SECURITY TRADING:

Securities are traded in three different ways in stock exchanges in India. They

are-

1. Spot Basis: under this the sellers of the share must deliver the share certificate within

48hours to the buying broker. As such, the seller receives the selling price immediately

upon the share. Under this basis of trading, delivery of security certificate and payment

of cash are more or less immediate.

2. Cash Basis: In this method, the securities are not exactly traded for cash. In general,

actual delivery of certificates and the payment of cash must take place before the next

settlement date meant for cash transactions, when outstanding accounts arising from the

cash basis of trading among the brokers are settled. Since the settlement date for cash


13

transactions occurs only once in two weeks in most stock exchanges in India, the cash

or certificate mostly change hands only on the following settlement date after deal is

made.

3. Settlement Trading: Under this type of trading, it is possible to buy shares, even if we

do not have requisite amount of money, or sell shares even if we do not have the share

certificate. While this system facilitates buying and selling of shares without payment

of cash or delivery of shares at short notice, it requires the buyers and sellers to go

around hunting for suitable lenders of money and share certificates respectively. This

snag is overcome by routing once transactions through a broker, who attends to the

problem of finding such lenders.

However, this system of trading has been suspended by SEBI. It is excepted that in

due course more modern systems of trading will replace this system.

CAPITAL MARKET:

Capital is required to bring a business into existence, to keep it alive and see it

growing. Achieving the goal of business requires the performance of such business

functions as production, distribution, marketing, research and development all of which

involve investment of capital. Further, companies require capital not only for meeting

their long term requirements of funds for new projects, modernization, expansion and

diversification programmes also for covering operational expenses.

Categories of Capital:

1. Long-term capital/fixed capital: It represents the amount of capital invested in

fixed assets. It is a long term investment.

2. Short-term capital/working capital: it represents the amount of capital invested

in current assets. Current assets are those assets which can be converted into cash with

in a year/an accounting period. Working capital is required for meeting the operating

cost of the concern.


14

3. Export capital: The amount of capital required for making payment in

international trade is called export capital. The methods of payment in international

trade are:

a. Cash with order

b. Open account

c. Bills of exchange and

d. Banker’s documentary credits.

4. Venture capital: Venture capital is the capital invested in highly risky ventures.

Meaning and Definition of Capital Market:

Generally speaking, capital market is the place wherein funds are raised for

companies for meeting their long term requirements. Capital market is a market for

long term capital.

Capital market may be defined as the mechanism which co-ordinate the

demand and supply forces of long term capital. The participants on the demand and

supply side of this market are financial institutions, mutual funds, agents, brokers,

dealers, borrowers and lenders.

Components of Capital Market:

Broadly speaking, capital market is composed of two segments.

i. The new issues market or Primary market

ii. The secondary market

i. The new issues market or Primary market:- The primary market the existing

companies or the new companies offer shares/debentures to the public for

subscription. The primary market also includes the offer of securities to the existing

share holders of the companies on right and bonus basis. In the primary market the

companies acquire long term funds for meeting their requirements like project


15

financing, expansion, modernizations etc. Primary market creates financial claims.

In this market the public can only buy the shares. Parties involved in the primary

market are the lenders and the borrowers. Merchant bankers, registrars, issue

companies, under-writers, bankers to the issue, public financial institutions, mutual

funds etc. are the major players in the new issue market.

ii. The Secondary market:- In the secondary market or stock market old issue are bought

and sold. In this market the public can buy and sell securities. This market does not

create financial claims. In this market fund does not flow between borrowers and

lenders but funds flows between lenders and others/buyers of security. The brokers,

the investors, mutual funds and the financial institution are the important

constituents of the secondary market.

Players in the capital market:-

The players in the capital market are divided into three categories:

i) Companies issuing securities:- As per the SEBI Guidelines, companies intending to issue securities are divided three categories, viz.

a) New companies.

b) Existing unlisted companies

c) Existing listed companies

A company is a new company if it satisfies all the following three conditions.

1. It has not completed 12 months of commercial operations.

2. Its audited operative results are not available.

3. It is set up by entrepreneurs with or without track record.

A company is said to be an existing listed company if its shares are listed in the any one

of the recognized stock exchanges.

Existing closely held or private companies are called existing unlisted companies.


16

i. 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:

a) Merchant bankers

b) Under-writers

c) Registrars

d) Brokers

e) Depositories

f) Collecting agents

g) Adverting agencies

h) Agents

i) Stock brokers and Sub-brokers

j) Mutual Funds

ii. Investors:- The investors are comprising of financial and investment companies

and a general public. Companies are employing funds in the hope of receiving future

benefits. All rational investors prefer return, but most investors are risk averse,

attempt to maximize capital gain. Their preferences for dividends are a capital gain

depends on their economic status and the effect of tax differential on dividends and

capital gains. The institutions and companies raising capital from investors frame the

schemes in such a way that these are suitable to all types of investors. The main

objectives of investments are as follows:

A. Safety: - Safety of money is the first objective of an investor.

B. Liquidity: - The liquidity refers to the receipt back of investment when the investor

wants it. Capital appreciation and, Minimum risk.

Profitability: - The investor makes investment for earning money. He would like to

invest in those securities where rate of return is higher.


17

Structure of Capital Market in India: - The structure of Indian capital market

has undergone a remarkable transformation over the last four and a half decades and

now comprises an impressive network of financial institutions and new financial

instruments. The secondary market has become more sophisticated in response to the

varied needs of the investors. Provision of long term credit is entrusted with specialized

financial institutions. Of these IDBI, IFCI, UTI, LIC, GIC etc. Constitute the largest

segment. The various constitutes of capital market are:

i. Equity market

ii. Debt market

iii. Government securities market

iv. Mutual fund schemes.

Factors Influencing the growth of Capital market:-

The growth of the capital market is influenced by several factors which are listed

below:

� The level of savings and investment

� Economic development

� Rapid industrialization

� Speed in acquiring, processing and acting upon information

� Technological advances

� Political stability

� Increased price volatility

� Corporate performance

� Globalization of finance

� Financial innovation and Tax asymmetries

� Advances in financial theory

� Regulatory change

� Foreign Institutional Investor’s (FII’s) participation in the capital market

� NRI’s investment

� Sophistication among investment managers

� Emergence of financial intermediaries like Mutual funds

� Development of financial service sectors like merchant banking, leasing,

venture capital financing


18

� International agreement

� Liquidity factors

� Agency costs

About the Organization

Dantkale and Vijay.Javalegekar a partnership sub broker firm works for the main

broker Vimal and Sons who operate under the brand Share Spot. Vimal and Sons are

the registered broker for the BSE and NSE.

Name of the Organisation : Dantkale and V.Javalegekar Association

Spot Market 48, Navipeth, above Ram Mandir,

Solhapur 413007 .Ph(0217)2628101/2744451

This organization was running successfully since from 15 years. It started in

year 1992.It is partnership firm.

Its sub broker registered under SEBI.

In this organization they are dealing with F&O Trading

NSE Trading

BSE Trading

They are charging brokerage of 0.1% for buying and delivery charge at 0.75 OR 1%

They have good facilities for trading process which leads to satisfy the customer’s

like- LCD facility, Computer and Office boys.

The term broker of stock broker is loosely used to denote intermediately, but the

member broker of a Stock Exchange is a registered member, licensed to trade as per

the Rules, Bylaws and Regulations of the stock exchange. He has been given a

responsibility to observer some rules, and order and a code of conduct and behaves in

a befitting manner to sub serve the objectives of the Exchange and in the public

interest. The so called brokers acting as an agent of UTI, LIC etc, are necessarily the

members of stock exchange.

Since May 1992, the member brokers and sub brokers have also to register

with Securities and Exchange Board of India and the public should deal with such


19

brokers and sub brokers only. These brokers are not supposed to advertise their

business. Each is given a code number of registration number.

Organization Structure

Main Broker

Sub Broker

Partner 1 Partner 2

Branch manager

Senior Executives

Executives

Junior Executives


20

TECHINICAL ANALYSIS

It is a process of identifying trend reversals at an earlier stage to formulate the

buying and selling strategy. With the help of several indicators they analyze the

relationship between price volume and supply demand for the overall market and the

individual stock. Volume is favourable on the up swing i.e. the number of shares

traded is greater than before and on the down side the number of shares traded

dwindles. If it the other way round, trend reversals can be expected.

Assumptions

1. The market value of the scrip is determined by the interaction of supply and

demand.

2. The market discounts everything. The price of the security quoted

represents the hopes fears and inside information received by the market players. The

inside information regarding the issue of bonus shares, and right issues in support the

prices. The loss of earnings and information regarding the forthcoming labors

problem may result in fall in price. These factors may cause a shift in demand and

supply, changing the direction of trends.

3. The market always moves in trend. Except for minor deviations, the stock

prices move in trends. The prices may create definite patterns too. The trend may be

either increasing or decreasing. The trend continues for sometime and then it

reverses.


21

4. Any layman knows the fact that history repeats itself. It is true to the stock

market also. In the rising market investors psychology has up beats and they purchase

the shares in greater volumes, driving the prices higher. At the same time, in the

down trend they may be eager to get out of the market by selling them and thus

plunging the share price further. The market technicians assume that past prices

predict the future.

HISTORY OF TECHNICAL ANALYSIS

The technical analysis is based on the doctrine given by Charles.H.Dow in

1984, in the Wall Street Journal. He wrote a serious if articles in the Wall street

Journal. A.J.Nelson, a close friend if Charles Dow formalized the Dow theory for

economic forecasting. The analysis used of individual sticks and moving averages in

the early 1920’s Later on, with the aid of calculators and computers, sophisticated

techniques came into vogue.

TECHNICAL TOOLS

Generally used technical tools are, Dow theory, volume of trading, short

selling, odd lot trading, bars and line charts, moving averages and oscillators.

DOW THEORY

Dow developed his theory to explain the movement of the indices of Dow

Jones Averages. He developed the theory on the basis of certain hypotheses. The

first hypothesis is that, no signal individual or buyer can influence the major trend of

the market. However, an individual investor can affect the daily price movement by

buying or selling huge quantum of particular scrip. The intermediate price movement

also can be affected to a lesser degree by an investor.

His second hypothesis is that the market discounts every thing. Even natural

calamities such as earthquake, plague and fire also get quickly discounted in the

market. The Pokhran blast affected the share market for a short while and then the

market returned back to normally.


22

His third hypothesis is that the theory is not infallible. It is not a tool to beat

the market but provides a way to understand it better.

The theory according to Dow theory the trend is divided into primary,

intermediate and short term trend. The primary trend may be the broad upward or

downward movement that may last for a year or two. The intermediate trends are

corrective movements, which may last for three weeks to three months. The primary

trend may be interrupted by the intermediate trend. The short term trend refers to the

day to day price movements. It is also known as oscillatons.

TREND

Trend is the direction of the movement. The prices can either increase or fall

or remain flat. Three directions of the share price movements are called as rising,

falling and flat trends. The point to be remembered is that share price does not rise or

fall in a straight line. Every rise or fall in a price experiences a counter move. If a

share price is increasing, the counter move will be a fall in the price and vice versa.

The share prices move in zigzag manner.

Trend Line

Y

Y

Days

Rising trend line

Flat trend line

Falling trend line

Price


23

Revival of b1 market confidence phase1

Good corporate earnings phase2

Speculation phase3

PRIMARY TREND

A primary trend may a bull market moving in a steady upward direction, or a

bear market steadily dropping. When the market exhibits the increasing trend, it is

called bull market. The bull market shows three clear cut peaks. Each peak is higher

than the previous peak. The bottoms are also higher than the previous bottoms. The

reactions following the peak used to halt before the previous bottoms. The phases

leading to the three peaks are revival, improvement in corporate profit and

speculation. The revival period encourages more and more investors to buy scrip’s,

their expectations about the future being high. In the second phase, increased profits

of corporate would result in the future price rise. In the third phase, prices advance

due to inflation and speculation. The below diagram clarifies three phases of bull

market.

Y Bull Market

T3

T2

T1

Y

Days

The reverse is true with the bear market. Here, the first phase of falls starts with the

abandonment of hopes. The chances of price moving back to the previous high level

seemed to be low. This would result in the sale of shares. In the second phase,

companies are reporting lower profits and dividends. This would lead to selling

pressure. The final phase is characterized by the distress sale of shares.

Price


24

Bear Market

Y

T1

T2

B1 B2 B3

X

Days

THE SECONDAY TREND

The secondary trend or the intermediate trend moves against the main trend and leads

to correction. In the bull market the secondary trend would result in the fall of about

33.66% of the earlier rise. In the bear market, the secondary trend carries the price

upward and corrects the main trend. The correction would be 33% to 66% of the

earlier fall. Intermediate trends corrects the over bought and over sold condition. It

provides the breathing space to the market.

Y Secondary Corrections

B

A

Days X

Price

Loss of hope (phase1) Recession in business(phase2)

Distress selling(phase3)

Price

33% to 66% of ‘B’

33% to 66% of ‘A’


25

MINOR TRENDS

Minor trends or tertiary moves are called random wriggles. They are simply daily

price fluctuations. Minor trend tries to correct the secondary trend movement. It is

better for the investors to concentrate on the primary or secondary trends then on the

minor trends. The chartist plots the scrip’s price or the market index each day to trace

the primary or secondary trend.

MOVING AVERAGE

The market indices do not rise or fall in the straight line. The upward or downward

movements are interrupted by counter moves. The underline trend can be studied by

smoothening of the data. To smooth the data moving average technique is used.

The word moving means that the body of data moves ahead to include the

recent observations. It it is five day moving average, on the sixth day the body of date

moves to include the sixth day observation eliminating the first day’s observation.

Like wise it continues. In moving average calculation, closing price of stock is used.

Calculation of Five-Day Moving Average for Reliance’s Stock

Day Price Average

Feb 4, 99 255 ---

6 261 ----

7 269 266.2

8 273 270.8

11 273 272.8

12 278 273.2

13 271 274.0

14 271 273.8


26

Index and stock price moving average

Individual stock price is compared with the stock market indices. The moving

average of the stock and index are plotted in the same sheet and trends are compared.

If BSE/NSE index is above the stock’s moving average line the particular stock has

bullish trend.

The price may increase above the market average. If the SENSEX or NIFTY is below

the stock’s moving average, the bearish market can be expected for the particular

stock

RISK

Risk refers to the possibility that the actual outcome of an investment will differ from

its expected outcome. More specifically, most investors are concerned about the

actual outcome being less than the expected outcome. The wider the range of

possible outcomes, the greater the risk.

SOURCES OF RISK

The three major one’s are

1) Business risk

2) Interest rate risk

3) Market risk.

TYPES OF RISK

The modern portfolio theory looks at risk form a different respective. It divides the

total risk as follows.

Total risk= Unsystematic + Systematic

The unsystematic risk (Unique risk) of a security represents that portion of its total

risk which stems from firm – specific factors like the development of a new product, a

labor strike, or the emergence of a new competitor. Events of this nature primarily

affect the specific firm and not all firms in general.


27

In a diversified portfolio, unique risks of different stocks tend to cancel each

other—a favourable development in one firm may upset an adverse happening in

another and vice versa.. Hence unique risk is also referred to as diversifiable risk or

unsystematic risk.

The systematic risk (Market risk)

The market risk of a stock represents that portion of its risk which is attributable to

economy- wide factors like the growth rate or GDP, the level of government

spending, money supply, interest rate structure, and inflation rate. Since these factors

affect all firms to a greater or lesser degree, the investors cannot avoid the risk arising

from them, however diversified portfolio may be. Hence, it is also referred as

systematic risk or non diversifiable risk.

The Characteristic Regression Line (CRL)

CRL is a simple linear regression model estimated for a particular stock against the

market index return to measure it’s diversifiable and un diversifiable risks. The

model is

Ri = αi + βiRm + ei

Ri – Return of the ith stock

αi – Intercept

βi – Slope of the ith stock

Rm – Return of the market index.

Ei – the error term


28

The security return is

Today’s security return = Today’s Price – Yesterday’s Price

Yesterday’s Price X 100

Today’s Market return = Today’s Index – Yesterday’s Index

Yesterday’s Index X 100

Beta

Beta is the slope of the CRL. Beta describes the relationship between the stock’s

returns and the index returns.

1) Beta = +1.0

One percent change in market index returns causes exactly 1% change in the stock

return. It indicates that the stock moves in tandem with the market

2) Beta = + 0.5

One percent changes in market index return causes 0.5 % change in the stock return.

The stock is less volatile compared to the market.

3) Beta = + 2.0

One percent change in market index return causes 2% change in the stock return. The

stock is more volatile. When there is a decline of 10% in the market return, the stock

with a beta of 2 would give a return of 20%. The stock with more than 1 beta is

considered to be risky.

4) Negative Beta

Negative beta indicates that the stock return moves in the opposite direction to the

market return. A stock with a negative Beta of -1 would provide a return of 10%, if

the market return declines by 10% and vice versa.

Stocks with negative beta resist the decline in the market return, but stocks

with negative returns are very rare.

a) Beta = 1

Y


29

Stock Return Beta

Alpha 0 X Market return b) Beta > 1 Y

Beta

Stock Return

Alpha 0 Market return X c) Beta < 1 Y


30

Beta

Stock Return

Beta Alpha 0 X Market return Alpha: The intercept of the characteristic regression line is alpha i.e. the

distance between the intersection and the horizontal axis. It indicates that the

commodity return is independent of the market return. A positive value of

alpha is a healthy sign. Positive alpha values would yield profitable return.

According to the portfolio theory in well diversified portfolio the average

value of alpha of all commodities turn out to be zero.

Beta (ß) = n*∑X*Y – (∑X * ∑ Y)/ n*∑ X^2-∑ X^2

Alpha= Avg of Y- Beta* Avg of X

Banks in India

India has a well developed banking system. Most of the banks in India were founded

by Indian entrepreneurs and visionaries in the pre-independence era to provide


31

financial assistance to traders, agriculturists and budding Indian industrialists. Indian

banks have played a significant role in the development of Indian economy by

inculcating the habit of saving in Indians and by lending finance to Indian industry.

The commercial banking structure in India consists of: Scheduled Commercial Banks

and Unscheduled Banks. Scheduled commercial Banks constitute those banks, which

have been included in the Second Schedule of Reserve Bank of India (RBI) Act,

1934. RBI includes only those banks in this schedule, which satisfy the criteria laid

downNvidePsectionD42B(6)(a)MofUtherAct.

Indian banks can be broadly classified into nationalised banks/public sector banks,

private banks and foreign banks.

Foreign Banks in India


32

Foreign banks have brought latest technology and latest banking practices in India.

They have helped made Indian Banking system more competitive and efficient.

Government has come up with a road map for expansion of foreign banks in India.

The road map has two phases. During the first phase between March 2005 and March

2009, foreign banks may establish a presence by way of setting up a wholly owned

subsidiary (WOS) or conversion of existing branches into a WOS. The second phase

will commence in April 2009 after a review of the experience gained after due

consultation with all the stake holders in the banking sector. The review would

examine issues concerning extension of national treatment to WOS, dilution of stake

and permitting mergers/acquisitions of any private sector banks in India by a foreign

bank.

Major foreign banks in India are:

• ABN-AMRO Bank

• Abu Dhabi Commercial Bank Ltd.

• American Express Bank Ltd

• BNP Paribas

• Citibank

• DBS Bank Ltd

• Deutsche Bank

• HSBC Ltd

• Standard Chartered Bank

Nationalised Banks in India

Banking System in India is dominated by nationalised banks. The nationalisation of

banks in India took place in 1969 by Mrs. Indira Gandhi the then prime minister. The


33

major objective behind nationalisation was to spread banking infrastructure in rural

areas and make available cheap finance to Indian farmers. Fourteen banks were

nationalised in 1969. TheseMBanksPwereOBefore 1969, State Bank of India (SBI)

was the only public sector bank in India. SBI was nationalized in 1955 under the SBI

ActNofM1955.

The second phase of nationalisation of Indian banks took place in the year 1980.

SevenMmoreNbanksKwereRnationalisedGwithPdepositsPoverQ200Pcrores.

List of Public Sector Banks in India is as follows:

• Allahabad Bank

• Andhra Bank

• Bank of Baroda

• Bank of India

• Bank of Maharashtra

• Canara Bank

• Central Bank of India

• Corporation Bank

• Dena Bank

• Indian Bank

• Indian Overseas Bank

• Oriental Bank of Commerce

• Punjab and Sind Bank

• Punjab National Bank

• State Bank of Bikaner & Jaipur

• State Bank of Hyderabad

• State Bank of India (SBI)

• State Bank of Indore

• State Bank of Mysore

• State Bank of Patiala

• State Bank of Saurashtra

• State Bank of Travancore

• Syndicate Bank


34

• UCO Bank

• Union Bank of India

• United Bank of India

• Vijaya Bank

Private Banks in India

All the banks in India were earlier private banks. They were founded in the pre-

independence era to cater to the banking needs of the people. But after nationalisation

of banks in 1969 public sector banks came to occupy dominant role in the banking

structure. Private sector banking in India received a filip in 1994 when Reserve Bank

of India encouraged setting up of private banks as part of its policy of liberalisation of

the Indian Banking Industry. Housing Development Finance Corporation Limited

(HDFC) was amongst the first to receive an 'in principle' approval from the Reserve

Bank of India (RBI) to set up a bank in the private sector.

Private banks have played a major role in the development of Indian banking industry.

They have made banking more efficient and customer friendly. In the process they

have jolted public sector banks out of complacency and forced them to become nore

competitive.

Major private banks in India are:

• Bank of Rajasthan

• Bharat Overseas Bank

• Catholic Syrian Bank

• Centurion Bank of Punjab

• Dhanalakshmi Bank

• Federal Bank

• HDFC Bank

• ICICI Bank

• IDBI Bank

• IndusInd Bank


35

• ING Vysya Bank

• Jammu & Kashmir Bank

• Karnataka Bank

• Karur Vysya Bank

• Kotak Mahindra Bank

• SBI Commercial and International Bank

• South Indian Bank

• United Western Bank

• UTI Bank

• YES Bank

CNX Bank Index

The Indian banking Industry has been undergoing major changes, reflecting a number

of underlying developments. Advancement in communication and information

technology has facilitated growth in internet-banking, ATM Network, Electronic

transfer of funds and quick dissemination of information. Structural reforms in the


36

banking sector have improved the health of the banking sector. The reforms recently

introduced include the enactment of the Securitization Act to step up loan recoveries,

establishment of asset reconstruction companies, initiatives on improving recoveries

from Non-performing Assets (NPAs) and change in the basis of income recognition

has raised transparency and efficiency in the banking system. Spurt in treasury

income and improvement in loan recoveries has helped Indian Banks to record better

profitability. In order to have a good benchmark of the Indian banking sector, India

Index Service and Product Limited (IISL) hasBdevelopedBtheBCNXPBankKIndex.

CNX Bank Index is an index comprised of the most liquid and large capitalized

Indian Banking stocks. It provides investors and market intermediaries with a

benchmark that captures the capital market performance of Indian Banks. The index

will have 12 stocks from the banking sector which trade on the National Stock

Exchange.

The average total traded value for the last six months of CNX Bank Index stocks is

approximately 74% of the traded value of the banking sector. CNX Bank Index stocks

represent about 79% of the total market capitalization of the banking sector as on

March 31,G2005.

The average total traded value for the last six months of all the CNX Bank Index

constituents is approximately 10% of the traded value of all stocks on the NSE. CNX

Bank Index constituents represent about 9% of the total market capitalization as on

MarchP31,K2005.

Methodology

The index is a market capitalization weighted index with base date of January 01,

2000,MindexedGtoHaKbaseGvalueMofM1000.


37

SelectionMCriteria

Selection of the index set is based on the following criteria:

1. Company's market capitalization rank in the universe should be less than 500

2. Company's turnover rank in the universe should be less than 500

3. Company's trading frequency should be at least 90% in the last six months.

4. Company should have a positive net worth.

5. A company which comes out with a IPO will be eligible for inclusion in the

index, if it fulfills the normal eligibility criteria for the index for a 3 month

period instead of a 6 month period.

Bank of India

1st Quarter

Date Stock

Price(X) Index

Price(Y) X Y X^2 Y^2 XY

Stock Price Return Index Price

Return

6-Jan 132.5 4673.34

16-Jan 133.47 4624.15 0.0073 -0.0105 0.0001 0.0001 -0.0001

23-Jan 126.58 4487.18 -0.0516 -0.0296 0.0027 0.0009 0.0015


38

31-Jan 129.43 4574.71 0.0225 0.0195 0.0005 0.0004 0.0004

7-Feb 122.71 4476.5 -0.0519 -0.0215 0.0027 0.0005 0.0011

15-Feb 131.81 4562.5 0.0742 0.0192 0.0055 0.0004 0.0014

22-Feb 132.17 4473.68 0.0027 -0.0195 0.0000 0.0004 -0.0001

1-Mar 133.55 4520.89 0.0104 0.0106 0.0001 0.0001 0.0001

8-Mar 136.18 4618.39 0.0197 0.0216 0.0004 0.0005 0.0004

16-Mar 132.56 4661.64 -0.0266 0.0094 0.0007 0.0001 -0.0002

23-Mar 131.23 4660.88 -0.0100 -0.0002 0.0001 0.0000 0.0000

30-Mar 133.78 4668.97 0.0194 0.0017 0.0004 0.0000 0.0000

Total 0.0161 0.0007 0.0131 0.0032 0.0047

2nd Quarter

Beta Alpha

0.613621 -0.00823

3rd Quarter

Date Stock

Price(X) Index


Stock Price

Return Index Price

Return 4-Jul 99.38 3682.11

11-Jul 99.69 3736.74 0.0031 0.0148 0.0000 0.0002 0.0000 18-Jul 90.54 3596.63 -0.0918 -0.0375 0.0084 0.0014 0.0034 25-Jul 90.11 3632.22 -0.0047 0.0099 0.0000 0.0001 0.0000 1-Aug 108.4 3999.31 0.2030 0.1011 0.0412 0.0102 0.0205 8-Aug 117.35 4143.54 0.0826 0.0361 0.0068 0.0013 0.0030

Beta Alpha

0.358983 -0.00046

Date Stock

Price(X) Index


Stock Price

Return Index Price

Return 7-Apr 133.43 4760.16

18-Apr 126.51 4585.45 -0.0519 -0.0367 0.0027 0.0013 0.0019 25-Apr 124.45 4563.47 -0.0163 -0.0048 0.0003 0.0000 0.0001 2-May 124.74 4530.25 0.0023 -0.0073 0.0000 0.0001 0.0000 9-May 147.07 4896.37 0.1790 0.0808 0.0320 0.0065 0.0145

16-May 145.04 4861.72 -0.0138 -0.0071 0.0002 0.0001 0.0001 23-May 130.23 4453.24 -0.1021 -0.0840 0.0104 0.0071 0.0086 30-May 121.32 4300.74 -0.0684 -0.0342 0.0047 0.0012 0.0023

7-Jun 112.64 4072.38 -0.0715 -0.0531 0.0051 0.0028 0.0038 14-Jun 101.86 3644.75 -0.0957 -0.1050 0.0092 0.0110 0.0100 21-Jun 102.32 3705.85 0.0045 0.0168 0.0000 0.0003 0.0001 27-Jun 104.52 3756.99 0.0215 0.0138 0.0005 0.0002 0.0003

-0.2124 -0.2208 0.0651 0.0306 0.0417


39

16-Aug 128.52 4357.24 0.0952 0.0516 0.0091 0.0027 0.0049 23-Aug 130.25 4414.12 0.0135 0.0131 0.0002 0.0002 0.0002 30-Aug 138.85 4522.24 0.0660 0.0245 0.0044 0.0006 0.0016

6-Sep 141.57 4667.96 0.0196 0.0322 0.0004 0.0010 0.0006

13-Sep 141.18 4658.03 -0.0028 -0.0021 0.0000 0.0000 0.0000 20-Sep 152.48 4903.92 0.0800 0.0528 0.0064 0.0028 0.0042 27-Sep 149.65 5008.75 -0.0186 0.0214 0.0003 0.0005 -0.0004

0.4451 0.3177 0.0772 0.0210 0.0381

Beta Alpha 0.433464 0.010401

4th Quarter

Date Stock

Price(X) Index


Stock Price

Return Index Price

Return 5-Oct 162.21 5280.94

12-Oct 164.39 5270.22 0.0134 -0.0020 0.0002 0.0000 0.0000 19-Oct 158.57 5366.56 -0.0354 0.0183 0.0013 0.0003 -0.0006 27-Oct 154.78 5382.36 -0.0239 0.0029 0.0006 0.0000 -0.0001 3-Nov 174.33 5622.14 0.1263 0.0445 0.0160 0.0020 0.0056

10-Nov 175.4 5620.59 0.0061 -0.0003 0.0000 0.0000 0.0000 17-Nov 183.56 5991.68 0.0465 0.0660 0.0022 0.0044 0.0031 24-Nov 193.75 6104.34 0.0555 0.0188 0.0031 0.0004 0.0010

1-Dec 201.89 6195.59 0.0420 0.0149 0.0018 0.0002 0.0006 8-Dec 205.86 6247.43 0.0197 0.0084 0.0004 0.0001 0.0002

15-Dec 179.7 5771.04 -0.1271 -0.0763 0.0161 0.0058 0.0097 22-Dec 191.19 5849 0.0639 0.0135 0.0041 0.0002 0.0009

0.1872 0.1089 0.0456 0.0133 0.0203

Beta Alpha

0.4356 0.002485

Bank of India Table-1

Company Quarter Beta Alpha


40

Graph-1

Bank Of India

0.3909

0.6331

0.3818 0.4457

-0.0004 -0.0072 0.0113 0.0021-0.1

0.1

0.3

0.5

0.7

1 2 3 4Quarter

Val

ue

Beta Alpha

Interpretation of Beta:- In first quarter, it shows a positive trend of 0.3909 and in

next quarter it went up to 0.6331 which is more than 0.5 which indicates that one

percent change in market return causes a 0.5% change in stock return. The stock is

less volatile compared to market, but this did not continue in third quarter, with value

of 0.3818 which is less than previous quarter. In fourth quarter, there is slight up ward

movement,0.4457 which is near to 0.5.

By this interpretation the stock is less volatile compared to the market.

Interpretation of Alpha:- Here Alpha is the Market return. In first quarter it is not

giving any return and this continued with in second quarter. But in third quarter gives

a return of 0.0113 which is high compared to the fourth quarter as the alpha is 0.0021.

Conclusion: - From the above Interpretation of Beta and Alpha values of four

quarters the individual script is volatile but its not going to be influenced by the

market.

Quarter Wise 5days Moving Average

Bank of India 1 0.3909 -0.0004

2 0.6331 -0.0072

3 0.3818 0.0113

4 0.4457 0.0021


41

1st Quarter

Graph-1

Bank of India Qtr 5 days Moving Avg

010203040

6-Ja

n-06

12-Ja

n-06

17-Ja

n-06

20-Ja

n-06

25-Ja

n-06

31-Ja

n-06

3-Feb

-06

8-Feb

-06

14-F

eb-0

6

17-F

eb-0

6

22-F

eb-0

6

27-F

eb-0

6

2-Mar-0

6

7-Mar-0

6

10-M

ar-0

6

16-M

ar-0

6

21-M

ar-0

6

24-M

ar-0

6

29-M

ar-0

6

Date

Val

ue

Stock Avg Index Avg

Interpretation of 5-days MA:- In the above graph, we depicts that, the stock price

for 5days MA line and market index MA line goes on with correlation and it is

continued with whole quarter. On 6th Jan to 20th Jan there is a decline in the market

after that form 25th Jan to 3rd Feb it goes up and for the rest of the Quarter this ups and

down were continued. During all these up and downs the Market Index is constant. .

Conclusion: This we conclude that even thaw there is a Constant move in the Index

price, but in individual script is so volatile and it’s moving with the market.

2nd Quarter


42

Graph-2

Bank of India Qtr wise 5 days Moving Avg

05

101520253035

3-Apr-0

6

7-Apr-0

6

13-A

pr-0

6

19-A

pr-0

6

24-A

pr-0

6

27-A

pr-0

6

2-May-0

6

5-May-0

6

10-M

ay-0

6

15-M

ay-0

6

18-M

ay-0

6

23-M

ay-0

6

26-M

ay-0

6

1-Ju

n-06

6-Ju

n-06

9-Ju

n-06

14-Ju

n-06

19-Ju

n-06

22-Ju

n-06

26-Ju

n-06

29-Ju

n-06

Date

Val

ue

Stock Avg Index Avg

Interpretation of 5-days MA:- From the above graph, it shows that the 5days MA

line of stock and MA line market index goes on with correlation and it is continued

with whole quarter. On 3rd Apr to 5th may there is a down ward movement in Both

Index and Script prices, but after this there is a sudden increase up to 15th May and

later a fall continue till the Quarter ending.

Conclusion:- As from the above Interpretation, It indicates that the stock moves in

Tandem with the market. Hear the market is bearish as the prices of Market index and

stock lines are continually falling.

3rdQuarter


43

Graph-3

Bank of India Qtr wise 5 days Moving Avg

05

10152025303540

3-Ju

l-06

6-Ju

l-06

11-Ju

l-06

14-Ju

l-06

19-Ju

l-06

24-Ju

l-06

27-Ju

l-06

1-Aug-

06

4-Aug-

06

9-Aug-

06

14-A

ug-0

6

18-A

ug-0

6

23-A

ug-0

6

28-A

ug-0

6

31-A

ug-0

6

5-Sep-

06

8-Sep-

06

13-S

ep-0

6

18-S

ep-0

6

21-S

ep-0

6

26-S

ep-0

6

29-S

ep-0

6

Date

Val

ue

Stock Avg Index Avg

Interpretation of 5-days MA:- From the above graph, it clears that 3rd Jul to 24th Jul

there is a down ward movement in Both Index and Script prices, but after this there is

a sudden increase up to 5th Sep then a little-bit increase and the rise was continued till

the Quarter ending. Here the individual stock and market index lines were goes with

correlation and this was continued with the whole Quarter.

Conclusion:- As from the above Interpretation, it indicates that the stock moves in

Tandem with the market. It also shows the Bullish trend as the market and stock

prices are moving in an upward trend.

4th Quarter

Graph-4


44

Bank of India Qtr wise 5 Days moving Avg

0

10

20

30

40

50

3-Oct-

06

6-Oct-

06

11-O

ct-06

16-O

ct-06

19-O

ct-06

23-O

ct-06

30-O

ct-06

2-Nov

-06

7-Nov

-06

10-N

ov-0

6

15-N

ov-0

6

20-N

ov-0

6

23-N

ov-0

6

28-N

ov-0

6

1-Dec

-06

6-Dec

-06

11-D

ec-0

6

14-D

ec-0

6

19-D

ec-0

6

22-D

ec-0

6

28-D

ec-0

6

Date

Val

ue

Stock Avg Index Avg

Interpretation of 5-days MA:- From the above graph, it depicts that market index

and individual stock price lines are correlated and this was continued with the whole

quarter. On 3rd Oct to 30th Oct there is a fall in stock prices but during this period the

Market price was not affected so much, on 28th Nov to 6th Dec the market index and

stock price are intersect each other and they get a little diversion on 14th Dec and on

28 Dec again there is collision.

Conclude: - It indicates that the stock moves in tandem with the market index. There

is a volatility exists in the stock price as compare to the market index, even though the

market line is up ward the script is not going with that upward trend but at the end of

Quarter it was moved along with market index.

Final Conclusion:- From the above observation made in these Four Quarters, its

clears that the Investment in Bank of India stock is a good during the First Quarter but

this will be not with Second Quarter as the market is falling a bearish mode of market

a good situation to buy and in Third Quarter the market is in Bullish mood and hear

the investor can sell his stock and make a good money out of it. Even though he holds

and it’s a good investment as the market is continued its Bullish move till the end of

Fourth Quarter.

HDFC 1st Quarter

Date Stock

Price(X) Index


Stock Price

Return Index Price

Return


45

6-Jan 733.45 4673.34 16-Jan 746.23 4624.15 0.0174 -0.0105 0.0003 0.0001 -0.0002 23-Jan 733.36 4487.18 -0.0172 -0.0296 0.0003 0.0009 0.0005 31-Jan 735.58 4574.71 0.0030 0.0195 0.0000 0.0004 0.0001 7-Feb 745.14 4476.5 0.0130 -0.0215 0.0002 0.0005 -0.0003

15-Feb 752.52 4562.5 0.0099 0.0192 0.0001 0.0004 0.0002 22-Feb 735.2 4473.68 -0.0230 -0.0195 0.0005 0.0004 0.0004 1-Mar 729.11 4520.89 -0.0083 0.0106 0.0001 0.0001 -0.0001 8-Mar 759.17 4618.39 0.0412 0.0216 0.0017 0.0005 0.0009

16-Mar 767.6 4661.64 0.0111 0.0094 0.0001 0.0001 0.0001 23-Mar 741.95 4660.88 -0.0334 -0.0002 0.0011 0.0000 0.0000 30-Mar 748.31 4668.97 0.0086 0.0017 0.0001 0.0000 0.0000

0.0223 0.0007 0.0045 0.0032 0.0017

Beta Alpha 0.375931 -0.0007

2nd Quarter

Date Stock

Price(X) Index


Stock Price

Return Index Price

Return 7-Apr 807.93 4760.16

18-Apr 817.46 4585.45 0.0118 -0.0367 0.0001 0.0013 -0.0004 25-Apr 838.84 4563.47 0.0262 -0.0048 0.0007 0.0000 -0.0001 2-May 831.14 4530.25 -0.0092 -0.0073 0.0001 0.0001 0.0001 9-May 870.87 4896.37 0.0478 0.0808 0.0023 0.0065 0.0039

16-May 861.62 4861.72 -0.0106 -0.0071 0.0001 0.0001 0.0001 23-May 808.35 4453.24 -0.0618 -0.0840 0.0038 0.0071 0.0052 30-May 763.02 4300.74 -0.0561 -0.0342 0.0031 0.0012 0.0019

7-Jun 737.29 4072.38 -0.0337 -0.0531 0.0011 0.0028 0.0018 14-Jun 677.64 3644.75 -0.0809 -0.1050 0.0065 0.0110 0.0085 21-Jun 717.3 3705.85 0.0585 0.0168 0.0034 0.0003 0.0010 27-Jun 744.89 3756.99 0.0385 0.0138 0.0015 0.0002 0.0005

-0.0696 -0.2208 0.0229 0.0306 0.0224

Beta Alpha

0.935019 -0.01416

3rd Quarter

Date Stock

Price(X) Index


Stock Price

Return Index Price

Return


46

4-Jul 767.54 3682.11 11-Jul 785.37 3736.74 0.0232 0.0148 0.0005 0.0002 0.0003 18-Jul 730.91 3596.63 -0.0693 -0.0375 0.0048 0.0014 0.0026 25-Jul 725.8 3632.22 -0.0070 0.0099 0.0000 0.0001 -0.0001 1-Aug 788.18 3999.31 0.0859 0.1011 0.0074 0.0102 0.0087 8-Aug 799.01 4143.54 0.0137 0.0361 0.0002 0.0013 0.0005

16-Aug 815.71 4357.24 0.0209 0.0516 0.0004 0.0027 0.0011 23-Aug 847.79 4414.12 0.0393 0.0131 0.0015 0.0002 0.0005 30-Aug 846.85 4522.24 -0.0011 0.0245 0.0000 0.0006 0.0000

6-Sep 869.46 4667.96 0.0267 0.0322 0.0007 0.0010 0.0009 13-Sep 847.02 4658.03 -0.0258 -0.0021 0.0007 0.0000 0.0001 20-Sep 876.64 4903.92 0.0350 0.0528 0.0012 0.0028 0.0018 27-Sep 885.1 5008.75 0.0097 0.0214 0.0001 0.0005 0.0002

0.1512 0.3177 0.0177 0.0210 0.0166

4th Quarter

Date Stock

Price(X) Index


Stock Price

Return Index Price

Return 5-Oct 919.07 5280.94

12-Oct 945.33 5270.22 0.0286 -0.0020 0.0008 0.0000 -0.0001 19-Oct 997.54 5366.56 0.0552 0.0183 0.0031 0.0003 0.0010 27-Oct 977.94 5382.36 -0.0196 0.0029 0.0004 0.0000 -0.0001 3-Nov 1009 5622.14 0.0318 0.0445 0.0010 0.0020 0.0014

10-Nov 1011.73 5620.59 0.0027 -0.0003 0.0000 0.0000 0.0000 17-Nov 1093.76 5991.68 0.0811 0.0660 0.0066 0.0044 0.0054 24-Nov 1095.09 6104.34 0.0012 0.0188 0.0000 0.0004 0.0000

1-Dec 1106.2 6195.59 0.0101 0.0149 0.0001 0.0002 0.0002 8-Dec 1093.06 6247.43 -0.0119 0.0084 0.0001 0.0001 -0.0001

15-Dec 1040.42 5771.04 -0.0482 -0.0763 0.0023 0.0058 0.0037 22-Dec 1028.25 5849 -0.0117 0.0135 0.0001 0.0002 -0.0002

0.1193 0.1089 0.0145 0.0133 0.0113

Beta Alpha 0.759975 0.001653

HDFC

Table-2 Company Quarter Beta Alpha

HDFC 1 0.406 -0.0007

2 1.0059 -0.0125

Beta Alpha 0.799204 0.016408


47

3 0.7912 0.0152

4 0.7626 0.0014

Graph-2

HDFC

0.406

1.0059

0.7912 0.7626

-0.0007 -0.0125 0.0152 0.0014-0.2

00.20.4

0.60.8

11.2

1 2 3 4

Quarter

Val

ue

Beta Alpha

Interpretation of Beta:- In first quarter the beta is having a positive move with 0.406

which is nearer to 0.5 and this positive trend continued in second quarter with 1.0059.

Here 1% change in index return causes exactly 1% change in the stock return. It

indicates that both stock and indices move in the same direction.

But this does not continue with third quarter. A slight decline to 0.7912 which

is again a healthy sign being more than 0.5. This trend almost continued with decline

of 0.7626 indicating that stock is slightly volatile.

Interpretation of Alpha:- In first quarter there is no market return i.e. the alpha value

is Zero. But in third quarter a return is 0.0152 and continuing the same with fourth

quarter with a little decline to 0.0014.

Conclusion:- From the above Interpretation of Beta and Alpha values of four quarters

the individual script is volatile but it is little bit influenced by the market, which leads

to small amount of variations in values of market return.


1st Quarter

Graph-1


48

HDFC Qtr wise 5 days Moving Avg

40424446485052

6-Ja

n-06

12-Ja

n-06

17-Ja

n-06

20-Ja

n-06

25-Ja

n-06

31-Ja

n-06

3-Feb

-06

8-Feb

-06

14-F

eb-0

6

17-F

eb-0

6

22-F

eb-0

6

27-F

eb-0

6

2-Mar-0

6

7-Mar-0

6

10-M

ar-0

6

16-M

ar-0

6

21-M

ar-0

6

24-M

ar-0

6

29-M

ar-0

6

Date

Val

ue

Stock Avg Index Avg

Interpretation of 5-days MA:- From the above graph, it shows that market index

and stock lines are goes on with correlation with and its continue with the whole

Quarter. Here the individual stock is performing well as compared with the Market

Index. The 5 days MA line of stock is up and there is lots of volatility in script as well

as in the market prices. On 14th Feb the stock price is go up and on 27th Feb it was

fallen down and again pickup back on 21st Mar and a fall again on 29th Mar.

Conclusion:- Here it indicates that the performance of the stock is good as compare

to the Market Index. There is so much volatility exists in the stock that the market will

not able to influence the script prices.

2nd Quarter

Graph-2


49

HDFC Qtr wise 5days Moving Avg

0

10

20

30

40

50

60

70

3-Ap

r-06

7-Ap

r-06

13-A

pr-0

6

19-A

pr-0

6

24-A

pr-0

6

27-A

pr-0

6

2-May

-06

5-May

-06

10-M

ay-0

6

15-M

ay-0

6

18-M

ay-0

6

23-M

ay-0

6

26-M

ay-0

6

1-Ju

n-06

6-Ju

n-06

9-Ju

n-06

14-Ju

n-06

19-Ju

n-06

22-Ju

n-06

26-Ju

n-06

29-Ju

n-06

Date

Val

ue

Stock Avg Index Avg


and stock lines are goes on with correlation and its continued with the whole Quarter.

Here the individual stock is performing well as compared with the Market Index. The

5 days MA line of stock is up and there is a lot’s of volatility in script as well as in the

market prices. From 2nd May to 15th May there is up ward movement and later there

was down ward movement up to 14th June and a small pickup by the Quarter ending.

Conclusion:- Here it indicates that the performance of the stock is good as compared

to the Market Index. There is so much volatility exists in the stock that the market was

not able to influence the script prices and there was lots of up’s and down’s exists

during this period.

3rdQuarter

Graph-3


50


010203040506070

3-Ju

l-06

6-Ju

l-06

11-Ju

l-06

14-Ju

l-06

19-Ju

l-06

24-Ju

l-06

27-Ju

l-06

1-Aug-

06

4-Aug-

06

9-Aug-

06

14-A

ug-0

6

18-A

ug-0

6

23-A

ug-0

6

28-A

ug-0

6

31-A

ug-0

6

5-Sep-

06

8-Sep-

06

13-S

ep-0

6

18-S

ep-0

6

21-S

ep-0

6

26-S

ep-0

6

29-S

ep-0

6

Date

Val

ue

Stock Avg Index Avg

G Interpretation of 5-days MA:- From the above graph, it clears that market index



5 days MA line of stock is up and there is a lot’s of volatility in script as well as in the

market prices. From 19July to end of Quarter there is a up ward trend in the script as

well as in index.

Conclusion:- The market and the individual script lines are up ward trend and the

market is in Bullish mode. Here it indicates that the performance of the stock is good

as compared to the Market Index.

4th Quarter

Graph-4


51


01020304050607080

3-Oct-

06

6-Oct-

06

11-O

ct-06

16-O

ct-06

19-O

ct-06

23-O

ct-06

30-O

ct-06

2-Nov

-06

7-Nov

-06

10-N

ov-0

6

15-N

ov-0

6

20-N

ov-0

6

23-N

ov-0

6

28-N

ov-0

6

1-Dec

-06

6-Dec

-06

11-D

ec-0

6

14-D

ec-0

6

19-D

ec-0

6

22-D

ec-0

6

28-D

ec-0

6

Date

Val

ue

Stock Avg Index Avg


and stock lines are goes on with correlation and its continue with the whole Quarter.


5 days MA line of stock is up and there was a lot’s of volatility in script as well as in

the market prices. From 3rd Oct to 19th Oct there was a rising trend in the script and

market index prices and later on 23rd Oct to 11th Dec there are a lot of ups and downs

and later a down ward trend in the Market till the end of this Quarter.


market is in Bullish mode and later there is a recession. Here it indicates that the

performance of the stock is good as compared to the Market Index.

Final Conclusion:-From the above observation made in these Four Quarters, its

clears that the Investment in HDFC stock in First Quarter is quite a risky one as there

is a lots of volatility exists during this period, in Second Quarter as the market was

falling a bearish mode of market a good situation to buy and in Third Quarter the

market is in Bullish mood and hear the investor can sell his stock and make a good

money out of it. Even though he holds and it’s a good investment as the market is

continued its Bullish move till the end of Fourth Quarter and later there is a recession

in this script.

ICICI Bank 1st Quarter

Date Stock Index X Y X^2 Y^2 XY


52

Price(X) Price(Y)

Stock Price

Return Index Price

Return 6-Jan 604.38 4673.34

16-Jan 582.31 4624.15 -0.0365 -0.0105 0.0013 0.0001 0.0004 23-Jan 568.66 4487.18 -0.0234 -0.0296 0.0005 0.0009 0.0007 31-Jan 602.72 4574.71 0.0599 0.0195 0.0036 0.0004 0.0012 7-Feb 595.62 4476.5 -0.0118 -0.0215 0.0001 0.0005 0.0003

15-Feb 605.44 4562.5 0.0165 0.0192 0.0003 0.0004 0.0003 22-Feb 592.82 4473.68 -0.0208 -0.0195 0.0004 0.0004 0.0004 1-Mar 602.12 4520.89 0.0157 0.0106 0.0002 0.0001 0.0002 8-Mar 607.6 4618.39 0.0091 0.0216 0.0001 0.0005 0.0002

16-Mar 607.8 4661.64 0.0003 0.0094 0.0000 0.0001 0.0000 23-Mar 599.17 4660.88 -0.0142 -0.0002 0.0002 0.0000 0.0000 30-Mar 595.48 4668.97 -0.0062 0.0017 0.0000 0.0000 0.0000

-0.0114 0.0007 0.0069 0.0032 0.0036

Beta Alpha 0.520905 0.000605

2nd Quarter

Date Stock

Price(X) Index


Stock Price

Return Index Price

Return 7-Apr 605.68 4760.16

18-Apr 582.11 4585.45 -0.0389 -0.0367 0.0015 0.0013 0.0014 25-Apr 579.43 4563.47 -0.0046 -0.0048 0.0000 0.0000 0.0000 2-May 584.83 4530.25 0.0093 -0.0073 0.0001 0.0001 -0.0001 9-May 644.18 4896.37 0.1015 0.0808 0.0103 0.0065 0.0082

16-May 639.45 4861.72 -0.0073 -0.0071 0.0001 0.0001 0.0001 23-May 581.15 4453.24 -0.0912 -0.0840 0.0083 0.0071 0.0077 30-May 566.16 4300.74 -0.0258 -0.0342 0.0007 0.0012 0.0009

6-Jun 540.91 4104.69 -0.0446 -0.0456 0.0020 0.0021 0.0020 13-Jun 493.26 3742.06 -0.0881 -0.0883 0.0078 0.0078 0.0078 20-Jun 486.38 3663.94 -0.0139 -0.0209 0.0002 0.0004 0.0003 26-Jun 502.53 3758.13 0.0332 0.0257 0.0011 0.0007 0.0009

-0.1705 -0.2224 0.0320 0.0272 0.0291

Beta Alpha

0.875191 -0.00666

3rd Quarter

Date Stock

Price(X) Index



53

Beta Alpha 0.94109 0.001703

4th Quarter

Date Stock

Price(X) Index


Stock Price

Return Index Price

Return 4-Oct 697.89 5238.9

11-Oct 697.88 5283.08 0.0000 0.0084 0.0000 0.0001 0.0000 18-Oct 715.29 5353.67 0.0249 0.0134 0.0006 0.0002 0.0003 26-Oct 740.49 5340.28 0.0352 -0.0025 0.0012 0.0000 -0.0001 2-Nov 776.27 5608.56 0.0483 0.0502 0.0023 0.0025 0.0024 9-Nov 779.31 5591.63 0.0039 -0.0030 0.0000 0.0000 0.0000

16-Nov 859.34 5919.34 0.1027 0.0586 0.0105 0.0034 0.0060 23-Nov 872.83 6097.55 0.0157 0.0301 0.0002 0.0009 0.0005 30-Nov 869.66 6160.16 -0.0036 0.0103 0.0000 0.0001 0.0000

7-Dec 872 6266.67 0.0027 0.0173 0.0000 0.0003 0.0000 14-Dec 841.28 5826.31 -0.0352 -0.0703 0.0012 0.0049 0.0025 21-Dec 866.96 5882.56 0.0305 0.0097 0.0009 0.0001 0.0003 29-Dec 883.79 5948.14 0.0194 0.0111 0.0004 0.0001 0.0002

0.2446 0.1333 0.0176 0.0127 0.0121

Beta Alpha

0.748947 -0.00415

ICICI


ICICI 1 0.5672 0.0005

Stock Price

Return Index Price

Return 3-Jul 488.71 3662.6

10-Jul 493.55 3755.37 0.0099 0.0253 0.0001 0.0006 0.0003 17-Jul 487.03 3638.84 -0.0132 -0.0310 0.0002 0.0010 0.0004 24-Jul 486.4 3552.51 -0.0013 -0.0237 0.0000 0.0006 0.0000 31-Jul 544.58 3963.4 0.1196 0.1157 0.0143 0.0134 0.0138 7-Aug 554.02 4100.5 0.0173 0.0346 0.0003 0.0012 0.0006

14-Aug 589.27 4323.81 0.0636 0.0545 0.0040 0.0030 0.0035 22-Aug 592.07 4421.72 0.0048 0.0226 0.0000 0.0005 0.0001 29-Aug 590.35 4482 -0.0029 0.0136 0.0000 0.0002 0.0000

5-Sep 607.37 4649.14 0.0288 0.0373 0.0008 0.0014 0.0011 12-Sep 605.09 4631.33 -0.0038 -0.0038 0.0000 0.0000 0.0000 19-Sep 643.82 4888.75 0.0640 0.0556 0.0041 0.0031 0.0036 26-Sep 661.28 4963.8 0.0271 0.0154 0.0007 0.0002 0.0004

0.3140 0.3160 0.0246 0.0251 0.0237


54

2 0.8857 -0.0059

3 0.7074 0.0072

4 0.5941 -0.0009

Graph-3

ICICI

0.5672

0.8857

0.70740.5941

0.0005 -0.0059 0.0072 -0.0009

-0.2

0

0.2

0.4

0.6

0.8

1

1 2 3 4

Quarter

Val

ue

Beta Alpha

Interpretation of beta:- In first quarter, the beta is having a positive mode of 0.5672

which is more than 0.5 and there does not exist much volatility in market. This trend

continued and Beta went up by 0.8857 which depicts the stock moves in the same

direction as market moves. But in third quarter there is a slight decline in Beta i.e.

0.7074 which again shows that stock price moves with market. Finally in fourth

quarter it came down to 0.5941 which is the healthy sign for the individual stock as

the stock is less volatile as compared to the market.

Interpretation of Alpha:- In first and third quarter there is a market return is 0.0005

and 0.0072 this shows a small increase in the market return. But this will is followed

by second and fourth quarter as there is no return from the market.


the individual script is not so volatile but it is little bit influenced by the market,

which leads to get a positive return in two quarters.


1st Quarter

Graph-1


55

ICICI Qtr wise 5 days Moving Avg

0

10

20

30

40

50

6-Ja

n-06

12-Ja

n-06

17-Ja

n-06

20-Ja

n-06

25-Ja

n-06

4-Ja

n-06

9-Ja

n-06

8-Feb

-06

14-F

eb-0

6

17-F

eb-0

6

22-F

eb-0

6

27-F

eb-0

6

2-Mar-0

6

7-Mar-0

6

10-M

ar-0

6

16-M

ar-0

6

21-M

ar-0

6

24-M

ar-0

6

29-M

ar-0

6

Date

Val

ues

Stock Avg Index Avg



continued with whole quarter. On 6th Jan to 9th Jan there is a decline in the market

after that from 8th Feb it goes up and for the rest of the Quarter these ups and down

were continued. During all these up and downs the Market Index is constant. .

Conclusion: This we conclude that even though there is a Constant move in the Index

price, but in individual script is so volatile and it’s moving with the market. Here the

market is stable and volatility exists only with the stock prices.

2nd Quarter

Graph-2


56

ICICI Qtr wsie 5 days Moving Avg

0102030405060

3-Apr-0

6

7-Apr-0

6

13-A

pr-0

6

19-A

pr-0

6

24-A

pr-0

6

27-A

pr-0

6

2-May-0

6

5-May-0

6

10-M

ay-0

6

15-M

ay-0

6

18-M

ay-0

6

23-M

ay-0

6

26-M

ay-0

6

31-M

ay-0

6

5-Ju

n-06

8-Ju

n-06

13-Ju

n-06

16-Ju

n-06

21-Ju

n-06

25-Ju

n-06

28-Ju

n-06

Date

Val

ue

Stock Avg Index Avg



From 3rd Apr to 27th Apr there is a down ward movement and on 5th May to 15th May

a rising trend and till the end of Quarter there is a continues fall.


Tandem with the market. Hear the market is bearish as the prices of Market index and

stock lines are continually falling.

3rdQuarter

Graph-3


57


0102030405060

3-Ju

l-06

6-Ju

l-06

11-Ju

l-06

14-Ju

l-06

19-Ju

l-06

24-Ju

l-06

27-Ju

l-06

1-Aug-

06

4-Aug-

06

9-Aug-

06

14-A

ug-0

6

18-A

ug-0

6

23-A

ug-0

6

28-A

ug-0

6

31-A

ug-0

6

5-Sep-

06

8-Sep-

06

13-S

ep-0

6

18-S

ep-0

6

21-S

ep-0

6

26-S

ep-0

6

29-S

ep-0

6

Date

Val

ue

Stock Avg Index Avg

Interpretation of 5-days MA:- From the above graph, it clears that 3rd Jul to 24th Jul

there is a down ward movement in both Index and Script prices, but after this there is

a sudden increase from 27th Jul to 4th Aug then a little-bit decrease in script line and

the rise will continued till the Quarter ending. Here the individual stock and market

index lines go with correlation and this was continued with the whole Quarter.


Tandem with the market. It also shows the Bullish trend as the market and stock

prices are moving in an upward trend.

4th Quarter

Graph-4


58


010203040506070

3-Oct-

06

6-Oct-

06

11-O

ct-06

16-O

ct-06

19-O

ct-06

23-O

ct-06

30-O

ct-06

2-Nov

-06

7-Nov

-06

10-N

ov-0

6

15-N

ov-0

6

20-N

ov-0

6

23-N

ov-0

6

28-N

ov-0

6

1-Dec

-06

6-Dec

-06

11-D

ec-0

6

14-D

ec-0

6

19-D

ec-0

6

22-D

ec-0

6

28-D

ec-0

6

Date

Val

ue

Stock Avg Index Avg


and individual stock prices lines are correlated and this will continued with the whole

quarter. On 3rd Oct to 16th Oct there is a fall in stock prices but during this period the

Market price will not affected so much, from 19th Nov to 20th Nov the market index

and stock price are intersect each other and they get a little diversion till 14th Dec and

on 19th Dec again there is collision and this will continued further.

Conclude:- It indicates that the stock moves in tandem with the market index. There

is a volatility exists in the stock price as compare to the market index, the market line

is up ward at some points the script is going to intersect with the Market Price line.


clears that the Investment in ICICI stock is a good during the First Quarter but this

will be not with Second Quarter as the market is falling a bearish mode of market a

good situation to buy and in Third Quarter the market is in Bullish mood and hear the

investor can sell his stock and make a good money out of it. Even thaw he holds and

it’s a good investment as the market is continued its Bullish move till the end of

Fourth Quarter.

State Bank of India 1st Quarter

Date Stock

Price(X) Index

Price(Y) X Y X^2 Y^2 XY Stock Price Index Price


59

Return Return 6-Jan 923.26 4673.34

16-Jan 922.44 4624.15 -0.0009 -0.0105 0.0000 0.0001 0.0000 23-Jan 903.61 4487.18 -0.0204 -0.0296 0.0004 0.0009 0.0006 31-Jan 894.2 4574.71 -0.0104 0.0195 0.0001 0.0004 -0.0002 7-Feb 866.44 4476.5 -0.0310 -0.0215 0.0010 0.0005 0.0007

15-Feb 875.87 4562.5 0.0109 0.0192 0.0001 0.0004 0.0002 22-Feb 865.24 4473.68 -0.0121 -0.0195 0.0001 0.0004 0.0002 1-Mar 875.58 4520.89 0.0120 0.0106 0.0001 0.0001 0.0001 8-Mar 895.81 4618.39 0.0231 0.0216 0.0005 0.0005 0.0005

16-Mar 934.17 4661.64 0.0428 0.0094 0.0018 0.0001 0.0004 23-Mar 964.77 4660.88 0.0328 -0.0002 0.0011 0.0000 0.0000 30-Mar 980.4 4668.97 0.0162 0.0017 0.0003 0.0000 0.0000

0.0628 0.0007 0.0056 0.0032 0.0026

Beta Alpha

0.489641 -0.00273

2nd Quarter

Date Stock

Price(X) Index


Stock Price

Return Index Price

Return 7-Apr 987.06 4760.16

18-Apr 939.07 4585.45 -0.0486 -0.0367 0.0024 0.0013 0.0018 25-Apr 922.62 4563.47 -0.0175 -0.0048 0.0003 0.0000 0.0001 2-May 906.93 4530.25 -0.0170 -0.0073 0.0003 0.0001 0.0001 9-May 961.49 4896.37 0.0602 0.0808 0.0036 0.0065 0.0049

16-May 957.02 4861.72 -0.0046 -0.0071 0.0000 0.0001 0.0000 23-May 899.5 4453.24 -0.0601 -0.0840 0.0036 0.0071 0.0050 30-May 870.98 4300.74 -0.0317 -0.0342 0.0010 0.0012 0.0011

6-Jun 828.84 4104.69 -0.0484 -0.0456 0.0023 0.0021 0.0022 13-Jun 768.72 3742.06 -0.0725 -0.0883 0.0053 0.0078 0.0064 20-Jun 754.06 3663.94 -0.0191 -0.0209 0.0004 0.0004 0.0004 26-Jun 751.75 3758.13 -0.0031 0.0257 0.0000 0.0007 -0.0001

-0.2625 -0.2224 0.0192 0.0272 0.0220

Beta Alpha 1.28762 0.010508

3rd Quarter

Date Stock

Price(X) Index


Stock Price

Return Index Price

Return


60

Beta Alpha 1.198536 -0.0048

4th Quarter

Date Stock

Price(X) Index


Stock Price

Return Index Price

Return 4-Oct 1021.5 5238.9

11-Oct 1027.48 5283.08 0.0059 0.0084 0.0000 0.0001 0.0000 18-Oct 1031.17 5353.67 0.0036 0.0134 0.0000 0.0002 0.0000 26-Oct 1041.96 5340.28 0.0105 -0.0025 0.0001 0.0000 0.0000 2-Nov 1105.38 5608.56 0.0609 0.0502 0.0037 0.0025 0.0031 9-Nov 1119.25 5591.63 0.0125 -0.0030 0.0002 0.0000 0.0000

16-Nov 1159.63 5919.34 0.0361 0.0586 0.0013 0.0034 0.0021 23-Nov 1234.31 6097.55 0.0644 0.0301 0.0041 0.0009 0.0019 30-Nov 1288.81 6160.16 0.0442 0.0103 0.0019 0.0001 0.0005

7-Dec 1347.52 6266.67 0.0456 0.0173 0.0021 0.0003 0.0008 14-Dec 1246.54 5826.31 -0.0749 -0.0703 0.0056 0.0049 0.0053 21-Dec 1238.37 5882.56 -0.0066 0.0097 0.0000 0.0001 -0.0001 29-Dec 1238.85 5948.14 0.0004 0.0111 0.0000 0.0001 0.0000

0.2024 0.1333 0.0192 0.0127 0.0136

Beta Alpha

0.720811 -0.00105

SBI


SBI 1 0.5 -0.0025

2 0.9713 0.0027

3-Jul 724.74 3662.6 10-Jul 742.06 3755.37 0.0239 0.0253 0.0006 0.0006 0.0006 17-Jul 728.32 3638.84 -0.0185 -0.0310 0.0003 0.0010 0.0006 24-Jul 714.83 3552.51 -0.0185 -0.0237 0.0003 0.0006 0.0004 31-Jul 774.58 3963.4 0.0836 0.1157 0.0070 0.0134 0.0097 7-Aug 817.41 4100.5 0.0553 0.0346 0.0031 0.0012 0.0019

14-Aug 858.11 4323.81 0.0498 0.0545 0.0025 0.0030 0.0027 22-Aug 882.21 4421.72 0.0281 0.0226 0.0008 0.0005 0.0006 29-Aug 896.77 4482 0.0165 0.0136 0.0003 0.0002 0.0002

5-Sep 934.77 4649.14 0.0424 0.0373 0.0018 0.0014 0.0016 12-Sep 936.48 4631.33 0.0018 -0.0038 0.0000 0.0000 0.0000 19-Sep 978.62 4888.75 0.0450 0.0556 0.0020 0.0031 0.0025 26-Sep 980.9 4963.8 0.0023 0.0154 0.0000 0.0002 0.0000

0.3117 0.3160 0.0187 0.0251 0.0209


61

3 0.7721 0.0057

4 0.6514 0.0001

Graph-4

SBI

0.5

0.97130.7721

0.6514

-0.0025 0.0027 0.0057 0.0001-0.2

0

0.20.4

0.60.8

11.2

1 2 3 4

Quarter

Val

ue

Beta Alpha

Interpretation of Beta:- In the first quarter with the Beta of 0.5 which shows a

very healthy sign as the stock is less volatile compare to the market, but this trend did

not continue with the second quarter, there is a substantial hike in Beta value by

0.9713 which is near to 1, indicate that stock is moving along with the market. In third

quarter there is a decline of 0.7721 compare to second quarter, which is not going to

have any effect on individual stock. This decline continued in fourth quarter also, a

Beta of 0.6514 which is a little bit more than 0.5.

Hence it indicates that the stock is volatile compared to the market.

Interpretation of Alpha:- In first quarter there is no market return, but in second

quarter there is a return of 0.0027 which is followed with third and fourth quarter i.e.

0.0057 and 0.0001 it is less than the third quarter.


the script is performing in a good manner and market return is also good. Here the

individual script and market are moving in the same direction.


1st Quarter

Graph-1


62

SBI Qtr wise 5 days Moving Avg

40

42

44

46

48

50

6-Ja

n-06

12-Ja

n-06

17-Ja

n-06

20-Ja

n-06

25-Ja

n-06

31-Ja

n-06

3-Feb

-06

8-Feb

-06

14-F

eb-0

6

17-F

eb-0

6

22-F

eb-0

6

27-F

eb-0

6

2-Mar-0

6

7-Mar-0

6

10-M

ar-0

6

16-M

ar-0

6

21-M

ar-0

6

24-M

ar-0

6

29-M

ar-0

6

Date

Val

ue

Stock Index

Interpretation of 5-days MA:- From the above graph, its shows that On 17th Jan

there is a intersection between the Market index and stock line, later a fall up to 20th

Jan and again a intersection on 25th Jan. A radical fall in the script as well as in market

index up to 22nd Feb and a tremendous increase and on 16th Mar a intersection

between the stock and market line and this individual script is moving up ward than

the market index line.

Conclude:- There is a volatility exists in the stock price as compared to the market

index, the market line is up ward at some points the script is going to intersect with

the Market Price line. The individual script performance is good as compared to the

market. At the end of this Quarter there is a Bullish move in the script.

2nd Quarter

Graph-2


63

SBI Qtr wise 5 days Moving Avg

0102030405060

3-Apr-0

6

7-Apr-0

6

13-A

pr-0

6

19-A

pr-0

6

24-A

pr-0

6

27-A

pr-0

6

2-May-0

6

5-May-0

6

10-M

ay-0

6

15-M

ay-0

6

18-M

ay-0

6

23-M

ay-0

6

26-M

ay-0

6

31-M

ay-0

6

5-Ju

n-06

8-Ju

n-06

13-Ju

n-06

16-Ju

n-06

21-Ju

n-06

25-Ju

n-06

28-Ju

n-06

Date

Val

ue

Stock Index



continued with whole quarter. Here the Market index and script price lines are moving

in the same direction and they are in declining move.


Tandem with the market. Hear the market is Bearish as the prices of Market index and

stock lines are continually falling and also the individual script is moving along with

the market.

3rdQuarter

Graph-3


64

SBI Qtr wise 5days Moving Avg

0

10

20

30

40

50

60

3-Ju

l-06

6-Ju

l-06

11-Ju

l-06

14-Ju

l-06

19-Ju

l-06

24-Ju

l-06

27-Ju

l-06

1-Aug-

06

4-Aug-

06

9-Aug-

06

14-A

ug-0

6

18-A

ug-0

6

23-A

ug-0

6

28-A

ug-0

6

31-A

ug-0

6

5-Sep-

06

8-Sep-

06

13-S

ep-0

6

18-S

ep-0

6

21-S

ep-0

6

26-S

ep-0

6

29-S

ep-0

6

Date

Val

ue

Stock Index

Interpretation of 5-days MA:- In the above graph, we shows that, the stock price for

5days MA line and market index MA line goes on with correlation and it is continued

with whole quarter. Here the Market index and script price lines are moving in the

same direction and they are is an up ward trend.


Tandem with the market. Hear the market is Bullish as the prices of Market index and

stock lines are continually rising and also the individual script is moving along with

the market.

4th Quarter

Graph-4


65

SBI Qtr wise 5days Moving Avg

01020304050607080

3-Oct-

06

6-Oct-

06

11-O

ct-06

16-O

ct-06

19-O

ct-06

23-O

ct-06

30-O

ct-06

2-Nov

-06

7-Nov

-06

10-N

ov-0

6

15-N

ov-0

6

20-N

ov-0

6

23-N

ov-0

6

28-N

ov-0

6

1-Dec

-06

6-Dec

-06

11-D

ec-0

6

14-D

ec-0

6

19-D

ec-0

6

22-D

ec-0

6

28-D

ec-0

6

Date

Val

ue

Stock Index



with whole quarter. Here the Market index and script price lines are moving in the

same direction and they are is an up ward trend from 3rd Oct to 6th Dec and a little fall

the script as well as in market line.


Tandem with the market. Hear the market is Bullish as the prices of Market index and

stock lines are continually rising and also the individual script is moving along with

the market and at the end of Quarter a small decline in the both individual script as

well as in market index line.

Final Conclusion:- From the above observation made in these Four Quarters, its

clears that the Investment in SBI stock in is a wise investment First Quarter but this

will be not with Second Quarter as the market is falling a bearish mode its an good

situation to buy and in Third Quarter the market is in Bullish mood and here the

investor can sell his stock and make a good money out of it. Even thaw he holds and

it’s a good investment as the market is continued its Bullish move till the end of

Fourth Quarter.

Canara Bank 1st Quarter


66

Date Stock

Price(X) Index


Stock Price

Return Index Price

Return 6-Jan 243.84 4673.34

16-Jan 235.4 4624.15 -0.0346 -0.0105 0.0012 0.0001 0.0001 23-Jan 226.48 4487.18 -0.0379 -0.0296 0.0014 0.0009 0.0009 31-Jan 239.21 4574.71 0.0562 0.0195 0.0032 0.0004 0.0004 7-Feb 235.48 4476.5 -0.0156 -0.0215 0.0002 0.0005 0.0005

15-Feb 266.74 4562.5 0.1328 0.0192 0.0176 0.0004 0.0004 22-Feb 264.26 4473.68 -0.0093 -0.0195 0.0001 0.0004 0.0004 1-Mar 271.62 4520.89 0.0279 0.0106 0.0008 0.0001 0.0001 8-Mar 280.58 4618.39 0.0330 0.0216 0.0011 0.0005 0.0005

16-Mar 277.19 4661.64 -0.0121 0.0094 0.0001 0.0001 0.0001 23-Mar 269.43 4660.88 -0.0280 -0.0002 0.0008 0.0000 0.0000 30-Mar 272.83 4668.97 0.0126 0.0017 0.0002 0.0000 0.0000

0.1249 0.0007 0.0267 0.0032 0.0032

Beta Alpha

0.128049 -0.00139

2nd Quarter

Beta Alpha 0.924553 0.001925

3rd Quarter

Date Stock

Price(X) Index

Price(Y) X Y X^2 Y^2 XY Stock Price Index Price

Date Stock

Price(X) Index


Stock Price

Return Index Price

Return 7-Apr 269.82 4760.16

18-Apr 255.31 4585.45 -0.0538 -0.0367 0.0029 0.0013 0.0013 25-Apr 253.66 4563.47 -0.0065 -0.0048 0.0000 0.0000 0.0000 2-May 251.69 4530.25 -0.0078 -0.0073 0.0001 0.0001 0.0001 9-May 270.07 4896.37 0.0730 0.0808 0.0053 0.0065 0.0065

16-May 262.4 4861.72 -0.0284 -0.0071 0.0008 0.0001 0.0001 23-May 229.34 4453.24 -0.1260 -0.0840 0.0159 0.0071 0.0071 30-May 224.76 4300.74 -0.0200 -0.0342 0.0004 0.0012 0.0012

7-Jun 221.02 4072.38 -0.0166 -0.0531 0.0003 0.0028 0.0028 14-Jun 202.69 3644.75 -0.0829 -0.1050 0.0069 0.0110 0.0110 21-Jun 207.96 3705.85 0.0260 0.0168 0.0007 0.0003 0.0003 27-Jun 204.04 3756.99 -0.0188 0.0138 0.0004 0.0002 0.0002

-0.2618 -0.2208 0.0336 0.0306 0.0306


67

Return Return 4-Jul 198.67 3682.11

11-Jul 199.11 3736.74 0.0022 0.0148 0.0000 0.0002 0.0002 18-Jul 191.56 3596.63 -0.0379 -0.0375 0.0014 0.0014 0.0014 25-Jul 177.97 3632.22 -0.0709 0.0099 0.0050 0.0001 0.0001 1-Aug 193.51 3999.31 0.0873 0.1011 0.0076 0.0102 0.0102 8-Aug 197.4 4143.54 0.0201 0.0361 0.0004 0.0013 0.0013

16-Aug 206.7 4357.24 0.0471 0.0516 0.0022 0.0027 0.0027 23-Aug 208.77 4414.12 0.0100 0.0131 0.0001 0.0002 0.0002 30-Aug 217.35 4522.24 0.0411 0.0245 0.0017 0.0006 0.0006

6-Sep 236.67 4667.96 0.0889 0.0322 0.0079 0.0010 0.0010 13-Sep 245.73 4658.03 0.0383 -0.0021 0.0015 0.0000 0.0000 20-Sep 258.9 4903.92 0.0536 0.0528 0.0029 0.0028 0.0028 27-Sep 217.75 5008.75 -0.1589 0.0214 0.0253 0.0005 0.0005

0.1208 0.3177 0.0560 0.0210 0.0210

Beta Alpha 0.324027 0.023217

4th Quarter

Date Stock

Price(X) Index


Stock Price

Return Index Price

Return 5-Oct 286.23 5280.94

12-Oct 280.39 5270.22 -0.0204 -0.0020 0.0004 0.0000 0.0000 19-Oct 282.41 5366.56 0.0072 0.0183 0.0001 0.0003 0.0003 27-Oct 284.29 5382.36 0.0067 0.0029 0.0000 0.0000 0.0000 3-Nov 295.4 5622.14 0.0391 0.0445 0.0015 0.0020 0.0020

10-Nov 288.63 5620.59 -0.0229 -0.0003 0.0005 0.0000 0.0000 17-Nov 296.3 5991.68 0.0266 0.0660 0.0007 0.0044 0.0044 24-Nov 298.98 6104.34 0.0090 0.0188 0.0001 0.0004 0.0004

1-Dec 301.45 6195.59 0.0083 0.0149 0.0001 0.0002 0.0002 8-Dec 309.05 6247.43 0.0252 0.0084 0.0006 0.0001 0.0001

15-Dec 266.41 5771.04 -0.1380 -0.0763 0.0190 0.0058 0.0058 22-Dec 269.05 5849 0.0099 0.0135 0.0001 0.0002 0.0002

-0.0494 0.1089 0.0232 0.0133 0.0133

Beta Alpha 0.601806 0.012597

Canara Bank Table-5

Company Quarter Beta Alpha CANBANK 1 0.1322 -0.0013


68

2 0.8357 -0.0001 3 0.3481 0.0212 4 0.6483 0.0117

Graph-5

CANBANK

0.1322

0.8357

0.3481

0.6483

-0.0013 -0.0001 0.0212 0.0117

-0.2

0

0.2

0.4

0.6

0.8

1

1 2 3 4

Quarter

Val

ue

Beta Alpha

Interpretation of Beta:- In the first quarter, the Beta being very less i.e. 0.1322

which is less than 0.5, which is least volatile in the market. This trend did not

continue with second quarter, there is sudden change in Beta value i.e. 0.8357 which

is more than 0.5 which shows the stock is moving along with the market. We see a

declining trend in beta value in third quarter i.e.0.3481 which is less than 0.5 and here

the script is least volatile. In fourth quarter there is a up ward movement in Beta value

by 0.6483 which is more than 0.5 and by knowing and comparing all these four

quarter finally we come to a conclusion that is there is a lot of volatility existing in

stock price.

Interpretation of Alpha:- In first and second quarter there is no return from the

market. But in third and fourth quarter there is a return of 0.0212 and 0.0117 which is

a good sign.


the individual script is volatile and the market value is not going to influence the

script.


1st Quarter


69

Graph-1

CanBank Qtr wise 5 days Moving Avg

0102030405060

6-Ja

n-06

12-Ja

n-06

17-Ja

n-06

20-Ja

n-06

25-Ja

n-06

31-Ja

n-06

3-Feb

-06

8-Feb

-06

14-F

eb-0

6

17-F

eb-0

6

22-F

eb-0

6

27-F

eb-0

6

2-Mar-0

6

7-Mar-0

6

10-M

ar-0

6

16-M

ar-0

6

21-M

ar-0

6

24-M

ar-0

6

29-M

ar-0

6

Date

Val

ue

Stock Index



with whole quarter. On 12th Jan to 31st Jan there a intersection between the market

line and stock line, there was a up ward movement on 8th Feb to 17th Feb and a decline

on 22nd Feb, but a good pick-up in the rest of Quarter.

Conclusion: This we conclude that even thaw there is a Constant move in the Index

price, but in individual script is so volatile and it’s moving with the market. Here the

market is stable and volatility exists only with the stock prices, stock price will

dominated the market index price.

2nd Quarter

Graph-2


70

CanBank Qtr wise 5days Moving Avg

0102030405060

3-Apr-0

6

7-Apr-0

6

13-A

pr-0

6

19-A

pr-0

6

24-A

pr-0

6

27-A

pr-0

6

2-May-0

6

5-May-0

6

10-M

ay-0

6

15-M

ay-0

6

18-M

ay-0

6

23-M

ay-0

6

26-M

ay-0

6

1-Ju

n-06

6-Ju

n-06

9-Ju

n-06

14-Ju

n-06

19-Ju

n-06

22-Ju

n-06

26-Ju

n-06

29-Ju

n-06

Date

Val

ue

Stock Index


and stock lines are goes on with correlation and its continue with the whole Quarter.

Here the individual stock was performing well as compared with the Market Index.

The 5 days MA line of stock is up and there was a lot’s of volatility in script as well

as in the market prices. From 3rd Apr to 27th Apr there is down ward trend in the script

as well as market prices and later there is a up ward movement up to 10th May, later a

fall will continue till the end of Quarter.

Conclusion:- Here it indicates that the performance of the stock is good as compared

to the Market Index. There is so much volatility exists in the stock that the market will

not able to influence the script prices and there are a lots of up’s and down’s exists

during this period, here there is a Bearish trend in the Market index as well as in the

individual script price.

3rdQuarter

Graph-3


71

CanBank Qtr wise 5days Moving Avg

010

2030

4050

60

3-Ju

l-06

6-Ju

l-06

11-Ju

l-06

14-Ju

l-06

19-Ju

l-06

24-Ju

l-06

27-Ju

l-06

1-Aug-

06

4-Aug-

06

9-Aug-

06

14-A

ug-0

6

18-A

ug-0

6

23-A

ug-0

6

28-A

ug-0

6

31-A

ug-0

6

5-Sep-

06

8-Sep-

06

13-S

ep-0

6

18-S

ep-0

6

21-S

ep-0

6

26-S

ep-0

6

29-S

ep-0

6

Date

valu

e

Stock Index

Interpretation of 5-days MA:- From the above graph, it clears that market index



The 5 days MA line of stock is up and there is a lot’s of volatility in script as well as

in the market prices. From 3rd Jul to 23rd Jul there is a declining trend in the both

lines, On 24th Jul there is a intersection between the market line and script line and

this intersection will continue till 4th Aug and later an up ward trend continued till the

Quarter ending.


market is in Bullish mode. Here it indicates that the performance of the stock is good

as compared to the Market Index.

4th Quarter

Graph-4


72

CanBank Qtr wise 5 days Moving Avg

010203040506070

3-Oct-

06

6-Oct-

06

11-O

ct-06

16-O

ct-06

19-O

ct-06

23-O

ct-06

30-O

ct-06

2-Nov

-06

7-Nov

-06

10-N

ov-0

6

15-N

ov-0

6

20-N

ov-0

6

23-N

ov-0

6

28-N

ov-0

6

1-Dec

-06

6-Dec

-06

11-D

ec-0

6

14-D

ec-0

6

19-D

ec-0

6

22-D

ec-0

6

28-D

ec-0

6

Date

Val

ue

Stock Index




The 5 days MA line of stock is up and there is a lot’s of volatility in script as well as

in the market prices. From 3rd Oct to 10th Nov there is a lots of volatility in the script

and market index prices.

On 15th Nov there is a intersection between the individual script and the market index

line, this was continue till 11th Dec and later a dramatic fall in the individual script.


market is in Bullish mode and later there is a recession. Here there is a decline in the

performance of the stock is come down as compared to the Market Index.


clears that the Investment in Canara Bank stock in First Quarter good one as the

market is stagnant during this period, in Second Quarter as the market is falling a

bearish mode of market a good situation to buy and in Third Quarter the market is in

Bullish mood and hear the investor can sell his stock and make a good money out of

it. Even thaw he holds and it’s a good investment as the market is continued its

Bullish move, but this will not continue with the end of Fourth Quarter as there is a

sudden fall in the individual script.

Findings and Conclusions


73

The findings and conclusions have been given after each analysis point in the report. Methodology Adopted for the Calculation of Moving Average of both Scripts and Index Moving Average (MA) trends,

� For the appropriate graphical representation of Moving Average for Index and the lines in the graph give the closer and clear comparative picture of the movement/trend.

For example:

Date ICICI Avg Avg of 5days Index Avgof 5days

2-Jan-06 597 div by 15 4556.25 div by 100 3-Jan-06 606.5 4600.25 4-Jan-06 613.7 4694.15 5-Jan-06 604.55 4760.45 6-Jan-06 600.15 604.38 40.292 4755.6 4673.34 46.7334

Formula Used for the Calculation of Alpha and Beta

Beta (ß) = n*∑X*Y – (∑X * ∑ Y)/ n*∑ X^2-∑ X^2

Alpha= Avg of Y- Beta* Avg of X


74

BIBLIOGRAPHY

Referred Books:

1. Security analysis and Portfolio Management By; Punithavathy Pandian.

2. Invest Analysis and Portfolio Management By; Prasanna Chandra

Websites:

1. www.nseindia.com

2. www.bseindia.com

3. Google search engine.


75

MC Shri Final

Documents

Transcript of MC Shri Final