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International Markets
1. Introduction
ORIGIN OF NYSE
The origin of the New York Stock Exchange (NYSE) is dated back to
May 17, 1792, when the Buttonwood Agreement was signed by
twenty-four stock brokers outside of 68 Wall Street in New York
under a buttonwood tree. Also called the “Big Board”, it is the
largest stock exchange in the world in terms of dollar volume and
second largest in terms of number of companies listed.
3. Problem
4. Objectives
Comparative Analysis
This is the main part of the study wherein the various stock
exchanges of the sample have been compared on certain
parameters, both qualitatively and quantitatively.
Qualitative Analysis
In this section the various stock exchanges have been compared
on the following
parameters;
1. Market Capitalization
2. number of listed securities
3. listing agreements
4. circuit filters
5. settlement
These parameters are used to look at selected important aspects
of any stock exchange, viz.,the market capitalization gives an idea
about the size of the respective exchanges; whereasthe number of
listed securities acts as an indicator for the volume and liquidity of
any exchange. The listing agreements take care of the governance
issue, while circuit filters give an insight into the risk management
framework of the said exchange. Finally, the efficiency of a stock
exchange has been measured in terms of its settlement process.
Market Capitalization
Market capitalization is the measure of corporate size of a country.
It shows the current
stock price multiplied by the number of outstanding shares. It is
commonly referred to as
Market cap. It is calculated by multiplying the number of common
shares with the current price of those shares. This term is often
confused with capitalization, which is the total amount of funds used
to finance a firm's balance sheet and is calculated as market
capitalization plus debt (book or market value) plus preferred
stock. While there are no strong definitions for market cap
categorizations, a few terms are frequently used to group
companies based on its capitalization. The table below shows the
market capitalization of various stock markets in the world.
Listed Securities
Quantitative Analysis.
The hypothesis that the exchanges impact each other has been
tested through various statistical methods with data on price,
returns collected from the exchanges. Mainly the correlation
analysis, exponential trend analysis and the risk-return analysis
has been used to validate the hypothesis.
Price Relationship
Abstract
The ups and downs of the financial markets are always in the news. After all, there's plenty to
report. Wide price fluctuations are a daily occurrence on the world's stock markets as investors
react to economic, business, and political events. Of late, the markets have been showing
extremely erratic movements, which are in no way tandem with the information that is fed to the
markets. Thus chaos prevails in the markets with investor optimism at unexpected levels. Irrational
exuberance has substituted financial prudence. Has the stock market volatility increased? Has the
Indian market developed into a speculative bubble due to the emergence of "New Economy"
stocks? Why is this volatility so pronounced? In this paper we try to analyse these questions in the
context of Indian stock markets. We try to unearth the rationale for these weird movements. We
examine the fundamentalist view put forward by economists who argue that volatility can be
explained by Efficient Market Hypothesis. On the other hand, the view that volatility is caused by
psychological factors is tested. An empirical study of BSE Sensex and a set of representative
stocks are carried out to find the changes in their volatility in the last two years. The stock market
regulation in introduction of rolling settlement and dematerialization as a measure of reducing
volatility is put to test. Thus, the paper will help the investors as well as market regulators to make
the markets more efficient.
• To find the relationship between the FIIs equity investment pattern and Indian
stock indices.
Scope of the study is very broader and covers both the stock indices and its
comparison with foreign institutional investments. But, study is only going to cover
foreign investments in form of equity. The time period is limited from January 2007
to December 2008 as it will give exact impact in both the bullish and bearish trend.
The study will provide a very clear picture of the impact of foreign institutional
investors on Indian stock indices. It will also describe the market trends due to FIIs
inflow and outflow.
The study would be helpful for further descriptive studies on the ideas that will be
explored. Moreover, it would be beneficial to gain knowledge regarding foreign
institutional investments, their process of registration and their impact on Indian
stock market.
Research Problem
An adage says “a problem well defined is half solved”. The project deals with the
“Impact of Foreign Institutional Investors on Indian Stock Market”. This research
project studies the relationship between FIIs investment and stock indices. For this
purpose India’s two major indices i.e. Sensex and S&P CNX Nifty are selected.
These two indices, in a way, represent the picture of India’s stock markets. Five
indices of BSE i.e. BSE Auto, BSE Bankex, BSE Consumer Durables, BSE FMCG,
BSE Realty are also selected so as to further observe the effect of FII in particular
industry . So this project reveals the impact of FII on the Indian capital market.
There may be many other factors on which a stock index may depend i.e.
Government policies, budgets, bullion market, inflation, economic and political
condition of the country, FDI, Re./Dollar exchange rate etc. But for this study I have
selected only one independent variable i.e. FII. This study uses the concept of
correlation and regression to study the relationship between FII and stock index. The
FII started investing in Indian capital market from September 1992when the Indian
economy was opened up in the same year. Their investments include equity only.
The sample data of FIIs investments consists of monthly average from January 2007
to December 2008.
RESEARCH DESIGN
Null Hypothesis (Ho): The various BSE indices and S&P CNX Nifty index does not
rise with the increase in FIIs investment.
Alternate Hypothesis (Ha): The various BSE indices and S&P CNX Nifty index
rises with the increase in FIIs investment.
Exploratory Research
As an exploratory study is conducted with an objective to gain familiarity with the
phenomenon or to achieve new insight into it, this study aims to find the new
insights in terms of finding the relationship between FII’S and Indian Stock Indices.
SAMPLING DESIGN
• Universe
In this study the universe is finite and will take into the consideration related news
and events that have happened in last few year.
• Sampling Unit: -
As this study revolves around the foreign institutional investment and Indian stock
market. So for the sampling unit is confined to only the Indian stock market.
SAMPLING TECHNIQUE: -
Convenient Sampling: Study conducted on the basis of availability of the Data and
requirement of the project. Study requires the events that have impact on the Indian
stock market.
Secondary data: For the secondary data various literatures, books, journals,
magazines, web links are used. As there are not possibilities of collecting data
personally so no questionnaire is made.
2 CONCLUSION
In developing countries like India foreign capital helps in increasing the productivity of
labour and to build up foreign exchange reserves to meet the current account deficit. Foreign
Investment provides a channel through which country can have access to foreign
capital.
According to Data analysis and findings, it can be concluded that FII do have any significant
impact on the Indian Stock Market but there are other factors like government policies, budgets,
bullion market, inflation, economical and political condition, etc. do also have an impact on the
Indian stock market. There is a positive correlation between stock indices and FIIs but FIIs didn’t
have any significant impact on Indian Stock Market. The null hypothesis is rejected. BSE CD and
Nifty showed some positive correlation with FII in 2007 and 2008 but rest of the indices showed
very less positive correlation with FII. Also the coefficient of determination is less in all the case.
It shows the absence of linear relation between FII and stock index. This does not mean that there
is no relation between them.
One of the reasons for absence of any linear relation can also be due to the sample data. The data
was taken on monthly basis. The data on daily basis can give more positive results (may be). Also
FII is not the only factor affecting the stock indices. There are other major factors that influence
the bourses in the stock market.
5.3 LIMITATIONS
Besides following scientific methodologies the study has come across some limitations. These are:
? The study is based on Sensex sample. The Sensex companies have an external image that they
are the best performers in the country. If the sample companies consist of probably a
heterogeneous group then the results may give better insight in to relationship of the specific
variables.
? The data is taken on monthly basis. The data on daily basis can give more positive results.
? Secondary data that I have used in this study may not give true picture of the concern.
5.4 RECOMMENDATIONS
After the analysis of the project study, following recommendations can be made:
1) Simplifying procedures and relaxing entry barriers for business activities and providing investor
friendly laws and tax system for foreign investors.
2) Allowing foreign investment in more areas. In different industries indices the FIIs should be
encouraged through different patterns like futures, options, etc.
3) Somewhere, a restriction related to the track record of Sub- Accounts is also to be made on the
investors who withdraw money out of the Indian stock market who have invested with the help of
participatory notes.
4) We have to modernize and also have to save our culture. Similarly the laws should be such that
it protect domestic investors and also promote trade in country through FIIs.
Suggestion:
run in Indian stock market with calculative mind will take you and your investing into a different
stage of higher returns all together.
Variation and fluctuations in day to day business will give you shock as well as surprise ;you
will loose and gain with rapid rate rate in day to day activities of the share market but in the long
run it will prove you steady growth of returns.
A yearly comparison speaks a theory too, and that’s its rate,you can be in positive point of view
with positive sources o sensex
For mid term investors: A long
A wide range o portfolio with regular investment say monthly will lead to steady growth o
return which will be more than the deposits in bank.
Fluctuation in very short period should be avoided and ignored to complete the period of
investment to maximize the return
Speculation must be avoided as too many o the investors just wanted to insure their day to
day profits but they ignored the market conditions and economic factors.
A rapid growth can be registered in a very short period which excites you to invest more
and more into the stock market but it requires a deep knowledge of the market or it will
result in huge losses.
Short term investors should the money regularly on the market as their some investment
will be on the higher value of the market and some investment will be when market is low
,so the average invested amount and the average market will be in equilibrium position
Patience , strategy, knowledge about the market, investing policies , portfolio management,
Ratings of the companies, government policies , etc. are some of the major factors to boom
your return despite of fluctuations
CONCLUSION
In developing countries like India foreign capital helps in increasing the productivity of
labour and to build up foreign exchange reserves to meet the current account deficit. Foreign
Investment provides a channel through which country can have access to foreign
capital.
According to Data analysis and findings, it can be concluded that FII do have any significant
impact on the Indian Stock Market but there are other factors like government policies, budgets,
bullion market, inflation, economical and political condition, etc. do also have an impact on the
Indian stock market. There is a positive correlation between stock indices and FIIs but FIIs didn’t
have any significant impact on Indian Stock Market. The null hypothesis is rejected. BSE CD and
Nifty showed some positive correlation with FII in 2007 and 2008 but rest of the indices showed
very less positive correlation with FII. Also the coefficient of determination is less in all the case.
It shows the absence of linear relation between FII and stock index. This does not mean that there
is no relation between them.
One of the reasons for absence of any linear relation can also be due to the sample data. The data
was taken on monthly basis. The data on daily basis can give more positive results (may be). Also
FII is not the only factor affecting the stock indices. There are other major factors that influence
the bourses in the stock market.
5.3 LIMITATIONS
Besides following scientific methodologies the study has come across some limitations. These are:
? The study is based on Sensex sample. The Sensex companies have an external image that they
are the best performers in the country. If the sample companies consist of probably a
heterogeneous group then the results may give better insight in to relationship of the specific
variables.
? The data is taken on monthly basis. The data on daily basis can give more positive results.
? Secondary data that I have used in this study may not give true picture of the concern.
5.4 RECOMMENDATIONS
After the analysis of the project study, following recommendations can be made:
1) Simplifying procedures and relaxing entry barriers for business activities and providing investor
friendly laws and tax system for foreign investors.
2) Allowing foreign investment in more areas. In different industries indices the FIIs should be
encouraged through different patterns like futures, options, etc.
3) Somewhere, a restriction related to the track record of Sub- Accounts is also to be made on the
investors who withdraw money out of the Indian stock market who have invested with the help of
participatory notes.
4) We have to modernize and also have to save our culture. Similarly the laws should be such that
it protect domestic investors and also promote trade in country through FIIs.