Project on Volatility in Indian Stock Market

8/13/2019 Project on Volatility in Indian Stock Market

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Project on volatility in Indian stock market


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PREFACE

A project report on stock market is being prepared in attempts to interpret in-depth study of

volatility in Indian stock market. This report helps us to understand various terminologies in

stock market. This report gave me opportunity to have complete idea about volatility in stockmarket. This gave me idea about technical and fundamental analysis in stock market and how

trading is being done in stock market. This project report helps in following aspects, Build

understanding of central ideas and theories of stock market.

Develop familiarity with the analysis of stock market. Furnish institutional material relevant for

understanding the environment in which trading decisions are taken. This project will guide to

investors for an investment in stock market. This project deployed a lot time for collections of

information from various sources. This project will be very helpful to know volatility from

January 2006 to December 2006 and reasons for such high volatility and would be able to take

decisions for investment in volatile stock market


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EXCUTIVE SUMMARY

Stock market is an avenue for growth of earnings. This project includes how broking is being

done in stock market. It involves stock market analysis such as fluctuations in Sensex & nifty,

reasons for fluctuations in stock market, fluctuations in stock market and reasons for the same.

Stock market has been the best avenue for investment in securities since last 10 years. Mostly

future and option trading was the worst trading in stock market in these sessions. I have covered

various sessions for analysis from July 2006 to December 2006In these sessions, stock market

was most volatile so that I have covered various analyses with most affected factors to the global

market. Various stock indices in BSE such as BANKEX, BSE Metal, BSE IT, BSE FMCG, BSE

PSU have been most affected due to panic market in these sessions and I have made analysis ofthese indices. In this project, I have included most gainer period and most loser period with

reasons for the same. I also included comparison between Bond yields and foreign investments

by foreign investors.


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RESEARCH PLAN

Volatility in Indian Stock Market

Objectives:

To study volatility in Indian stock market while taking SENSEX of Bombay stock exchange as a

source of secondary data which broadly represent Indian stock market along with NIFTY of

National stock exchange?

To study the factors which are making Indian stock market volatile?

To furnish institutional material relevant for understanding the environment in which stock

market fluctuation are occurring.

Scope:

This study can be used by investors, traders and other professionals as a supplement to their own

research.

Hypothesis:

This is the exploratory research which tries to shows the factors which are making stock market

volatile.Any fluctuation in foreign market has more effect on Indian stock market than that of domestic

market.

In the given volatile economic conditions, the market is efficient to any news and information.

Sources of data:

Data used in this study is of secondary in nature. Sensex and Nifty is taken as a source of

information which widely describes Indian stock market. Here monthly prices of both indexes

are taken for the study purpose.


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INTRODUCTION

Stock exchanges to some extent play an important role as indicators, reflecting the performance

of the country's economic state of health. Stock market is a place where securities are bought and

sold. It is exposed to a high degree of volatility; prices fluctuate within minutes and are

determined by the demand and supply of stocks at a given time. Stockbrokers are the ones who

buy and sell securities on behalf of individuals and institutions for some commission. The

Securities and Exchange Board of India (SEBI) is the authorized body, which regulates the

operations of stock exchanges, banks and other financial institutions. The past performances in

the capital markets especially the securities scam by Harshad Mehta has led to tightening of the

operations by SEBI. In addition the international trading and investment exposure has made it

imperative to better operational efficiency. With the view to improve, discipline and bring

greater transparency in this sector, constant efforts are being made and to a certain extent

improvements have been made. As the condition of capital markets are constantly improving, it

has started drawing attention of lot more people than before. On the career related aspects,

professionals have opportunities to choose from for a wide range of jobs available in a number of

organizations in this sector and one can expect to have good times ahead of him.


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INDIAN CAPITAL MARKET OVERVIEW

Evolution

Indian Stock Markets are one of the oldest in Asia. Its history dates back to nearly200 years ago.

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

Company was the dominant institution in those days and business in its loan securities used to be

transacted towards the close of the eighteenth century. Thus, at present, there are totally twenty-

one recognized stock exchanges in India excluding the Over The Counter Exchange of India

Limited (OTCEI) and the National Stock Exchange of India Limited (NSEIL).

Trading Pattern of the Indian Stock Market

Trading in Indian stock exchanges is limited to listed securities of public limited companies.

They are broadly divided into two categories, namely, specified securities (forward list) and non-

specified securities (cash list). Equity shares of dividend paying, growth-oriented companies

with a paid-up capital of at least Rs.50 million and a market capitalization of at least Rs.100

million and having more than 20,000shareholders are, normally, put in the specified group and

the balance in non-specified group. Two types of transactions can be carried out on the Indian

stock exchanges: (a) spot delivery transactions "for delivery and payment within the time or on

the date stipulated when entering into the contract which shall not be more than 14 daysfollowing the date of the contract: and (b) forward transactions "delivery and payment can be

extended by further period of 14 days each so that the overall period does not exceed 90 days

from the date of the contract". The latter is permitted only in the case of specified shares. The

brokers who carry over the outstanding pay carryover charges (can tango or backwardation),

which are usually determined by the rates of interest prevailing. A member broker in an Indian

stock exchange can act as an agent, buy and sell securities for his clients on a commission basis

and also can act as a trader or dealer as a principal, buy and sell securities on his own account

and risk, in contrast with the practice prevailing on New York and London Stock Exchanges,

where a member can act as a jobber or a broker only. The nature of trading on Indian Stock

Exchanges are that of age old conventional style of face-to-face trading with bids and offers

being made by open outcry. However, there is a great amount of effort to modernize the Indian

stock exchanges in the very recent times.


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Over The Counter Exchange of India (OTCEI)

The traditional trading mechanism prevailed in the Indian stock markets gave way to many

functional inefficiencies, such as, absence of liquidity, lack of transparency ,unduly long

settlement periods and benami transactions, which affected the small investors to a great extent.

To provide improved services to investors, the country's first ring less, scrip less, electronic stock

exchange - OTCEI - was created in 1992 by country's premier financial institutions - Unit Trust

of India, Industrial Credit and Investment Corporation of India, Industrial Development Bank of

India, SBI Capital Markets, Industrial Finance Corporation of India, General Insurance

Corporation and its subsidiaries and Can Bank Financial Services.

Trading at OTCEI is done over the centers spread across the country. Securities traded on the

OTCEI are classified into

Listed Securities - The shares and debentures of the companies listed on the OTC can be bought

or sold at any OTC counter all over the country and they should not be listed anywhere else.

Permitted Securities - Certain shares and debentures listed on other exchanges and unitsof mutual funds are allowed to be traded

Initiated debentures - Any equity holding at least one-lakh debentures of particular scripcan offer them for trading on the OTC.OTC has a unique feature of trading compared to

other traditional exchanges. That is, certificates of listed securities and initiated

debentures are not traded at OTC. The original certificate will be safely with the

custodian. But, a counter receipt is generated out at the counter, which substitutes the

share certificate and is used for all transactions. In the case of permitted securities, the

system is similar to a traditional stock exchange. The difference is that the delivery and

payment procedure will be completed within 14 days. Compared to the traditional

Exchanges, OTC Exchange network has the following advantages

OTCEI has widely dispersed trading mechanism across the country, which providesgreater liquidity and lesser risk of intermediary charges.


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Greater transparency and accuracy of prices is obtained due to the screen-based scrip lesstrading.

since the exact price of the transaction is shown on the computer screen, the investor getsto know the exact price at which s/he is trading.

Faster settlement and transfer process compared to other exchanges.

In the case of an OTC issue (new issue), the allotment procedure iscompleted in a monthand trading commences after a month of the issue closure, whereas it takes a longer

period for the same with respect to other exchanges.

Thus, with the superior trading mechanism coupled with information transparency investors are

gradually becoming aware of the manifold advantages of the OTCEI.


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National Stock Exchange (NSE)

With the liberalization of the Indian economy, it was found inevitable to lift the Indian stock

market trading system on par with the international standards. On the basis of the

recommendations of high-powered Pherwani Committee, Industrial Development Bank of India,

Industrial Credit and Investment Corporation of India, Industrial Finance Corporation of India,

all Insurance Corporations, selected commercial banks and others incorporated the National

Stock Exchange in 1992.Trading at NSE can be classified under two broad categories:(a)

Wholesale debt market and(b) Capital market. Wholesale debt market operations are similar to

money market operations -institutions and corporate bodies enter into high value transactions in

financial instruments such as government securities, treasury bills, public sector unit bonds,

commercial paper, certificate of deposit, etc. There are two kinds of players in NSE:(a) Trading

members and(b) Participants. Recognized members of NSE are called trading members who

trade on behalf of themselves and their clients. Participants include trading members and large

players like banks who take direct settlement responsibility. Trading at NSE takes place through

a fully automated screen-based trading mechanism, which adopts the principle of an order-driven

market. Trading members can stay at their offices and execute the trading, since they are linked

through a communication network. The prices at which the buyer and seller are willing to

transact will appear on the screen. When the prices match the transaction will be completed and aconfirmation slip will be printed at the office of the trading member.

NSE has several advantages over the traditional trading exchanges. They are

as follow

market trading network across the nation.

Investors can trade at the same price from anywhere in the country since inter-market operations

are streamlined coupled with the countrywide access to the securities.

in communication, late payments and the malpracticesprevailing in the traditional

trading mechanism can be done away with greater operational efficiency and informational


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transparency in the stock market operations, with the support of total computerized network.

Unless stock markets provide professionals service, small investors and foreign investors will not

be interested in capital market operations. And capital market being one of the major sources of

long-term finance for industrial projects, India cannot afford to damage the capital market path.

In this regard NSE gains vital importance in the Indian capital market system.

Bombay Stock Exchange (BSE)Sensex

For the premier Stock Exchange that pioneered the stock broking activity in India,128 years of

experience seems to be a proud milestone. A lot has changed since1875 when 318 persons

became members of what today is called "The Stock Exchange, Mumbai" by paying a princely

amount of Re1.Since then, the country's capital markets have passed through both good and bad

periods. The journey in the 20th century has not been an easy one. Till the decade of eighties,

there was no scale to measure the ups and downs in the Indian stock market. The Stock

Exchange, Mumbai (BSE) in 1986 came out with a stock index that subsequently became the

barometer of the Indian stock market. SENSEX is not only scientifically designed but also based

on globally accepted construction and review methodology. First compiled in 1986, SENSEX is

a basket of30 constituent stock representing a sample of large, liquid and representative

companies. The base year of SENSEX is 1978-79 and the base value is 100. The index is widely

reported in both domestic and international markets through print as well as electronic media.


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The Index was initially calculated based on the "Full Market Capitalization "methodology but

was shifted to the free-float methodology with effect from September 1, 2003. The "Free-float

Market Capitalization" methodology of index construction is regarded as an industry best

practice globally. All major index providers like MSCI, FTSE, STOXX, S&P and Dow Jones use

the Free-float methodology.

Due to is wide acceptance amongst the Indian investors; SENSEX is regarded to be the pulse of

the Indian stock market. As the oldest index in the country, it provides the time series data over a

fairly long period of time (From 1979 onwards). Small wonder, the SENSEX has over the years

become one of the most prominent brands in the country. The growth of equity markets in India

has been phenomenal in the decade gone by. Right from early nineties the stock market

witnessed heightened activity in terms of various bull and bear runs. The SENSEX captured all

these events in the most judicial manner. One can identify the booms and busts of the Indian

stock market through SENSEX.


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4.0 STOCK MARKET ANALYSIS

In this stock market analysis, I have taken data of Sensex and Nifty for the period of6 months

from July 2006 to December 2006 After taking into consideration data of stock market, I

compared Nifty with Sensex through graphical presentation and also did analysis of fluctuations

in stock market week wise.

Nifty July 2013

Date Open High Low Close Volume Adj Close

7/31/2013 5738.35 5752.1 5675.75 5742 235500 5742

7/30/2013 5836.05 5861.3 5747.6 5755.05 181500 5755.05

7/29/2013 5869.95 5886 5825.8 5831.65 0 5831.65

7/26/2013 5907.5 5944.25 5869.7 5886.2 0 5886.2

7/25/2013 5970.4 5990.65 5896.4 5907.5 0 5907.5

7/24/2013 6077.8 6077.8 5962.8 5990.5 0 5990.5

7/23/2013 6064.3 6093.35 6061.3 6077.8 0 6077.8

7/22/2013 6029.2 6064.05 6004.75 6031.8 0 6031.8

7/19/2013 6038.05 6063.95 6020.55 6029.2 0 6029.2

7/18/2013 5973.3 6050.75 5973.3 6038.05 0 6038.05

7/17/2013 5955.25 5989.75 5927 5973.3 0 5973.3

7/16/2013 6030.8 6030.8 5912.7 5955.25 0 5955.25

7/15/2013 6009 6037.9 5980.95 6030.8 0 6030.8

7/12/2013 5935.1 6018.5 5935.1 6009 0 6009

7/11/2013 5816.7 5948.8 5816.7 5935.1 0 5935.1

7/10/2013 5859 5879.2 5803 5816.7 0 5816.7

7/9/2013 5834.6 5864.95 5834.6 5859 0 5859

7/8/2013 5867.9 5867.9 5775.7 5811.55 0 5811.55

7/5/2013 5836.95 5900.3 5836.95 5867.9 0 5867.9

7/4/2013 5794.75 5848.2 5786.05 5836.95 0 5836.95

7/3/2013 5857.55 5857.55 5760.55 5770.9 0 5770.9

7/2/2013 5898.85 5898.85 5852.35 5857.55 0 5857.55

7/1/2013 5842.2 5904.05 5829.15 5898.85 0 5898.85


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Sensex july 2013

Data Open High Low Close

1/7/2013 19,352.48 19,598.43 19,347.57 19,577.39

2/7/2013 19,573.93 19,589.14 19,442.75 19,463.82

3/7/2013 19,347.11 19,347.11 19,147.31 19,177.76

4/7/2013 19,256.12 19,445.02 19,245.01 19,410.84

5/7/2013 19,568.79 19,640.27 19,477.74 19,495.82

8/7/2013 19,418.98 19,422.69 19,185.92 19,324.77

9/7/2013 19,399.37 19,486.00 19,380.25 19,439.48

10/7/2013 19,482.66 19,505.93 19,237.91 19,294.12

11/7/2013 19,468.46 19,723.51 19,468.46 19,676.06

12/7/2013 19,898.69 19,991.94 19,785.59 19,958.47

15/07/2013 19,926.10 20,072.44 19,883.19 20,034.48

16/07/2013 19,788.09 19,890.63 19,649.58 19,851.23

17/07/2013 19,928.95 19,983.22 19,778.54 19,948.73

18/07/2013 19,999.51 20,176.90 19,956.20 20,128.41

19/07/2013 20,213.45 20,256.60 20,111.13 20,149.85

22/07/2013 20,096.71 20,264.90 20,065.69 20,159.12

23/07/2013 20,249.98 20,351.06 20,249.98 20,302.13

24/07/2013 20,200.20 20,252.70 19,994.25 20,090.68

25/07/2013 20,062.00 20,110.81 19,763.90 19,804.76

26/07/2013 19,892.47 19,907.45 19,699.76 19,748.19

29/07/2013 19,714.42 19,751.03 19,570.87 19,593.28

30/07/2013 19,577.75 19,672.72 19,328.54 19,348.34

31/07/2013 19,304.07 19,387.50 19,126.82 19,345.70


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After a spirited rally the previous week, the Nifty moved in a band of 150 points between 5750

and 5900, ending with modest gains of 0.53 percent at 5868. It may seem small but the extreme

volatility within this band caught traders on the wrong foot.

Time and again, markets prove that predicting them in the short run is hazardous. Investors

welcomed the governments bold decision toincrease gas pricesbut reacted negatively to its

ordinance on thefood security bill.The already weakrupeecracked further to 60.35 against the

dollar as the election gimmick could cost the state exchequer over $20 billion.

In addition to the rupee, oil also made an upward move after the political crisis in Egypt and

crossed $100 after a long time. U.S.jobs datashowed that employment growth was stronger than

expected. U.S. markets rallied on Friday and the 10-year benchmark yield rose to 2.73 percent,

the highest in 24 months. This could again lead to withdrawal by FIIs, starting another wave of

correction in emerging markets, especially India.

The weakness in rupee, already down 9 percent during the last quarter, will affect company

earnings. Operating margins are likely to see reversals due to the overall slowdown in the

economy and higher interest costs while MTM losses on foreign exchange liabilities could

further suppress net margins. Metals, cement and the construction sectors are expected to be

worst hit and profits may plunge by about 40-50 percent annually. Owing to weak vehicle sales,

profits of all auto companies, except Mahindra & Mahindra, may decline. Pharma, telecom and

private banks could be the only sectors which could post growth of over 10 percent.

Unileversopen offerfor its Indian unit evoked a mixed response with most shareholders staying

away. Only a third of public shareholding was tendered despite the offer price being at a nearly

30 percent premium to the pre-offer market price in April.

Among the most plausible reasons from the institutional angle was to find another compelling

investment opportunity to replace HUL, which would continue to have a decent weightage in the

index. The money flowing to retail investors may not find its way into equity markets.

Some of Kingfisher chairman Vijay Mallyas assets are being off-loaded by banks. Mangalore

Chemicals has been bought by Deepak Fertilizers as well as Zuari Agro. It needs to be seen who

would finally get control of the company.

Gitanjali Gems continued to crack from circuit to circuit nearly 65 percent in the last month

as word got around that financiers could be selling the stock.
http://in.reuters.com/article/2013/06/29/india-gas-price-hike-idINDEE95R09820130629http://in.reuters.com/article/2013/06/29/india-gas-price-hike-idINDEE95R09820130629http://in.reuters.com/article/2013/06/29/india-gas-price-hike-idINDEE95R09820130629http://in.reuters.com/article/2013/07/03/india-food-subsidy-bill-ordinance-idINDEE96209U20130703http://in.reuters.com/article/2013/07/03/india-food-subsidy-bill-ordinance-idINDEE96209U20130703http://in.reuters.com/article/2013/07/03/india-food-subsidy-bill-ordinance-idINDEE96209U20130703http://in.reuters.com/article/2013/07/05/rupee-india-market-idINDEE96402520130705http://in.reuters.com/article/2013/07/05/rupee-india-market-idINDEE96402520130705http://in.reuters.com/article/2013/07/05/rupee-india-market-idINDEE96402520130705http://in.reuters.com/article/2013/07/06/usa-economy-idINDEE96408N20130706?type=economicNewshttp://in.reuters.com/article/2013/07/06/usa-economy-idINDEE96408N20130706?type=economicNewshttp://in.reuters.com/article/2013/07/06/usa-economy-idINDEE96408N20130706?type=economicNewshttp://in.reuters.com/article/2013/07/05/unilever-open-offer-hindustan-unilever-idINDEE9630FH20130705http://in.reuters.com/article/2013/07/05/unilever-open-offer-hindustan-unilever-idINDEE9630FH20130705http://in.reuters.com/article/2013/07/05/unilever-open-offer-hindustan-unilever-idINDEE9630FH20130705http://in.reuters.com/article/2013/07/05/unilever-open-offer-hindustan-unilever-idINDEE9630FH20130705http://in.reuters.com/article/2013/07/06/usa-economy-idINDEE96408N20130706?type=economicNewshttp://in.reuters.com/article/2013/07/05/rupee-india-market-idINDEE96402520130705http://in.reuters.com/article/2013/07/03/india-food-subsidy-bill-ordinance-idINDEE96209U20130703http://in.reuters.com/article/2013/06/29/india-gas-price-hike-idINDEE95R09820130629


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Every bull run brings with it a new set of entrepreneurs so enchanted by market capitalization

that they concentrate more on reverse engineering to achieve their goals than through

performance of their business. The heady concoction of market operators, financiers, PR

agencies and willing promoters create a maze showcasing temporary wealth, attracting gullible

investors. The story more often than not leaves a trail of bloodied investors. We have seen a

number of examples recently.

In the coming week, the Nifty would remain in a broad range of 5600 to 5970 with a negative

bias on fears of FII pullout. The results season would also contribute to market caution but, as

mentioned earlier, volatility is here to stay.

Most developed equity markets gained in July, supported by stronger macroeconomic data. Japanwas an exception as its stockmarket fell slightly. Emerging markets lagged behind developed

markets.

The US Federal Reserve (Fed) struck a more dovish tone, easing fears about reduced monetarystimulus. Fed chairman Ben Bernanke emphasised that any scaling back of quantitative easing

depends on economic conditions.

Chinese equities gained after data showed the economy expanded by an annual 7.5% in thesecond quarter, in line with expectations. Authorities implemented financial market reform by

liberalising bank lending rates.

There was encouraging news from the eurozone as Purchasing Manager surveys continued toshow improvement. The flash composite eurozone PMI for July was above 50.0 for the first time

since January 2012.

In bond markets, the yield on the 10-year US Treasury continued to rise slightly amid furthersigns of economic improvement. Italian and Spanish government bonds posted the best returns

among developed market sovereigns.


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Nifty august 2013


8/30/2013 5407.45 5493.3 5360.2 5471.8 336400 5471.8

8/29/2013 5316.5 5428.9 5303 5409.05 326500 5409.05

8/28/2013 5233.45 5317.7 5118.85 5285 336000 5285

8/27/2013 5426.5 5427.4 5274.25 5287.45 306000 5287.45

8/26/2013 5499.4 5528.7 5454.45 5476.5 242000 5476.5

8/23/2013 5428.75 5478.8 5377.8 5471.75 251500 5471.75

8/22/2013 5282.8 5418.95 5254.05 5408.45 284500 5408.45

8/21/2013 5494.45 5504.1 5268.45 5302.55 255000 5302.55

8/20/2013 5353.45 5417.8 5306.35 5401.45 261100 5401.45

8/19/2013 5497.55 5499.65 5360.65 5414.75 219700 5414.75

8/16/2013 5705.45 5716.6 5496.05 5507.85 248100 5507.85

8/15/2013 5742.3 5742.3 5742.3 5742.3 0 5742.3

8/14/2013 5715.4 5754.55 5690.2 5742.3 223700 5742.3

8/13/2013 5600.25 5704.75 5578.9 5699.3 223000 5699.3

8/12/2013 5606.7 5644.1 5557.1 5612.4 195700 5612.4

8/9/2013 5565.65 5565.65 5565.65 5565.65 0 5565.65

8/8/2013 5510.05 5577.6 5510.05 5565.65 204900 5565.65

8/7/2013 5549.3 5561.45 5486.85 5519.1 245000 5519.1

8/6/2013 5664.9 5664.9 5521.8 5542.25 216200 5542.25

8/5/2013 5682.4 5721 5661.5 5685.4 197200 5685.4

8/2/2013 5750.05 5761.85 5649 5677.9 222500 5677.9

8/1/2013 5776.9 5808.5 5676.85 5727.85 216800 5727.85


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Sensex August2013

Date Open High Low Close

1/8/2013 19,443.29 19,569.20 19,170.46 19,317.19

2/8/2013 19,399.55 19,451.70 19,078.72 19,164.02

5/8/2013 19,178.06 19,306.51 19,141.68 19,182.26

6/8/2013 19,127.10 19,131.92 18,667.30 18,733.04

7/8/2013 18,758.53 18,811.46 18,551.35 18,664.88

8/8/2013 18,687.30 18,829.26 18,621.67 18,789.34

12/8/2013 18,898.94 19,066.97 18,796.01 18,946.98

13/08/2013 18,895.26 19,248.11 18,864.81 19,229.84

14/08/2013 19,299.42 19,392.56 19,203.63 19,367.59

16/08/2013 19,297.11 19,310.95 18,559.65 18,598.18

19/08/2013 18,587.38 18,587.38 18,139.15 18,307.52

20/08/2013 18,142.83 18,306.46 17,970.98 18,246.04

21/08/2013 18,545.44 18,567.70 17,807.19 17,905.91

22/08/2013 17,896.84 18,349.82 17,759.59 18,312.94

23/08/2013 18,386.53 18,546.60 18,210.75 18,519.44

26/08/2013 18,602.56 18,728.19 18,488.93 18,558.13

27/08/2013 18,460.72 18,460.72 17,921.82 17,968.08

28/08/2013 17,851.44 18,101.84 17,448.71 17,996.15

29/08/2013 18,073.66 18,455.66 18,071.22 18,401.04

30/08/2013 18,424.72 18,679.26 18,272.76 18,619.72


18/41

Stocks have been in free fall this month, therupeehas been hitting record low levels and

investors arerunning scared.

TheMumbai Sensexindex swung wildly on Wednesday, at first popping into positive territory

but then falling by 760 points to close with a loss of nearly 2% for the day.

This is the fourth consecutive day of losses, with the index down by 7.5% over the period. In the

past month, the benchmark index has tumbled by just over 11%.

Investors are growing increasingly concerned about theU.S. Federal Reservecutting back on its

massivebond-buying program,which has generated a wave of liquidity around the world and

propped up global markets.

As the Fed looks to taper its $85-billion-per-month stimulus program,emerging markets-- and

India in particular -- have suffered damaging capital outflows.

Related: Nissan resurrects Datsun in India
http://money.cnn.com/2013/08/19/news/economy/india-rupee/index.html?iid=ELhttp://money.cnn.com/2013/08/19/news/economy/india-rupee/index.html?iid=ELhttp://money.cnn.com/2013/08/19/news/economy/india-rupee/index.html?iid=ELhttp://buzz.money.cnn.com/2013/08/20/fear-emerging-markets/?iid=ELhttp://buzz.money.cnn.com/2013/08/20/fear-emerging-markets/?iid=ELhttp://buzz.money.cnn.com/2013/08/20/fear-emerging-markets/?iid=ELhttp://money.cnn.com/data/world_markets/sensex/?iid=ELhttp://money.cnn.com/data/world_markets/sensex/?iid=ELhttp://money.cnn.com/data/world_markets/sensex/?iid=ELhttp://money.cnn.com/news/specials/fed/?iid=ELhttp://money.cnn.com/news/specials/fed/?iid=ELhttp://money.cnn.com/news/specials/fed/?iid=ELhttp://money.cnn.com/2013/06/19/news/economy/federal-reserve-stimulus/index.html?iid=ELhttp://money.cnn.com/2013/06/19/news/economy/federal-reserve-stimulus/index.html?iid=ELhttp://money.cnn.com/2013/06/19/news/economy/federal-reserve-stimulus/index.html?iid=ELhttp://money.cnn.com/2013/08/04/investing/bric-markets/index.html?iid=ELhttp://money.cnn.com/2013/08/04/investing/bric-markets/index.html?iid=ELhttp://money.cnn.com/2013/08/04/investing/bric-markets/index.html?iid=ELhttp://money.cnn.com/2013/07/15/autos/datsun-india/index.html?iid=ELhttp://money.cnn.com/2013/07/15/autos/datsun-india/index.html?iid=ELhttp://money.cnn.com/2013/07/15/autos/datsun-india/index.html?iid=ELhttp://money.cnn.com/2013/08/04/investing/bric-markets/index.html?iid=ELhttp://money.cnn.com/2013/06/19/news/economy/federal-reserve-stimulus/index.html?iid=ELhttp://money.cnn.com/news/specials/fed/?iid=ELhttp://money.cnn.com/data/world_markets/sensex/?iid=ELhttp://buzz.money.cnn.com/2013/08/20/fear-emerging-markets/?iid=ELhttp://money.cnn.com/2013/08/19/news/economy/india-rupee/index.html?iid=EL


19/41

Local factors are making the situation worse. Investors are losing faith in India's sluggish

economy and worry about its large current account deficit, which reflects the nation's tendency to

import more goods than it exports and leaves it heavily reliant on foreign capital.

The economy grew at its slowest pace in a decade in 2012 and forecasters have been

downgrading their expectations for future growth.

"There is no dynamism in India right now that will allow the free flow of capital," said Stephen

Pope, managing partner at Spotlight Ideas.

Pope pointed to the extreme bureaucracy, which is slowing economic and political progress.

"Everything seems to make some progress and then it stops because of the level of bureaucracy.

And this is what is killing the potential of India. It should be challenging China, but it's not," he

said.

Others have voiced concerns that elections due by May 2014 will do little to strengthen India's

political leadership.

"Whatever new coalition assumes power by next spring will be very weak, deepening India's

political paralysis and reducing already paltry chances for reforms needed to re-energize the

lagging economy," said David Sloan, director for Asia at Eurasia Group.

Related: Fed provokes run for the hills ... in China and India

Investors are selling the rupee, pushing the currency on Wednesday to a record low versus the

U.S. dollar.

Economists and traders said the sell-off was exacerbated by indecisive moves from the Indian

central bank. The Reserve Bank of India announced Tuesday that it would inject over $1 billion

into the markets, just days after saying it was working to tighten liquidity. The announcement

came after yields on Indian government bonds spiked above 9%.

"It's taking neither a hot nor cold stance to protect its currency and this indecision is fueling the

market's selling bias when it comes to the rupee," said Kathleen Brooks, a research director at

FOREX.com.

Ishaq Siddiqi, a market strategist at ETX Capital, said the central bank was doing little to secure

stability for the Indian economy and currency.

"This is seen as a sign of desperation from the Reserve Bank of India," he said
http://buzz.money.cnn.com/2013/08/20/fear-emerging-markets/?iid=ELhttp://buzz.money.cnn.com/2013/08/20/fear-emerging-markets/?iid=ELhttp://buzz.money.cnn.com/2013/08/20/fear-emerging-markets/?iid=EL


20/41

P-Notes investment at 3-month high of $26 billion in August

nvestments into Indian shares through participatory notes (P-Notes) hit a three-month high of Rs

1.65 lakh crore (about $26 billion) in August.

P-Notes, mostly used by overseas High Networth Individuals (HNIs), hedge funds and other

foreign institutions, allow them to invest in Indian markets through registeredForeign

Institutional Investors (FIIs)while saving on time and costs associated with direct

registrations.

According to the latest data released by the Securities and Exchange Board of India (Sebi), the

total value of P-Note investments in Indian markets (equity, debt and derivatives) rose to Rs

1,64,817 crore at the end of August.

At the end of July, foreign investments into Indian markets through P-Notes stood at Rs 1.48

lakh crore, againstRs 1.47 lakh crore in June.

Notably, investments into Indian shares through P-Notes climbed to Rs 1.68 lakh crore in May,

highest in six months, due to improved global liquidity situation but investment declined in the

succeeding two months (June-July) because of a slew of global and domestic factors like

deprecating rupee and widening current account deficit (CAD), among others.

Besides, the value of P-Notes issued with derivatives as underlying, stood at Rs 1,02,224 crore at

August-end.

The quantum of FIIs investments through P-Notes increased to a nine month high of 13.27 per

cent in August from 11.45 per cent in July.

Till a few years ago, P-Notes used to account for more than 50 per cent oftotal FII investments,

but their share has fallen after Sebi tightened disclosure norms and other regulations for such

investments.

P-Notes have been accounting for mostly 15-20 per cent of total FII holdings in India since 2009

while it used to be much higher, in the range of 25-40 per cent, in 2008. It was as high as over 50

per cent at the peak of Indian stock market bull run during a few months in 2007.

FIIs, the key drivers of Indian markets, pulled out Rs 5,922 crore (around $902 million) from the

Indian stock market last month. Additionally, FIIs withdrew Rs 9,773 crore ($1.55 billion) from

the debt market in August.
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21/41

Nifty September 2013


9/20/2013 6104.55 6130.95 5932.85 6012.1 318600 6012.1

9/19/2013 6044.15 6142.5 6040.15 6115.55 287200 6115.55

9/18/2013 5872.75 5916.9 5840.2 5899.45 153600 5899.45

9/17/2013 5824.2 5857.8 5804.9 5850.2 157900 5850.2

9/16/2013 5930.3 5957.25 5798.15 5840.55 219500 5840.55

9/13/2013 5828 5884.3 5822.9 5850.6 190800 5850.6

9/12/2013 5931.15 5932 5815.8 5850.7 273000 5850.7

9/11/2013 5887.25 5924.35 5832.7 5913.15 265000 5913.15

9/10/2013 5738.5 5904.85 5738.2 5896.75 275200 5896.75

9/9/2013 5680.4 5680.4 5680.4 5680.4 0 5680.4

9/6/2013 5617.45 5688.6 5566.15 5680.4 253000 5680.4

9/5/2013 5553.75 5625.75 5552.7 5592.95 274900 5592.95

9/4/2013 5358.65 5460.25 5318.9 5448.1 0 5448.1

9/3/2013 5574.7 5580.95 5323.75 5341.45 250300 5341.45

9/2/2013 5480.25 5564.9 5478.85 5550.75 0 5550.75


22/41

Sensex September 2013

Data Open High Low Close

2/9/2013 18,691.83 18,942.06 18,678.93 18,886.13

3/9/2013 19,002.77 19,007.31 18,166.17 18,234.66

4/9/2013 18,314.68 18,612.60 18,188.43 18,567.55

5/9/2013 18,857.60 19,117.52 18,847.02 18,979.76

6/9/2013 19,072.02 19,293.96 18,929.38 19,270.06

10/9/2013 19,448.39 20,012.69 19,444.66 19,997.10

11/9/2013 19,999.77 20,055.53 19,777.63 19,997.45

12/9/2013 20,046.05 20,052.05 19,676.49 19,781.88

13/09/2013 19,744.54 19,899.37 19,675.68 19,732.76

16/09/2013 19,977.38 20,086.43 19,596.15 19,742.47

17/09/2013 19,721.90 19,819.10 19,635.44 19,804.03

18/09/2013 19,865.99 20,013.33 19,775.29 19,962.16

19/09/2013 20,354.73 20,739.69 20,347.30 20,646.64

20/09/2013 20,616.35 20,677.99 20,051.43 20,263.71

Stocks plunge as Fed minutes cause volatility

In a volatile trading session, stocks took a beating as investors continue to worry about the

timing and scope of a paring back on the Federal Reserve's bond-buying stimulus program.

Stocks took a dive immediately after the 2 p.m. ET release of the minutes from the Federal

Reserve's last meeting but then quickly recovered and then plunged all over again late in the

session.

In the minutes, Fed policymakers indicated they are still on track to slow the central bank's

massive stimulus this year and end it in mid-2014, but gave no signal whether the scale-back

could begin next month.


23/41

The Dow Jones industrial average fell 105.44, or 0.7%, to close at 14,897.55. The Dow is now

riding a six-session losing streak and closed below 15,000 for the first time since July 3. It's the

Dow's first six-day drop since July 2012.

The Standard & Poor's 500 index fell 9.55, or 0.6%, to 1,642.80 and the Nasdaq composite index

dropped 13.80, or 0.4%, to 3,599.55.

While the Fed minutes did not send a clear message of exactly when quantitative easing (QE)

will start to be pulled back, the kneejerk reaction of stock investors suggest investors expect

tapering to begin in September.

Even if the Fed does start to taper in September, one Wall Street expert thinks the stock market

will take it in stride, partly because the central bank has telegraphed its intentions to Wall Street.

.

"If I was a betting man I think they will start in the fall," says Frank Fantozzi, president and CEO

of Planned Financial Services in Cleveland, adding that the Fed will probably ease off the

stimulus pedal slowly. "It might be more of a 'Taper Lite.' They will probably start small,

reducing their current $85 billion in monthly asset purchases by $15 billion" or less. I am

confident that the economy will be able to handle the change."

Treasury yields spiked higher after the release. The yield on the benchmark 10-year Treasury

note rose to 2.89% from 2.82% as investors sold bonds.

Wall Street is keeping an eye on the key 3% level, a yield that hasn't been seen since July 25,

2011. Rising bond yields have also been giving investors pause, as higher borrowing costs on

mortgages, for example, and for corporations can slow down the economy.

"However you want to parse the minutes today, the take-away is the same: the end of QE is upon

us," says Andy Busch, editor of The Busch Update.

As a result, interest rates will continue to "normalize" and move higher. A risk for stocks, Busch

adds, is if the rate rise continues to be quick and large, citing the recent damage to stocks caused

by the rapid move up in the yield on the 10-year Treasury note from 1.63% in early May. If rates

continue to spike, it "means stocks don't look so cheap."


24/41

The Federal Reserve has been buying $85 billion a month in government securities and

mortgage-backed bonds in order to help keep interest rates down and spur borrowing and

investment. Improvement in the U.S. economy has raised expectations the Fed will begin

reducing its monetary stimulus next month.

On Tuesday, the Dow fell slightly to 15,002.99. The S&P 500 added 0.4% to 1,652.35. The

Nasdaq rose 0.7% to 3,613.59.

Investors were also parsing through earnings releases from more American retailers. Shares of

home improvement retailer Lowe's rose 3.9% after it topped quarterly earnings forecasts and

upped its full-year outlook. But Target shares dipped 3.6% after it provided a downbeat outlook

for the balance of 2013.

Global markets have been shaky this week as traders, worried about a potential pullback in bond

purchases by the Fed, began dumping bonds. Money has also flowed out of emerging stock

markets, sending the currencies of countries such as Malaysia, Indonesia and India sharply

lower.

On Wednesday, Indonesia's benchmark index rose 1% after dropping a total of more than 8% on

Monday and Tuesday.

Elsewhere in Asia, Japan's Nikkei 225 index swung between gains and losses for most of the

trading session. The benchmark ended 0.2% higher at 13,424.733. South Korea's Kospi fell 1.1%

to 1,867.46. Hong Kong's Hang Seng lost 0.7% to 21,817.73.

Regional benchmarks across Europe mostly declined. The U.K.'s FTSE 100 index was off 1.0%

to 6,390.84.

Benchmark oil for October delivery was down $1.24 to $103.88 per barrel in electronic trading

on the New York Mercantile Exchange.


25/41

Stock markets may remain volatile on RBI move

Stock marketsare likely to remain volatile this week as investors come to terms with an

unexpected hike ininterest rateby theRBIand portfolio churning ahead of the September

derivatives contract expiry, according to experts.

The surprise move from the RBI has reversed the bullish tone of the markets as the 25 basis point

rise in repo rate caught market participants completely off-guard, brokers said.

The RBI raised the short-term policy repo rate to 7.5 per cent from 7.25 per cent,

sayinginflationhad to be lowered to more tolerable levels. The RBI also partially eased its

liquidity-tightening steps that were unveiled to defend a weakening rupee.

"This week will see expiry of September month's F&O contracts (on Thursday) so volatility will

tend to remain high. Meanwhile, the markets are likely to consolidate in the broad range of

5,800-6,150 and form a base for next directional move," said Jayant Manglik, President Retail

Distribution, Religare Securities Ltd.

Stock markets would also monitor trend in foreign fund investment and global cues for further

direction. Overseas investors have pumped in over Rs 11,000 crore (USD 1.7 billion) in

theIndian stock marketso far this month.

TheBSEbenchmark had lost 383 points on Friday, the most in three weeks, after RBI monetary

policy review. TheSensexhad surged 684.48 points to an almost 3-year high on Thursday aftertheUS Federal Reserverefrained from easing its stimulus programmer.

For the entire week, the index gained 2.69 per cent to close at 20,263.71.

"The deferment in withdrawal of quantitative easing by the US has given Indian policy makers a

breathing space of three months at the least and six months at the best," said P H Ravi Kumar,

Managing Director, Capri Global Capital Ltd.
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26/41

FII exit hit the Indian stock market

Foreign institutional investors (FIIs) have played a very important role in shaping our markets'

fortunes with their money flows.A large part of the 25 per cent-plus rally in Sensex in the year 2012 can be attributed to the $20-

billion-plus of inflows from FIIs.

For the year 2013 so far, they have poured in over Rs 60,000 crore.

FIIs turned net sellers in June, with the net equity outflow amounting to Rs 21,657 crore,

indicating a change in sentiment, ET reported.

Between June and August 2013, India saw its sharpest bout of FII outflow since the global

financial crisis, leading to fears of a possible capitulation by FIIs, say experts.

Does it mean that Indian markets are likely to face fresh bouts of selling by

FIIs amid global headwinds?

Deutsche Bank is of the view that it would be premature to conclude if the worst of the FII

selling is over. They collectively hold close to 40 per cent of the outstanding free float in Indian

markets.

"Following incoming governor Raghuram Rajan's announcements on assuaging pain in the

currency markets, we have seen the rupee partially recovering losses and FIIs emerging as net

buyers to the tune of close to $1 billion over the past eight trading sessions (recouping close to

25% of outflow seen over June-August)," said Deutsche Bank in a report.

Most analysts continue to reiterate that currency stability remains the key determinant for the

equity market certainty. Recent announcements over the FCNR-B, supportive trade data and

easing investment facilitation in debt markets have resulted in improving investor sentiment and

concerns over CAD.

"The market has come back largely because of the stopping of selling by FIIs as the rupee factor

has worked in their favour," said Deven Choksey, MD, KR Choksey Securities in an interview

with ET Now.


27/41

"I agree that speaking of fundamentals, things have not changed beyond a point. If one looks at

the advance tax data, it suggests that the growth has been somewhere around 7-8 per cent," he

added.

One would probably try to argue that if fundamentally things have not changed, why exactly

markets are moving higher after a sharp fall?

Given the fact the fundamentals have not changed much, analysts peg rally in equity markets

based on a couple of factors. One is attractive valuations after the recent sell-off and other is

stability (appreciation) in currency.

Choksey is of the view that if the rupee goes down further and stabalises near its real value of

around 59-60, the market could remain relatively in the positive zone. So, any correction in the

market in the coming days would bring new money into the market for investment. A more

sustainable return of faith will come back to the markets on government's commitment on

drawing a line on the fiscal deficit at 4.8 per cent of GDP.

Investors are keenly expecting a fuel price hike (both one-time hike as well as a higher monthly

calibrated hike) as an endorsement of the commitment to fiscal discipline. Convergence of

political will on critical economic issues also bodes well.


28/41

FII ownership in Sensex

The FII ownership in the 30 companies that comprise the Sensex went up to 18.35 per cent in

June 2013, from 16.36 per cent a year ago, said an ET report. This is also the highest level of FIIholding in the Sensex in the past five years. This means that if FIIs decide to exit, the Indian

equities will take a severe hit.

If look at top ten stocks which have maximum FII holding, banks/financials have been the worst

hit. IT and pharma stocks as well as auto companies with export background have managed to

buck the trend supported by sharp depreciation in Indian currency.


29/41

What should investors do amid uncertainty of FII flows?

Until there is a more stable environment around domestic macro, Deutsche Bank advises

investors to focus on key themes. One is the global recovery play; by focusing on companies

deriving significant revenues from non-India geographies. The other is by focusing on

companies which benefit from rupee depreciation. These include Hindalco, TCS, Wipro, Infosys,

Tech Mahindra, RIL, United Phosphorous and Bharat Forge.

Investors can also look at rural plays focusing on firms that derive a substantial component of

revenues from 'Rurban India', likely to benefit from one of the best monsoons in India over many

years. Companies which will benefit include stocks like ITC, HDFC Bank, Maruti Suzuki,

M&M, MMFSL and UltraTech Cements.

FIIs are of the view that some private sector banks have entered a very attractive valuation zone

and they were open to having an exposure to them, says Macquarie report.

The recent correction in the Indian stock market has made them bullish on certain stocks with

compelling valuations.

According to the brokerage, long-only funds are still invested in large names and are not looking

to exit them at current levels; but there has been some sector rotation - from financials to IT,

consumers and/or pharmaceuticals.


30/41

Impact Of Rupee Depreciation On Various Industries In India

Recently in the last one quarter, Rupee has depreciated almost 18% from what it used to be

a quarter back. There are multiple factors which have contributed to the fall down of the Indian

Currency. Some of them are increasing CAD, weaker GDP of the country translating into

increasing gap between Imports and exports which has cumulatively boosted the outflow of the

foreign currency from the country. Apparently, RBI has not been able to intervene aggressively

due to the limited foreign reserve and hasnt been able to take any decisive steps.

However, amidst the currency hedging, one of the question that continues to remain unanswered

is the impact of this crisis over the various industries. We try to think in another dimension

analyzing who all are the gainers and looser behind the unsterilized Rupee and high end

fluctuations.

Gaining sectors / Industries

Software Industry

Most of the Indian

Software firms derive half

of their revenue from US;a weaker rupee would

definitely have contributed

to the gains. According to

the analyst, On average,

one percentage point

depreciation in the rupee

translates into a 30-50 bps

gain in operating margins for information technology (IT) companies.

The three biggest gainers are the major IT companies - TCS, Infosys and Wipro. The three

companies will approximately gain an additional 5,700 crore, 3,600 crore and 2,700 crore,

respectively, on net dollar earnings for 2013-14.


31/41

In the mid tier IT Companies , HCL Tech and Tech Mahindra will continue to be the big gainers.

Over the last three quarters, HCL has signed large deals (over $3 billion) when rupee was

between 54 and 59, while Tech Mahindra guided to keeping margins stable at around 21 per cent

if the rupee held at near 60 levels.

Pharmaceutical Industry

In pharmaceutical industry as well,

most companies in the sector will gain

from the rupee's fall, since a substantial

proportion of their revenues comes

from exports. A strong US dollar and

yen will boost net sales and operating

margins.

Indian pharma industry evaluates to $20 billion, or Rs 1 lakh crore, with exports accounting for

$9 billion, or Rs 45,000 crore. Many domestic companies such as Lupin, Sun Pharmaceutical and

Dr Reddy's Laboratories have high exposure to the west for their exports will gain from rupee

depreciation.


32/41

Losing sectors/Industries

Oil & Gas Industry

Oil and gas industry is likely to have the mixed impact. It is most likely to be on the negative

side for the importers.

The most affected will be government oil marketing companies such as HPCL and BPCL. This is

because of limited ability to pass on higher crude oil (which they import) prices to consumers

due to price controls (except on petrol).

Automobile Industry

The automobile industry, which majorly relies on import of auto components, could be affected

because of a fall in the rupee not only against the US dollar but also against other global

currencies. The reasons are higher cost for importing components, higher royalty to foreign

parent firms and paying off their debt of ECB and FCCB.


33/41

Maruti Suzuki, Hyundai, Honda are most likely to be affected by the Rupee fall precisely

because of the higher foreign currency borrowings and large import of components which will

result into the net loss.

Aviation Industry

Rupee depreciation will considerably impact airlines

as their dollar revenue is less while most of their

expenses are in dollars. With the tumbling currency,

there is increase in costs of aviation turbine fuel

(ATF) and lease rentals and because of that airlines

faced financial pressure. Airlines industry also

expected that margins and profits will strike in the

coming period. As consequences, airlines have decided to increase their fares by 20-25 per cent

across the board.

FMCG

Raw material costs for Hindustan Unilever, Godrej

Consumer Products, Colgate Palmolive and Dabur are

likely to gradually move up with rupee fall. Consumer

goods companies will have to pay more for imported

commodities like palm oil, packaging and crude-linked

raw materials that have a global impact on pricing.

In nut shell majority of the sectors are having negative impact of rupee depreciation and the

higher cost for the companies will get pass on to the end consumers. So it will have a off-putting

impact on economy, industries and the consumers at large.


34/41

A Turning Tide?

In the equity markets, sentiments play an important part. However, it is equally true that the

sentiments do not take much time to change. This is exactly what the Indian markets have

experienced over the last few trading sessions. The kind of up-move that the equity indices have

witnessed since September 4, 2013 has taken the street by surprise.

Two important factors played a pivotal role in the upsurge. First and the foremost was the slight

appreciation in the rupee against the dollar. While most on the street only hoped for the new RBI

Governor to arrest the fall, the actions taken by the governor actually helped the currency

appreciate. After hitting an all-time low against the USD few days ago, the rupee has now

bounced back to the 63.58 level.

The question now is how much more appreciation can we expect to see going ahead? But before

that question is answered, we need to understand that apart from the actions taken by Dr

Raghuram Rajan, there are certain other economic aspects to the recovery. The basic reason has

been what is known as Exchange Rate Overshooting in exchange rate jargon.

In simple terms, this means that considering the fundamental factors, if there is a consensus of

the rupee depreciating to certain levels (say 68) and it overshoots that target, some pullback

happens and the rupee may again come back to the 62 levels. So, there is a possibility of the

rupee touching the 62 mark against the USD. However, this level is not sustainable, as it willfinally settle between 65-68 per USD.

We have stated several times in the past that it is not the fall in the rupee but the volatility and

the sharp fall which shakes up the markets. As the currency settles down at a certain levels

(which we feel is around 65-68), India Inc. would get good time to play its strategy.


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Another factor has been the return of FIIs on the scene. In the last four trading sessions, FIIs

have been net buyers to the tune of Rs 5191 crore. Selling in the debt market has also been

arrested, or at least reduced. This has been another of the prime factors that has helped the rupee

appreciate. It is a known fact that whenever FIIs have turned net buyers, they have taken the

markets to a new orbit. However, it now remains to be seen whether or not FII inflows would

continue. We feel it would be difficult to make a prediction on this before the FOMC meet

scheduled on September 17 and 18. The impact of the same has been such that even the RBI

postponed its mid-quarter review until after the FMOC meet.

We expect the markets to remain range-bound till the FOMC and RBI meets are over as no one

would like to take a bold step ahead of these two crucial meetings. Till then, expect the markets

to remain choppy.


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SENSEX MILSESTONES

The Sensex crossed the 1,000 mark on July 25, 1990; the 2,000 mark on January15, 1992; the

3,000 mark on February 29, 1992; the 4,000 mark on March 30, 1992;

the 5,000 mark on October 11, 1999; the 6,000 mark on January 2, 2004; the 7,000mark on June

21, 2005; the 8,000 mark on September 8, 2005; the 9,000 mark on December 09, 2005; and

finally the historic 10,000 mark on February 7, 2006

.

It created another landmark when it touched 11,000 on March 27, 2006. The Sensex closed at a

high of 12,903 on 28 Oct 2006. To reach from the 11,000 mark to the12000 mark only took 19

working days, the shortest time interval for a 1000 points climb in BSE Sensex history,

surpassing the just set record of 29 days that it took to reach 11,000 from 10,000.

Here is a timeline on the rise and rise of the Sensex through Indian stock market history.

1000, July 25, 1990

- On July 25, 1990, the Sensex touched the four-digit figure for the first time and closed at 1,001

in the wake of a good monsoon and excellent corporate results.

2000, January 15, 1992

- On January 15, 1992, the Sensex crossed the 2,000-markand closed at 2,020 followed by the

liberal economic policy initiatives undertaken by the then finance minister and current Prime

Minister Dr Manmohan Singh.

3000, February 29, 1992

- On February 29, 1992, the Sensex surged past the 3000mark in the wake of the market-friendly

Budget announced by the then Finance Minister, Dr Manmohan Singh.

4000, March 30, 1992- On March 30, 1992, the Sensex crossed the 4,000-mark and closed at 4,091 on the expectations

of a liberal export-import policy. It was then thatthe Harshad Mehta scam hit the markets and

Sensex witnessed unabated selling.


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5000, October 11, 1999

- On October 8, 1999, the Sensex crossed the 5,000-markas the BJP-led coalition won the

majority in the 13th Lok Sabha election.

6000, February 11, 2000- On February 11, 2000, the InfoTech boom helped the Sensex to cross the 6,000-mark and hit

and all time high of 6,006.

7000, June 21, 2005

- On June 20, 2005, the news of the settlement between the Ambani brothers boosted investor

sentiments and the scripsof RIL, Reliance Energy, Reliance Capital and IPCL made huge gains.

This helped the Sensex crossed 7,000points for the first time.

8000, September 8, 2005

- On September 8, 2005, the Bombay Stock Exchange's benchmark 30-share index -- the Sensex

-- crossed the 8000 level following brisk buying by foreign and domestic funds in early trading.

9000, December 09, 2005

- The Sensex on November 28, 2005 crossed 9000 to touch 9000.32 points during mid-session at

the Bombay Stock Exchange on the back of frantic buying spree by foreign institutional

investors and well supported by local operators as well as retail investors.

10,000, February 7, 2006

- The Sensex on February 6, 2006 touched 10,003 points during mid-session. The Sensex finally

closed above the 10K-mark on February 7, 2006.

11,000, March 27, 2006

- The Sensex on March 21, 2006 crossed 11,000 and touched a life-time peak of 11,001 points

during mid-session at the Bombay Stock Exchange for the first time. However, it was on March

27, 2006 that the Sensex first closed at over 11,000 points.

12,000, April 20, 2006

- The Sensex on April 20, 2006 crossed 12,000 and touched a life-time peak of 12,004 points

during mid-session at the Bombay Stock Exchange for the first time.


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CONCLUSIONS

India has been witness to a four-year up and down cycle in the stock markets. Since1992, the

Indian markets have peaked every fourth year and then dropped 35-45%during the next three

years. What is surprising though is that the Dalal Street has bucked the trend this time

around. Some of the major conclusions derived in the study are as under.

Declaration of any financial result and other information of the company has direct effect on

its stock price.

News related to any political and economic affair has also the direct effect on stock market.

In short,

The following hypothesis have been tested and proved positive.

Any fluctuation in foreign market has more effect on Indian stock market than that of domestic

market.

In the given volatile economic conditions, the market is efficient to any news and information.

At the end it is concluded that following are Major factors, which have generally

contributed to fall & rise in SENSEX & NIFTY:

1. US economic growth

2. Crude oil prices

3. Emerging market valuations

4. Foreign direct investment (FDI)

5. Capital spending6.Equity supply

7. Government policy toward foreign firms

8. Politics

9. Domestic risk

10. Foreign institutional investors (FII) withdrawals


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11. US Fed interest rates

12. Indian industry growth

13. Budget 2006-07 and finance bill

14. Tax circular regarding transaction tax to FII.


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Bibiliography

www.capitalmarket.com

www.wikipedia.org.com

www.google.com

www.yahoofinanace.com

www.moneycontrol.com

www.skicapital.net

www.nseindia.com

www.bseindia.com

www.sebi.org
http://www.capitalmarket.com/http://www.capitalmarket.com/http://www.wikipedia.org.com/http://www.wikipedia.org.com/http://www.google.com/http://www.google.com/http://www.yahoofinanace.com/http://www.yahoofinanace.com/http://www.moneycontrol.com/http://www.moneycontrol.com/http://www.skicapital.net/http://www.skicapital.net/http://www.nseindia.com/http://www.nseindia.com/http://www.bseindia.com/http://www.bseindia.com/http://www.sebi.org/http://www.sebi.org/http://www.sebi.org/http://www.bseindia.com/http://www.nseindia.com/http://www.skicapital.net/http://www.moneycontrol.com/http://www.yahoofinanace.com/http://www.google.com/http://www.wikipedia.org.com/http://www.capitalmarket.com/

Project on Volatility in Indian Stock Market

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