Project KMML

FINANCIAL ANALYSIS OF STOCK MARKET
CHAP TER I INTRODUCTION
Introduction
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In simple words stock exchange is an organized market for free purchase and sales of industrial securities. The Securities Contracts (regulation) Act, !"# defines a stock exchange as, $an% &od% of indi'iduals, whether incorporated or not, esta&lished for the purpose of assisting regulating and controlling &usiness in &u%ing and selling and dealing in securities(. The stock market can &e a great source of confusion for man% people. The a'erage person generall% fails into one or two categories. The first &elie'e in'esting is a form of gam&ling, the% are certain that if %ou in'est %ou will more than likel% and end up losing %our mone%. )ithout such knowledge against stock market and functions the share holders loose their in'estment. These feelings are not ground in facts and are the result of personal experience. Someone who &elie'es along this line of thinking simpl% does not understand what the stock market is or wh% it exists. The second categor% consists of those who know the% should in'est for the long run, &ut don*t know where to &egin. +an% feel like in'esting is some sort of &lack magic that onl% a few people hold the ke% to. +ore often than not, the% lea'e their financial decisions up to professionals, cannot tell %ou wh% the% own a particular stock or mutual fund. Stock ,xchange has to make application in the prescri&ed manner to the Central -o'ernment has the power to withdraw or suspend recognition of a recognized stock exchange through their functions.
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It is set out to pro'e that the a'erage in'estor can e'aluate the &alance sheet of a compan%, and following a few relati'el% simple calculations, arri'e at what the% &elie'e is the .real., or intrinsic 'alue of the compan%. This will allow a person to look at a stock and know that it is worth. This gi'es each in'estor the freedom to know when a securit% is under'alued, increasing their long/term returns su&stantiall%. The largest stock market in the 0nited States, &% market capitalization, is the 1ew 2ork Stock ,xchange (12S,). In Canada, the largest stock market is the Toronto Stock ,xchange. +a3or ,uropean examples of stock exchanges include the Amsterdam Stock ,xchange, 4ondon Stock ,xchange, 5aris 6ourse, and the 7eutsche 68rse (9rankfurt Stock ,xchange). In Africa, examples
include 1igerian Stock ,xchange, :S, 4imited, etc. Asian examples include the Singapore ,xchange, the Tok%o, the ;ong <ong Stock ,xchange, the Shanghai Stock ,xchange, and the 6om&a% Stock ,xchange. In 4atin America, there are such exchanges as the 6+=9 6o'espa and the 6+>. Australia has a national stock exchange, the Australian Securities ,xchange, due to the size of its population. Utility of Stock Market
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It is &ase on the economic functions performed &% the stock exchange make it a useful for all? the in'estors, the compan%, and societ%. Investors It pro'ides the in'estors with a read% market for the purchase and sale of securities. The companies from encroaching upon the legitimate right of the shareholders &% making rigid @4isting 5ro'isions@. In'estors to assess from time to time the 'alue of their in'estment or funds. It helps the in'estors in selecting the stock and share in which the% could in'est their sa'ing most profita&l%. Companies It helps the compan% in enhancing its prestige through listing of the compan%@s shares and collection their funds to increase their growth. It helps the compan% sensing market that the in'estor would prefer ,Auit% share, 5reference share or 7e&entures etc. the premium at which the eAuit% shares can &e issued.
Society It promotes the economic growth of a countr% &% channelizing the sa'ing of &oth the rich and the poor into producti'e enterprises in the pu&lic as well as pri'ate sector. The socializing the capital of large corporations, it means acAuire shares in
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large enterprises on account of an efficient machiner% for purchase of assets. It pro'ides information to people li'ing in different part of the countr%. The effecti'e and stead% stock market shows the strength of the countr% or market or econom%. 6efore we examine how to 'alue a compan%, it is important to understand the nature of &usinesses and the stock market. This is the cornerstone of learning to in'est well. 1.2 Financial Terms: 9ollowing are the financial terms are used in share market Earnin per s!are "E#S$: The amount of profit to which each share is entitled %oin #u&lic: Slang for when a compan% is planning an Initial pu&lic offer I#': Initial pu&lic Bffering. An I5B is when a compan% sells stock in itself for the first time. Market Cap:
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The amount of mone% %ou would ha'e to pa% if %ou &ought e'er share of stock in A compan% (To calculate market cap, multipl% the num&er of shares &% the price per share. ) S!ort for Market Capitali(ation Ticker Sym&ol: A short group of letters that represent a particular stock. The financial institution or in'estment &ank that is doing all of the paperwork and orchestrating a compan%*s I5B. (eg. $State Trading Corporation of India( is referred to as $STC India() S!are: A share represents an in'estor*s ownership in a $share( of the profit, losses, and assets of a compan%. It is created when a &usiness car'es itself into pieces and sells them to in'estors in exchange for cash. Money Market: +arket for short/term financial asset which are near su&stitute for mone%. I.) T!e Stock Market:
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6usiness is the cornerstone of e'er% econom%. Almost e'er% large corporation started out as a small, mom/and/pop operating and through growth, &ecame financial giants e.g. 7ell Computers. 7ell computer &egan with selling computer out of his college dorm room. ;ow did the small compan% grow from tin%, hometown enterprise of the largest &usinesses in the American econom%C The% raised capital &% selling stock in themsel'es. )hen a compan% is growing, the &iggest hurdle is often raising enough mone% to expand the compan% is listing their shares. 4isting means inclusion of the securities in the official list of stock exchange for the purpose of trading on the stock exchange DIn India the listing is made under. certain rules and regulation Eule ! of the Securities Contracts (Eegulation) Eules, !"FG.
The% can either &orrow the mone% form a &ank or 'enture capitalist, or sell part of the &usiness to in'estors and use the mone% to fund growth. Taking out a loan is common, and 'er% useful/to a point. 6anks will not alwa%s lend mone% to companies, and o'er/eger managers ma% tr% to &orrow to much initiall%, wrecking the &alance sheet. 9actors such as these often pro'oke owners of small &usiness to issue stock. In exchange for gi'ing up a tin% fraction of control, the% are gi'en cash
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to expand the &usiness. In addition to mone% that does not ha'e to &e paid &ack, .going pu&lic. (as its called when a compan% sell stock in itself for the first time) gi'es the &usiness managers and owners a new tool instead of pa%ing cash for an acAuisition, the% can use their own stock. To &etter understand the stock market it gi'es a compan% D-AI4 (India)G details following? 'vervie* of Company: -ail (India) is a pu&lic sector compan% incorporated in !HI to create gas
infrastructure and to undertake gas related &usiness in India. -ail is the undisputed leader in the market, transmission and distri&ution of the natural gas in India. -ail has FHJ market share in natural gas transmission and FKoLo market share in natural gas marketing in India. A part from natural gas, -ail has &usiness interest in petrochemicals, 45- transmission, telecommunications and exploration &usiness. %as Sector in India: 1atural gas often referred as new age fuel, is the cleanest of the fossil fuel. >ersatile in nature, it is used in power, fertilizer, automoti'e, petrochemicals, domestic and commercials. 1atural gas comprise a&out HJ if the total energ% &asket of India against MIJ of the world a'erage. Currentl% energ% sector is
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dominated &% coal and o'er a period of time natural gas is likel%. To increase its share significantl%, currentl% power sector which consumes around M!J. 7emand for natural gas in retail sector in the form of compressed natural gas is on uptrend due to it inherent ad'antages. 9ollowing is the comparison ,nerg% Consumption Items Coal 'il /atural %as 1ydro electric /uclear India J +, 2. 1 )orld J 2). 20 . .
2usiness model: . 1atural -as? -AI4 has #FKK km of 1atural -as high pressure trunk pipeline grid with a capacit% to carr% IH ++SC+7 of natural gas across the countr%. 1atural gas is supplied to 'arious consumers through these pipeline grids. 45-? -AI4 produces 45- through fractionation. -AI4 45- is an eco/friendl% fuel and pro'ides a cheaper and effecti'e means of reducing pollution and increasing producti'it%. -ail has F 45- gas processing unit produce .M ++T5A of 45-. -ail also has !MM <+ of 45- transmission pipeline network to transport 45- in the countr%.
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5etrochemicals? -AI4 use natural gas as feed stock for the manufacture of ;75,L 4475,. -ail@s integrated petrochemical complex is located in 5ata, 7istrict Aurai%a, 0ttar 5radesh, a&out N"K km from 7elhi. The plant is ISB !KKK and ISB IKKK certified. The 9acilit% has a capacit% of NKKKKK T5A of ,th%lene KK T5A of 5ol%mers (;75,L4475,). -ail market it products under the &rand name -/lene and -/lex. Telecom? -ail has high speed optic/fi&er network and extends to well o'er N,KKK <+ connecting around MKK cities across 'arious states. Its telecom ser'ice is ser'ed under the &rand name -AI4 T,4. ". ,xploration = 5roduction (,=5)? In Brder to integrate the suppl% chain -ail participated in the 1,45 &idding process. Currentl% it has MF oil and gas ,xploration &locks and N Coal. #. 9inancial Aspects? -ail has shown consistent growth performance in the past. The compan% has hea'il% in'ested in its infrastructure and still in in'estment phase. The &enefit of the in'estment is likel% to get Eeflected in the future. The compan% is consistent di'idend pa%ing and likel% to reward handsomel% in future also. FY06 FY07 FY08 FY09 FY10 (Expectin
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g) Total Income 1+)-1.1+ (Crore) Net profit 2)44 (Crore) Eq it! 144 "i#i$en$ (%) E&' (()) *oo+ #al e 2,.)1 121.)3 1,21..11 2+0+.)2 144 )4.1 1)3.-1 -0+.. 13032.. 2,-2.3 140 2).3 1.4.2 -0+.. 2+04 2314 -4 22.35 121.35 12.))24 )104 34 20.,5 1),..5 12.-
Enq ir! Capital -0+ (Crore) Ad3usted for ?M 6onus
9ollowing is share holding pattern (as on NK +arch M) Category ,o#ernment . t al / n$) In) rance Companie) /II 0t1er) *o$ie) Corporate & 2lic Total 6 57-34 3-44 13-16 13-09 9-7 0-88 2-39 144
Current Market Situation of %7I8 1S, S%m&ol

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-AI4
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9AC, >A40, ISI1 1B 4AT,ST ,5S 5L, +AE<,T 5EIC,
? ? ? ? ?
Es. K I1, M!AK K ! Es. MM M."K MI"
8imitation In India natural gas is controlled commodit% in India which is a single &iggest draw&ack for the compan%. Tariffs for transport of gas are determined &% the 5etroleum and 1atural -as Eegulator% 6oard (51-E6) price and suppl% of natural gas is influenced &% the go'ernment policies which are su&3ect change from time to time ,ntr% of pri'ate companies in the gas distri&ution &usiness is likel% to increase competition for the compan% (e.g. Eeliance) The a&o'e details are gi'e a clear picture of stock market and it is 'erified &% the competitor as per the market condition, or change in time to time. 6efore in'esting
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the m.ck market it is stud% a&out the compan% profile and anal%sis the competitor nature and facilities. It leads to &etter 'ision to the share holders or in'estors.
OBJECTIVES OF THE STUDY

The o&3ecti'es of the pro3ect is to Stud% the stock market Anal%ze the Trend and practice Conduct 9inancial anal%sis 9undamental anal%sis statements and health, and markets. Bf a &usiness in'ol'es anal%zing its management and competiti'e ad'antages and its competitors and markets. The anal%sis is performed on historical and present data, &ut with the goal to make financial pro3ections. There are se'eral possi&le o&3ecti'es? To make pro3ection on its &usiness performance To calculate its credit risk &ut with the goal to make
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To conduct a compan% stock 'aluation and predict its pro&a&le price e'aluation To e'aluate its management and make internal &usiness decisions l 7nalytical models: )hen the o&3ecti'e of the anal%sis is to determine what stock to &u% and at what price, there are two &asic methodologies . 9undamental anal%sis maintains that markets ma), misprice a securit% in the short run &ut that the correct price will e'entuall% &e reached. 5rofit can &e made &% trading the mispriced securit% and then waiting for the market to recognize its mistake and re price the securit%. M. Technical anal%sis maintains that all information is reflected alread% in the stock price, so fundamental anal%sis is waste of time. Trends are %our friend and sentiment changes predate and predict trend changes. In'estors emotional responses to price mo'ement lead to recogniza&le price chart patterns. Technical anal%sis does not care what the 'alue of a stock is. Their price predictions are onl% extrapolation from historical price patterns. In'estors can use &oth these different &ut somewhat complementar% methods for stock picking. +an% fundamental in'estors use technical for deciding entr% and
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exit points. +an% technical in'estors use fundamentals to limit their uni'erse of possi&le stock to good companies. The choice of stock anal%sis is determined &% the in'estors in the different paradigms for how the stock market works. See the discussions at efficient market h%pothesis, random walk h%pothesis, capital asset pricing model, fed model Theor% of ,Auit% >aluation, and &eha'ioral finance.
Il. 9ifferent portfolio styles: In'estors ma% use fundamental anal%sis within different portfolio management st%les. . 6u% and hold in'estors &elie'e that latching onto good &usinesses allows the in'estors asset to grow with the &usiness. 9undamentals anal%sis lets them find good companies, so the% lower their risk and pro&a&ilit% of wipe/out. M. +anagers ma% use fundamental anal%sis to correctl% 'alue good and &ad companies. ,'en &ad compan%@s stock goes up and down creating opportunities for profits.
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N. Contrarian in'estors distinguish in the short run, the market is a 'oting machine, not a weighing machine. 9undamental anal%sis allows %ou to
make %our own decision 'alue on 'alue, and ignore the market. I. >alue in'estors restrict their attention to under'alued companies &elie'ing that its hard to fall out of ditch. The 'alue comes from fundamental anal%sis ". +anagers ma% use fundamental anal%sis to determine future growth rates for &u%ing high priced growth stocks. #. +anagers ma% also include fundamental factors along with technical factors into computer models Top do*n and 2ottom:up In'estors can use either a top/ down or &ottom/up approach The top/down in'estor starts his anal%sis with glo&al economics, including &oth international and national economic indicators, such as -75 growth rates, inflation, interest rates, exchange rates, producti'it% and energ% prices. ;e narrows his search down to regional industr% anal%sis of total sales, price le'els, the effects of competing products, foreign competition, and entr% or exit from the industr%. Bnl% then does he narrow his search to the &est &usiness in that area.
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The &ottom/up in'estors starts with specific &usiness, regardless of their industr%, region.
METHODOLOGY
Ouants are aiding &rokers and in'estment managers for stock market anal%sis and prediction. The Auant@s &lack magic stems from man% of the e'ol'ing artificial
intelligence techniAues. ,xtensi'e literature exists descri&ing attempts to use artificial intelligence techniAues, and in particular neural networks howe'er the tremendous difficult% in interpreting the results is. The neural nets approach is a &lack &ox approach in which no new knowledge regarding the nature of the interactions &etween the market indicators and the stock market fluctuation is extracted form the market data conseAuentl%, there is a need to de'elop methodologies and tools which would help in increasing the degree of understanding of market processes and, at the same time, would allow for relati'el% accurate predictions. The methods stemming from the research on knowledge acAuisition capa&ilities for the purpose of market prediction and market data anal%sis. This paper descri&es the methodolog% of rough sets which citing two applications which appl% rough set theor% (6ST) for stock market anal%sis using data logic EP. This is &ased on the 'aria&le precision model of rough sets (>5ES) to acAuire new knowledge from market data.
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The data@s for the report 5rimar% 7ata Secondar% 7ata l. #rimary 9ata *ere o&tained &y 7irect o&ser'ation? The data@s for the reports was o&tained &% the o&ser'ing conditions and incidents. Inter'iew? The information regarding expansion and finance were o&tained in consultation with the 6ranch +anager of capstocks 2. Secondary data: The ma3or sources of the statistics in the report are the periodic schedules of &usiness re'iews that include annual reports, 6usiness news, minutes of meeting etc.The stud% was organized was in such a wa% that first the Stock +arket was studied then its financial configuration and marketing tactics were examined.
PERIOD OF STUDY
/K /MK N to N /K /MK N
LIMITATIONS
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It must &e emphasized that there are no guarantees when it comes to indi'idual stocks, some companies pa% out di'idends, &ut man% others do not. And there is no B&ligation to pa% out di'idends e'en for those firms that ha'e traditionall% gi'en them. )ithout di'idends, an in'estor can make mone% on a stock onl% through its appreciation the open market. Bn the downside, an% sock ma% go &ankrupt, in which case %our in'estments are worth nothing. Although risk might sound all negati'e, there is also a &right side. Taking on greater risk demands a greater return on %our in'estment. This is the reason wh% stocks ha'e historicall% outperformed other in'estments such as &onds or sa'ing Accounts. B'er the long term and in'estment in stocks has historicall% had an a'erage return of around K/ "J. Competitors? 7ue to the 'ast competition in the field of stock market critical data@s like the financial structure could not &e explored completel%. The compan% was not a&le to gi'e out important details regarding its profita&ilit%. %ro*t!? -rowth factor was taken as a ma3or concern and not profita&ilit%.
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CHAPTER II INDUSTRY PROFILE
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The Indian &roking industr% is one of the oldest trading industries that ha'e &een around e'en &efore the esta&lishment of 6S, in HF". 6S, is the oldest stock market in India. The histor% of India stock trading starts with N H persons taking mem&ership in 1ati'e share and Stock 6rokers Association, which we know &% the name 6om&a% Stock ,xchange or 6S, in short. In !#", 6S, got permanent recognition from the -o'ernment of India. 6S, and 1S, represent themsel'es as s%non%ms of India stock market. The histor% of India stock market is almost the same as the histor% of 6S, the regulations and reforms &een laid down in the eAuit% market has resulted in rapid growth and de'elopment. There are MN recognized stock exchanges in India, including the B'er the Counter ,xchange of India (BTC,I) for small and new companies and the 1ational Stock ,xchange (1S,) which was set up as a model exchange to pro'ide nation/wide ser'ices to in'estors. 1S,, which in the recent past has accounted for the largest trading 'olumes, has a full% automated screen &ased s%stem that operates in the wholesale de&t market segment as well as the capital market segment.
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India@s market capitalization was amongst the highest among the emerging markets. India has emerged as the *orld;s 14t! lar est e<uity market after it added se'eral companies to the &illion dollar clu& in terms of capitalization, taking the total to H companies. India has &ecome the third largest Asian market (excluding :apan and Australia) after ha'ing toppled <orea, China and Singapore that ha'e HK, "K and IF firms with &illion/dollar market capitalization respecti'el%. India is also inching closer to outpacing Taiwan that has HI such companies &ut lags far &ehind ;ong <ong which has KF, the highest in Asia. n India, there are NN registered +utual 9und houses. )hile income funds accounted for I!J of the total assets and eAuit% or growth funds had M#J of the total assets. 6alanced funds, gilt funds, ,4SS and 4iAuid fundsL mone% market funds accounted for the rest. The num&er of companies listed on the 6S, at the end of 7ecem&er !!I was I,FKM. This was more than the aggregate total of companies listed in ! emerging markets (+ala%sia, S.Africa, +exico, Taiwan, <orea, 5hilippines, Thailand, 6razil and Chile). The num&er of companies was also more than that in de'eloped markets of :apan, 0<, -erman%, 9rance, Australia, Switzerland, Canada and ;ong <ong.
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CHAPTER III LITERATURE REVIEW
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Literature Review
,speciall% the stock markets, for de'eloping and de'eloped markets ha'e now &ecome more closel% interlinked despite uniAueness of the specific markets or the countr% profile. literature has show strong interest on the linkages among international stock markets and interest has increased considera&l% after the loose of financial regulations in &oth mature and emerging markets, the technological de'elopments in communications and trading s%stems@ and the introduction of inno'ati'e financial products, creating more opportunities for international portfolio in'estment. The interest can also &e attri&uted to the glo&alization which gi'e /another impetus to the higher intertwinement of international economies and financial markets. In recent %ears the new remunerati'e emerging eAuit% markets ha'e attracted the attention of international fund managers as an opportunit% for portfolio di'ersification. This intensifies the curiosit% of academics in exploring
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international market linkages. ,arlier studies &% Eiple, 4essard, and ;iliard generall% find low correlation &etween the national stock markets, supporting the &enefits of international di'ersification. The links &etween national stock markets
ha'e &een of heightened interest in the wake of Bcto&er !HF international market crash glo&all%. The crash has made people realize that 'arious national eAuit% markets are so closel% connected and the de'eloped markets like the 0S stock market extent a strong influence on other markets. Appl%ing the 'ector auto regression models ,un and Shim find e'idence of co/mo'ements &etween the 0S stock market and other world eAuit% markets. Chenung and 1g in'estigated the d%namic properties of stock return in Tok%o and 1ew 2ork and fin that the us market is an Important glo&al factor from :anuar% !H" to 7ecem&er !g!. 4ee and <im examine the effect of the Bcto&er !HF crash and conclude that national stock markets &ecame more interrelated after the crash and find that the co/ mo'ements among national stock market were stronger when the 0S stock market is more 'olatile. Corha% etal stud% the stock markets of Australia, :apan, ;ong <ong, 1ew Qealand and Singapore and find no e'idence of a single stochastic trend for these countries. Bnl% a few studies ha'e examined the co/mo'ement of Indian stock market with international markets. Sharma and <enned% ! ! F)
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examine the price &eha'ior of Indian market with the 0S and 0< market and find no e'idence of s%stematic c%clical component or periodicit% for these markets. Eao and 1aik appl% the cross/spectral anal%sis and that for the Indian stock index, the
gains estimates front either 0S or the :apan indices and @independent@ and hence the% conclude that relationship of Indian market with international markets is poor reflecting the institutional fact and the Indian econom% has &een characterized &% hea'% control through the entire se'enties with li&eralization measure initiated onl% in the late eighties.
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CHAPTER IV RESEARCH METHODOLOGY
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)eekl% indices of the stock exchanges from data stream for India and the three most de'eloped countries including the united state, united kingdom and :apan are use as proxies to measure the stock market for each countr%, specificall%, 6S, MKK(India)M,S=5 "KK(0nited states), 9TS, KK(the 0nited <ingdom) and 1ikkei MM" stock a'erage (:apan). Bur sample co'er the period from , !!" through 7ecem&er N ,MKK", a total of K %ear and indices are ad3usted to &e in terms of 0S 7ollars for &etter comparison. The weekl% indices a opposed to dail% data is used to a'oid representation &ias from some thinl% trade stocks, that is the pro&lems of non/trading and non/s%nchronous trading and to a'oid the serious &idLask spread in dail% data. In addition, we use )ednesda% indices to a'oid the da% of the week effect of stock returns. To examine the co/mo'ements &etween the Indian stock market and the de'eloped markets, we first stud% their relationship &% the simple regression. %( )RaP&%Pet )here the endogenous 'aria&le %l represents the India@s stock index? the exogenous 'aria&le %et is the rock index of an% of the de'eloped countries including the 0S, the 0< and :apanS and et is the error term. In order to stud% the 3oin effect from all
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the de'eloped stock markets on the Indian market, we further stud% the following multiple regression?
I 7 7M 7N 2tRa (M) P& %tP&M%tP&N%tPet )here %t tae the stock indices for the 0nited States, the 0< and :apan R? l , M and N respecti'el%. The 'alidit% and relia&ilit% of the regression relationship reAuire the examination of the trend characteristics of the 'aria&les and co integration test and the presence of unit root processes in the stock indices results in the spurious regression pro&lem. Co integration tests consist of two steps. The first step is to examine the stationar% properties of the 'arious stock indices in our stud%. If a series, sa% %t, has a stationar%, in'erti&le and stochastic AE+A representation after differencing d times, it is said to &e integrated of order 7, and denoted &% % tRI(7). To test the null h%pothesis ;o? %tRI(l) 'ersus the alternati'e h%pothesis ; ? %tRI(K), we appl% the 7icke%/9uller and the augmented 7icke%/ 9uller (A79) unit root test &ased on the following regression and %t can &e chosen in to achie'e white noise residuals for the A79 test and when p?K, the test is know and the 7icker/9uller (79) test.
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Testing the null h%pothesis of the presence of a unit root in %t is eAui'alent to testing the h%pothesis that a(t)RK. If a(t) is significantl% less than zero, the null h%pothesis of a unit root re3ected. In addition, we test the h%pothesis that lt is a random walk with drift, that (&K,aK,a )R( &K,K,K) and %t is random walk without drift (&o,ao,ar) R(K,K,K) using the likelihood ratio test statistics &z and oz respecti'el% if the h%potheses that arRK (&K,aK,ar)?( &K,K,K) or(&K,aK,a ) ?(K,K,K) are accepted, we can conclude that %t is I( ). If we cannot re3ect the h%potheses that %t is I( ), we need to further test the null h%pothesis ;o? %tRI(M) 'ersus the alternati'e h%pothesis ; I ? %t ?I( I ). 1ote that most series are integrated order at most one. In addition, we appl% the 55 test de'eloped &% 5hilips and 5erron to detach the presence of a unit root. The 55 test is nonparametric with respect nuisance parameters and there&% is suita&le for e'er% wide class of weakl% dependent and possi&l% heterogeneousl% distri&uted data. If &oth %t and %t(%dti) are the same order sa% l(d),with dTK, we then estimated the co integrating parameter in ( )or(M) &% B4S regression if the residuals are stationer%, the series %t and 2t(%dti) are said to &e co integrated Co integration exists for 'aria&les means despite 'aria&les are indi'idual no stationar%, a linear com&ination of two or more time series can &e stationar% and there is a long run eAuili&rium relationship &etween these 'aria&les.
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If there is a long/run in
or M is stationar% while the repressor are indi'iduall%
trending, there ma% &e some transitor% correlation &etween the indi'idual repressors and the error term. ;owe'er, in the long run, the correlation must &e zero &ecause of the cat that rending 'aria&les must e'entuall% di'erge from stationar% ones. Thus the regression on the le'els of the 'aria&les is meaningful and no spurious. Another techniAue CA5+ (Capital Asset 5ricing +odel) is one of the premier methods of e'aluation of capital in'estment proposals. A5+S gi'es a mechanism &% which the reAuired rate of return for di'ersified portfolio of pro3ect or in'estment can &e calculated gi'e the risk. It has tow part ? I a rise/free rate of return and M a risk premium for the amount of s%stematic risk of the portfolio. EeAuired rate of return? ErP(Em/Ef)6i, when Er/ risk free rate of return Em/ returns on market portfolio 6i / 6eta or risk coefficient of the e'aluated portfolio gi'en market portfolio 6eeta?
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The risk free return is the rate of return o&taina&le on risk free in'estments, like in'estment in go'ernment &onds. The market rate of return is the grand a'erage rate of return o&taina&le on market representati'e portfolio. A Surrogate for this can &e return of Eepresentati'e market indices like 1AS7A-,
7B):B1,S.I170STEIA4, S=5 "BB, 6S, S,1S,U (I17IA), and the like. 6eta of the pro3ect/co'ariance &etween returns of the pro3ect and chosen market portfolio di'ided &% 'ariance of the return on the market portfolio@ the returns referred to here can &e historical or future expected or &oth. So gi'e the returns (expected or actual) of the market portfolio o'er a period of time and those of the capitals pro3ect o'er the same time horizon as a&o'e, &eta of the pro3ect can &e calculated. The formula is? 6eta? S (Em/+Em)(Ei/+Ei)LS(Em/+Em)M, )hen Em R Eeturns on market portfolio o'er times +EmR +eans return on market portfolio EiR Eeturns on Capital o'er times +EmR means return of the capital pro3ect fS Suppose the following are the Em and Ei for " %ears gi'e row (i) and (ii) &elow &eta is computed &ased on the a&o'e formula s gi'e the rest of the rows &elow?
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M I II III I? ? ?I =m = =m:M=m =i:M=i @"III$"I?$ "=m:M=m$2 10 1+ >2 1 2 0 1. 1>0 0 1. 1.
N 14 1+ :2 1 :2 0
I 22 2>14 10 104 144
" :2 :. :10 :24 2-4 13.
Total .4 ,4 4 4 0). )24
+Em R #KL"?R M and, +Ei RFKL" PR I 6eta R S (Em/+Em)(Ei/+Ei)LS(EmV+Em) M 6eta RIN#LNMKR .N#" 4et Ef ? HJ EeAuire rate of return ? Ef P( +Em / +ri)W R HJ P( MJ/HJ) .NM#" RHJ P".I"J R N .I"J
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The mean EiR IJ so that the actual or expected return is greater than the reAuired return. CA+5 assume perfect capital market, free flow of information homogenous risk and return expectations of in'estors, that di'ersification thoroughl% reduces the uns%stematic risk, existence of representati'e market portfolio and so on
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CHAPTER V DATA PRESENTATION, ANALYSIS AND FINDINGS OF THE STUDY
5lain and simple, stock is a share in the ownership of a compan%. Stock represents a claim on the compan%@s assets and earnings. As %ou acAuire more stock, %our ownership stake in the compan% &ecomes greater. )hether %ou sa% shares, eAuit%, it all means the same thing.
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?.l 2ein an '*ner: A stock is represented &% a stock certificate. This is a fanc% piece of paper that is proof of %our ownership. In toda%@s computer age, %ou won@t actuall% get to see this document &ecause %our &rokerage keeps these records electronicall%. This is done to make the share easier to trade. In the past, when a person wanted to sell his or her shares, that person ph%sicall% took the certificates down to the &rokerage. 1ow, trading with a click of the mouse or a phone call makes life easier for e'er%&od%. ;olding a compan%@s stock means that %ou are one of the man% owners (shareholders) of a compan% and, as such, %ou ha'e a claim to e'er%thing the compan% owns. This means that technicall% %ou own a tin% sil'er of e'er% piece of furniture, e'er% trademark, and e'er% contract of the compan%. As an owner, %ou are entitled to %our share of the compan%@s earnings as well as an% 'oting rights attached to the stock. 6eing a shareholder of a pu&lic compan% does not mean %ou ha'e a sa% in the da%/ toda% running of the &usiness. Instead, one 'ote per share to elect the &oard of directors at annual meetings is the extent to which %ou ha'e a sa% in the compan%. 9or instance, &eing a shareholder doesn@t mean %ou can call up the compan% +anaging director and tell him how %ou think the compan% should &e run. In the
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same line of thinking, &eing a shareholder doesn@t mean %ou can walk into the factor% and gra& a free case of &ud light. The management of the compan% is supposed to increase the 'alue of the firm for shareholders. If this doesn@t happen, the shareholders can 'ote to ha'e the management remo'ed at least in theor%. In realit%, indi'idual in'estors like %ou and I don*t enough shares to ha'e a material influence on the compan%. It@s reall% the &ig &o%s like large institutional in'estors and &illionaire entrepreneurs who make the decisions. 9or ordinar% shareholders@ not &eing a&le to manage the compan% isn*t such a &ig deal After all@ the idea is that %ou don@t want to ha'e to work to make mone% rightC The importance of &eing share holders is that %ou are entitled to a portion of the compan%@s profits and ha'e a claiming on assets. 5rofits are sometimes paid out in the form of di'idends. The more share %ou own, the larger the portion of the profits %ou get. 2our claim on assets is onl% rele'ant if a compan% goes &ankrupt. In case of liAuidation, %ou will recei'e what@s left after all the creditors ha'e &een paid. This last point is worth repeating? The importance of stock ownership is %our claim on assets and earnings. )ithout this, the stock wouldn@t &e worth the paper it*s printed on.
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Another extremel% important feature of stock is its limited lia&ilit%, which means that, as an owner of a stock, %ou are not personall% lia&le if the compan% is not a&le to pa% its de&ts. Bther companies such as partnerships are setup so that if
partnership goes &ankrupt the creditors can come after the partners (shareholders) personall% and sell off their house, car, furniture, etc. Bwning stock means that, no matter what, the maximum 'alue %ou can lose is the 'alue of %our in'estment. ,'en if a compan% of which %ours are a shareholder goes &ankrupt, %ou can ne'er lose %our personal assets. ?.2 9e&t vs E<uity: )h% does a compan% issue stock, wh% could the founders share the profits with thousands of people when the% could keep profits to themsel'es. The reason is that at some point e'er% compan% needs to raise mone%. To do this companies can either. 6orrow it from some&od% or raise it &% selling part of the compan% which is known as issuing stock@ A compan% can &orrow &% taking a loan from a &ank or &% issuing &onds. 6oth methods fit under the de&t of financing. Bn the other hand. Issuing stock is called eAuit% financing. Issuing stock is ad'antageous for the compan% &ecause it does not reAuire the compan% to pa% &ack the mone% or make interest pa%ments along the wa%. All the shareholders get in return for their mone%
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is the hope that the shares will someda% &e worth more than what the% paid for them. The first sale of a stock, which is issued &% the pri'ate compan% itself, is called the initial pu&lic offering (I5B). It is important that %ou understand the distinction &etween a companies financing through de&t and financing through eAuit%/ when %ou &u% a de&t in'estment such as a &ond, %ou are guaranteed the return of %our mone% along with promised interest pa%ments. This is not the case with an eAuit% in'estment. 6% &ecoming an owner, %ou assume the risk of the compan% not &eing successful / 3ust as a small &usiness owner is not guaranteed a return, neither is a shareholder. As an owner, %our claim on assets is less than that of creditors. This means that if a compan% goes &ankrupt and liAuidates, %ou as a shareholder don@t get an% mone% until the &anks and &ondholders ha'e &een paid outS we call this a&solute priorit%. Share holders earn a lot if a compan% is successful &ut the% also stand to lose their entire in'estment if the compan% isn*t successful. ?.) Classification of Securities: 5rimar% Securities? The% are also termed as direct securities, since, the% are issued directl% &% the ultimate users to ultimate sa'er, such as eAuit% share and de&enture issued &% a compan% to its shareholder or de&enture holders.
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Secondar% Securities? The% are also termed as indirect securities. The% are issued &% financial intermediaries such as &ank, 0TI +utual 9und etc. to ultimate sa'ers. Bwnership Securities? The holders of these securities eAuit% shares and preference Shares are part owners of the compan% in which the% hold shares. 7e&t securities? The% are also termed as creditor ship securities, since the holder of the securities are taken as the creditors of the compan%. The examples of such securities are de&enture and deposit certificates. It is &asicall% said that the Common share represent ownership in a compan% and a claim (di'idends) on a portion of profits. In'estors get one 'ote per share to elect the &oard mem&ers, who o'ersee the ma3or decisions made &% management. B'er the long term, common stock, &% means of capital growth, %ields higher returns than almost e'er% other in'estment. This higher return comes at a cost since common stocks entail the most risk. If a compan% goes &ankrupt and liAuidates, theCommon shareholders will not recei'e mone% until the creditors, &ondholders and preferred shareholders are paid. Short term Securities? These are securities maturing within a period of one %ear. Such securities include certificate of 7eposit, commercial 5aper, Commercial 6ills, Treasur% 6ills etc.
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+edium/term Securities? These securities ha'e a maturit% range of one to fi'e %ears. 4ong/term Securities? These are securities ha'ing a maturit% period of more than fi'e %ears. +edium and long/term securities are generall% pu&lic sector &onds,
state go'ernment loans, de&entures or &onds issued &% the compan% or financial institutions etc. The short term securities deals in mone% market while those of long/term and medium/term period are dealt in the capital market. Common and preferred are the two main forms stockS howe'er, it@s also possi&le for companies to customize different classes of stock in an% wa% the% want. The most common reason for this is the compan% wanting the 'oting power to remain with a certain groupS therefore, different classes of share are gi'e different 'oting rights. ?.0 Tradin Stocks: +ost stocks are traded on exchanges, which are places where &u%ers and sellers meet and decide on a price. Some exchanges are ph%sical locations where transactions are carried out on a trading floor. 2ou ha'e pro&a&l% seen pictures of a trading floor, in which traders are wildl% throwing their arms up, wa'ing, %elling,
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and signaling to each other. The other t%pe of exchange is 'irtual, composed of a network of computers where trades are made electronicall%. Securities &etween &u%ers and sellers reduce the risk of in'esting. :ust imagine how difficult it would &e to sell shares if %ou had to call around the neigh&orhood tr%ing to find a &u%er. A stock market is nothing more than a super/sophisticated farmer*s market linking &u%er and sellers, reducing the risk of in'esting. 6efore we go on, we should distinguish &etween the primar% market and secondar% market. The primar% market is where securities are created (&% means of an I5B) while, in the secondar% market, in'estors trade pre'iousl%/issued securities without the in'ol'ement of the issuing companies. The secondar% market is what people are referring to when the% talk a&out the stock market. It is important to understand that the trading of compan%@s stock does not directl% in'ol'e that compan%. T!e /e* Aork Stock EBc!an e The most prestigious exchange in the world is the 1ew 2ork Stock ,xchange (12S,) the .6ig 6oard. was founded o'er MaK %ears ago in rF!Mwith the signing of the 6uttonwood Agreement &% MI 1ew 2ork Cit% stock &rokers and merchants. Currentl% the 12S,, with stocks like -eneral, ,lectric, +c7onald*s, Citi group,
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Coca/cola, -illette and wal/mart is the market of choice for the largest companies in America. The 12S, is the first t%pe of exchange (as we referred to a&o'e), where much of the trading is done face/to/face on a trading floor. This is also referred to as a listed ,xchange orders come in through &rokerage firms that are mem&ers of the exchange and flow down to floor &rokers who go to a specific spot on the floor where the stock trades. At this location, known as the trading posts, there is a specific person known as the specialist whose 3o& is to match &u%ers and sellers. 5rices are determined using an auction method? The current price is the highest amount an% &u%er is will to pa% the lowest price at which someone is willing to sell. once a trade has &een made, the details are sent &ack to the &rokerage firms, who then notifies the in'estors who placed the order. Although there is human contact in this process, computers pla% a huge role in the process. T!e /asda< The second t%pe of exchange is the 'irtual sort called an o'er/the counter (BTC) market, of which the 1asdaA is the most popular. These markets ha'e no central location or floor &roker what so e'er@ Trading is done through a computer and telecommunications network of dealers. It used to &e that the largest companies
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were listed onl% on the 12S, while all other second tier stocks traded on the other exchanges. The tech &oom of the late !!Ks changed all thisS now the 1asdaA is home to se'eral &ig technolog% companies such as +icrosoft, Cisco, Intel, 7ell and oracle. This has resulted in the 1asdaA &ecoming a serious competitor to the 12S,. Bn the 1asdaA &rokerages act as market makers for 'arious stocks. A market maker pro'ides continuous &id and ask price within a prescri&ed percentage spread for shares for which the% are designated to make a market. The% ma% match up &u%ers and sellers directl% &ut usuall% the% will maintain an in'entor% of shares to meet demands of in'estors. In India stock market ma3or roles are pla%ed &% 1S, and 6S,. /ational Stock EBc!an e: The 1ational Stock ,xchange (1S,) is India*s leading stock exchange co'ering 'arious cities and towns across the countr%. 1S, was set up &% leading institutions to pro'ide a modern, full% automated screen/&ased trading s%stem with national reach. The 1S, was incorporated in 1o'em&er !!M with an eAuit% capital of Es.M" Crore. The International Securities Consultanc% (ISC) of ;ong <ong helped in
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setting up the 1S,.
ISC prepared the detailed &usiness plan, including the
installation of hardware and software s%stems. 1S, index 1I92, 1S, is a professionall% managed national market for shares, 5S0 &onds, de&enture and go'ernment securities with all the necessar% infrastructure and trading facilities. The ,xchange has &rought a&out unparalleled transparenc%, speed = efficienc%, safet% and market integrit%. It has set up facilities that ser'e as a model for the securities industr% in terms of s%stems, practices and procedures. 1S, has pla%ed a catal%tic role in reforming the Indian securities market in terms of microstructure, market practices and trading 'olumes. The market toda% uses state/of/art information technolog% to pro'ide an efficient and transparent trading, clearing and settlement mechanism, and has witnessed se'eral inno'ations in products = ser'ices 'iz. demutualization of stock exchange go'ernance, screen &ased trading, compression of settlement c%cles, dematerialization and electronic transfer of securities, securities lending and &orrowing, professionalization of trading mem&ers, fine/tuned risk management s%stems, emergence of clearing co operations to assume counterpart% risks, market of de&t and deri'ati'e instruments and intensi'e use of information technolog%. It is calculated the index of 1I9T2 &ased on top NK companies (as per the information from the stock staff). 2om&ay Stock EBc!an e
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6om&a% Stock ,xchange is the oldest stock exchange in Asia with a rich heritage of o'er NN %ears of existence@ what is now popularl% known as 6S, was
esta&lished as .The 1ati'e Share = Stock 6rokers Association. in HF". 6S, is the first stock exchange in the countr% which o&tained permanent recognition (in !"#) from the -o'ernment of India under the securities contracts (Eegulation) Act (SCEA) !"#. ,arlier an Association of 5ersons (AB5), 6S, is now a
corporatized and demutualised entit% incorporated under the pro'isions of the companies Act, !"#. 5ursuant to the 6S, (corporatization and 7emutualization) Scheme, MKK" notified &% the Securities and ,xchange 6oard of India (S,6I). Toda%@ 6S, is the world@s num&er I exchange in terms of the num&er of listed companies and the world@s "th in handling of transactions through its electronic trading s%stem. The 6S, Index, S,1S,U, is India@s first and most popular stock market .&enchmark index@ sensex is tracked worldwide. It constitutes NK stocks representing M ma3or sectors. The S,1S,U is constructed on a @free/float@
methodolog%, and is sensiti'e to market mo'ements and market realities. Aparl from the S,1S,U, 6S, offers MN indices including N sectoral indices/ It has entered into an index cooperation agreement with 7eutsche 6orse and Singapore Stock ,xchange. These agreements ha'e made S,1S,U and other 6S, indices a'aila&le to in'estors across the glo&e. +oreo'er, 6arcla%s -lo&al In'estors (6-I),
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at ;ong <ong, the glo&al leader in ,T9s through its iShares &rand has created the exchange traded fund (,T9) called XiShares 6S, S,1S,U India Tracker* which tracks the S,1S,U. The ,T9 ena&les in'estors in ;ong <ong to take an exposure to the Indian eAuit% market. It is calculated the index of S,1S,U &ased on top "K companies (as per the information from the stock staff). 't!er EBc!an e The third largest exchange in the 0S is the American Stock ,xchange (A+,U). The A+,U use to &e an alternati'e to the 12S,, &ut that role has since &een filled &% the 1asdaA. In fact, the 1ational Association of Securities 7ealers (1AS7), which is the parent of 1asdaA, &ought the A+,U in !!H. Almost all trading now on the A+,U is in small/cap stocks and deri'ati'es. There are man% stock exchanges located in 3ust a&out e'er% countr% around the world. American markets are undou&tedl% the largest, &ut the% still represent onl% a fraction of total in'estment around the glo&e. The two other main financial hu&s are 4ondon, home of the 4ondon Stock ,xchange, and ;ong <ong, home of the ;ong <ong Stock ,xchange. The last place worth mentioning is the o'er the Counter market, &ut the term commonl% refers to small pu&lic companies that don@t meet the listing reAuirements of an% of the regulated markets, including the
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1asdaA. The BTC66 is home to penn% stocks &ecause there is little to no regulation. This makers in'esting in an BTC66 stock 'er% risk%.
?.+ #rice C!an e on Stock: Stock prices change e'er% da% as a result of market force. 6% this we mean that share prices change &ecause of suppl% and demand. I more people want to &u% a stock (demand) than sell it (suppl%), then the price mo'e up. Con'ersel%, if more people wanted to sell a stock than &u% it, there would &e greater suppl% than demand, and the price would fall. 0nderstanding suppl% and demand is eas%. )hat is difficult to comprehend is what make people like a particular stock and dislike another stock. This come down to figuring out what new is positi'e for a compan% and what new is negati'e. There are man% answers to this pro&lem and 3ust a&out an% in'estor %ou ask has their own idea and strategies. That &eing said, the principal theor% is that the price mo'ement of stock indicates what in'estors feel a compan% is worth. 7on@t eAuate a compan%@s 'alue with the stock price/ The 'alue of a compan% is its market capitalization, which is the stock
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price multiplied &% the num&er of shares outstanding. To further complicate things, the price of a stock does not onl% reflect a compan%@s current 'alue, it also reflects the growth that in'estors expect in the future. The important factor that affects the 'alue of a compan% is its earnings. ,arnings are the profit a compan% makes, and in the long run no compan% can sur'i'e without them/ It makes sense when %ou think a&out it. If a compan% ne'er makes mone%, it is not going to sta% in &usiness. 5u&lic companies are reAuired to report their earnings four times a %ear (Bnce each Auarter). )all street watches with ra&id attention at these times, which are referred to as earnings seasons. The reason &ehind this is that anal%sis &ases their future 'alue of a compan% on their earnings pro3ection. If a compan%*s results surprise (are &etter than expected)@ the price 3umps up. If a compan%@s results disappoint (are worse than expected), then the price will fall. Bf course, it@s not 3ust earnings that can change the sentiment towards a stock (which, in turn, changes its price). It would &e a rather simple world if this were the case during the dotcom &u&&le, for example, dozens of internet companies rose to ha'e market capitalizations in the &illions of dollars without e'er making e'en the smallest profit. As we all know, these 'aluations did not hold, and most internet companies saw their 'alues shrink to a fraction of their height, still, the fact that
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prices did mo'e that much demonstrates that there are factors other than current earnings that influence stocks. In'estors ha'e de'eloped literall% hundreds of these 'aria&les, ratios and indicators. Some %ou ma% ha'e alread% heard of such as the priceLearnings ratio, while other is extremel% complicated and o&scure with name like mo'ing a'erage con'ergence di'ergence. So, wh% does stock price change the &est answer is that no&od% reall% knows for sure. Some &elie'e that it is not possi&le to predict how stock prices will change while other think that &% drawing charts and looking at past price mo'ements, %ou can determine when to &u% and sell. The onl% thing we do know is that stocks are 'olatile and can change in price extremel% rapidl%. The important things to grasp a&out this su&3ect are the following? Suppl% and demands in the market determine stock prices. Theoreticall%, earnings are what effect in'estors* 'aluation of a compan%, &ut there are other indicators that in'estors use to predict stock price. Eemem&er it is in'estor sentiments, attitudes and expectations that ultimatel% affect stock prices. A 5rice time the num&er of share outstanding is the 'alue of a compan% is the 'alue of a compan%.
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There are man% theories that tr% to explain the wa% stock price mo'e the wa% the% do. 0nfortunatel%, there is no on. theor% that explains e'er%thing. ?. . 2uyin Stocks: 2ou ha'e now learned what a stock is and a little &it a&out the principles &ehind the stock market, &ut how do %ou actuall% go a&out &u%ing stocks. There are two main wa%s to purchase stock. . 7irect in'estment plans and 7i'idend in'estment plans M. 0sing a 6rokerage . 7i'idend rein'estment plans (7EI5s) and direct in'estment plans (7I5s) are plans &% which indi'idual companies, for a minimal cost allow shareholders to purchase stock directl% from the compan%. 7rips are a great wa% to in'est small amount of mone% at regular inter'als. M. 0sing a 6rokerage is the most common method to &u% stock is to use a 6rokerage/ 6rokerages come in two different fla'ors. 9ull/ser'ice &rokerage offer
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%ou (supposedl%) expert ad'ice and can manage %our accountS the% also charge a lot. 7iscount &rokerage offer little in the wa% of personal attention &ut are much cheaper. At one time, onl% the wealth% could afford a &roker since onl% the expensi'e, full/ser'ice &rokers were a'aila&le. )ith the internet came the explosion of online discount &rokers. Thanks to them nearl% an%&od% can now afford to in'est in the market. =eadin a Stock Ta&le The following image gi'es a correct picture on stock trading?
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Column l? It refers the compan% name, this column lists the name of the compan% or special s%m&ols or letter following the name, it is common stock. 7ifferent s%m&ols impl% different classes of shares. 9or example 7hanalekshmi 6ank it is uses $7;16A1<(. Colum M? Series refers t%pe of the stock or share. It means it is ,O for eAuit% share. Column N? 6id Auantit% means the Auantit% of share a'aila&le or num&ers of share in the present condition in the market. This figure shows the total num&er of share traded for the da%, listed in hundreds. To get the actual num&er traded add $KK( to the end of the num&er listed. Colum I? It is the rate of a'aila&le on the present market condition and it 'aries as per time to time. It mean if %our want to sell %our share onl% in the 6idrate.
Column "= #? It@s the rate the &u%ers Auoted as per their rate, simpl% e.g. if the
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749 ask rate or Es@ N N on the current market citiu'ation for Auantit% of MMN. It means the purchase of share or stock onl% present Askrate. colum F? It is the percentage of shares, it is calculated the pre'ious da% closing rate and current rate calculations. The percentage of share is helpful the share holder to 0nderstand increase or decrease of stock. Column H? It is the 'alue of opening price of the da%. Column !? This indicated the price range at which the stock has maximum throughout the da%, these is the maximum price that people ha'e paid for the stock. Colum K? It is the lowest price of the share under the current market condition. Column = M? lt is the list of the Total 6u%er and sellers in the market. 4arge
num&er of 6u%ers in the market the stock 'alue will increase at a high price. If large num&er of sellers in the market the stock 'alue will decrease at a low price. In some time the market culti'ation is large seller the price of share not will decrees the stock. )e ha'e alread% discussed the -ail (India) who is one of the most profits making compan% under the pu&lic concern. In the stock exchange figure shows the upward and down trends of stock market with -ail. In Bcto&er the market decrease and also decrease the 'alue of -ail.
BSS IT MISSION
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5erson interested in &u%ing or selling listed securities ma% &e classified as two t%pe In'estor, Speculators. In'estors are mainl% interested in income from their in'estment in securities, while speculators are mainl% interested in the profit which the% make on account of mo'ement in prices. In stock market mainl% deals speculations on )all Street, the &ull and &ears are in constant struggle. If %ou ha'e not heard of these terms alread%, %ou undou&tedl% will as %ou &egin to in'est. ?., Types of Speculators or investors in stock market: 2ull? A &ull is speculators who expects and increase in price of a particular securit%. A &ull is agrees to &u% securities (without an% intention of taking actual deli'er%) with a 'iew to selling them in the future at a profit. Tendenc% of a &ull is to throw his 'ictim upward. A &ull market is when e'er%thing in the econom% is great or high position or -75 is growing. 6ull market cannot last fore'er though, and sometime the% can lead to dangerous situations if stocks &ecome o'er'alued. 2ear? A &ear is a speculator who expects a fall in the price of certain securit%. A &ear is agrees the sell in the hope that in future the price will fall and he will make a profit of purchasing, at a lower price the securities to &e sold. Tendenc% of &ear to throw his 'ictim downward. It is the situation of when the econom% is &ad,
BSS IT MISSION
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recession is looming and stock prices are falling. 6ear market make it shogun for in'estors to pick profita&le stocks. Bne solution to this is to make Tor.% when stocks are falling using a techniAue called short selling. )hen the tread of market is toward is falling price, the market is called &earish. 8ame 9uck? In case a &ear is not in a position to fuIfil his commitment to sell securit% &ecause the securit% is not a'aila&le and the other part% is not prepared for carr%ing o'er the transaction, it is said that the &ear is struggling like a lame duck. Sta ? A stage is e'er% cautions speculator on the stock exchange. ;e neither sa%s nor sell securities &ut simpl% applies for share of new, compan% and the share is allotted he hopes to sell these share at premium as soon as the% allotted. ;e sells the share &efore he is reAuired to pa% the allotment mone%. In case the selling price is less than his purchase price, he suffers a loss.
?.- Follo*i n t!e are top companies: The Eeal "KK Eanking comprised NKKK listed (on 6om&a% Stock ,xchange and or 1ational Stock ,xchange) and unlisted whose annual audited financial data were a'aila&le with "tr Bcto&er MK M. This %ear, for the first time, consolidate num&er
BSS IT MISSION
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were taken for companies that came out with consolidated 5rofit and 4oss accounts and 6alance sheet(com&ining their su&sidiaries@ and associates@ num&ers). 7ata used were for financial %ear MK MS for companies with 92 ended N +arch
MK M or NK :une MAAg. 9or companies that changed their 92, and had a fiscal %ear of more or less than M months, data has &een annualized to M months. ,ach data has &een annualized to M months. ,ach data was computer in prowess using certain set definitions (explained &elow). 9or all stock market/related data and computations, 1S, data were taken for companies listed on &oth 6S, = 1S,. The rankings are &ased on the sum of Total income and total assets. To eliminate difference in nature of manufacturing and ser'ices companies ( +anufacturing firms are assets hea'%S whine ser'ices firm are income/hea'%).Two lists ha'e &een created for non/ financial companies and financial ser'ice companies.
9efinitions: Total 7ssets: This includes next fixed assets, in'estment current assets (in'entor%, cash and &ank &alance, and total recei'a&les), deferred tax assets and loans and ad'ances. It excludes deferred re'enue expenditure. In the case of &anks it also
BSS IT MISSION
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includes ad'ance. 9or housing finance companies, housing loans from a part of total assets. Current lia&ilities and pro'ision ha'e not &een included. Total Income: Includes sales and income from financial and trading ser'ices. It is net of prior/period and extraordinar% income. Items such as profit or loss from sale of assets such as land and &uilding, 5lant and +achiner% excluded. 7i'idend recei'ed &% the companies or interest recei'ed on In'estments and interest recei'ed from treasur% assets excluded from non/financial companies and included for financial companies. 'peratin #rofit: ,xcess of income o'er total expenses &efore making pro'ision for tax. /et #rofit: ,xcess of income o'er total expense after making pro'ision for tax, net of extraordinar% income and expenses. =eturn =atios: 6ased on a'erage assets, a'erage capital emplo%ed and a'erage net worth, respecti'el% to account for change that ha'e happened o'er time. The a'erages are computer for a two a period. Market Cap: The product of the closing share price and the num&er of outstanding ,Auit% share on N st march MK M.
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S!are!older returns: Includes &enefits such as di'idends, ad3usting share prices for stock splits, rights and &onuses. /et #rofit: 1et profit is expressed as a percentage of total income Earnin per S!are "E#S$: ,arning per share is an indicator showing the
profita&ilit% of a compan%/ ,5S is arri'ed at &% di'iding compan%@s net profit &% num&er of shares. ,5S R (1et profit L1um&er of share)
Comparison of E#S Compan% 7 2 C Capital (9>? 1 crore 1 crore 1 crore Es. K) 1et profit 1 crore +4 lak!s 2 crore ,5S =s. 14 =s. + =s. 24
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9rom the a&o'e ta&le we can see that compan% C is showing more profita&ilit% than others. It is assumed that a low 5L, share is &etter than a high 5L, share? in other words higher 5L, ratio indicated expensi'e 'aluation of the stock. Though the 5L, ratio is good tool it does not gi'e complete picture of the compan%. 5rice ,arnings Eatio? It is common 'aluation method used &% anal%sts to 'alue a compan% or a market as a whole. ;ere the current market price of a particular share is compated with the earning per share (,5S) of that particular share. 5I, is also known as Xprice multiple* or @earning multiple@. 5L, ration? (Current +arket price /? ,arning 5er share)
Comparison of #I2 ratio: Compan% Capital Face value s!are /o of s!are /et profit Market price E#S @ +4 lak!I14 lak!
BSS IT MISSION
A 1 Crore =s. 14 14 lak! +4 lak! =s. .4 +
6 1 Crore =s. 14 14 lak! +4 lak! =s. 04 +

Page 60
#IE @ M#IE#S
.4I+@12
04I+@-
9rom the a&o'e ta&le we can see that stock 6 is less expensi'e and is worth in'esting when compared with stock A. In the following are the Short ke%s used 1A? 1ot A'aila&le 04? 0nlisted 4A? 4isted After N
st
march MK M
Indian Eailwa% 9inance Corp. and -+E Infrastructure fund the plan outla% of the Eailwa%s and the pro3ects of -+E -roup, respecti'el%. As such the% cannot &e compared with &anks and other financial institution. TOP 50-Non Finance Co panie!
"an # $01 $ 1 2 3 4 1 2 3 4 Co pany Tota% &nco e ' Tota% (!!et ("!) Crore) 463615-4 0 407160-0 3 304481-5 6 270469-8 0 Tota% &nco e(" !) Crore) Tota% (!!et! ("!) Crore) 145890-5 6 247168-3 5 188594-3 8 121682-7 9 Operatin g pro*it ("!) Crore) NP ("!) Crore) "OC E (+) "ON , (+) -ar#et Cap ("!) Crore)
(eliance In$ )trie) 0il an$ Nat ral ,a) Corp In$ian 0il Corp Tata 'teel
BSS IT MISSION
317724-8 4 159991-6 8 115887-1 8 148787-0 1
10495-67 1845-34 25834-63 15360-9 0 42471-13 19195-0 9 18968-05 8883-82
2-62 10-14 22-43 12-24
4-14 14-98 22-54 28-71
46240-28 239964-8 9 166874-8 3 15042-9
Page 61
5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26
5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26
*1arat &etrole m 3in$ )tan &etrole m NT&C Tata .otor) 3in$alco In$ )trie) (eliance Comm nicatio n) 'teel 5 t1orit! of In$ia *1arati 5irtel 6ar)en an$ To 2ro *1arat 1ea#! Electrical) 'terilite In$ )trie) ' 7lon Ener8! E))ar 0il &o9er ,ri$ Corp .a1in$ra : .a1in$ra "6/ ,ail (In$ia) ;ipro In$ian /armer<) fertili7er Coop >'; 'teel Tata Con) ltanc! 'er#ice Tata &o9er
BSS IT MISSION
202008-7 0 185576-5 4 164269-4 0 154713-5 2 134103-0 8 129418-2 9 108947-0 0 104546-6 0 98772-50 79716-06 69682-64 65423-01 64430-09 61423-68 60995-39 59473-08 55630-74 54466-90 53982-93 52014-92 50878-60 50228-53
147228-7 2 135863-2 3 47727-10 80035-00 65910-29 27199-20 53083-24 37831-84 41959-79 30972-87 24570-71 27616-69 41121-59 7073-13 29005-76 10418-79 26080-82 26446-80 33428-14 17547-00 28162-02 18259-33
54779-98 49713-31 116542-3 0 74678-52 68192-79 102219-0 9 55864-01 66654-76 56812-71 48743-19 45111-93 37806-32 23308-50 54350-55 31981-63 49054-29 29549-92 28020-10 20554-79 34467-91 22716-58 31969-20
4782-41 4121-95
713-03 558-49
3-16 3-50 7-17 4 16-28 0-11 10-16 19-41 21-57 11-68 N5 17-66 4-86 43-76 4-67 11-16 13-63 15-69 26-50 5-32 40-24 34-03 8-75
5-20 5-10 11-51 4 34-19 0-28 17-51 23-35 30-51 21-50 N5 18-80 9-99 4 13-47 13-34 28-35 20-57 19-81 30-30 8-37 40-65 34-1219-70
13595-79 9117-54 148294-6 8 8110-48 8849-91 36089-51 39837-71 118782-3 6 39323-08 73944-44 25335-76 6345-28 8717-10 40236-52 10696-98 28394-31 31153-80 36019-47 =6 4355-43 52703-07 17018-68
14166-40 6571-90 2322-64 3581-63 4 2502-70 46-74
11012-37 6243-98 11028-68 6022-65 14009-37 7757-24 6039-83 4438-77 6606-27 2641-80 997-54 5793-31 2668-12 2260-90 4504-00 835-89 4474-11 1907-14
40000-48 1872-26 5873-88 5283-99 5446-00 1959-48 2207-09 6735-22 4239-22 4509-27 2867-45 3836-70 320-15 450-66 4776-69 1738-46
Page 62
27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49
27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49
(eliance Infra)tr ct re 5$ani Enterpri)e ITC ,ra)im in$ )trie) Info)!) Tec1nolo8ie) Cairn In$ia 5$it1!a *irla N #o .ar t1i ' 7 +i In$ia >a!apra+a)1 5))ociate) >et 5ir9a!) (In$ia) 'tate Tra$in8 Corpn of In$ia ?i$eocon In$ )trie) Tata Tele 'er#ice) 3i$ )tan =ni le#er >in$al 'teel an$ &o9er Tata Comm nicatio n =nitec1 E))ar 'teel Tata C1emical) .."C I)pat In$ )tr! 52en 0ff)1ore & n@ 6i!o$
48733-26 48297-59 46046-54 45281-70 44783-00 42256-16 41938-00 38257-20 37016-29 36988-41 33622-86 33036-81 32957-46 31473-43 31225-94 30717-63 29608-13 28970-27 27793-89 25261-16 23607-32 23293-52 23148-40
14020-32 28163-77 25576-89 20894-57 22620-00 2615-25 14834-01 24195-60 5431-57 13295-29 23511-96 12123-65 6545-08 22819-44 11843-56 10561-00 3315-45 12828-53 12458-02 8448-49 9158-49 3452-71 11988-63
34712-94 20133-82 20469-65 24387-13 22163-00 39640-91 27104-49 14061-60 31584-72 23693-12 10110-90 20913-16 26412-38 8653-99 19382-38 20156-63 26292-68 16141-74 15335-87 16813-10 14448-83 19840-81 1159-77
2040-10 1148-20 5512-69 4719-51 7668-00 1299-40 813-09 2388-30 1993-25 4660-80 328-17 2487-32 360-42 3171-30 5275-77 2006-78 2033-45 18-7-57 1688-04 6730-31 383-42 2305-97 654-92
1129-79 489-43 32774-0 3 2551-91 5771-00 837-20 4674-85 1143-60 521-05 4 2369-85 108-11 833-75 4 2059-14 2357-31 2991-17 365-36 1195-51 299-51 793-88 4360-47 4989-13 427-77 31-05
5-50 5-41 24-82 16-70 36-01 2-50 46-64 11-77 2-62 4 15-70 17-82 6-42 4 20-11 129-3 2 24-20 4-26 11-49 3-06 8-51 43-87 4 12-26 2-68 0-82
7-13 19-03 24-88 24-60 36-01 2-69 4 14-71 12-57 8-94 4 74-67 17-82 11-25 4 40-25 129-3 2 54-85 5-17 27-01 6-37 18-65 43-77 4 40-04 33-47 1-19
11626-88 6600-49 69769-78 1450429 75836-97 34917-65 4227-44 22530-65 9955-76 1462-07 670-80 2000-81 =6 51772-06 18644-15 14772-97 5665-58 "6 3328-82 61770-28 1326-35 1505-85 2761-69
BSS IT MISSION
Page 63
50
50
0il In$ia
21728-04
8199-49
13528-55
3895-18
2227-90
25-62
25-81
65
BSS IT MISSION
Page 64
TOP 50 Finance Co panie!

"an# $01$ Co pany Tota% Tota% (!!et 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 '*I ICICI *an+ & n@a2 national *an+ *an+ of *aro$a *an+ of In$ia Canara *an+ 3"/C *an+ I"*I *an+ =nion *an+ of In$ia 5Ai) *an+ Central *an+ of In$ia '!n$icate *an+ In$ian 0#er)ea) *an+ 3"/C 0riental *an+ of Commerce =C0 *an+ Citi *an+ 5lla1a2a$ *an+ 'tan$ar$ C1arte$ *an+ 3'*C Corporation *an+ In$ian *an+ 'tate 2an+ of ("!) Crore) 1418565-95 548235-73 276633-96 250832-00 246280-31 239730-84 203418-55 187510-46 174739-35 161424-26 159394-31 140743-22 132359-38 127842-31 122514-71 121275-72 115817-40 106556-91 106370-97 103688-28 93979-86 91938-09 83277-60 Tota% Crore) 133740-20 64984-35 23021-54 18394-33 19493-05 19596-61 19926-83 13444-02 13401-69 13690-30 11541-33 10487-72 11285-97 11710-34 9932-10 9279-81 10517-70 8717-11 8878-80 9056-27 7087-24 7696-11 6494-47 6435-70 6582-50 6156-51 Tota% ("!) Crore) Operatin ("!) 11169-2 5 3011-78 3129-81 2327-64 3009-41 1891-63 2247-98 753-80 1708-38 1655-57 570-77 913-36 1257-29 1795-12 907-85 482-38 2159-74 777-98 1905-28 1291-11 808-86 911-74 492-11 531-54 1443-98 653-45 6-92 2-02 15-34 9-96 12-42 9-12 10-78 1-48 11-48 7-75 7-38 10-28 10-66 2-09 10-02 6-19 10-09 12-09 11-66 7-70 9-67 14-18 7-27 16-72 6-53 21-86 18-89 24-74 16-46 17-14 8-09 21-24 17-79 9-12 19-64 20-93 13-47 13-78 14-02 20-70 13-62 20-44 13-13 17-54 14-57 16-67 NP ("!) "OC E (+) "ON , (+) -ar#et Cap ("!) Crore) 67748-07 37048-89 12973-12 8536-59 11522-35 6793-70 41406-89 3290-49 7417-66 14896-92 1374-08 2508-60 2484-29 40170-58 2858-44 1321-21 =6 1733-20 =6 =6 2590-53 3235-71 =6 =6 16596-71 2192-20
ANALYSIS OF STOCK &nco e ' FINANCIAL &nco e("!) (!!et! g MARKET pro*it Crore)
Crore) 1304825-75 81441-95 483251-38 253612-42 232437-67 226787-26 220134-26 183491-72 174066-44 161377-66 147733-96 147252-08 130255-50 121073-41 116131-97 112582-61 111995-91 105299-70 97839-80 97492-17 94632-01 86892-62 84241-98 76783-13 69665-46 68253-81 68567-17 31894-64 17617-90 13898-66 15125-87 14499-36 12569-89 11290-30 10550-78 9994-70 8890-64 8127-45 8758-25 10221-48 8100-48 7123-20 6324-31 6342-42 5637-33 5078-20 5235-01 5372-75 5058-51 5192-94 6088-51 4481-96
3!$era2a$ 'tate *an+ of 79101-16 BSS IT MISSION &atiala &o9er /inance Corp5n$1ra *an+ 74836-31 74723-68
7-94 Page 18-20 65 2-63 14-82 13-85 18-89
./are /o%0in g "an#

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 Temptation foo$) Bal!ani 'teel) & n@a2 C1emical) : Co >ai Corp E$ comp 'ol tion) 6anco In$ )trie) .a9ana ' 8ar) 5$ani Enterpri)e) >In$al 'teel an$ &o9er "i#i<) 6a2oratorie) >in$al "rillin8 an$ 6an$) I./5 *ala@i "i)tillerie) *an+ of In$ia
Top 50 1y ./are /o%0er "et2rn 3 year 1 year Co pany ret2rn! (+)

1928-86 680-99 593-82 452-21 439-42 412-55 401-56 344-25 222-63 152-50 131-80 109-60 100-39 91-52 89-68 86-42 82-07 69-64 68-54 62-83 60-49 59-88 59-75 56-47 55-50 53-43 52-64 50-85 45-65 45-04 44-44 43-07
3 year! EP. (+)

21-86 0-33 10-25 1-54 76-12 4-61 417-46 13-37 99-35 65-05 16-29 112-26 44-12 57-26 329-00 107-50 10-71 0-12 1-97 3-55 15-15 4-33 30-09 215-60 24-67 40-79 97-08 7-13 3-53 41-65 0-43 14-12
ret2rn! (+)
482-09 680-99 11-32 484-44 445-37 461-43 4014-56 55-32 441-67 425-36 430-95 109-60 445-29 410-46 47-68 440-40 43-58 473-07 51-82 437-90 481-38 455-23 444-43 21-75 436-79 424-27 432-38 473-29 437-27 433-72 455-06 413-30
EP. gro4t/(+)
636-66 468-27 443-53 497-21 457-68 3-79 4162-16 142-35 453-00 425-95 9-36 823-19 12-15 200-06 36-61 70-58 192-66 498-95 490-83 486-98 33-10 483-78 208-23 53-07 482-22 137-84 49-17 22-52 411-66 51-85 179-99 416-14 Page 66
'tate *an+ of *i+anar an$ >1a *1 )1an 'teel ,T6 >ai *ala@i Int Cent r! &l! 2oar$ (In$ia) EAi$e In$ )trie) &ra+a)1 In$ )trie) E#ere)t Banto C!lin$er 'reeram Tran)port /in'tate *an+ of Tra#ancore 'e)a ,oa *1arti 5irtel (eliance In$ )trie) *inani In$ )trie) 3at) n 58ro &ro$ ct) Tata &o9er (eliance Nat ral (e),oo$ Cear In$ia
BSS IT MISSION
33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50
NT&C *a!er Crop) 'cience =nion *an+ io In$ia ,5I6 (In$ia) 3ero 3on$a .otor) 'tate Tra$e In Corp of In$ia &o9er /inance Corp .a$ra) 5l mini m Ca)trol In$ia *1arat 3ea#! Electrical) (all!) In$ia ' n &1armace tical Int Ne)tle In$ia 'tate *an+ of In$ia 5)ian &aint) >ain Irri8ation '!)tem) >a8aran &ra+a)1an C1ettina$ Cement Corp
40-33 39-85 38-51 38-26 36-72 36-28 35-89 33-53 32-56 31-25 30-91 30-87 30-61 29-42 28-86 28-10 26-38 25-42
46-74 8-36 7-39 410-27 57-76 464-62 48-25 143-32 43-44 425-98 21-39 48-95 6-36 432-34 433-48 441-96 34-67 1-09
9-95 23-91 34-18 22-10 64-19 13-09 17-16 5-72 21-49 62-53 59-98 61-09 59-28 143-67 38-35 16-53 3-04 41-43
24-39 47-36 126-75 411-63 37-81 432-27 146-44 493-19 50-04 428-22 151-49 99-65 81316 93-81 44-51 7-84 474-82 90-83
"an#
Top 50 1y Pro*it! Net Pro*it Tota% Co pany 0il : Nat ral ,a) Corpn (eliance In$ )trie) 'tate *an+ of In$ia Tata 'teel *1arti 5irtel NT&C (eliance Comm nicaton 'teel 5 t1orit! of In$ia Info)!) Tec1nolo8ie) Tata Con) ltanc! 'er#ice "6/ 'terlite In$ )trie) (In$ia) N."C ;ipro ITC & n@a2 National *an+ ICICI *an+ of In$ia >in$al 'teel : &o9er ,5I6 (In$ia) 6ar)en : T 2ro ,ra)im In$ )trie) ("!) Crore) 19195-09 15360-90 11169-25 8883-82 7757-24 6571-90 6243-98 6022-65 5771-00 4776-69 4509-27 4504-38 4360-47 3836-70 3274-03 3129-81 3011-78 3009-41 2991-17 2867-75 2668-12 2551-91 &nco e ("!) Crore) 115887-18 15991-68 113740-00 148782-01 37891-84 4727-10 27199-20 53083-24 22620-00 28162-02 10418-79 24570-71 8448-06 26446-80 25576-89 23021-54 64984-35 19493-05 11843-56 26080-82 41959-79 20894-57 Net pro*it -argin 16-56 9-60 9-82 5-97 20-47 13-77 22-96 11-35 25-51 16-96 43-28 18-33 51-62 14-51 12-80 13-60 4-63 15-44 25-26 11-00 6036 12-21 Page 67
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
BSS IT MISSION
23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50
3in$ )tan =nile#er *an+ of *aro$a *1arat1 3ea#! Electrical) 3"/C *an+ 0il In$ia Citi *an+ 'e)a ,oa &o9er ,ri$ Corpn 'tan$ar$ C1artere$ *an+ Canara *an+ ' n &1armace tical Intl).a1in$ra an$ .a1in$ra In$ian 0il Corpn 3"/C Tata &o9er =nion *an+ of In$ia 5Ai) *an+ Bota+ .a1in$ran *an+ &o9er /inance Corpn5m2 @a Cement 3'*C 3ero 3on$a .otor) In$ian 0#er)ea) *an+ National 5l mini m ,reat Ea)tern '1ippin8 ( ral Electrification Corpn =nitec1 EI"4&arr! (In$ia)
2357-31 2327-64 2260-90 2247-98 2227-90 2159-74 1994-80 1907-14 1905-28 1891-63 1874-23 1872-26 1845-34 1795-12 1738-46 17038-38 1685-57 1527-90 1443-98 1370-72 1291-11 1284-39 1257-29 1247-29 1243-63 1237-04 1195-93 1166-04
22819-44 18934-33 30972-87 19926-83 8199-49 10517-70 5615-37 7073-13 8878-80 19596-61 4682-55 29005-76 317724-84 11710-34 18259-33 13401-69 13690-30 7953-69 6582-50 7643-21 9056-27 14398-92 11285-97 6013-08 4088-01 4913-89 3315-45 11681-12
10-33 12-65 7-30 11-28 27-17 20-53 35-52 26-96 21-46 9-65 40-03 6-45 0-58 15-33 9-52 12-75 12-31 19-21 21-94 17-93 14-26 8-92 11-14 20-74 30-42 25-17 36-07 9-98
ANALYSIS
Bne of the most profound and far reaching financial phenomenon the late twentieth centur% and the forepart of this centur% is the explosi'e growth in international
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financial transactions and capital flows among 'arious financial transactions and capital flow among 'arious financial markets in de'eloped and de'eloping countries. This phenomenon in international finance is not onl% a result of the li&eralization of capital market de'eloped and de'eloping countries and the increasing 'ariet% and complexit% of financial instruments. 6ut also a result of the increasing relati'it% of the de'eloping and de'eloped economies as de'eloping countries &ecome more integrated in international flow of trade and pa%ments. 7e'eloped economies like 0S and ,uropean Countries, ha'e &alance sheet pro&lem in the &anks where the% are sitting with huge 15A arising out of housing market. +oreo'er, these countries ha'e consumption &ased econom% main financed &% &anks through credit cards. As &anks are saddled with &ased assets, the% are affecting their econom%. +oreo'er the% ha'e de'eloped infrastructure in which the go'ernment cannot spent more. 1ature of the pro&lem in the de'eloped countries is so deep that it will take time, and immediate reco'er% ma% not &e possi&le. 7e'eloping economies like china and India, ha'e huge head room for de'eloping their infrastructure, and the go'ernments ha'e announced fiscal stimulus package for de'eloping their infrastructure especiall% china, which will create emplo%ment in the econom%. +oreo'er their &anks are not as &ad as inthe
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de'eloped countries. :o& losses are relati'el% less compared with de'eloped countries. +ore freedom in the mo'ing capital flow impro'es the allocation of capital glo&all% allowing resources to mo'e to areas with higher rates of return. Contraril%. Attempts to restrict capital flow lead to distortion of capital structure that is generall% costl% to the economies imposing the controls. Thus the &oost in international capital flows and financial transaction is an underwa% and to certain extent, irre'ersi&le process. Since the work from -ru&el on expounding the &enefits from international portfolio di'ersification, The relationship among the national stock markets has &een widel% studied. The relationship among different stock markets has great influence on in'estment &ecause di'ersification theor% assume that price of different stock markets do not mo'e together so that in'estors could &u% share in foreign as well national markets seek to reduce risk through glo&al di'ersification . International capital market and the increasing international portfolio in'estment ha'e importance implications for macroeconomic policies. )hile contri&uting to &uild up of foreign exchange reser'es, international portfolio in'estment can influence the exchange rate and could lead to appreciation of local currenc%. Thus, it has great influence on trade and fiscal im&alance among countries. Also, foreign
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portfolio in'estments are amena&le to sudden withdrawals and there for these ha'e potential for desta&ilizing an econom%. In the present condition of de'eloping countries e.g. 0S homeowner had &een using the increased propert% 'alue experienced in the housing &u&&le to refinance their hoe with lower interest rate and take out second mortgages against the added 'alue to use the fund for consumer spending. 6etween !!F and MKK# increased &% MIJ. Stock markets all o'er the world has crashed e'er since Index 1an sen /ikkei S1an ai FTSE 97H 9o* Fones SenseB ;igh )13+-.01 1-)44.)3 .120.40 .,+0.14 -1+1.+, 102,3.3. 2024).,, H Bct MK M 1+0)1.,) 324).)2 2432.22 0)....3 +41)..2 32+-.14 1---4 Change J :+1.,1 :03.,1 :.+.-0 :)+.)+ :)-.+4 :)+.1, :)2.+-
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35000 30000 25000 20000 15000 10000 5000 0

1i81 840ct412
As per the a&o'e ta&le we can understand, this crisis has put some go'ernments in to trou&le Iceland, a small ,uropean nation &ecome &ankrupt and approached other nations for financial aids@ +an% of the ,uropean nations approached I+9 and other international monitor% agencies for loans due to this financial crisis. After the independence, a multitude of social and political pro&lems ha'e stood in India@s wa% of realizing its true economic potential. ;owe'er, it has recentl% made
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tremendous strides in the economic field through &oth economic and political reforms. The most significant polic% should &e the opening of the econom% to foreign in'estment on 'er% li&eral terms for the first time in independent India@s histor%. The polic% soon the har'ested positi'e results as it industrial exports and foreign in'estment toda% are growing at the countr%@s fastest rate e'er. As now the glo&alization of capital flows has led to the growing rele'ance of emerging capital markets. India is one of the countries with an expanding capital market that is increasingl% attracting funds from the foreign countries. The Indian stock market &egan with the esta&lishment of Securities and ,xchange 6oard of India (S,6I) in !!H to frame rules and guidelines for 'arious operations of the stock exchange in India. It is compare Indian mone% market and 0S, 0S -75 is I trillion Y. That is, 0S is le'eraged nearl% N." times that of its -75 ( KKK & is trillion). 6ut when
considering le'erage &% India it is onl% less than one time to that of Indian -75. Bur hose hold le'erage is onl% oLo of the -75 compare to KKJ of 0S
householdS at same, Indian house hold ha'e sa'ings of MNoLo of our -75. Bur &anking s%stem is well structured and well regulated. Bur &ank@s le'erage ratio is K/ " when compared to 0S &ank@s NK/IK in all sense our financial s%stem is safe.
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Indian econom% has shown relati'el% &etter resilience to current economic crisis. 4ea'ing 7ecem&er Auarter which was an a&erration due to panic in the econom%, +arch Auarter has performed relati'el% &etter. 5+I and II5 dat showing signs of impro'ement. Inflation has fallen to near zero le'els, which gi'es enough head room for &anks to cut rate. Eural econom% which form ma3or part of India is 'irtuall% unaffected &% the slow down Indian electorates selected sta&le go'ernment which is going to &e the game changer for Indian econom%.
>I.I ,merging +arket 5erformance? /:an/ M 'pen S!an !ai /ikkei 1an sen FTSE 9o* 1-03.42 -331.21 1000-.22 00)0.42 -,,2.2+ #/April/ M Close 2.,. 3234 1,+00 0+4, -+40 =eturn 6 00.,) :).)2 21.0) :1..0 :).4.
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/IFTA
23.).)
0)1-
0+.,2
20000 18000 16000 14000 12000 10000 8000 6000 4000 2000 0 ' 1an81ai Ni++ei 3an8)en8 /T' E "o9 14>an412 645pr412
Stock market is said to &e the &arometer of the econom%, &ut due to integration of glo&al econom%, market tend to mo'e up or down s%nchronousl% for short term, irrespecti'e of the econom%, &ut other longer term period, each market has its own wa% and tend to outperform or underperform &ase on the econom%. ,merging market like china and India are likel% to outperform other market due to their inherent strength, &ut de'eloped markets like 0S and 0<, will take time for
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reco'er% since their pro&lem is structural which will not get sol'ed in shorter term@ +arket has fallen so much that e'en a small pull &ack looks significant in 5ercentage terms. There is alwa%s consolidation phase &etween 6ear and 6ull market which is likel% to happen in emerging markets including India, &efore sa% new &ull market starts. It is time to remem&er the immortal Auotes of legendar% in'estor Sir :ohn Templeton, who sa%s $6ull markets are &orn on pessimism, grow on skepticism, mature on optimism, and die on euphoria(. It show the comparison and how our econom% sufficient growth and economic strength. The new found interest in the Indian Stock +arkets and intriguing Auestion is how far India has gone down the road towards international financial interaction and whether the linkages exist among the stock indices of India and world@s ma3or stock indices. To answer these Auestions, we examine the
interrelationship &etween Indian stock markets and ma3or de'eloped stock markets and stud% the underl%ing mechanism through which the Indian stock indices interact with international stock indices &% anal%zing empiricall% the long run the pair wise, multiple and fraction co integration relationship ad short /run d%namic -ranger causalit% linkage &etween the India stock market and the world ma3or de'eloped markets including 0S,0< and :apan in the post li&eralization period.
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)e conclude that India stock market is integrated with mature markets and sensiti'e to the d%namics in these markets in a long run. In a short run, &oth 0S And :apan -ranger causes the Indian stock market &ut not 'ice 'ersa. In addition to that the Indian stock index and the mature stock indices form fractionall% co integrated relationship in the long run with common fractional non stationar% components and find that the method is the &est re'eal their co integration relationship. =esearc! Anal%sis and interpretation, Eesearch of in'estors /MKK In'estors Inter'iew was also held with existing market condition of in'estment The stud% region/ Tri'andrum Anal%sis and interpretation is &ased on the sur'e% conducted &% the researcher. According to the responds getting from the respondents the researched make the anal%sis. The &reak of samples according to sex of the respondents is
Fi ure ?I.I
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)e can see that the male in'estor is more than female in'estor , in this here the reason &ehind is that the researched was conducted an pre stud% &efore the pro3ect work started. In this research we can see that mostl% the males decision maker. That@s wh% this there the research gi'e more preference of male candidates.
The in'estor are Income wise Income #er year /um&er of =espondent
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J2 lak!s 2.+:).+ ).+:0.+ 0.+:+.+ K+.+ Total
+)) 03 )2 2244
The awareness of In'estment 5eriod and Eeturns?
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Investors J . mont!s J 12 mont!s J 1- mont!s J 20 mont!s K20 mont!s Total
/um&er of =espondents ,+ +1 )2 22 24 244
In this research mostly prefer the time return with in short period of six month.It show nobody want to wait for a long time get thw return from their investments
Commodity EBc!an e Market: Commodities are more than what %our think the% are. Almost e'er%thing %ou see around is made of what market considers commodit%. A commodit% could &e an article, a product or material that is &ought and sold. It could &e an% kind of
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mo'a&le propert%, exceptiona&le claims, mone% and securities. commodit% trade form the &ack &orne of world econom%.
Commodity eBc!an e in India: Commodit% exchange is common platform where market participants from 'aried spheres trade in wide spectrum of commodit% deri'ati'es. In simpler terms one can determine the price of contracts on a current date, for goods to &e transacted in future. There are some Ml commodit% exchanges in India. ;owe'er most of them are regional, off line (non screen/&ased) and commodit% specific, hence these are inoperati'e. Significantl% the go'ernment has recentl% allowed four national le'el multi commodit% exchanges to trade in all permitted commodities.
Follo*in are commodity eBc!an e in India /ation Multi:commodity EBc!an e in India "/MCE$
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1ational +ulti/commodit% exchanging India (1+C,) was first to get national status in lndia@ It is promoted &% commodit% rele'ant institutions like C)C (central warehousing corporation), 1A9,7 (national Agricultural co/operati'e marketing federation of India).
/C9EH 1ational commodit% and 7eri'ati'es ,xchange, purses like chan, urad, fur are most acti'el% trade here. Bother commodities like 3eera, pepper, menthe oil, guar and wheat etc. are acti'el% traded. MCH +ulti commodit% ,xchange of India 4imited (+CU) formed in MKKN. The exchange has de'eloped its reputation for trading in &ullion, crude oil and menthe oil and &ase metals. These are the three national commodit% future market exchange in India. The 9uture +arket commission (9+C), which is under the central -o'ernment super'ises and regulates the working of all these commodities markets. %lo&al Commodity Markets
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/A2'T 1ew 2ork 6oard of Trade 126BT) is the world@s largest commodities exchange for Coffee, Sugar, cotton and 9rozen concentrated orange :uice. The exchange was founded as 1ew 2ork cotton ,xchange in HFK. 126BT also facilitates trade in foreign currencies and deri'ate indices for eAuities. 8ME 4ondon +etal ,xchange trades in +etals and non ferrous metals like alluminium, copper, lead, nickel tin and zinc, consumers as well as producers of metals use the official prices of 4+, for their long term contract pricing there are o'er IKK 4+, appro'ed warehouse in some NM location co'ering 0SA, ,urope, the middle and the far east. ;as &oth open outcr% as well as electronic. T'C'M Tok%o Commodit% ,xchange (TBCB+) is the largest exchange in :apan and second largest commodit% exchange in the world for futures and options. Crude oil, gasoline, kerosene, gas oil, gold, sil'er, aluminum, platinum and ru&&er are the commodities that are acti'el% traded. In India commodit% futures market has had along and cheAuered histor%. 7espite the huge potential, this market has not performed as expected. The commodit% market in India comprise of all palpa&le markets that we come across in our dail% li'es. Such markets are social institutions that facilities exchange goods for mone%. In Indian commodit% market su& classified in two one is wholesale +arket, another is Eetail market.
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FINDINGS
;ere is the stud% is take to know the financial anal%sis of stock market. The in'estment methods In'estor in'est a specific amount of a continuous period, at a regular or one time in'estment. In stock market 'olatile and down market is &etter to in'est in s%stematic or an in a'erage method so that we can limit the loss of &ulk in'esting at the same time, well not miss amd opportunit% to make gains. The market situations are changed the market conditions, such as S,6I, E6I, -o'ernment polic% etc. we should proper anal%sis the preset condition and expect future condtions &efore in'esting the mone%. 9ollowing are the main factors stock market It is &ase India is &etter positioned among emerging markets and econom% &ased on local consumption. India still a de'eloping countr% whose -75 is expanding. The in'estor in'ests on stock market with in short time to get his returns as per the market situation. In long term gain we preferl% purchase or in'est in gold &ecause of the gold its 'alue will racing nature at a long period and easil% liAuidated as cash.
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,'en though it is mainl% used a risk offloading. Itcan also alternati'e gains as preferred. The market changing within seconds, factors such as the national economic growth, inflation le'el and monitor% policies, &alance of trade le'els and treds, 6udgets etc. 6% using the Auestionnaire the rearche found that there is relationship &etween in'estor and is also optimistic mind and it will dangerous the time of market down situations.
CHAPTER VI
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SUGGESTIONS AND CONCLUSION
SUGGESTIONS -lo&al meltdown and high 'olatilit% market confused a&out %our in'estment and is &ased on %ou to help with stock market people or &rokers. 0na'aila&ilit% of the market tends or conditions it is need to a &etter in'estment the in'estor need guidelines from stock markets.
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The understanding of stock ta&le how to purchase and sells of share, the high low price and how market to get up index etc. should know a&out the in'estors. If in'estors periodical get interest on their in'est it &etter in'est in MUTUAL FUNDS its get &oth &etter earning and tax relief. It in'ests for a longtime it is &etter to purchase 6luchip companies share or gold, it has medium risk factor and the in'estment is safe.
CONCLUSION
Stock means ownership as an owner %ou ha'e a claim on the asset and earning of the compan% as well as 'oting right with %our share. Stock markets are places where &u%ers and sellers of stock meet trade. The 12S, are the most important exchange in India. Stock price change according to suppl% and demand there are
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man% factors influence price, the most important of which is earnings. Stock is eAuit%, &onds are de&t, and &ondholders are guaranteed a return on their in'estment and ha'e a higher claim than share holder. This generall% wh% stocks are considered risker in'estments and reAuire a higher rate of return. If %ou can lose %our in'estment with dealing stock market or get a lot of mone% from %our in'estment in the right compan%. To &u% the stocks %ou can either use a &rokerage or di'idend in'estment plans, stacka&le actuall% not that hard to read once %ou know what e'er%thing stand for .+ainl% &ull market and &ear market is made on stock market. It is the onl% the stud% was conducted to determine the stock market anal%sis Indian stock market is wide range, it affect all decision of our econom% taken on stock market to financial crisis .The stud% &ased on stock market.
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BIBLIOGRAPHY
2usiness *orld : (The ranking made &% M 1o'em&er MK M ,dition) CS S!in : (International transmission of stock market mo'ements
:ournal of stock market) ( !!M)
Financial Mana ement policy : 5rassanna Chandra (+c-raw ;ill 5u&lishing Compan%) (MKKF)
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Financial Mana ement : (E< 1air A< 6anaer3ee, >< Agarwal) +eerut? 5ragati 5rakashan( MKKM) Infoline plus : A regular information 9eatures of Cap stock and Securities (India) p't 4td (+a% MKKH)
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ANNEXURE
2787/CE S1EET 'F C7#ST'CD SECU=ITIES

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Mar 2012 SOURCES OF FUNDS :

Share Capital Reserves Total E!"it# Share $arra%ts E!"it# 'ppli(atio% )o%e# Total Sharehol+ers F"%+s )i%orit# -%terest Se("re+ .oa%s U%se("re+ .oa%s Total .oa% F"%+s /oli(# 0ol+ers F"%+ Other .ia1ilities Total .ia1ilities
Mar 2011
Mar 2010
(in crores)
22.84 388.88 &.&& &.&& 4**.,2 3 .*5 4&.83 &.&& 4&.83 &.&& 3.68 4 5.38
(in crores)
22.84 385.28 &.&& &.&& 4&8.*2 35.,5 3,. 3 &.&& 3,. 3 &.&& 3.52 485.32
(in crores)
22.53 36 .25 &.&& *.88 3 3.66 33.32 *&.56 &.&& *&.56 &.&& &.&& 43,.54
'//.-C'T-ON OF FUNDS :
.oa% 2 No%3C"rre%t 'ssets Fi4e+ 'ssets 5ross 6lo(7 .ess: '(("8"late+ Depre(iatio% .ess: -8pair8e%t o9 'ssets Net 6lo(7 .ease '+:"st8e%t Capital $or7 i% /ro;ress -%vest8e%ts C"rre%t 'ssets<.oa%s = '+va%(es -%ve%tories S"%+r# De1tors Cash a%+ 6a%7 6ala%(e .oa%s a%+ '+va%(es &.&& , .*8 2& . 8 **3.8* &.&& 82.8* 26*.53 *24.6* &.&& **,.6, 268.32 *5,.5* ,.2& 64.*4 &.&& 33.&6 &.&& *6. 4 ***.,, &.64 5&.6* &.&& 4&.&3 &.&& 8.2& , .88 84.&3 36.,* &.&& 4,.32 &.&& 2.83 *3,.4 &.&& &.&& &.&&
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Total C"rre%t 'ssets .ess: C"rre%t .ia1. = /rovisio%s C"rre%t .ia1ilities /rovisio%s Total C"rre%t .ia1ilites = /rovisio%s Net C"rre%t 'ssets )is(ella%eo"s E4pe%ses %ot >ritte% o99 De9erre+ Ta4 'ssets De9erre+ Ta4 .ia1ilit# Net De9erre+ Ta4 Other 'ssets Total 'ssets Co%ti%;e%t .ia1ilit#
4&2. ,
468. 5
543.5&
*2 .86 2*.&& *5&.86 252.** &.&& 3.3* &.&5 3.26 ,8.24 4 5.38 35.52
*,4.* 2*.,4 * 5. 3 2,3.&2 &.&& 2.52 &.2 2.23 8*. 6 485.32 **.*&
2,&.42 24.&5 2 4.4, 24 .&3 &.&& 2.53 *.66 &.8, &.&& 43,.54 4.8&
5EB9IT A17 4BSS ACCB01T B9 CA5STBC< S,C0EITI,S
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)ar 2&*2 -NCO)E :

Operati%; -%(o8e Other -%(o8e Total -%(o8e
)ar 2&**
)ar 2&*&
(in crores)
25&.& ,.&5 25,.*4
(in crores)
2,4.8 6.4& 28*.2
(in crores)
2 8.44 5.6, 3&4.**
E?/END-TURE :
Operati%; = '+8i%istratio% E4pe%ses )is(ella%eo"s E4pe%ses -%terest .ess: /re3operative E4pe%ses Capitalise+ E8plo#ee E4pe%se Total E4pe%+it"re 5ross /ro9it Depre(iatio% )i%orit# -%terest (1e9ore ta4@ /ro9it 6e9ore Ta4 Ta4 Fri%;e 6e%e9it Ta4 De9erre+ Ta4 Net /ro9it )i%orit# -%terest (a9ter ta4@ /ro9it2.oss o9 'sso(iate Co8pa%# Net /ro9it a9ter )i%orit# -%terest = /2. 'sso.Co. E4traor+i%ar# -te8s '+:"ste+ Net /ro9it '+:"st8e%t 1elo> %et pro9it / = . 6ala%(e 1ro";ht 9or>ar+ 'ppropriatio%s / = . 6ala%(e (arrie+ +o>% Divi+e%+ /re9ere%(e Divi+e%+ E!"it# Divi+e%+ (A@ Divi+e%+ /er Share(Rs@ *&*.*, *3. & 3. , &.&& ,6.34 * 5.38 6*.,6 *4.*6 &.&& 4,.6& 25.32 &.&& 3*.&4 23.32 3.8, &.&& * .45 3&.&8 * .53 2.&5 *2*.62 28.*5 **4. , *,.*3 &.&& ,5.&& &.,5 &.8* &.8* &.64 **6.*, *6.82 *. &.&& 8&.3 2*5.3, 65. 2 *5.6, &.&& 5&.25 2&.*5 &.&& 3*.35 3*.45 2.43 &.&& 2 .&2 3&.*5 2 .*, 3&.&2 **8.5& 25.88 *2*.62 *,.*3 &.&& ,5.&& &.,5 *.25 *.25 *.*4 *2&. & *8.&* *.33 &.&& ,2. * 2*3.*5 &. 6 *4.*6 &.&& ,6.8& 2 .&3 &.&& 3&.6* 48.38 2.2& &.&& 46.*8 3&.56 46.,4 &.&& .68 2,.*5 **8.5& *6.8 &.&& ,5.&& &.,5
BSS IT1e9ore MISSION E/S )i%orit# -%terest (U%it C"rr.@
Page 94
*. 5 *. 5 *.85
,5S &efore +inorit% Interest (Ad3) (0nit Curr.)

E/S a9ter )i%orit# -%terest (U%it C"rr.@
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Page 95

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FINANCIAL ANALYSIS OF STOCK MARKET

CHAP TER I INTRODUCTION

FINANCIAL ANALYSIS OF STOCK MARKET

FINANCIAL ANALYSIS OF STOCK MARKET

FINANCIAL ANALYSIS OF STOCK MARKET

FINANCIAL ANALYSIS OF STOCK MARKET

FINANCIAL ANALYSIS OF STOCK MARKET

FINANCIAL ANALYSIS OF STOCK MARKET

FINANCIAL ANALYSIS OF STOCK MARKET

FINANCIAL ANALYSIS OF STOCK MARKET

FINANCIAL ANALYSIS OF STOCK MARKET

FINANCIAL ANALYSIS OF STOCK MARKET

Enq ir! Capital -0+ (Crore) Ad3usted for ?M 6onus

Current Market Situation of %7I8 1S, S%m&ol

FINANCIAL ANALYSIS OF STOCK MARKET

9AC, >A40, ISI1 1B 4AT,ST ,5S 5L, +AE<,T 5EIC,

Es. K I1, M!AK K ! Es. MM M."K MI"

FINANCIAL ANALYSIS OF STOCK MARKET

OBJECTIVES OF THE STUDY

FINANCIAL ANALYSIS OF STOCK MARKET

FINANCIAL ANALYSIS OF STOCK MARKET

FINANCIAL ANALYSIS OF STOCK MARKET

FINANCIAL ANALYSIS OF STOCK MARKET

FINANCIAL ANALYSIS OF STOCK MARKET

FINANCIAL ANALYSIS OF STOCK MARKET

FINANCIAL ANALYSIS OF STOCK MARKET

CHAPTER II INDUSTRY PROFILE

FINANCIAL ANALYSIS OF STOCK MARKET

FINANCIAL ANALYSIS OF STOCK MARKET

FINANCIAL ANALYSIS OF STOCK MARKET

CHAPTER III LITERATURE REVIEW

FINANCIAL ANALYSIS OF STOCK MARKET

FINANCIAL ANALYSIS OF STOCK MARKET

FINANCIAL ANALYSIS OF STOCK MARKET

FINANCIAL ANALYSIS OF STOCK MARKET

CHAPTER IV RESEARCH METHODOLOGY

FINANCIAL ANALYSIS OF STOCK MARKET

FINANCIAL ANALYSIS OF STOCK MARKET

FINANCIAL ANALYSIS OF STOCK MARKET

FINANCIAL ANALYSIS OF STOCK MARKET

or M is stationar% while the repressor are indi'iduall%

FINANCIAL ANALYSIS OF STOCK MARKET

FINANCIAL ANALYSIS OF STOCK MARKET

M I II III I? ? ?I =m = =m:M=m =i:M=i @"III$"I?$ "=m:M=m$2 10 1+ >2 1 2 0 1. 1>0 0 1. 1.

I 22 2>14 10 104 144

" :2 :. :10 :24 2-4 13.

Total .4 ,4 4 4 0). )24

FINANCIAL ANALYSIS OF STOCK MARKET

FINANCIAL ANALYSIS OF STOCK MARKET

CHAPTER V DATA PRESENTATION, ANALYSIS AND FINDINGS OF THE STUDY

FINANCIAL ANALYSIS OF STOCK MARKET

FINANCIAL ANALYSIS OF STOCK MARKET

FINANCIAL ANALYSIS OF STOCK MARKET

FINANCIAL ANALYSIS OF STOCK MARKET

FINANCIAL ANALYSIS OF STOCK MARKET

FINANCIAL ANALYSIS OF STOCK MARKET

FINANCIAL ANALYSIS OF STOCK MARKET

FINANCIAL ANALYSIS OF STOCK MARKET

FINANCIAL ANALYSIS OF STOCK MARKET

FINANCIAL ANALYSIS OF STOCK MARKET

setting up the 1S,.

ISC prepared the detailed &usiness plan, including the

FINANCIAL ANALYSIS OF STOCK MARKET