CHAPTER-1

INTRODUCTION

INTRODUCTION
Indian financial market has seen an extraordinary volatility in the last few years. Since year 2002, Indian market has grown from a much volatile conditions to growth phenomena, from a SENSEX point of 5500 in December 2003 to 13,787 in December 2006 and crossed the mark of 20,000 in the year 2007. Due to various reasons the stock market has also experienced drastic decline to even less than 8,000 points in 2008. It is not because of only the domestic market but also the international investors. There are many other variables which contribute to the positive growth of the stock market. FIIs investment is considered to be one of the biggest push after the economic fundamentals. There is no doubt that the liberalization of the FII flows into the Indian Capital Market since 1993 has had a considerable impact on Indian stock market. The present paper is an attempt to explore the FIIs investment behavior and its relationship with SENSEX movement. The Indian financial market has experienced tremendous growth in terms of primary issues and trades on secondary market. The liberalization policies initiated in India in the early 1990s brought about radical changes in the behavior of stock market. Rising globalization, deregulation, and foreign institutional investments made the Indian stock market more competitive and efficient. The economic benefit from the developed economies particularly from capital markets comes out as catalyst. With the rise of equity culture throughout the world, India which has a long history of stock exchanges, has witnessed a noticeable shift in the proportion of investors participation in stock markets. The role of investors is very vital in the success of market guided economic systems. As part of economic reforms, India opened its stock market to foreign investors in September 1992 and has received portfolio investment from foreigners in the form of foreign 2institutional investment in equities and other markets including derivatives. It has emerged as one of the most influential groups to play a critical role in the overall performance of the stock market. The liberalization of FII flows into the Indian capital market since 1993 has had a significant impact on market practices. Many of the moves to modernize the equity markets in the past decade may be attributed to pressure or behavioral changes from foreign investors such as SEBIs amendment in 2006 about reducing the Validity Period of Registration Certificate from five years to three years and increase in the registration and renewal fees. The demat trading system introduced to increase the confidence of FIIs and others. The demat form of trading could able to avoid the problems of fake shares and fake transfers etc. The new industrial policy of the
2

government has initiated many measures to attract foreign capital. The foreign Exchange Regulation Act has been replaced with Foreign Exchange Management Act. BACK GROUND: The United States housing bubble is an economic bubble affecting many parts of the United States housing market in over half of American states. Housing prices peaked in early 2006, started to decline in 2006 and 2007, and reached new lows in 2012. On December 30, 2008 the CaseShiller home price index reported its largest price drop in its history. [2] Increased foreclosure rates in 20062007 among U.S. homeowners led to a crisis in August 2008 for the subprime, AltA, collateralized debt obligation (CDO), mortgage, credit, hedge fund, and foreign bank markets. In October 2007, the U.S. Secretary of the Treasury called the bursting housing bubble "the most significant risk to our economy." Any collapse of the U.S. Housing Bubble has a direct impact not only on home valuations, but the nation's mortgage markets, home builders, real estate, home supply retail outlets, Street hedge held by large institutional investors, and foreign banks, increasing the risk of a nationwide recession.[5][6]
[7][8]

Concerns about the impact of the collapsing housing and credit markets on the larger U.S.

economy caused President George W. Bush and the Chairman of the Federal Reserve Ben Bernanke to announce a limited bailout of the U.S. housing market for homeowners who were unable to pay their mortgage debts.[9] In 2008 alone, the United States government allocated over $900 billion to special loans and rescues related to the US housing bubble, with over half going to Fannie Mae and Freddie Mac (both of which are government-sponsored enterprises) as well as the Federal Housing Administration (which is a United States Government agency). [10]On December 24, 2009 the Treasury Department made an unprecedented announcement that it would be providing Fannie Mae and Freddie Mac unlimited financial support for the next three years[11] despite acknowledging losses in excess of $400 billion so far. The Treasury has been criticized for encroaching on spending powers that are enumerated for Congress alone by the US constitution, and for violating limits imposed by the Housing and Economic Recovery Act of 2008.

To recapitulate the events, the general election was held in four phases-the dates of polls being 20th April, 26th April, 5th May and 10thMay. The counting started on 13th May and because of use of electronic voting machines, most results were declared on that day. However, the exit polls conducted by the media started to give an indication of a non-NDA government from the second phase of polling. If one looks closely at the behavior of the Sensex during this period, it shows that the downward movement of the Sensex started around 23rd April, that is between the first and second phase of polling and kept declining till the middle of May. The behavior of the foreign portfolio investors matched the behavior of Sensex during this period. Net FII investment in the Indian capital markets started fluctuating sharply from 23 April and from 30th April it turned negative. Net FII investment in the Indian stock market continued to be negative till the middle of May. During this period, the Sensex and net FII investment showed very high degree of correlation. For the period 23rd April to 17th May, the correlation between daily net FII equity investment and the Sensex was as high as 0.70. Fig u re 1 shows daily movements of Sensex and Net FII investment in India during the months of April, May and June. A somewhat different trend is observed from 18th May to the end of that month. The Sensex started a recovery from 18th May and the declining trend of net F II investment also reversed from that day. Indian financial market has seen an extraordinary volatility in the last few years. Since year 2002, Indian market has grown from a much volatile conditions to growth phenomena, from a SENSEX point of 5500 in December 2003 to 13,787 in December 2006 and crossed the mark of 20,000 in the year 2007. Due to various reasons the stock market has also experienced drastic decline to even less than 8,000 points in 2008. It is not because of only the domestic market but also the international investors. There are many other variables which contribute to the positive growth of the stock market. FIIs investment is considered to be one of the biggest push after the economic fundamentals. There is no doubt that the liberalization of the FII flows into the Indian Capital Market since 1993 has had a considerable impact on Indian stock market. The present paper is an attempt to explore the FIIs investment behavior and its relationship with SENSEX movement.

The Eurozone crisis is an ongoing financial crisis that has made it difficult or impossible for some countries in the euro area to repay or re-finance their government debt without the assistance of third parties. From late 2009, fears of a sovereign debt crisis developed among investors as a result of the rising private and government debt levels around the world together with a wave of downgrading of government debt in some European states. Causes of the crisis varied by country. In several countries, private debts arising from a property bubble were transferred to sovereign debt as a result of banking system bailouts and government responses to slowing economies post-bubble. In Greece, unsustainable public sector wage and pension commitments drove the debt increase. The structure of the Eurozone as a monetary union (i.e., one currency) without fiscal union (e.g., different tax and public pension rules) contributed to the crisis and harmed the ability of European leaders to respond. European banks own a significant amount of sovereign debt, such that concerns regarding the solvency of banking systems or sovereigns are negatively reinforcing. Concerns intensified in thereafter, leading Europe's finance ministers on 9 May 2010 to approve a rescue package worth 750 billion aimed at ensuring financial stability across Europe by creating the European Financial Stability Facility (EFSF). In October 2011 and February 2012, the eurozone leaders agreed on more measures designed to prevent the collapse of member economies. This included an agreement whereby banks would accept a 53.5% write-off of Greek debt owed to private creditors, increasing the EFSF to about 1 trillion, and requiring European banks to achieve 9% capitalization. To restore confidence in Europe, EU leaders also agreed to create a European Fiscal Compact including the commitment of each participating country to introduce a amendment. European policy makers have also proposed greater integration of EU banking management with euro-wide deposit insurance, bank oversight and joint means for the recapitalization or resolution of failing banks. The European Central Bank has taken measures to maintain money flows between European banks by lowering interest rates and providing weaker banks (mostly from crisis countries) with cheap loans of more than one trillion Euros.

BSE SENSEX (^BSESN) 2012 Prev Close:

Open:

19,409.69
19,466.29

Day's Range: 52wk Range: Quotes delayed, except where indicated otherwise. Currency in INR.

19,612.18 15,135.90 19,561.90

OBJECTIVE OF THE STUDY

To analyse the performance of BSE sensex. To analyse the performance of NYSE, NASDAQ, stock exchanges. To know the risk and return of the BSE & NYSE, NASDAQ, stock exchanges. To correlate the performance of BSE SENSEX with NYSE AND NASDAQ with the help of returns. To identify the factors influencing the indices.

SCOPE OF THE STUDY

The report examines The Impact of Foreign Institutional Investments and Foreign Direct Investment on Equity Stock Market in India. The scope of the research comprises of information derived from secondary data from various websites. The various information and statistics were derived from the websites of BSE, Money Control, RBI and SEBI. Sensex and Nifty was a natural choice for inclusion in the study, as it is the most popular market indices and widely used by market participants for benchmarking.

NEED FOR THE STUDY

We need Asian market Historical prices(BSE) among us stocks NYSE,NASDAQ)

The stock market is a complex financial entity with many forces at work. When you trade stocks on the market, you are competing with professional traders and institutions, many of whom have decades of experience. For this reason, it is necessary to study the stock market carefully before putting money to work in risky investments.
Fortunately there are tools and concepts that can greatly enhance the learning curve. With

focus and determination, anyone can study the stock market for ultimate success in their investing goals.

LIMITATION
As the time available is limited and the subject is very vast. The study is general. It is mainly based on the data available in various websites &other secondary sources ; The inferences made is purely from the past years performance; There is no particular format for the study; Sufficient time is not available to conduct an in-depth study;

10

METHODOLOGY
The arithmetic average measures the central tendency. The purpose of computing an average value for a set of observations is to obtain a single value, which is representative of all the items. The main objective of averaging is to arrive at a single value which is a representative of the characteristics of the entire mass of data and arithmetic average or mean of a series(usually denoted by x) is the value obtained by dividing the sum of the values of various items in a series (sigma x) divided by the number of items (N) constituting the series. ARITHMETIC AVERAGE OR MEAN: if X1,X2..Xn are the given N observations. Then X= X1+X2+.Xn N RETURN Return (%) = Current Price (P1) Previous Price (P0) * 100 Previous Price (P0)
Average Return ( ) Variance (2) = = x / N (x )2 / N 1 x = Return; = Average Return

Standard Deviation ( ) = 2

STANDARD DEVIATION:
It is by far the most important and widely used measure of studying dispersions. For a set of N observations X1,X2..Xn with mean X, Deviations from Mean: (X1-X),(X2-X),.(Xn-X) Mean-square deviations from Mean: = 1/N (X1-X)2+(X2-X)2+.+(Xn-X)2 =1/N sigma(X-X)2

VARIANCE:
The square of standard deviation is known as Variance. 11

Variance is the square root of the standard deviation: Variance = (S.D) 2Where, (S.D) is standard deviation

DATA COLLECTION:
PRIMARY INFORMATION: DATA SOURCES FROM NSE

SECONDARY INFORMATION: Analyzing Data with Descriptive Statistics

12

CHAPTER-2 LITERATURE REVIEW

13

LITERATURE REVIEW
FDI DECISIONS:
This paper surveys the recent burgeoning literature that empirically examines the foreign direct investment (FDI) decisions of multinational enterprises (MNEs) and the resulting aggregate location of FDI across the world. The contribution of the paper is to evaluate what we can say with relative confidence about FDI as a profession, given the evidence, and what we cannot have much confidence in at this point. Suggestions are made for future research directions. Foreign Direct Investment (FDI) flows have increased substantially in the past two decades. These developments have motivated the appearance of a large number of empirical papers that test the expected benefits that FDI inflows are assumed to bring to the host countries. We survey the recent theoretical and empirical literature, but restrict our attention to the productivity changes that are induced by increased FDI inflows. We review both the aggregate productivity effects, as well as the spillover effects of FDI on local firms. This paper studies the dynamics of expected stock return and volatility in emerging financial market. We find clustering predict ability and persistence in conditional volatility and others have documented for mature market. However, emerging market exhibit higher volatility and conditional probability of large price changes then mature market exposure to high country specific risk does not appear to be rewarded with higher expected return. We deduct a risk reward relation in Latin America but not in Asia. The article examines the impact of foreign institutional investor s FII equity investment behavior in the Indian stock market. It attempts to find out the two-way causality between foreign institutional investors (FIIs) behavior and performance of Indian stock market for the period of January 1997 to June 2007.this article seeks to examine the idea that financial liberalization induces increased efficiency in the financial market as permission of FIIs equity investment is an important example of financial liberalization. Return in the stock market is used as proxy for the efficiency of the stock market in India .granger causality test has been applied to test the bidirectional causality. Apart from net investment of FIIs, the purchase and sales behavior of FIIs are analyzed separately. The results indicate that stock market performance is a major determinant
14

of both the FIIs purchase and sales behavior. But we did not find strong evidence that the variations in the stock market indices are determined by FIIs investment behavior.

BLOCK HOLDER, MARKET EFFICIENCY AND MANAGERIAL MYOPIA:

This paper shows holders can add value even if they cannot interview in a firms operations. Block holders have strong incentive to monitor the firms fundamental value, since they can sell their stakes upon bad news. By trading on their private information (following the Wall Street rule) they cause prices to reflect fundamental value rather than current earnings. This in turn encourages managers to invest for long term growth rather than short term profits. Contrary to the view that the U.S.s liquid markets and transient shareholders exacerbate myopia, this paper shows that they can encourage investment. This paper contributes to the literature on FDI and economic growth. We deviate from previous studies by introducing measures of the volatility of FDI Inflows. As introduced into the model, these are predicted to have a negative effect on growth. We estimate the standard model using cross-section, panel data and instrumental variable techniques. Whilst all results are not entirely robust, there is a consistent finding that FDI has a positive effect on growth whereas volatility of FDI has a negative impact. The evidence for a positive effect of FDI is not sensitive to which other explanatory variables are included. In particular, it is not conditional on the level of human capital (as found in some previous studies). There is a suggestion that it is not the volatility of FDI per se that retards growth but that such volatility captures the growth-retarding effects of unobserved variables.

FOREIGN DIRECT INVESTMENT IN BANGLADESH; AN ANALYSIS OF PERCEPTION OF PROSPECTIVE INVESTORS:

Bangladesh had gone through several major policy changes regarding the ownership and control of industries with a view of promoting economic growth. one of the strategies the government of Bangladesh (GOB) followed to accelerate economic growth was to attract foreign direct investment (FDI) into country Diversifying globally i.e., holding a well diversified portfolio of securities from around the globe in proportion to market capitalizations, irrespective of investors country of residence, has long been advocated as means to reduce overall portfolio risk and maximize risk-adjusted returns by the traditional capital asset pricing model (CAPM). Foreign
15

investment inflow depends on returns in the stock market, rates of inflation (both home and foreign), and exante risk. In terms of magnitude, the impact of stock market returns and the ex-ante risk turned out to be the key determinants of FII inflows. An investment will always carry the consideration of risk factor in its risk-return behavior. In an investment friendly environment the bullish behaviour dominates the trends and at a given huge volume of investments, foreign investors may play a role of market makers and book their profits, i.e., they can buy financial assets when the prices are declining thereby jacking-up the asset prices and sell when the asset prices are increasing (Gordon & Gupta, 2003). Hence, there is a possibility of bi-directional relationship between FII and the equity returns. Although FII flows help supplement the domestic surplus resources and augment domestic investments without rising the foreign debt of the recipient countries, helps to maintain stabilized balance of payments particularly current account segment. Entry of FII may also leads to decrease the required rate of return for equity, and improve stock prices of the host economies / nations. However, there are uncertainties about the defencelessness of recipient countrys capital markets to such flows. FII flows, often referred to as 'hot money' (i.e., short-term and overly tentative), are extremely unstable in character compared to other forms of capital flows. Foreign portfolio investors are regarded as 'fair weather friends' who come in when there is money to be made and leave at the first sign of impending trouble in the host country thereby destabilizing the domestic economy of the recipient country. Often, they have been blamed for exacerbating small economic problems in the host nation by making large and concerted withdrawals at the slightest hint of economic weakness. It is also alleged that as they make frequent marginal adjustments to their portfolios on the basis of a change in their perceptions of a country's solvency rather than variations in underlying asset value, they tend to spread crisis even to countries with strong fundamentals thereby causing 'contagion' in international financial markets. Several research studies on FII flows to emerging market economies (EMEs) over the world have found that financial market infrastructure like market size, market liquidity, trading cost, extent of informational dissemination etc., legal mechanisms relating property rights, harmonization of corporate governance, accounting, listing and other rules with those followed in developed economies etc., are some of the important determinants of foreign portfolio investments into emerging markets. The Securities and Exchange Board of India (SEBI) and Reserve Bank of India (RBI) have initiated several measures such as allowing overseas pension funds, mutual funds, investment trusts and asset management companies, banks, institutional portfolio managers, universal funds, endowments, easing the norms for registration of FIIs, reducing procedural delays, lowering the fees of registration, mandating strict disclosure norms, improved regulatory
16

mechanisms etc. all these are supported by strong fundamentals, have made India as one of the attractive destinations for FIIs. The following table highlights the registered FIIs in India during the period from 2006 to 2010.From the above table it is clear that there is constant growth in the number of registered FIIs in India. In the year 2006(January, 2006), the number of registered FIIs were 833 only. The same number has been increased to 1697 by the year 2010 (January 2010). The number has been increased by more than 100 per cent. In spite of the global financial crisis the number of registered FIIs has shown a significant increase. Irrespective of the situation in Indian stock markets these FIIs has earmarked their presence. But the investment made by FIIs has experienced drastic decline in the recent past. This is mainly because of the global economic meltdown. Though the number of registered FIIs increased the net investments were not increased proportionately.

TABLE
FIIS INFLOWS IN SENSEX MOVEMENTS YEARS 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Up to 20 SENSEX 3972 3262 3377 5839 6603 9398 13787 20287 9647 17465 20509 18503 17159 FII (Rs in crores) 6678.6 12474.1 3653.8 35083.7 39707.2 49232.3 38285.9 70361.5 -53309.7 84262.6 131552.8 125.085 51248

THE TABLE SOURSE: BSE INDIA AND YAHOO FINANCE Additional indicators and data reflect that movements in the SENSEX during the two years have clearly been driven by the behavior of foreign institutional investors (FIIs), who were responsible for net equity purchases of as much as $6.6 and $8.5 billion respectively in 2003 and 2004. The Pearson correlation values indicate positive correlation between the foreign institutional investments and the movement of Sensex. (The value of Pearson correlation is 0.570894)
17

ADVANTAGES OF FII IN INDIAN MARKET

FIIs have a greater appetite for equity than debt in their asset structure. The opening up the economy to FIIs has been in line with the accepted preference for non-debt creating foreign inflows over foreign debt. Enhanced flow of equity capital helps improve capital structures and contributes towards building the investment gap. Managing uncertainty and controlling risks. FII inflows help in financial innovation and development of hedging instruments. Also, it not only enhances competition in financial markets, but also improves the alignment of asset prices to fundamentals. Improving capital markets. FIIs as professional bodies of asset managers and financial analysts enhance competition and efficiency of financial markets. Equity market development aids economic development. By increasing the availability of riskier long term capital for projects, and increasing firms incentives to provide more information about their operations, FIIs constitute professional bodies of asset managers and financial analysts, who, by contributing to better understanding of firms operations, improve corporate governance. Bad corporate governance makes equity finance a

DISADVANTAGES OF FII IN INDIAN MARKET

Problems of Inflation: Huge amounts of FII fund inflow into the country creates a lot of demand for rupee, and the RBI pumps the amount of Rupee in the market as a result of demand created. Problems for small investor: The FIIs profit from investing in emerging financial stock markets. If the cap on FII is high then they can bring in huge amounts of funds in the countrys stock markets and thus have great influence on the way the stock markets behaves, going up or down.
18

 The FII buying pushes the stocks up and their selling shows adverse impact on Exports: FII flows leading to appreciation of the currency may lead to the exports industry becoming uncompetitive due to the appreciation of the rupee. Hot Money: Hot money refers to funds that are controlled by investors who actively seek short-term returns. These investors scan the market for short-term, high interest rate investment opportunities. Hot money can have economic and financial repercussions on countries and banks. When money is injected into a country, the exchange rate for the country gaining the money strengthens, while the exchange rate for the country losing the money weakens. If money is withdrawn on short notice, the banking institution will experience a

IMPACT OF FIIS ON STOCK MARKET INSTABILITY

Investment of FIIs are motivated not only by the domestic and external economic conditions but also by short run expectations shaped primarily by what is known as market sentiment. The element of speculation and high mobility in FII investment can increase the volatility of stock return in emerging markets. In fact, a widely held perception among academicians and practitioners about the emerging equity markets is that price or return indices in these markets are frequently subject to extended deviations from fundamental values with subsequent reversals and that these swings are in large part due to the influence of highly mobile foreign capital.
Volatility is an unattractive feature that has adverse implications for decisions

pertaining to the effective allocation of resources and therefore investment. Volatility makes investors averse to holding stock due to increased uncertainty.
Investors in turn demand higher risk premium so as to ensure against increased

uncertainty. A greater risk premium consequently lowers physical

implies

higher

cost

of

capital

and

investment.

In addition, great volatility may

increase the option to wait thereby delaying investment. Also weak regulatory system in emerging market economies (EMEs) reduce the efficiency of market signals and the processing of information, which further magnifies the problem of volatility. But some researchers have the opposite assumption of non19

disestablishing hypothesis that says FIIs have no adverse impact Trading by FIIs happens on a continuous basis and therefore has a lasting impact on the local stock market. There is, however, surprisingly little empirical evidence on the impact of FIIs trading on the host countrys stock return volatility, thereby making it imperative that this aspect of local equity markets, which is important for both risk analysis and portfolio construction, be examined. ATTEMPTS TO FILL THE GAP. BESIDE THE INTRODUCTION, THIS CHAPTER IS CLASSIFIED INTO TWO PARTS. Part i presents the impact of foreign institutional investors on the indian stock market volatility.
Part ii shows the structure of the volatility before and after introduction of the foreign

institutional investors in Indian stock market. The scope of the study is limited to the India which has become an attraction for FIIs in recent years, in fact the emerging markets of many developing countries have been attracting large inflows of private capital in recent years. The surge in capital flows occurred first in Latin America, then South East Asia and is now clearly visible in South Asia. A significant feature of these capital flows is the increasing importance of foreign portfolio investment (FPI), whose buying and selling of stocks on a daily basis determines the magnitude of such capital flows. A significant improvement has also taken place in India relating to the flow of foreign capital during the period of post economic reforms. The major change in the capital flows particularly in Foreign Institutional Investors (FIIs) investments has taken place following the changes in trade and industrial policy. Over the past 15 years or so India has gradually emerged an important destination of global investors investments in emerging equity markets. In 2006, India had a share of about 0.55% of global investment which is quite high in comparison to year 2001 in which Indias share was only 0.12% . On the other hand some of the developed countries have shown a downward trend. The foreign financial inflows, beside other factors, helped the Indian stock market to rise at a great height according to financial analysts. Sensex crossed a new high. It crossed 20000- mark in December 2007, which was 13786.91 in December 2006 and

20

9397.93 in December 2005. This historical movement is also due to the other parameters of the economy, which are favorable for the investment. The returns on investment are also much favorable. The profit performance of the firms may explain the reasons for

FII AND FDI CONNECTION

The relationship between FII and FDI (Foreign Direct Investment) is intertwined. In 1998 1999 a number of reforms were initiated, that were designed specifically for attracting FDI. In India FDI is allowed through FIIs. This is done through private equity, preferential allotment, joint ventures and capital market operations. The only industries in which FDI isnt allowed are arms, railways, coal, nuclear and mining. 100% financing by FDI is allowed in infrastructural projects such as construction of the bridges and the tunnels. In the financial sector, insurance and banking operations can have foreign investors.

DIFFERENCES BETWEEN FII & FDI

FDI and FIIs are two important sources of foreign financial flows into a country. FDI (Foreign Direct Investment) the acquisition abroad of physical assets such as plant and equipment, with operating control residing in the parent corporation. It is an investment made to acquire a lasting management interest (usually 10 percent of voting stock) in an enterprise operating in a country other than that of the investor, the investors purpose being an effective voice in the management of the enterprise. It includes equity capital, reinvestment of earnings, other long-term capital, and short-term capital. Usually countries regulate such investments through their periodic policies. In India such regulation is usually done by the Finance Ministry at the Centre through the Foreign Investment Promotion Board).

TYPES OF INVESTMENTS
FDI typically brings along with the financial investment, access to modern technologies and export market. The impact of the FDI in India is far more than that of FII largely because the former would generally involve setting up of production base - factories, power plant, telecom networks, etc. that enables direct generation of employment. There is also multiplier effect on the back of the FDI because of further domestic investment in related downstream and upstream projects and a host of other services. Korean Steel maker Poscos USD 8 billion steel plant in Orissa would be the largest FDI in India once it commences. Maruti Suzuki has been an exemplary case in the India's experience. However, the issue is that it puts an impact on local
21

entrepreneur as he may not be able to always successfully compete in the face of superior technology and financial power of the foreign investor. Therefore, it is often regulated that Foreign Direct Investments should ensure minimum level of local content, have export commitment from the investor and ensure foreign technology transfer to India.FII investments into a country are usually not associated with the direct benefits in terms of creating real investments. However, they provide large amounts of capital through the markets. The indirect benefits of the market include alignment of local practices to international standards in trading, risk management, new instruments and equities research. These enable markets to become more deep, liquid, feeding in more information into prices resulting in a better allocation of capital to globally competitive sectors of the economy. Foreign Institutional Investors Since, these portfolio flows can technically reverse at any time, the need for adequate and appropriate economic regulations are imperative. GOVERNMENT PREFERENCE FDI is preferred over FII investments since it is considered to be the most beneficial form of foreign investment for the economy as a whole. Direct investment targets a specific enterprise, with the aim of enhancing capacity and productivity or changing its management control. Direct investment to create or augment capacity ensures that the capital inflow translates into additional production. In the case of FII investment that flows into the secondary market, the effect is to increase capital availability in general, rather than availability of capital to a particular enterprise. Translating an FII inflow into additional production depends on production decisions by someone other than the foreign investor some local investor has to draw upon the additional capital made available via FII inflows to augment production. In the case of FDI that flows in for acquiring an existing asset, no addition to production capacity takes place as a direct result of the FDI inflow. Just like in the case of FII inflows, in this case too, addition to production capacity does not result from the action of the foreign investor the domestic seller has to invest the proceeds of the sale in a manner that augments capacity or productivity for the foreign capital inflow to boost domestic production. There is a widespread notion that FII inflows are hot money that it comes and goes, creating volatility in the stock market and exchange rates. While this might be true of individual funds, cumulatively, FII inflows have only provided net inflows of capital

STABILITY
22

FDI tends to be much more stable than FII inflows. Moreover, FDI brings not just capital but also better management and governance practices and, often, technology transfer. The know-how thus transferred along with FDI is often more crucial than the capital per se. No such benefit accrues in the case of FII inflows, although the search by FIIs for credible investment options has tended to improve accounting and governance practices among listed Indian companies.

23

TYPES OF FIIS
FII INVESTMENTS IN INDIA CAN BE OF THE TWO TYPES: 1. Normal FIIs: FII allocation of its total investment between equity and non-equity instruments (including dated government securities and treasury bills in the Indian capital market) should not exceed the ratio of 70:30. Equity related instruments would include fully convertible debentures, convertible portion of partially convertible debentures and tradable warrants. 2. 100% Debt FIIs: FII that can invest the entire corpus in dated government securities including treasury bills, non-convertible debentures/bonds issued by an Indian company subject to limits, if any. A FII needs to submit a clear statement that it wishes to be registered as FII/sub-account under 100% debt route.

ENTITIES WHICH CAN REGISTER AS FIIS:

Entities who propose to invest their proprietary funds or on behalf of "broad based" funds (fund having more than twenty investors with no single investor holding more than 10 per cent of the shares or units of the fund) or of foreign corporate and individuals and belong to any of the under given categories can be registered for FII. Pension Funds Mutual Fund Investment Trust Insurance or reinsurance companies Endowment Funds University Funds
Foundations or Charitable Trusts

Charitable Societies who propose to in on their own behalf, and Asset Management Companies
24

 Nominee Companies Institutional Portfolio Managers Trustees Power of Attorney Holders Banks Foreign Government Agency

TRENDS IN FIIS
Reporting Date Debt/Equity Gross Purchases( Rs Crore) Investment Gross Sales(Rs Crore) Net Investme nt (Rs Crore) Net Investment US($) million Conversio n 110. 6

Route (1 USD TO INR)*

Stock 10-Dec-12 Equity Exchange Primary market & others 0 1.4 Sub-total 2768.9 2170.7 Stock Debt Exchange 768.7 Primary market & others 281.1 3 Sub-total 1049.8 213.3 Total 3818.7 2384

2768.9 -1.4 598.1 210.3 278.1 836.6 1434.7

2169.4 -0.25 110.35 558.5 51.31 154.34 264.69

599.5

103.03

25

The data presented above is compiled on the basis of reports submitted to SEBI by custodians on 10-DEC-2012 and constitutes trades conducted by FIIs on and upto the previous trading day(s

26

DAILY TRENDS IN FII DERIVATIVE TRADES ON 11-DEC-2012

Reporting Date end of the date No. of Contracts 11-Dec-12 Index Options Stock Futures Stock Options Interest Rate Futures Amount in Crore Index Futures 354999 33271 35736 0 No. of Contracts 20919 10499.8 954.15 1009.17 0 Amount in crore 622.77 358842 44904 38086 0 No. of Contracts 17429 10623.34 1352.94 1080.38 0 Amount in Crore 519.67 1497435 1113783 68637 0 387598 44290. 11 32427. 94 1912.9 3 0 Derivative Products Buy Sell Open Interest at the

The above report is compiled on the basis of reports submitted to SEBI by NSE and BSE on 10DEC-2012 and constitutes FIIs trading / position of the previous trading day.

27

FII INVESTMENTS THROUGH QIPS

QIPs are private placements or issuances of certain specified securities by Indian listed companies to qualified institutional buyers in accordance with the provisions of SEBI guidelines. Qualified Institutional placements or QIPs were introduced in mid-2006. Indian companies that are listed on stock exchanges having nationwide terminals the BSE and NSE have been raising capital through the QIP route. Quarterly Institutional buyers are preferred primarily because these entities have a large risk appetite, possess the general expertise and have the experience to make an informed decision. In August 2008, SEBI liberalized the pricing conditions for QIPs by reducing the period of reckoning to an average of two weeks stock price, prior to the relevant date, against the earlier requirement of taking the higher of the previous six months or 15 days average price. The pre-existing slowdown in the markets led to attractive valuations for the investors. Companies have taken advantage of this revision in pricing guidelines .Unitech, raised Rs 1,621 cores in April 2009 at Rs 38.50 per share, and again raised Rs. 2,760 crores in July 2009 at Rs 81 per share. Other companies which successfully raised capital through QIPs were HDIL, Shobha Developers, Network 18, Dewan Housing and Bajaj Hindustan. Most of the companies which came out with QIPs were in the real-estate/infrastructure sector. However, some companies like GMR Infrastructure were not so successful and had to withdraw their issue and GVK Power and Infrastructure had to scale down by nearly 60% due to problems in the valuations. Domestic institutional investors, especially life insurers kept away from the QIPs on valuation concerns. However, FIIs which were net sellers had purchased Rs 9,500 crores in the same period. This led several FIIs to pick up the target stocks via QIP before the July 6thBudget and offload the same after the budget session. As per a CRISIL study, 10 out of 13 QIPs are currently quoting below the offer price. Since most of QIPs were in the reality and infrastructure sectors, one explanation is that FIIs came in expecting some quick gains from significant sops to the infrastructure and housing sectors in the Budget. It is also possible that the

28

rush for QIPs was driven largely by short-term considerations, where the FIIs hedged their bets by taking short positions in the issuers stock even as they bought into the offers.

NEW SOURCES OF FII FUNDS

The Securities and Exchange Board of India is in talks with the Cayman Islands Monetary Authority (Cima), over allowing funds based in the Caribbean into the country. Cayman Islands is one of the worlds largest tax havens and a lot of global hedge funds are based out of Cayman Islands Sebi has received numerous applications from Cayman-based funds since June when Cima was admitted as a full member of the international body of securities market regulators, the International Organization of Securities Commissions (Iosco). Iosco's constituents regulate more than ninety percent of the world's securities markets. Funds from Cayman Islands were usually not favored by SEBI owning to lack of transparency and difficulty in establishing the owner base. Consequently, these investments were viewed unfavorably and any Cayman fund seeking to invest in India had to be carefully examined. Post Caymans admission to Iosco, Sebi is now determining which grades of investment funds can be admitted expeditiously and which should be examined more carefully. Presently, there are 19 registered foreign institutional investors from Cayman Islands, taking the total to 19. The two recent additions have been Fir Tree Capital Opportunity Master Fund and Fir Tree Value Master Fund. The fund base of Cayman Islands is huge. There are about 9870 funds based there. Indian markets can expect more inflow from Cayman Island if SEBI agrees to let them come in.

RECOMMENDATIONS INCREASE CAP ON G-SEC BOND MARKETS:

Currently, the cap on FII investments in the bond market is USD 6 Billion. As per the new budget, proposes to borrow Rs.4.5 lakh crore in 2009-10 to support its infrastructure and other developmental projects. This could be opened up to the FIIs so that they can take part in Indias hitherto almost closed debt market. The Indian debt markets are not fully developed and see low volumes. The lifting of the cap on FIIs will increase the traded volumes and it will also help in preventing the crowding out of investment for private enterprises.
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ALLOW DOLLAR SETTLEMENTS IN INDIA:

The suggestion by SEBI to permit dollar settlements for FIIs would revolutionize the way in which they invest in the country. This will help mitigate risks of currency fluctuations for FIIs, and help in improve the volume and liquidity of the derivatives market. With dollar settlements, many participants, who want to take exposure to Indian markets through index buying, will be able to participate freely. This, in turn, will give stability to Indian markets as there will be buying of underlying stocks by the sellers of these contracts to FIIs. At present, settlements in India are done in rupee denominations. As a result, a number of FIIs, who intend to trade in Nifty futures, take the Singapore route where CNX Nifty index futures are traded on SGX. About 50 per cent of the total open interest (OI) build-up in Nifty futures takes place on the SGX, which allows settlements in US dollar. This enables different types of FIIs to operate there. Also, low transaction costs due to the absence of securities transaction tax, stamp duty and P-note complications have resulted in a gradual shift of FIIs into offshore markets. Settlements in dollar would also help in reducing the volatility in dollar-rupee conversion value caused due to FII flows. Each time a settlement is done, a seller of futures contracts to an FII would buy an equivalent amount of underlying stocks to hedge his/her exposure due to the sale. This would increase the trading volume and liquidity of Indian markets, once dollar settlement is allowed. CONCLUSION It is clear that the FIIs are influencing the Sensex movement to a greater extent. Further it is evident that the Sensex has increased when there are positive inflows of FIIs and there were decrease in Sensex when there were negative FII inflows. It has been perceived in some quarters that FII flows are major drivers of stock markets in India and hence a sudden

reversal of flows may harm the stability of its markets. The nature of relationship between FII flows and Indian stock market returns can be explained in terms of cumulative informational
30

disadvantage of foreign portfolio investors vis-a-vis domestic investors. the theory says that domestic investors posses better knowledge about indian financial markets than foreign investors and this information asymmetry leads to positive feedback trading by the foreign portfolio investors. there is no doubt fiis are influencing the movement of sensex to a greater extent. Since then, portfolio flows from foreign institutional investors (fii) have emerged as a major source of capital for emerging market economies (emes) such as brazil, russia, india, china and south Africa. Besides, the surge in foreign portfolio flows since 1990s can be attributed to greater integration among international financial markets, advancement in information technology and growing interest in emes among fiis such as private equity funds and hedge funds so as to achieve international diversification and reduce the risk in their portfolios. Economic growth is a function of, among other things, capital formation. As FII flows are a source of non-debt creating capital for the economy, many EMEs have been competing with each other to attract such flows through flexible investment norms/regulations or by offering fiscal sops. Further, FIIs have been assured decent returns on their investments, enabling continuous and sustainable investment flows. FII flows into India registered substantial growth from a meagre US$4 million in 199293 to over US$ 32 billion in 201011 (SEBI, 2011: 76). FII inflows underwent a sea-saw movement in India during the last decade. They registered spectacular growth especially since the middle of 2003 due to the higher growth rate in Indian GDP, robust corporate performance and an investment-friendly environment. Portfolio investment flows into India turned negative (outflow of US$ 12 billion) during 200809 (ibid.) mainly due to the heightened risk aversion of foreign investors, emanating from the global financial meltdown. Ever since foreign portfolio investors were allowed to invest in Indian financial markets in September 1992, there have been extensive deliberations on the impact of such flows. It is said that portfolio flows from FIIs inject global liquidity into the capital markets, raise the price-to-earnings ratios, thereby reducing the cost of capital. This, in turn, leads to further issues of equity capital and stimulates investment growth in the host economy, apart from bringing in best international corporate governance practices. Yet, FIIs have been targets of criticism due to characteristics such

31

as return chasing behavior, herd mentality, hot money flows, short-term speculative gains and their influence on domestic policy-making. Though numerous research studies have been conducted in respect of FII flows into India, most of them have been confined to assessing the impact of such flows on stock markets. Very few studies have focused on the overall impact of FII flows on all segments of the Indian financial markets, viz., the capital market, the foreign exchange market, the money market and other macro-economic variables, such as inflation, money supply and Index of Industrial Production (IIP). Given this background, it is all the more relevant to undertake a cause and-effect study of FII flows into Indian financial markets in a holistic manner, by considering various macro-economic parameters, such as IIP, interest rates, inflation, exchange rates, apart from the BSE Sensex, so as to enable policymakers to take informed decisions in this regard. The present study examines the causes and effects of FII net flows into Indian financial markets with the support of empirical data for the period April 2003March 2011, i.e., a time span of eight years, covering the period before, during and after the eruption of the global financial crisis. Commercial Paper in India is a new addition to short-term instruments in Indian Money market since 1990 onward. The introduction of Commercial paper as the short-term monetary instrument was the beginning of a reform in Indian Money market on the background of trend of Liberalization which began in the world economy during 1985 to 1990. A commercial paper in India is the monetary instrument issued in the form of promissory note. It acts as the debt instrument to be used by large corporate companies for borrowing short-term monetary funds in the money market. An introduction of Commercial Paper in Indian money market is an innovation in the Financial system of India. Prior to injection of Commercial Paper in Indian money market i.e. before 1990, the corporate companies had to depend upon the crude and traditional method of borrowing working capital from the commercial banks by pledging the inventory of raw materials as Collateral security. It involved more loss of time for the borrowing companies in availing the short-term funds for day-to-day production activities. The commercial paper has become effective instrument for these corporate companies to avail the short-term funds from the money market within shortest possible time limit by avoiding the hassles of direct negotiation with the commercial banks for availing the short-term loans.

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COMMERCIAL PAPER MARKET

The introduction of commercial paper as debt instrument has promoted commercial paper market as one of the components of Indian money market. In this commercial paper market, the issuers of commercial paper create supply while the subscribers to commercial paper create demand for these papers. The interaction between supply and demand for commercial papers promotes the commercial paper market. The main issuers of Commercial paper in this market are corporate and the main subscribers to the Commercial papers are the banking companies. Commercial Paper is issued by the issuers at a discount to face value of Commercial paper. The face value of Commercial Paper is in the denomination of Rs. 0.5 million and multiples thereof. The maturity period of Commercial paper in the Commercial Paper market ranges between minimum of 15 days and maximum of 1 year from the date of issue.[2] The subscriber to the commercial paper is the investor, and a single investor in the Commercial paper market is not allowed to invest less than Rs. 0.5 million. The other issuers of Commercial paper in this market are Primary dealers and All India Financial Institutions. The other investors or subscribers to Commercial paper in this market are individuals, Non-Resident Indians and Foreign Institutional Investors. COMMERCIAL PAPER AND CREDIT RATING AGENCIES Since Commercial paper is unsecured debt instrument in Indian money market, the issuers of Commercial paper are required to maintain relatively higher Credit rating. According to Reserve Bank of India norms, the issuers of Commercial Paper are eligible to issue Commercial Papers only if they have P2 or equivalent credit rating from any of the credit rating agencies in India. The main agencies are Credit Rating Information Services of India Limited (CRISIL), Credit Analysis and Research Limited (CARE), Investment Information and Credit Rating Agency of India Limited (ICRA). This credit rating is essential for the issue of Commercial papers because a Commercial paper is not backed by any collateral and so only corporate with high-quality credit ratings will easily find buyers without having to offer a substantial discount (higher cost) for the

33

CHAPTER-3 COMPANY PROFILE & INDUSTRY PROFILE

34

COMPANY PROFILE

35

BSE SENSEX
THE BSE (CORPORATIZATION AND DEMUTUALIZATION) SCHEME, 2005 Bombay Stock Exchange Limited (the Exchange) is the oldest stock exchange in Asia with a rich heritage. Popularly known as "BSE", it was established as "The Native Share & Stock Brokers Association" in 1875. It is the first stock exchange in the country to obtain permanent recognition in 1956 from the Government of India under the Securities Contracts (Regulation) Act, 1956.The Exchange's pivotal and pre-eminent role in the development of the Indian capital market is widely recognized and its index, SENSEX, is tracked worldwide. Earlier an Association of Persons (AOP), the Exchange is now a demutualised and corporative entity incorporated under the provisions of the Companies Act, 1956, pursuant to the BSE (Corporatization and Demutualization) Scheme, 2005 notified by the Securities and Exchange Board of India (SEBI).Bombay Stock Exchange Limited received its Certificate of Incorporation on 8th August, 2005 and Certificate of Commencement of Business on 12th August, 2005. The 'Due Date' for taking over the business and operations of the BSE, by the Exchange was fixed for 19th August, 2005, under the Scheme. The Exchange has succeeded the business and operations of BSE on going concern basis and its recognition as an Exchange has been continued by SEBI. With demutualization, the trading rights and ownership rights have been de-linked effectively addressing concerns regarding perceived and real conflicts of interest. The Exchange is professionally managed under the overall direction of the Board of Directors.The Board comprises eminent professionals, representatives of Trading Members and the Managing Director of the Exchange. The Board is inclusive and is designed to benefit from the participation of market intermediaries. In terms of organisation structure, the Board formulates larger policy issues and exercises over-all control. The committees constituted by the Board are broad-based.The day-to-dayoperations of the Exchange are managed by the Managing Director & CEO and a management team of professionals. The Exchange has a nation-wide reach with a presence in 417 cities and towns of India. The systems and processes of the Exchange are designed to safeguard market integrity and enhance transparency in operations. During the year 2004-2005, the trading volumes on the Exchange showed robust growth. The Exchange provides an efficient and transparent market for trading in equity, debt instruments and derivatives. The BSE's On Line Trading System (BOLT) is a proprietory system of the Exchange and is BS

36

7799-2-2002 certified. The surveillance and clearing & settlement functions of the Exchange are ISO 9001:2000 certified. The Stock Exchange, Mumbai, is now Bombay Stock Exchange Limited. The Exchange has a new name, and an entirely new perspective. A perspective born out of corporatization and demutualization. Bombay Stock Exchange Limited is Asias oldest stock exchange. It carries within itself the depth of knowledge of capital markets acquired since its inception in 1875. Located in Mumbai, the financial capital of India, it has been the backbone of the countrys capital markets.As a corporate entity, our new identity reflects our new perspective. Smoother, seamless, and efficient. Whichever way you look at it.

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NEW YORK STOCK EXCHANGE HISTORY

The New York Stock Exchange traces its origins to 1792, when 24 New York City stockbrokers and merchants signed the Buttonwood Agreement. This agreement set in motion the NYSEs unwavering commitment to investors and issuers. The historic combination of NYSE Group and Euro next in 2007 marked a milestone for global financial markets. It brought together major marketplaces across Europe and the United States whose histories stretch back more than four centuries. The combination was by far the largest of its kind and the first to create a truly global marketplace group.

DISCOVER HOW NYSE EURO NEXT GREW TO BECOME THE GLOBAL MARKETPLACE OF TODAY.
The New York Stock Exchange (NYSE), nicknamed the "Big Board," is a New York City-based stock exchange. It is the largest stock exchange in the world by dollar volume and the second largest by number of companies listed. Its share volume was exceeded by that of NASDAQ during the 1990s. The New York Stock Exchange has a global capitalization of $23.0 trillion as of September 30, 2006. The NYSE is operated by NYSE Euro next, which was formed by its merger with the fully electronic stock exchange Archipelago Holdings and Euro next. The New York Stock Exchange trading floor is located at 11 Wall Street, and is composed of five rooms used for the facilitation of trading. The main building is listed on the National Register of Historic Places and is located at 18 Broad Street, between the corners of Wall Street and Exchange Place.NYSE Group merged with Euro next, and many of its operations (particularly IT and the trading platform) will be combined with that of the New York Stock Exchange and NYSE Arcs. 20th century dawned; the NYSE was firmly established as one of Americas preeminent financial institutions. It was also experiencing a sustained rise in trading volume. Trading in listed stocks had tripled between 1896 and 1899. It would nearly double again by 1901.

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More space was clearly needed. So the Exchange invited eight of New York Citys leading architects to join in a competition to design a grand new building. Their instructions: The trading floor was to have more space, more light, and more convenience for the transaction of business. The Exchange chose the neoclassic design of architect George B. Post. Today, the Exchange building is considered one of Posts masterpieces and is a New York City and national landmark.
FROM DESIGN TO REALITY

May 1, 1901: The demolition of the old building at 10 Broad Street begins. The construction of the new building, which will occupy that site as well as newly-purchased land to the immediate north and south, is slated to take just one year and cost $1 million. However, problems with removing the old building and vaults, labor issues, and changes and additions cause delays. The additions also increase costs. But the approximately $4 million final cost is explained by R.H.Thomas, chairman of the Building Committee: Where so many of our members spend the active years of their lives, they are entitled to the best that architectural ingenuity and engineering skill can produce.April 22, 1903: The new Exchange building at 18 Broad Street opens to fanfare and festivity. Its recognized from the first as an example of masterful architecture. The six massive Corinthian columns across its Broad Street faade impart a feeling of substance and stability and, to many, it seems the very embodiment of the nations growth and prosperity.

AMONG ITS MARVELS:

The trading floor: At the time, one of the grandest spaces in the nation. It measures 109 x 140 feet and its marble walls rise 72 feet to meet the ornate gilt ceiling. Window wall: The entire front of the building is glass, making practically one stupendous window, 96 feet long and 50 feet high. Another window of the same size forms the New Street front. Skylight: The trading floor is surmounted by a vast skylight, 30 feet square.
Air conditioning: The Stock Exchange building is one of the first structures in the world to

employ it
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The new building is also notable for its many amenities, including separate dining rooms for smokers and non-smokers, an emergency hospital with a physician in constant attendance and the much-remarked upon annunciation boards (with over 24 miles of wiring) that are used to page members. INTEGRITY ABOVE ALL Entitled Integrity Protecting the Works of Man, the classical design depicts the 22 foot figure of Integrity in the center, with Agriculture and Mining to her left and Science, Industry and Invention on her right, representing the sources of American prosperity. The waves on either extreme of the pediment symbolize the ocean-to-ocean influence of the Exchange. In 1936, due to the combined effects of the statuarys weight 90 tons together with the ravages of pollution and flaws in the marble, the Exchange had to replace the marble figures with lead-coated replicas weighing only 10 tons. CONSTANT GROWTH AND CHANGE Much has changed since 1903, yet the NYSE has always kept pace with member and investor need for increased space and the latest technology.

ABOUT NASDAQ:

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The NASDAQ, an acronym for National Association of Securities Dealers Automated Quotations, is an electronic stock exchange with 3,300 company listings. It currently has a greater trading volume than any other U.S. exchange, making approximately 1.8 billion trades per day. The NYSE is still considered the biggest exchange because its market capitalization far exceeds that of the NASDAQ. The NASDAQ trades shares in a variety of companies, but is well known for being a high-tech exchange, trading many new, high growth, and volatile stocks. This is partially due to the fact that the listing fees on the NASDAQ are significantly lower than those for the NYSE, with the maximum price only $150,000. The NASDAQ is a publicly owned company, trading its shares on its own exchange under the ticker symbol NDAQ. The NASDAQ, as an electronic exchange, has no physical trading floor, but makes all its trades through a computer and telecommunications system. The exchange is a dealers' market, meaning brokers buy and sell stocks through a market maker rather than from each other. A market maker deals in a particular stock and holds a certain number of stocks on his own books so that when a broker wants to purchase shares, he can purchase them directly from the market maker. Since there is no trading floor where the NASDAQ operates, the stock exchange built the NASDAQ Market Site in New York's Times Square to create a physical presence. The tower has a large outdoor electronic display, giving current financial information 24 hours a day. The company also has a studio here where it broadcasts financial market updates. For a stock to be listed on the NASDAQ National Market, the company must meet certain strict financial criteria. For example, they must maintain a stock price of at least $1, and the total value of outstanding stocks must be at least $1.1 million. However the NASDAQ also has a market for smaller companies unable to meet these and other requirements, called the NASDAQ Small Caps Market. NASDAQ will move companies from one market to the other as their eligibility changes.

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U.S. SECURITIES AND EXCHANGE COMMISSION

"Securities and Exchange Commission" redirects here. For other uses, see Securities and Exchange Commission (disambiguation).The U.S. Securities and Exchange Commission (frequently abbreviated SEC) is a federal agency which holds primary responsibility for enforcing the federal securities laws and regulating the securities industry, the nation's stock and options exchanges, and other electronic securities markets in the United States. In addition to the Securities Exchange Act of 1934 that created it, the SEC enforces the Securities Act of 1933, the Trust Indenture Act of 1939, the Investment Company Act of 1940, the Investment Advisers Act of 1940, the Sarbanes Oxley Act of 2002 and other statutes. The SEC was created by Section 4 of the Securities Exchange Act of 1934 (now codified as 15 U.S.C. 78d and commonly referred to as the 1934 Act). OVERVIEW The SEC was established by United States President Franklin D. Roosevelt in 1934 as an independent, quasi-judicial regulatory agency during the Great Depression that followed the Crash of 1929. The main reason for the creation of the SEC was to regulate the stock market and prevent corporate abuses relating to the offering and sale of securities and corporate reporting. The SEC was given the power to license and regulate stock exchanges, the companies whose securities traded on them and the brokers and dealers who conducted the trading. Currently, the SEC is responsible for administering seven major laws that govern the securities industry. They are: the Securities Act of 1933, the Securities Exchange Act of 1934, the Trust Indenture Act of 1939, the Investment Company Act of 1940, the Investment Advisers Act of 1930, the SarbanesOxley Act of 2002 and most recently the Credit Rating Agency Reform Act of 2006. The enforcement authority given by Congress allows the SEC to bring civil enforcement actions against individuals or companies alleged to have committed accounting fraud, provided false information, or engaged in insider trading or other violations of the securities law. The SEC also works with criminal law enforcement agencies to prosecute individuals and companies alike for offenses which include a criminal violation.To achieve its mandate, the SEC enforces the statutory requirement that public companies submit quarterly and annual reports, as well as other periodic reports. In addition to annual financial reports, company executives must provide a narrative
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account, called the "management discussion and analysis" (MD&A) that outlines the previous year of operations and explains how the company fared in that time period. Management will usually also touch on the upcoming year, outlining future goals and approaches to new projects. In an attempt to level the playing field for all investors, the SEC maintains an online database called EDGAR (the Electronic Data Gathering, Analysis, and Retrieval system) online from which investors can access this and other information filed with the agency. Quarterly and bi-annual reports from public companies are crucial for investors to make sound decisions when investing in the capital markets. Unlike banking, investment in the capital markets is not guaranteed by the federal government. The potential for big gains needs to be weighed against equally likely losses. Mandatory disclosure of financial and other information about the issuer and the security itself gives private individuals as well as large institutions the same basic facts about the public companies they invest in, thereby increasing public scrutiny while reducing insider trading and fraud. The SEC makes reports available to the public via the EDGAR system. SEC also offers publications on investment-related topics for public education. The same online system also takes tips and complaints from investors to help the SEC track down violators of the securities laws. The SEC adheres to a strict policy that it never comments on the existence or status of an ongoing investigation.

HISTORY
Prior to the enactment of the federal securities laws and the creation of the SEC, there existed socalled Blue Sky laws that were enacted and enforced at the state level and regulated the offering and sale of securities to protect the public from fraud. Though the specific provisions of these laws varied among states, they all required the registration of all securities offerings and sales, as well as of every U.S. stockbroker and brokerage firm.However, these Blue Sky laws were generally found to be ineffective. For example, the Investment Bankers Association told its members as early as 1915 that they could "ignore" Blue Sky laws by making securities offerings across state lines through the mail.After holding hearings on abuses on interstate frauds (commonly known as the Pecora Commission), Congress passed the Securities Act of 1933 (15 U.S.C. 77a) which regulates interstate sales of securities (original issues) at the federal level. The subsequent Securities Exchange Act of 1934 (15 U.S.C. 78d) regulates sales of securities in the secondary market. Section 4 of the 1934 Act created the U.S. Securities and Exchange Commission to
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enforce the federal securities laws. Both laws are considered part of Franklin D. Roosevelt's "New Deal" raft of legislation.The Securities Act of 1933 is also known as the "Truth in Securities Act" or the "Federal Securities Act or just the "1933 Act." Its goal is to increase public trust in the capital markets by requiring uniform disclosure of information about public securities offerings. The primary drafters of 1933 Act were Huston Thompson, a former Federal Trade Commission (FTC) chairman, and Walter Miller and Ollie Butler, two attorneys in the Commerce Department's Foreign Service Division, with input from Supreme Court Justice Louis Brandeis. For the first year of the law's enactment, the enforcement of the statute rested with the Federal Trade Commission, but this power was transferred to the SEC following its creation in 1934. (Interestingly, the first, rejected draft of the Securities Act written by Samuel Untermeyer vested these powers in the U.S. Post Office, because Untermeyer believed that only by vesting enforcement powers with the postal service could the constitutionality of the act be assured. The law requires that issuing companies register distributions of securities with the SEC prior to interstate sales of these securities, so that investors may have access to basic financial information about issuing companies and risks involved in investing in the securities in question. Since 1994, most registration statements (and associated materials) filed with the SEC can be accessed via the SECs online system, EDGAR. The Securities Exchange Act of 1934 is also known as "the Exchange Act" or "the 1934 Act". This act regulates secondary trading between individuals and companies which are often unrelated to the original issuers of securities. Entities under the SECs authority include securities exchanges with physical trading floors such as the New York Stock Exchange (NYSE), self-regulatory organizations (SROs) such as the National Association of Securities Dealers (NASD), the Municipal Securities Rulemaking Board (MSRB), online trading platforms such as The NASDAQ Stock Market (NASDAQ) and ATS, and any other persons (e.g., securities brokers) engaged in transactions for the accounts of others. President Franklin D. Roosevelt appointed Joseph P. Kennedy, Sr., father of President John F. Kennedy, to serve as the first Chairman of the SEC, along with James M. Landis (one of the architects of the 1934 Act and other New Deal legislation) and Ferdinand Pecora (Chief Counsel to the United States Senate Committee on Banking and Currency during its investigation of Wall Street banking and stock brokerage practices). Other prominent SEC commissioners and chairmen include William O. Douglas (who went on to be a U.S. Supreme Court justice), Jerome Frank (one of the leaders of the legal realism movement) and William J. Casey (who would later head the Central Intelligence Agency under President Ronald Reagan).As part of the continuing investigation in 197475, Watergate scandal prosecutors offered
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companies that had given illegal campaign contributions to Richard Nixon's re-election campaign lenient sentences if they came forward. Many companies complied, including Northrop Grumman, 3M, American Airlines and Braniff International Airways. By 1976, prosecutors had convicted 18 American corporations of contributing illegally to Nixon's campaign. The SEC, in a state of flux after its chairman was forced to resign his post, began to audit all the political activities of publicly traded companies. The SEC's subsequent investigation found that many American companies were making vast political contributions abroad

ORGANIZATIONAL STRUCTURE
The SEC consists of five Commissioners appointed by the President of the United States with the advice and consent of the United States Senate. Their terms last five years and are staggered so that one Commissioner's term ends on June 5 of each year. To ensure that the SEC remains nonpartisan, no more than three Commissioners may belong to the same political party. The President also designates one of the Commissioners as Chairman, the SEC's top executive. However, the President does not possess the power to fire the appointed commissioners, a provision that was made to ensure the independence of the SEC. This issue arose during the 2008 Presidential Election in connection with the ensuing Financial Crises.In November 2012, Schapiro announced her intention to step down in December and President Obama said he would nominate Walter to succeed Schapiro. Though Walter's term expired in June 2012 she has continued to serve and can continue until the end of 2013. The president was also expected to nominate a new member.

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DIVISIONS
Within the SEC, there are five divisions. Headquartered in Washington, D.C., the SEC has 11 regional offices throughout the United States. The SEC's five main divisions are: Corporation Finance Trading and Markets Investment Management Enforcement Risk, Strategy, and Financial Innovation Corporation Finance is the division that oversees the disclosure made by public companies as well as the registration of transactions, such as mergers, made by companies. The division is also responsible for operating EDGAR. The Trading and Markets division oversees self-regulatory organizations such as FINRA and MSRB and all broker-dealer firms and investment houses. This division also interprets proposed changes to regulations and monitors operations of the industry. In practice, the SEC delegates most of its enforcement and rulemaking authority to FINRA. In fact, all trading firms not regulated by other SROs must register as a member of FINRA. Individuals trading securities must pass exams administered by FINRA to become registered representatives. The Investment Management Division oversees investment companies including mutual funds and investment advisors. This division administers federal securities laws, in particular the Investment Company Act of 1940 and Investment Advisers Act of 1940. This Division's responsibilities include: The Enforcement Division works with the other three divisions, and other Commission offices, to investigate violations of the securities laws and regulations and to bring actions against alleged violators. The SEC generally conducts investigations in private. The SEC's staff may seek voluntary production of documents and testimony, or may seek a formal order of investigation from the SEC, which allows the staff to compel the production of documents and witness testimony. The SEC can bring a civil action in a U.S. District Court or an administrative proceeding which is heard by an independent administrative law judge (ALJ). The SEC does not
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have criminal authority, but may refer matters to state and federal prosecutors. The current director of the SEC's Enforcement Division is Robert Khuzami, a former federal prosecutor.

CHAPTER-4
DATA ANALYSIS INTERPRETATION

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Date 2-Jan-12 3-Jan-12 4-Jan-12 5-Jan-12 6-Jan-12 9-Jan-12 10-Jan-12 11-Jan-12 12-Jan-12 13-Jan-12 16-Jan-12 17-Jan-12 18-Jan-12 19-Jan-12 20-Jan-12 23-Jan-12 24-Jan-12 25-Jan-12 27-Jan-12 30-Jan-12 31-Jan-12 Mean Standard Deviation Sample Variance

Open

Close

return(x) -0.11 1.91 -0.53 -0.23 0.50 -0.16 1.68 -0.29 -0.49 0.06 0.64 1.20 -0.31 0.42 -0.04 0.51 1.12 0.05 0.19 -1.60 1.34 0.28 0.83 0.69

15534.67 15517.92 15640.56 15939.36 15967.49 15882.64 15893.07 15857.08 15789.08 15867.73 15840.22 15814.72 15898.32 16165.09 16222.37 16175.86 16117.19 16037.51 16144.57 16154.62 16086.74 16189.36 16270.87 16466.05 16502.42 16451.47 16573.87 16643.74 16745.01 16739.01 16667.02 16751.73 16806.72 16995.77 17068.85 17077.18 17201.33 17233.98 17138.04 16863.3 16965.58 17193.55 DESCRIPTIVE ANALYISIS BSE JAN 2012

THE BELOW TABLE SHOWS RETURNS AND DESCRIPTIVE ANALYSIS FOR BSE FOR THE MONTH OF JAN-2012

SOURCE: BSEINDIA

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The The Above Graph Represents BSE Returns Volatility It Describes Positive and Negative Returns Gained For The Market Index

The below table shows returns and descriptive analysis for bse for the month of jan-2012

Date 1-Feb-12 2-Feb-12 3-Feb-12 6-Feb-12 7-Feb-12 8-Feb-12 9-Feb-12 10-Feb-12 13-Feb-12 14-Feb-12 15-Feb-12 16-Feb-12 17-Feb-12 21-Feb-12 22-Feb-12 23-Feb-12 24-Feb-12 27-Feb-12

Open 17179.64 17438.07 17444.25 17741.91 17813.74 17631.69 17647.8 17817.59 17761.7 17767.46 18000.3 18163.05 18331.2 18303.73 18490.87 18127.35 18079.01 17975.19
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Close 17300.58 17431.85 17604.96 17707.31 17622.45 17707.32 17830.75 17748.69 17772.84 17848.57 18202.41 18153.99 18289.35 18428.61 18145.25 18078.5 17923.57 17445.75

return(x) 0.70 -0.04 0.92 -0.20 -1.07 0.43 1.04 -0.39 0.06 0.46 1.12 -0.05 -0.23 0.68 -1.87 -0.27 -0.86 -2.95

28-Feb-12 29-Feb-12
Mean Standard Deviation Sample Variance

17545.11

17731.12

1.06 -0.93
-0.12 1.04 1.09

17919.93 17752.68 DESCRIPTIVE ANALYISIS BSE FEB- 2012

The above graph shows returns for investor to gain or loss in security for the month of Feb-2012, BSE Returns Volatility It Describes Positive and Negative Returns Gained for the Market Index. The below table shows returns and descriptive analysis for BSE for the month of March -2012 Date Open Close return(x) -0.74 -0.14 -1.34 -0.94 0.11 1.02 -1.04 0.75 -0.47 -1.35 -1.08 -1.47 0.04 1.74 -2.22 0.60 -1.87 0.28 -0.65 0.11 1.68

1-Mar-12 17714.62 17583.97 2-Mar-12 17661.39 17636.8 5-Mar-12 17598.42 17362.87 6-Mar-12 17336.64 17173.29 7-Mar-12 17127.18 17145.52 9-Mar-12 17325.82 17503.24 12-Mar-12 17772.1 17587.67 13-Mar-12 17680.23 17813.62 14-Mar-12 18003.15 17919.3 15-Mar-12 17916.85 17675.85 16-Mar-12 17656.81 17466.2 19-Mar-12 17531.47 17273.37 20-Mar-12 17308.89 17316.18 21-Mar-12 17301.16 17601.71 22-Mar-12 17586.06 17196.47 23-Mar-12 17257.72 17361.74 26-Mar-12 17377.59 17052.78 27-Mar-12 17209.13 17257.36 28-Mar-12 17234.48 17121.62 29-Mar-12 17039.85 17058.61 30-Mar-12 17117.41 17404.2 DESCRIPTIVE ANALYISIS BSE MAR- 2012
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Mean Standard Deviation Sample Variance

-0.33 1.10 1.21

The above graph shows returns for investor to gain or loss in security for the month of MARCH 2012
The below table shows returns and descriptive analysis for NYSE the month of March -2012

Date 3-Jan-12 4-Jan-12 5-Jan-12 6-Jan-12 9-Jan-12 10-Jan-12 11-Jan-12 12-Jan-12 13-Jan-12 17-Jan-12 18-Jan-12 19-Jan-12 20-Jan-12 23-Jan-12 24-Jan-12 25-Jan-12 26-Jan-12 27-Jan-12 30-Jan-12 31-Jan-12

Open 7477.03 7624.32 7612.15 7599.97 7557.68 7584.66 7668.9 7661.98 7681.26 7632.03 7670.47 7766.95 7819.37 7829.33 7843.94 7829.22 7829.74 7883.9 7876.61 7834.41

Close 7624.32 7612.15 7599.97 7557.68 7584.66 7668.9 7661.98 7681.26 7632.03 7670.47 7766.95 7819.36 7829.34 7855.52 7840.65 7914.81 7883.9 7876.61 7834.4 7838.48
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return(x)
1.97 -0.16 -0.16 -0.56 0.36 1.11 -0.09 0.25 -0.64 0.50 1.26 0.67 0.13 0.33 -0.04 1.09 0.69 -0.09 -0.54 0.05

DESCRIPTIVE STATISTICS NYSE JAN-2012

Mean Standard Deviation Sample Variance

0.31 0.67 0.45

The above graph shows returns for investor to gain or loss in security for the month of MARCH 2012

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The below table shows returns and descriptive analysis for NYSE the month of March -2012

Date 1-Feb-12 2-Feb-12 3-Feb-12 6-Feb-12 7-Feb-12 8-Feb-12 9-Feb-12 10-Feb-12 13-Feb-12 14-Feb-12 15-Feb-12 16-Feb-12 17-Feb-12 21-Feb-12 22-Feb-12 23-Feb-12 24-Feb-12 27-Feb-12 28-Feb-12 29-Feb-12
Mean Standard Deviation Sample Variance

Open 7838.48 7931.45 7945.43 8060.43 8048.03 8069.71 8082.98 8081.25 7992.03 8056.23 8029.62 7998.65 8092.19 8114.79 8102.45 8092.62 8151.46 8100.63 8149.07 8182.25

Close 7931.43 7945.43 8060.43 8048.04 8069.7 8082.98 8081.25 7992.05 8056.23 8029.61 7998.65 8092.19 8114.51 8115.42 8094.39 8136.15 8151.97 8143.56 8171.54 8113.24

return(x)
1.19 0.18 1.45 -0.15 0.27 0.16 -0.02 -1.10 0.80 -0.33 -0.39 1.17 0.28 0.01 -0.10 0.54 0.01 0.53 0.28 -0.84 0.20 0.64 0.41

DESCRIPTIVE STATISTICS NASDAQFEB -2012

In the above graph if you see carefully there are only some points which are above normal positive line and most of the returns of BSE and NASDAQ are below the normal positive line. But by looking at the positive correlation we can say that both the markets are in the same direction.
53

THE BELOW TABLE SHOWS RETURNS AND DESCRIPTIVE ANALYSIS FOR NYSE THE MONTH OF MARCH -2012

Date 1-Mar-12 2-Mar-12 5-Mar-12 6-Mar-12 7-Mar-12 8-Mar-12 9-Mar-12 12-Mar-12 13-Mar-12 14-Mar-12 15-Mar-12 16-Mar-12 19-Mar-12 20-Mar-12 21-Mar-12 22-Mar-12 23-Mar-12 26-Mar-12 27-Mar-12 28-Mar-12 29-Mar-12 30-Mar-12
Mean Standard Deviation Sample Variance

Open 8136.13 8157.66 8109.52 8000.43 7936.4 8038.8 8087.89 8102.1 8086.28 8223.76 8194.77 8265.44 8262.31 8247.15 8241.57 8154.19 8139.28 8228.19 8289.58 8234.83 8137.92 8201.27

Close 8175.11 8125.17 8091.28 7920.35 7979.78 8082.48 8102.1 8086.28 8234.48 8185.27 8246.72 8270.4 8297.47 8241.27 8219.34 8141.32 8180.05 8288.78 8239.33 8188.35 8166.37 8206.93

return(x)
0.48 -0.40 -0.22 -1.00 0.55 0.54 0.18 -0.20 1.83 -0.47 0.63 0.06 0.43 -0.07 -0.27 -0.16 0.50 0.74 -0.61 -0.56 0.35 0.07 0.11 0.61 0.37

DESCRIPTIVE STATISTICS NYSE MARCH -2012

The above graph shows returns for investor to gain or loss in security for the month of Feb-2012

54

The below table shows returns and descriptive analysis for NASDAQ the month of JAN -2012

s.no 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Mean Standard Deviation Sample Variance

Date

Open

Close

return(x) -0.33 0.32 1.03 0.11 -0.24 -0.07 0.56 0.29 0.12 -0.30 1.41 0.31 0.38 -0.07 0.54 0.54 -0.83 0.68 0.77 -0.42 0.24 0.54 0.29

3-Jan-12 2657.39 2648.72 4-Jan-12 2639.9 2648.36 5-Jan-12 2642.57 2669.86 6-Jan-12 2671.17 2674.22 9-Jan-12 2682.98 2676.56 10-Jan-12 2704.42 2702.5 11-Jan-12 2695.77 2710.76 12-Jan-12 2716.87 2724.7 13-Jan-12 2707.41 2710.67 17-Jan-12 2736.34 2728.08 18-Jan-12 2731.16 2769.71 19-Jan-12 2779.74 2788.33 20-Jan-12 2776.04 2786.7 23-Jan-12 2786.21 2784.17 24-Jan-12 2771.58 2786.64 25-Jan-12 2803.23 2818.31 26-Jan-12 2828.78 2805.28 27-Jan-12 2797.66 2816.55 30-Jan-12 2790.4 2811.94 31-Jan-12 2825.76 2813.84 DESCRIPTIVE STATISTICS NASDAQ JAN-2012

In the above graph if you see carefully there are only some points which are above normal positive line and most of the returns of BSE and NASDAQ are below the normal positive line. But by looking at the positive correlation we can say that both the markets are in the same direction.

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s.no 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Mean

Date 1-Feb-12 2-Feb-12 3-Feb-12 6-Feb-12 7-Feb-12 8-Feb-12 9-Feb-12 10-Feb-12 13-Feb-12 14-Feb-12 15-Feb-12 16-Feb-12 17-Feb-12 21-Feb-12 22-Feb-12 23-Feb-12 24-Feb-12 27-Feb-12 28-Feb-12 29-Feb-12

Open 2830.1 2854.1 2888.95 2892.52 2895.91 2906.59 2922.46 2902 2926.21 2921.7 2943.42 2915.67 2958.22 2957.3 2942.77 2933.16 2963.13 2945.87 2969.25 2991.67

Close 2848.27 2859.68 2905.66 2901.99 2904.08 2915.86 2927.23 2903.88 2931.39 2931.83 2915.83 2959.85 2951.78 2948.57 2933.17 2956.98 2963.75 2966.16 2986.76 2966.89

return(x) 1.22 0.40 1.61 -0.13 0.07 0.41 0.39 -0.80 0.95 0.02 -0.55 1.51 -0.27 -0.11 -0.52 0.81 0.23 0.08 0.69 -0.67 0.27 0.70 0.49

DESCRIPTIVE STATISTICS NASDAQ FEB-2012 Standard Deviation Sample Variance

In the above graph if you see carefully there are only some points which are above normal positive line and most of the returns of BSE and NASDAQ are below the normal positive line. But by looking at the positive correlation we can say that both the markets are in the same direction.

56

The below table shows returns and descriptive analysis for NASDAQ the month of MARCH -2012 s.no 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
Mean Standard Deviation Sample Variance

Date 1-Mar-12 2-Mar-12 5-Mar-12 6-Mar-12 7-Mar-12 8-Mar-12 9-Mar-12 12-Mar-12 13-Mar-12 14-Mar-12 15-Mar-12 16-Mar-12 19-Mar-12 20-Mar-12 21-Mar-12 22-Mar-12 23-Mar-12 26-Mar-12 27-Mar-12 28-Mar-12 29-Mar-12

Open 2979.11 2986.08 2969.73 2917.52 2922.57 2954.4 2975.09 2989.05 3003.71 3042.21 3048.58 3058.49 3057.24 3060.93 3077.44 3055 3066.37 3090.52 3124.06 3123.84 3087.25

Close 2988.97 2976.19 2950.48 2910.32 2935.69 2970.42 2988.34 2983.66 3039.88 3040.73 3056.37 3055.26 3078.32 3074.15 3075.32 3063.32 3067.92 3122.57 3120.35 3104.96 3095.36

return(x) 0.33 -0.33 -0.65 -0.25 0.45 0.54 0.45 -0.18 1.20 -0.05 0.26 -0.11 0.69 0.43 -0.07 0.27 0.05 1.04 -0.12 -0.60 0.26 -0.62
0.14 0.50 0.25

30-Mar-12 3110.97 3091.57 DESCRIPTIVE STATISTICS NASDAQ MAR-2012

57

In the above graph if you see carefully there are only some points which are above normal positive line and most of the returns of BSE and NASDAQ are below the normal positive line. But by looking at the positive correlation we can say that both the markets are in the same direction.

The Below Table REPRESENTS BSE, NYSE, NASDAQ

RETURNS
BSE -0.11 1.91 -0.53 -0.23 0.50 -0.16 1.68 -0.29 -0.49 0.06 0.64 1.20 -0.31 0.42 -0.04 0.51 1.12 0.05 0.19 -1.60 MONTHS JAN BSE NYSE 1.97 -0.16 -0.16 -0.56 0.36 1.11 -0.09 0.25 -0.64 0.50 1.26 0.67 0.13 0.33 -0.04 1.09 0.69 -0.09 -0.54 0.05 AVERAGE RETURNS 2012 NYSE NASDAQ 0.31 58 NASDAQ -0.33 0.32 1.03 0.11 -0.24 -0.07 0.56 0.29 0.12 -0.30 1.41 0.31 0.38 -0.07 0.54 0.54 -0.83 0.68 0.77 -0.42

0.28

0.24

FEB MARCH

-0.12 -0.33

0.20 0.11

0.27
0.14

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AVERAGE RETURNS 2012 MONTHS JAN FEB MARCH BSE 0.28 -0.12 -0.33 NYSE 0.31 0.20 0.11 NASDAQ 0.24 0.27 0.14

CORRELATION BSE BSE NYSE NASDAQ 1.00 0.12 0.11 NYSE 0.12 1.00 -0.19 NASDAQ 0.11 -0.19 1.00

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CHAPTER-5
SUGGESTIONS, FINDINGS&CONCLUSI ONS

61

SUGGESTION
NASDAQ and BSE are more strongly correlated than S&P and NASDAQ index BSE is approximately equally correlated with NASDAQ and S&P Index. BSE average daily returns are positive whereas average returns for all US index are negative BSE Sensex shows higher volatility and variability than US indexes (S&P and NASDAQ)

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FINDINGS
The study suggested that there is an overall positive as well as negative correlation between BSE sensex and NASDAQ. The study supports that mergers of top Indian companies will have its effect on Indian as well as foreign stock markets also.
Here correlation means relationship between two or more variables. In this study we taken two variables BSE SENSEX and NASDAQ. In the month of march the correlation between BSE SENSEX and NASDAQ is 0.11so there exists slight positive relationship and all data points are form as non linear structure and tilts upwards towards right. There is an overall positive as well as negative correlation of returns between the BSE sensex and NASDAQ stock exchange, because out of 3 month data collected () months have positive correlation and (2) months have negative correlation on returns. It shows that when BSE is increasing NASDAQ is decreasing and vice-versa because financial institutions are the main investors in BSE sensex By seeing the closing of both the stock markets we can say that increase and movement of funds is more in BSE when compared to NASDAQ.

63

CONCLUSION
There is an overall positive correlation of returns between the BSE SENSEX and NYSE, stock exchange, because out of (12) months data collected (10) months have positive correlation and (2) months have negative correlation on returns. It shows that when BSE is increasing NYSE, NASDAQ, DOWJONES is decreasing and vice-versa because foreign institutional investors are main investors in BSE SENSEX. If we see the closing of both BSE and NASDAQ its as follows. BSE started with a closing There is a clear picture that BSE SENSEX closing in April was much more than the closing of NASDAQ, NYSE & which means that funds flow in BSE SENSEX is more than NASDAQ, NYSE The year 2012 also started with merger of top Indian companies like Tata, Birla and Hutchison as a result huge funds were drawn out of the both stock markets. Due to this both BSE and NYSE, NASDAQ & DOWJONES fell down to a large extent. By seeing the closing of both the stock markets we can say that increase and movement of funds is more in BSE when compared to NYSE, NASDAQ & DOWJONES.

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BIBLIOGRAPY

1. WEBSITES

www.bseindia.com www.nasdaq.com www.yahoofinance.com www.moneycontrol.com www.rediff.com/money www.nyse.com www.dowjones.com

2. NEWS PAPER TIMES OF INDIA ECONOMIC TIMES BUSINESS LINE

3. BOOKS

FINANCE MANAGEMNET PRASANNA CHANDRA FINANCE MANAGEMENT 13 TH EDITIONS -IM PANDAY

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THANKINGYOU

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