SCHOOL OF ECONOMICS

Study of Fluctuations In Indian Stock Market

at SWASTIKA INVESTMART LIMITED ,INDORE
May-June 2011 (SUBMITTED IN PARTIAL FULLFILMENT OF REQUIRMENT OF SUMMER INTERNSHIP)

Submitted To:
Dr.GANESH KAWADIA

Submitted By:
HEENA GUPTA

DECLARATION
I HEENA GUPTA, student of MBA IInd Semester, studying at SCHOOL OF ECONOMICS DAVV UNIVERSITY INDORE, hereby declare that the summer training report on STUDY OF FLUCTUATIONS IN INDIAN STOCK MARKET submitted in partial fulfillment of Degree of Masters of Business Administration is the original work conducted by me. The information and data given in the report is authentic to the best of my knowledge. This summer training report is not being submitted to any other University for award of any other Degree, Diploma and Fellowship.

HEENA GUPTA
MBA (BE) 3rdsem

ACKNOWLEDGEMENT

It is my pleasure to be indebted to various people, who directly or indirectly contributed in the development of this work and who influenced my thinking, behavior, and acts during the course of study. I express my sincere gratitude to Mr. Vijay Jain, worthy Principal for providing me an opportunity to undergo summer training at Swastika Investmart Ltd. Indore. I also extend my sincere appreciation to faculty of my college who provided their valuable suggestions and precious time in accomplishing my project report. Lastly, I would like to thank the almighty and my parents for their moral support and my friends with whom I shared my day-to-day experience and received lots of suggestion that improved my quality of work.

( HEENA GUPTA )

Preface
In the present situation where stock market is going up and down, it is necessary to invest consciously in the market whatever it is, this is the study about the last two year fluctuations in stock market which enables the investor in taking decision regarding investment. This study tells the factor which directly or indirectly affects the market and some basic information not only share market but also other market such as derivatives or commodity market for the new investors or the students who have some interest in stock market. The objective of selecting the topic is to know about the market trends of the stock market and the information related to the investment for the future investor. The study of fluctuations of stock market makes the investor aquatinted with the factor affecting the investment and Stock prices can be volatile and some analysts argue that this volatility is excessive. This is not easy to prove, since it is difficult to assess certainty about future earnings and dividends. Companies tend to smooth dividends, so they will be less volatile than stock prices. Volatile stock prices do not have a major impact on consumption and capital spending since there is a good chance that price movements in one direction may be reversed.

Contents

1. Abstract 2. Research Methodology 2.1 Title of the Study 2.2 Objective of Study 2.3 Type of Research 2.4 Scope of Study 2.5 Limitation of Study 3. Core Study 4. SWOT 5. Conclusion 6. Bibliography
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Executive summary
A market is an environment that allows buyers and sellers to trade or exchange goods, services, and information. These interactions define demand and supply characteristics and are therefore fundamental to economies. A market can be defined as a place where any type of trade takes place. Markets are dependent on two major participants buyers and sellers. Buyers and sellers typically trade goods, services and/ or information. Historically, markets were physical meeting places where buyers and sellers gathered together to trade. Although physical markets are still vital, virtual marketplaces supported by IT networks such as the internet have become the largest and most liquid. Some markets are very competitive, with a number of vendors selling the same kinds of products or services. Conversely, some markets have low or no competition, particularly if the industry is protected by government legislation. The number of buyers and sellers involved will have a direct bearing on the price of the good or service to be sold, and has become known as the law of supply and demand. Where there are more sellers than buyers, the availability of supply will push down prices. If there are more buyers than sellers, the increased demand will push up prices. Everyone has seen it and
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everyone is wishing if he should have buy stocks before this rally. Albeit it could have been a gamble buying stocks before declaration of election results, it paid off for those who bought. Now that's history. Stock markets are going to be volatile for next few days and talked about all the "myths" that people have about the stock market.

INTRODUCTION TO THE ORGANIZATION

Swastika Investmart Ltd. (Formerly known as Swastika Fin-Lease Ltd.), a Public Limited Company, was incorporated in 1992 with its Registered Office in Mumbai and Administrative office at Indore (M.P.). It was promoted by Mr. Sunil Nyati belonging to the Swastika group of Rajasthan, engaged in diversified business since 1959. In the year 1995 the company came out with a Public issue of 15 Lac equity shares of Rs.10/- each for cash at par, aggregating Rs.150 Lacs. The shares of company are listed on BSE and is one of the few listed companies, engaged in Stock broking and Capital Markets activities. Since incorporation till 1998, the company was actively involved in the field of Hire Purchase and Lease Finance. It started the stock broking business as a sub-broker in the year 1998 and after getting the experience and with the blessings of its satisfied customers, it took the Corporate Membership of NSE in 2000 and BSE in 2004. Later, it got registered with CDSL in 2006 as Depository Participant as well. In the year 2007 the company has acquired membership of two premier Commodity Exchanges of India, NCDEX and MCX through its wholly owned subsidiary company Swastika Commodity Pvt. Ltd. It has also got the corporate membership of Currency Derivatives with NSE and MCX-SX in the year 2008. Over the years, Swastika has followed a consistent growth path and is established as one of the leading broking houses of the country with the support and confidence of its clients, investors, employees and associates. Today the Swastika group is managed by a team of over 200 professional staff members and has got a nationwide network. Swastika Investmart Limited, corporate member of all the premier stock and 7

commodity exchanges, is providing best value for money through personalised services, committed to high standards of corporate governance, highest levels of transparency, accountability and integrity in all its activities. Current Activities of SWASTIKA : Stock broking NSE & BSE Equities & Derivatives. Commodity Trading NCDEX & MCX. Currency Broking NSE & MCX-SX - Currency Derivatives. Depository Services CDSL. Portfolio Management & Investment Advisory Services. Mutual Funds And Fixed Deposits Investments. Initial Public Offering ( IPO) And IPO Financing. Technical Analysis and Research based advice. STRENGTHS OF SWASTIKA: Corporate Membership of NSE, BSE, NCDEX & MCX-SX . Internet Based Trading Platform. Depository Participants of CDSL 24 * 7 Web Base Back Office Software Own Private VSAT Net Work 30 Own Branches Business Partners and Sub Brokers More than 300 CTCL Net Work More than 600 Odin Licenses More than 26000+ Registered Clients (Individual & Corporate). Company Listed at BSE since 1995. In House Technical Analysis & Research team. Strong team for Fundamental Equity Analysis & Research. Team for Derivative strategies trading. 8

 Annual turnover in C M & F&O (NSE & BSE): More than Rs. 50,000 Crores. Annual turnover in Commodity (NCDEX & MCX): More than Rs. 2000 Crores. Annual turnover in Currency (NSE & MCX-SX): More than Rs. 100 Crores. PROPOSED ACTIVITIES OF SWASTIKA: Institutional Broking Empanelment with Banks, Financial Institutions & FIIs. Merchant Banking Services. Registrar & Transfer Agents Services. Equity Placement & Venture Capital Funding. Dealing in Forex. Financing & Loans Syndication Insurance Broking

RESEARCH METHODOLOGY
TITLE OF THE STUDY:Study of fluctuations of Indian stock market OBJECTIVE OF STUDY: To know the basic terminology of stock market. To make the investor aware about the factors which may affect their investment. To get the knowledge of other markets such as commodity market and derivatives. To know the ups and downs of stock market of last two years. To forecast or predict the future trend of stock market which helps in investment. To know the effect of these fluctuation on the Indian economy.

TYPE OF RESEARCH
Research:Research is defined as human activity based on intellectual application in the investigation of matter. The primary purpose for applied research is discovering, interpreting, and the development of methods and systems for the advancement of human knowledge on a wide variety of scientific matters of our world and the universe. Research can use the scientific method, but need not do so. Scientific research relies on the application of the scientific method, a harnessing of curiosity. This research provides scientific information and theories for the explanation of the nature and the properties of the world around us.

It makes practical applications possible. Scientific research is funded by public authorities, by charitable organizations and by private groups, including many companies. Scientific research can be subdivided into different classifications according to their academic and application disciplines. In this project the research type used is descriptive because this research is the most commonly used and the basic reason for carrying out descriptive research is to identify the cause of something that is happening. For instance, this research could be used in order to find out what age group is buying a particular brand of cola, whether a companys market share differs between geographical regions or to discover how many competitors a company has in their marketplace. However, if the research is to return useful results, whoever is conducting the research must comply with strict research requirements in order to obtain the most accurate figures /results possible. DESCRIPTIVE RESEARCH:Descriptive research is used to obtain information concerning the current status of the phenomena to describe "what exists" with respect to variables or conditions in a situation. The methods involved range from the survey which describes the status quo, the correlation study which investigates the relationship between variables, to developmental studies which seek to determine changes over time. Descriptive research can be of two types: i. Quantitative descriptive research emphasizes on what is, and makes use of quantitative methods to describe, record, analyze and interpret the present conditions. ii. Qualitative descriptive research also emphasizes on what is, but makes use of nonquantitative research methods in describing the conditions of the present.

SCOPE OF STUDY
Derivatives Sebi Stock exchange Commodity market Stock market Securities Day trading Factor affecting Indian stock market Effect on Indian economy

LIMITATIONS:-

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Limitations are the limiting lines that restrict the work in some way or other. In this research study also their were some limiting factors, some of them are as under: 1. Data Collection: The most important constraint in this study was data collection as Secondary data was selected for study. Secondary data means data that are already available i.e. they refer to the data which have already been collected and analysed by someone else.

2. Reliability: The data collected in research work was secondary data,So, this puts a question mark on the reliability of this data, which a very important factor of this study as conclusion has been derived from this secondary data only. 3. Accuracy: The facts and findings of the data cannot be accepted as accurate to some extent as firstly, secondary data was collected. Secondly, for doing descriptive research time needed is to be more, because in short period you cannot cover each point accurately.

Core study
Stock market:A stock market is a public market for the trading of company stock and derivatives at an agreed price; these are securities listed on a stock exchange as well as those only traded privately. The size of the world stock market was estimated at about $36.6 trillion US at the beginning of October 2008. The total world derivatives market has been estimated at about $791 trillion face or nominal value, 11 times the size of the entire world economy. The value of the derivatives market, because it is stated in terms of notional values, cannot be directly compared to a stock or fixed income security, which traditionally refers to an actual value. Moreover, the vast majority of derivatives 'cancel' each other out (i.e., a derivative 'bet' on an event occurring is offset by a comparable derivative 'bet' on the event not occurring.). The stocks are listed and traded on stock exchanges which are entities a corporation or mutual organization specialized in the business of bringing buyers and sellers of the organizations to a listing of stocks and securities together. The stock market in the United States includes the trading of all securities listed on the NYSE, the NASDAQ, the Amex, as well as on the many regional exchanges, e.g. OTCBB and Pink Sheets. European examples of stock exchanges include the London Stock Exchange, the Deutsche Brse and the Paris Bourse, now part of Euronext.

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Function and purpose:The stock market is one of the most important sources for companies to raise money. This allows businesses to be publicly traded, or raise additional capital for expansion by selling shares of ownership of the company in a public market. The liquidity that an exchange provides affords investors the ability to quickly and easily sell securities. This is an attractive feature of investing in stocks, compared to other less liquid investments such as real estate. An economy where the stock market is on the rise is considered to be an up and coming economy. In fact, the stock market is often considered the primary indicator of a country's economic strength and development. Rising share prices, for instance, tend to be associated with increased business investment and vice versa. Central banks tend to keep an eye on the control and behavior of the stock market and, in general, on the smooth operation of financial system functions. Financial stability is the raison d'tre of central banks. Exchanges also act as the clearinghouse for each transaction, meaning that they collect and deliver the shares, and guarantee payment to the seller of a security. This eliminates the risk to an individual buyer or seller that the counterparty could default on the transaction. The smooth functioning of all these activities facilitates economic growth in that lower costs and enterprise risks promote the production of goods and services as well as employment. In this way the financial system contributes to increased prosperity. The stock market, individual investors, and financial risk:Riskier long-term saving requires that an individual possess the ability to manage the associated increased risks. Stock prices fluctuate widely, in marked contrast to the stability of (government insured) bank deposits or bonds. This is something that could affect not only the individual investor or household, but also the economy on a large scale. The following deals with some of the risks of the financial sector in general and the stock market in particular. This is certainly more important now that so many newcomers have entered the stock market, or have acquired other 'risky' investments (such as 'investment' property, i.e., real estate and collectables). With each passing year, the noise level in the stock market rises. Television commentators, financial writers, analysts, and market strategists are all overtaking each other to get investors' attention. At the same time, individual investors, immersed in chat rooms and message boards, are exchanging questionable and often misleading tips. Yet, despite all this available information, investors find it increasingly difficult to profit. Stock prices skyrocket with little reason, then plummet just as quickly, and people who have turned to investing for their children's education and their own retirement become frightened. Sometimes there appears to be no rhyme or reason to the market, only folly.

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This is a quote from the preface to a published biography about the long-term valueoriented stock investor Warren Buffett.[4] Buffett began his career with $100, and $105,000 from seven limited partners consisting of Buffett's family and friends. Over the years he has built himself a multi-billion-dollar fortune. The quote illustrates some of what has been happening in the stock market during the end of the 20th century and the beginning of the 21st century.

Securities and Exchange Board of India

SEBI Bhavan , Mumbai Headquarters of SEBI

Organization Details:Headquarters -Mumbai, Maharashtra, India Established- 1992 Jurisdiction- India Head- Chairman Chairman- C B Bhave Official Website:-www.sebi.gov.in SEBI is the Regulator for the Securities Market in India. Originally set up by the Government of India in 1988, it acquired statutory form in 1992 with SEBI Act 1992 being passed by the Indian Parliament .Chaired by C B Bhave , SEBI is headquartered in the popular business district of Bandra-Kurla complex in Mumbai, and has Northern, Eastern, Southern and Western regional offices in New Delhi, Kolkata, Chennai and Ahmedabad.

Organization Structure:Chandrasekhar Bhaskar Bhave is the sixth chairman of the Securities Market Regulator. Prior to taking charge as Chairman SEBI, he had been the chairman of NSDL (National Securities Depository Limited) ushering in paperless securities. Prior to his stint at NSDL, he had served SEBI as a Senior Executive Director. He is a former Indian Administrative Service officer of the 1975 batch. The Board comprises:-

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Name Designation As per Mr. CB Bhave Chairman SEBI CHAIRMAN (S.4(1)(a) of the SEBI Act, 15 1992) Mr. KP Krishnan Joint Secretary, Ministry of Finance Member (S.4(1)(b) of the SEBI Act, 1992) Mr. Anurag Goel Secretary, Ministry of Corporate Affairs Member (S.4(1)(b) of the SEBI Act, 1992) Dr G Mohan Gopal Director, National Judicial Academy, Bhopal Member (S.4(1)(d) of the SEBI Act, 1992) Mr. MS Sahoo Whole Time Member, SEBI Member (S.4(1)(d) of the SEBI Act, 1992) Dr KM Abraham Whole Time Member, SEBI Member (S.4(1)(d) of the SEBI Act, 1992) Mr. Mohandas Pai Director, Infosys Member (S.4(1)(d) of the SEBI Act, 1992)

Functions and Responsibilities:SEBI has to be responsive to the needs of three groups, which constitute the market: he issuers of securities. t the investors. the market intermediaries. SEBI has three functions rolled into one body quasi-legislative, quasi-judicial and quasi executive. It drafts regulations in its legislative capacity, it conducts investigation and enforcement action in its executive function and it passes rulings and orders in its judicial capacity. Though this makes it very powerful, there is an appeals process to create accountability. There is a Securities Appellate Tribunal which is a three member tribunal and is presently headed by a former Chief Justice of a High court - Mr. Justice NK Sodhi. A second appeal lies directly to the Supreme Court. SEBI has enjoyed success as a regulator by pushing systemic reforms aggressively and successively (e.g. the quick movement towards making the markets electronic and paperless rolling settlement on T+2 basis ). SEBI has been active in setting up the regulations as required under law.

Stock exchange
A stock exchange, (formerly a securities exchange) is a corporation or mutual organization which provides "trading" facilities for stock brokers and traders, to trade stocks and other securities. Stock exchanges also provide facilities for the issue and redemption of securities as well as other financial instruments and capital events including the payment of income and dividends. The securities traded on a stock exchange include: shares issued by companies, unit trusts, derivatives, pooled investment products and bonds. To be able to trade a security on a certain

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stock exchange, it has to be listed there. Usually there is a central location at least for recordkeeping, but trade is less and less linked to such a physical place, as modern markets are electronic networks, which gives them advantages of speed and cost of transactions. Trade on an exchange is by members only. The initial offering of stocks and bonds to investors is by definition done in the primary market and subsequent trading is done in the secondary market. There is usually no compulsion to issue stock via the stock exchange itself, nor must stock be subsequently traded on the exchange. Such trading is said to be off exchange or over-the-counter. This is the usual way that derivatives and bonds are traded. Increasingly, stock exchanges are part of a global market for securities.

The role of stock exchanges

Stock exchanges have multiple roles in the economy, this may include the following: 1. Raising capital for businesses:The Stock Exchange provide companies with the facility to raise capital for expansion through selling shares to the investing public. 2. Mobilizing savings for investment:When people draw their savings and invest in shares, it leads to a more rational allocation of resources because funds, which could have been consumed, or kept in idle deposits with banks are mobilized &redirected to promote business activity with benefits for several economic sectors such as agriculture, commerce and industry, resulting in stronger economic growth and higher productivity levels and firms. 3. Facilitating Company Growth:Companies view acquisitions as an opportunity to expand product lines, increase distribution channels, hedge against volatility, increase its market share, or acquire other necessary business assets. A takeover bid or a merger agreement through the stock market is one of the simplest and most common ways for a company to grow by acquisition or fusion. 4 .Redistribution of wealth:Stock exchanges do not exist to redistribute wealth. However, both casual and professional stock investors, through dividends and stock price

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increases that may result in capital gains, will share in the wealth of profitable businesses. 5. Corporate governance:By having a wide and varied scope of owners, companies generally tend to improve on their management standards and efficiency in order to satisfy the demands of these shareholders and the more stringent rules for public corporations imposed by public stock exchanges and the government. Consequently, it is alleged that public companies (companies that are owned by shareholders who are members of the general public and trade shares on public exchanges) tend to have better management records than privately-held companies (those companies where shares are not publicly traded, often owned by the company founders and/or their families and heirs, or otherwise by a small group of investors). However, some welldocumented cases are known where it is alleged that there has been considerable slippage in corporate governance on the part of some public companies. 7. Creating investment opportunities for small investors:As opposed to other businesses that require huge capital outlay, investing in shares is open to both the large and small stock investors because a person buys the number of shares they can afford. Therefore the Stock Exchange provides the opportunity for small investors to own shares of the same companies as large investors. 8. Government capital-raising for development projects Governments at various levels may decide to borrow money in order to finance infrastructure projects such as sewage and water treatment works or housing estates by selling another category of securities known as bonds. These bonds can be raised through the Stock Exchange whereby members of the public buy them, thus loaning money to the government. The issuance of such bonds can obviate the need to directly tax the citizens in order to finance development, although by securing such bonds with the full faith and credit of the government instead of with collateral, the result is that the government must tax the citizens or otherwise raise additional funds to make any regular coupon payments and refund the principal when the bonds mature. 9 .Barometer of the economy:At the stock exchange, share prices rise and fall depending, largely, on market forces. Share prices tend to rise or remain stable when companies and the economy in general show signs of stability and growth. An economic recession, depression, or financial crisis could eventually lead to a stock market crash. Therefore the movement of share prices and in general of the stock indexes can be an indicator of the general trend in the economy.

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Bombay Stock Exchange

Introduction:Bombay Stock Exchange is the oldest stock exchange in Asia with a rich heritage, in its 133 years of existence. What is now popularly known as BSE was established as "The Native Share & Stock Brokers' Association" in 1875. BSE is the first stock exchange in the country which obtained permanent recognition (in 1956) from the Government of India under the Securities Contracts (Regulation) Act 1956. BSE's pivotal and pre-eminent role in the development of the Indian capital market is widely recognized. It migrated from the open outcry system to an online screen-based order driven trading system in 1995. Earlier an Association Of Persons (AOP), BSE is now a corporatized and demutualised entity incorporated under the provisions of the Companies Act, 1956, pursuant to the BSE (Corporatisation and Demutualisation) Scheme, 2005 notified by the Securities and Exchange Board of India (SEBI). With demutualisation, BSE has two of world's best exchanges, Deutsche Brse and Singapore Exchange, as its strategic partners. Over the past 133 years, BSE has facilitated the growth of the Indian corporate sector by providing it with an efficient access to resources. There is perhaps no major corporate in India which has not sourced BSE's services in raising resources from the capital market. Today, BSE is the world's number 1 exchange in terms of the number of listed companies and the world's 5th in transaction numbers. The market capitalization as on December 31, 2007 stood at USD 1.79 trillion . An investor can choose from more than 4,700 listed companies, which for easy reference, are classified into A, B, S, T and Z groups. The BSE Index, SENSEX, is India's first stock market index that enjoys an iconic stature , and is tracked worldwide. It is an index of 30 stocks representing 12 major sectors. The SENSEX is constructed on a 'free-float' methodology, and is sensitive to market sentiments and market realities. Apart from the SENSEX, BSE offers 21 indices, including 12 sectoral indices. BSE has ntered into an index cooperation agreement with Deutsche Brse. This agreement has made SENSEX and other BSE indices available to investors in Europe and America. Moreover, Barclays Global Investors (BGI), the global leader in ETFs through its iShares brand, has created the 'iShares BSE SENSEX India Tracker' which tracks the SENSEX. The ETF enables investors in Hong Kong to take an exposure to the Indian equity market. The first Exchange Traded Fund (ETF) on SENSEX, called "SPIcE" is listed on BSE. It brings to the investors a trading tool that can be easily used for the purposes of investment, trading, hedging and arbitrage. SPIcE allows small investors to take a long-term view of the market. BSE provides an efficient and transparent market for trading in equity, debt instruments and derivatives. It has a nation-wide reach with a presence in more than 359 cities and towns of India. BSE has always been at par with the international standards. The systems and processes are designed to safeguard market integrity and enhance transparency in operations. BSE is the

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first exchange in India and the second in the world to obtain an ISO 9001:2000 certification. It is also the first exchange in the country and second in the world to receive Information Security Management System Standard BS 7799-2-2002 certification for its BSE On-line Trading System (BOLT). BSE continues to innovate. In recent times, it has become the first national level stock exchange to launch its website in Gujarati and Hindi to reach out to a larger number of investors. It has successfully launched a reporting platform for corporate bonds in India christened the ICDM or Indian Corporate Debt Market and a unique tickercum-screen aptly named 'BSE Broadcast' which enables information dissemination to the common man on the street. In 2006, BSE launched the Directors Database and ICERS (Indian Corporate Electronic Reporting System) to facilitate information flow and increase transparency in the Indian capital market. While the Directors Database provides a single-point access to information on the boards of directors of listed companies, the ICERS facilitates the corporates in sharing with BSE their corporate announcements. BSE also has a wide range of services to empower investors and facilitate smooth transactions: Investor Services: The Department of Investor Services redresses grievances of investors. BSE was the first exchange in the country to provide an amount of Rs.1 million towards the investor protection fund; it is an amount higher than that of any exchange in the country. BSE launched a nationwide investor awareness programme'Safe Investing in the Stock Market' under which 264 programmes were held in more than 200 cities. The BSE On-line Trading (BOLT): BSE On-line Trading (BOLT) facilitates on-line screen based trading in securities. BOLT is currently operating in 25,000 Trader Workstations located across over 359 cities in India. BSE Training Institute: BTI imparts capital market training and certification, in collaboration with reputed management institutes and universities. It offers over 40 courses on various aspects of the capital market and financial sector. More than 20,000 people have attended the BTI programmes.

National Stock Exchange of India

National Stock Exchange Limited:Type- Stock Exchange Location-Mumbai, India Coordinates19337N 725135E / 19.06028N 72.85972E / 19.06028; 72.85972

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Owner- National Stock Exchange of India Limited Key people- Mr. Ravi Narain (Managing Director & CEO) Currency- INR No. of listings- 1587 Market-Cap - US$ 1.46 trillion (2006) Indexes:S&P CNX Nifty CNX Nifty Junior S&P CNX 500 Website http://www.nse-india.com/ NSE is mutually-owned by a set of leading financial institutions, banks, insurance companies and The National Stock Exchange of India Limited (NSE), is a Mumbai-based stock exchange. It is the largest stock exchange in India in terms of daily turnover and number of trades, for both equities and derivative trading.[1]. Though a number of other exchanges exist, NSE and the Bombay Stock Exchange are the two most significant stock exchanges in India, and between them are responsible for the vast majority of share transactions. The NSE's key index is the S&P CNX Nifty, known as the Nifty, an index of fifty major stocks weighted by market capitalization other financial intermediaries in India but its ownership and management operate as separate entities. There are at least 2 foreign investors NYSE Euronext and Goldman Sachs who have taken a stake in the NSE. As of 2006[update], the NSE VSAT terminals, 2799 in total, cover more than 1500 cities across India. In October 2007, the equity market capitalization of the companies listed on the NSE was US$ 1.46 trillion, making it the second largest stock exchange in South Asia. NSE is the third largest Stock Exchange in the world in terms of the number of trades in equities. It is the second fastest growing stock exchange in the world with a recorded growth of 16.6%. Origins:NSE building at BKC The National Stock Exchange of India was promoted by leading Financial institutions at the behest of the Government of India, and was incorporated in November 1992 as a tax-paying company. In April 1993, it was recognized as a stock exchange under the Securities Contracts (Regulation) Act, 1956. NSE commenced operations in the Wholesale Debt Market (WDM) segment in June 1994. The Capital Market (Equities) segment of the NSE commenced operations in November 1994, while operations in the Derivatives segment commenced in June 2000. Innovations:19

NSE has remained in the forefront of modernization of India's capital and financial markets, and its pioneering efforts include: Being the first national, anonymous, electronic limit order book (LOB) exchange to trade securities in India. Since the success of the NSE, existent market and new market structures have followed the "NSE" model. Setting up the first clearing corporation "National Securities Clearing Corporation Ltd." in India. NSCCL was a landmark in providing innovation on all spot equity market (and later, derivatives market) trades in India. Co-promoting and setting up of National Securities Depository Limited, first depository in India[2]. Setting up of S&P CNX Nifty. NSE pioneered commencement of Internet Trading in February 2000, which led to the wide popularization of the NSE in the broker community. Being the first exchange that, in 1996, proposed exchange traded derivatives, particularly on an equity index, in India. After four years of policy and regulatory debate and formulation, the NSE was permitted to start trading equity derivatives Being the first and the only exchange to trade GOLD ETFs (exchange traded funds) in India. NSE has also launched the NSE-CNBC-TV18 media centre in association with CNBCTV18, it is the one of the most important stock exchange in the world. Sensex & the Nifty The Sensex is an "index". What is an index? An index is basically an indicator. It gives you a general idea about whether most of the stocks have gone up or most of the stocks have gone down. The Sensex is an indicator of all the major companies of the BSE. The Nifty is an indicator of all the major companies of the NSE. If the Sensex goes up, it means that the prices of the stocks of most of the major companies on the BSE have gone up. If the Sensex goes down, this tells you that the stock price of most of the major stocks on the BSE have gone down. Just like the Sensex represents the top stocks of the BSE, the Nifty represents the top stocks of the NSE. Just in case you are confused, the BSE, is the Bombay Stock Exchange and the NSE is the National Stock Exchange. The BSE is situated at Bombay and the NSE is situated at Delhi. These are the major stock exchanges in the country. There are other stock exchanges like the Calcutta Stock Exchange etc. but they are not as popular as the BSE and the NSE.Most of the stock trading in the country is done though the BSE & the NSE. Besides Sensex and the Nifty there are many other indexes. There is an index that gives you an idea about whether the mid-cap stocks go up and down. This is called the BSE Mid-cap Index. The reasons for stock prices going "up" and "down" 20

Stock prices change every day because of market forces. By this we mean that stock prices change because of supply and demand. If more people want to buy a stock (demand) than sell it (supply), then the price moves up! Conversely, if more people wanted to sell a stock than buy it, there would be greater supply than demand, and the price would fall. (Basics of economics!) Understanding supply and demand is easy. What is difficult to understand is what makes people like a particular stock and dislike another stock. If you understand this, you will know what people are buying and what people are selling. If you know this you will know what prices go up and what prices go down! To figure out the likes and dislikes of people, you have to figure out what news is positive for a company and what news is negative and how any news about a company will be interpreted by the people. The most important factor that affects the value of a company is its earnings. Earnings are the profit a company makes, and in the long run no company can survive without them. It makes sense when you think about it. If a company never makes money, it isn't going to stay in business. Public companies are required to report their earnings four times a year (once each quarter). Dalal Street watches with great attention at these times, which are referred to as earnings seasons. The reason behind this is that analysts base their future value of a company on their earnings projection. If a company's results are better than expected, the price jumps up. If a company's results disappoint and are worse than expected, then the price will fall. As we all know, these high stock prices did not hold, and most internet companies saw their values shrink to a fraction of their highs. Still, this fact demonstrates that there are factors other than current earnings that influence stocks. So, what are "all the factors" that affect the stocks price? The best answer is that nobody really knows for sure. Some believe that it isn't possible to predict how stock prices will change, while others think that by drawing charts and looking at past price movements, you can determine when to buy and sell. The only thing we do know is that stocks are volatile and can change in price very very rapidly. The reasons for which companies issue stocks:Why would the founders share the profits with thousands of people when they could keep profits to themselves? The reason is that at some point every company needs to "raise money". To do this, companies can either borrow it from somebody or raise it by selling part of the company, which is known as issuing stock. A company can borrow by taking a loan from a bank or by issuing bonds. Both methods come under "debt financing". On the other hand, issuing stock is called equity financing. Issuing stock is advantageous for the company because it does not require the company to pay back the money or make interest payments along the way. All that the shareholders get in return for their money is the hope that the shares will someday be worth more than what they paid for them. The first sale of a stock, which is issued by the private company itself, is called the initial public offering (IPO). It is important that you understand the distinction between a company financing through 21

debt and financing through equity. When you buy a debt investment such as a bond, you are guaranteed the return of your money (the principal) along with promised interest payments. This isn't the case with an equity investment. By becoming an owner, you assume the risk of the company not being successful - just as a small business owner isn't guaranteed a return, neither is a shareholder. Shareholders earn a lot if a company is successful, but they also stand to lose their entire investment if the company isn't successful.

Stock Picking Having understood all the basics of the stock market and the risk
involved, now we will go into stock picking and how to pick the right stock. Before picking the right stock you need to do some analysis. There are two major types of analysis: 1. Fundamental Analysis 2. Technical Analysis Fundamental analysis is the analysis of a stock on the basis of core financial and economic analysis to predict the movement of stocks price. On the other hand, technical analysis is the study of prices and volume, for forecasting of future stock price or financial price movements. Simply put, fundamental analysis looks at the actual company and tries to figure out what the company price is going to be like in the future. On the other hand technical analysis look at the stocks chart, peoples buying behavior etc. to try and figure out what the stock price is going to be like in the future. In this article we will go into the basics of fundamental analysis. Technical analysis is a little more complicated. It is much more of an "art" than a science. It depends more on experience and involves some statistics and mathematics, so explaining technical analysis is out of the scope of this article. Calculation of BSE SENSEX This article explains how the value of the BSE Sensex or sensitive index is calculated. If you are not sure what we mean by the Sensex or what the Sensex is all about, you can find this out by reading our How to make money in the stock market? article. The Sensex has a very important function. The Sensex is supposed to be an indicator of the stocks in the BSE. It is supposed to show whether the stocks are generally going up, or generally going down. To show this accurately, the Sensex is calculated taking into consideration stock prices of different BSE listed companies. It is calculated using the free-float market capitalization method. This is a world wide accepted method as one of the best methods for calculating a stock market index. Please note: The method used for calculating the Sensex and the 30 companies that are taken into consideration are changed from time to time. This is done to make the Sensex an accurate index and so that it represents the BSE stocks properly. 3 important things you must know and follow as an new investor!

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You need to KNOW some unforgettable basics before you enter the world of investing in stocks. The stock market is a field dominated by savvy investors who know the ins-and-outs of the market. For people who are not on the inside, the stock market can be a VERY dangerous place. : Don't even consider "tips" that tell you about "hot stocks". Consider the source: There are many people in the market who put in all their time and effort in promoting certain stocks. They do this because they have their money invested in those stocks. If they can get enough people to buy the stock and they can get the stock price to rise, they will sell the stock for a huge price, the stock price will crash and they will walk off to promote another stock. Always use your own brain: It's extremely important. You must always use your own brain. Relying on the advice of others, no matter how well intentioned it may be, is almost always a complete disaster. Make sure you dig in and really examine the "facts about the companies" before you invest. Ignore press releases which have very little substance, and rely on "hype" to tell the company's story. And finally the most important tip!!! Only invest money you can afford to lose!! Sure this is a basic point, but many many people miss it. You should only invest money that you can honestly afford to lose!! Everyone enters into investments with the idea of earning big profits, but in many cases, this never works. (Especially if you are new to investing in the stock market!) Please understand that the above tips are tips for beginners. Once you really get into the stock market you do not need to follow these rules anymore. But if you are a new investor, you MUST follow these rules. They are for your own safety. But then again, nothing comes free. Everything has a price. You will have to loose some money, make some bad decisions and then only will you really understand the market. You cannot understand the market by just looking at it from far. By following these rules, you will basically not loose too much!

Derivatives:Commodities whose value is derived from the price of some underlying asset like securities, commodities, bullion, currency, interest level, stock market index or anything else are known as Derivatives. In more simpler form, derivatives are financial security such as an option or future whose value is derived in part from the value and characteristics of another security, the underlying asset. It is a generic term for a variety of financial instruments. Essentially, this means you buy a promise to convey ownership of the asset, rather than the asset itself. The legal terms of a contract are much more varied and flexible than the terms of property ownership. In fact, its this flexibility that appeals to investors. When a person invests in derivative, the underlying asset is usually a commodity, bond, stock, or currency. He bet that the value derived from the underlying asset will increase or decrease by a certain amount within a certain fixed period of time. Futures and options are two commodity traded types of derivatives. An options contract gives the owner the right to buy or sell an asset at a set price on or before a given date. On the other hand, the owner of a futures contract is obligated to buy or sell the asset. The other examples of derivatives are warrants and convertible bonds

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(similar to shares in that they are assets). But derivatives are usually contracts. Beyond this, the derivatives range is only limited by the imagination of investment banks. It is likely that any person who has funds invested, an insurance policy or a pension fund, that they are investing in, and exposed to, derivatives wittingly or unwittingly. Shares or bonds are financial assets where one can claim on another person or corporation; they will be usually be fairly standardised and governed by the property of securities laws in an appropriate country. On the other hand, a contract is merely an agreement between two parties, where the contract details may not be standardized.

India Commodity Market:The vast geographical extent of India and her huge population is aptly complemented by the size of her market. The broadest classification of the Indian Market can be made in terms of the commodity market and the bond market. Here, we shall deal with the former in a little detail. The commodity market in India comprises of all palpable markets that we come across in our daily lives. Such markets are social institutions that facilitate exchange of goods for money. The cost of goods is estimated in terms of domestic currency . India Commodity Market can be subdivided into the following two categories: Wholesale Market Retail Market Let us now take a look at what the present scenario of each of the above markets is like. The traditional wholesale market in India dealt with whole sellers who bought goods from the farmers and manufacturers and then sold them to the retailers after making a profit in the process. It was the retailers who finally sold the goods to the consumers. With the passage of time the importance of whole sellers began to fade out for the following reasons: The whole sellers in most situations, acted as mere parasites who did not add any value to the product but raised its price which was eventually faced by the consumers. The improvement in transport facilities made the retailers directly interact with the producers and hence the need for whole sellers was not felt. In recent years, the extent of the retail market (both organized and unorganized) has evolved in leaps and bounds. In fact, the success stories of the commodity market of India in recent years has mainly centered around the growth generated by the Retail Sector. Almost every commodity under the sun both agricultural and industrial are now being provided at well distributed retail outlets throughout the country. Moreover, the retail outlets belong to both the organized as well as the unorganized sector. The unorganized retail outlets of the yesteryears consist of small shop owners who are price takers where consumers face a highly competitive price structure. The organized sector on the other hand are owned by various business houses like Pantaloons, Reliance, Tata and others. Such markets are usually sell a wide range of articles both agricultural and manufactured, edible and inedible, perishable and durable. Modern marketing strategies and other techniques of sales promotion enable such markets to draw customers from every section of the society. However the growth of such markets has still centered around the urban areas primarily due to

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infrastructural limitations. Considering the present growth rate, the total valuation of the Indian Retail Market is estimated to cross Rs. 10,000 billion by the year 2010. Demand for commodities is likely to become four times by 2010 than what it presently is.

Money Market:When the stock prices show a downward trend , then it becomes risky to keep savings there. Although the stock market is associated with high risks and high returns , many are risk averse and prefer to invest in the more secure money market . The money market deals with very short term debt securities that mature in less than a year. Since the money market is extremely safe, it yields very low returns unlike the bond market. The money market securities that are issued by the government or financial institutions or large corporations are very liquid. Since the money market securities trade at very high denominations it becomes very difficult for the individual investors to have access to it. The money market is a type of a dealer market where firms purchase securities in their own account by assuming the risks themselves. Unlike the stock exchanges the money market securities do not operate in exchanges or through brokers. Transactions take place over phone or the electronic system. One may browse through the following links to have a more detailed information about money market. Major Factors That Affect Stock Price in stock market globally When you wish to invest in the stock market, then you should always make a good survey of the whole market. As you know that you cannot predict the stock market, so in that case you need to know the functioning of the market. There are some major factors that affect stock price. So let us discuss about the different factors affecting the stock price in this article. Demand AND SUPPLY One of the major factors affecting stock price is demand and supply. The trend of the stock market trading directly affects the price. When people are buying more stocks, then the price of that particular stock increases. On the other hand if people are selling more stocks, then the price of that stock falls. So, you should be very careful when you decide to invest in the Indian stock market. Market Cap Never try to guess the worth of a company simply by comparing the price of the stock. You should always keep in mind that it is not the stock but the market capitalization of the company that determines the worth of the company. So market cap is another factor that affects stock price. "Market Capitalization"?

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You probably think that you have never heard of the term market capitalization before. You have! When you are talking about mid-cap, small-cap and largecap stocks, you are talking about market capitalization! Market cap or market capitalization is simply the worth of a company in terms of its shares! To put it in a simple way, if you were to buy all the shares of a particular company, what is the amount you would have to pay? That amount is called the market capitalization! To calculate the market cap of a particular company, simply multiply the current share price by the number of shares issued by the company! Just to give you an idea, ONGC, has a market cap of Rs.170,705.21 Cr (when this article was written) Depending on the value of the market cap, the company will either be a mid-cap or largecap or small-cap company! Now the question is, how do YOU calculate the market cap of a particular company? You dont! Just go to a website like MoneyControl.com and look up the company whose market cap you are interested in finding out! The figure in front of Mkt. Cap will be the market cap value.

Day Trading:Day trading (and trading in general) is the buying and selling of various financial instruments, such as futures, options, currencies, and stocks, with the goal of making a profit from the difference between the buying price and the selling price. Day trading differs slightly from other styles of trading in that positions are rarely (if ever) held overnight or when the market being traded is closed. Day trading was originally only available to financial companies (such as banks), because only they had access to the exchanges and market data. But with recent technology such as the Internet, individual traders now have direct access to the same exchanges and market data, and can make the same trades at very low cost.

Trading Styles:There are several different styles of day trading, suited to different day trader personalities.The styles range from short term trading such as scalping where positions are only held for a few seconds or minutes, to longer term swing and position trading where a position may be held throughout the trading day. Most day trading systems have a lot of flexibility, and can have open positions for anywhere from a few minutes to a few hours, depending upon how the trade is doing (whether it is in profit). Some day traders will trade multiple styles, but most traders will choose a single style and only take that type of trade. Day trading also has different types of trade, such as trend trades, counter-trend trades, and ranging trades. Trend trades are trades in the direction of the current price movement (i.e. buying if the price is moving up), and counter-trend trades are trades against the direction of the current price movement (i.e. selling if the price is moving up). Ranging trades are trades that go back and forth between two prices, and are used when the market is moving sideways. Most day traders will choose a single type of trade, but some traders will take different types, and choose which one to trade depending upon the current condition of the market.

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In addition to the style and type of day trading, there are other variances between day traders. Some day traders like to make many trades throughout the trading day, while others prefer to wait for what they consider the best conditions for their trade, and perhaps only make one trade per day. However many trades are made, the trading process that is used, and the desired goal of making a profit, are the same.

FOREX
An overview of the Forex market:The Forex market is a non-stop cash market where currencies of nations are traded, typically via brokers. Foreign currencies are constantly and simultaneously bought and sold across local and global markets and traders' investments increase or decrease in value based upon currency movements. Foreign exchange market conditions can change at any time in response to real time events. The main enticements of currency dealing to private investors and attractions for short-term Forex trading are: 24-hour trading, 5 days a week with non-stop access to global Forex dealers. An enormous liquid market making it easy to trade most currencies. Volatile markets offering profit opportunities. Standard instruments for controlling risk exposure. The ability to profit in rising or falling markets. Leveraged trading with low margin requirements. Many options for zero commission trading.

Forex trading
The investor's goal in Forex trading is to profit from foreign currency movements. Forex trading or currency trading is always done in currency pairs. For example, the exchange rate of EUR/USD on Aug 26th, 2003 was 1.0857. This number is also referred to as a "Forex rate" or just "rate" for short. If the investor had bought 1000 euros on that date, he would have paid 1085.70 U.S. dollars. One year later, the Forex rate was 1.2083, which means that the value of the euro (the numerator of the EUR/USD ratio) increased in relation to the U.S. dollar. The investor could now sell the 1000 euros in order to receive 1208.30 dollars. Therefore, the investor would have USD 122.60 more than what he had started one year earlier. However, to know if the investor made a good investment, one needs to compare this investment option to alternative investments. At the very minimum, the return on investment (ROI) should be compared to the return on a "risk-free" investment. One example of a risk-free investment is long-term U.S. government bonds since there is practically no chance for a default, i.e. the U.S. government going bankrupt or being unable or unwilling to pay its debt obligation.

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When trading currencies, trade only when you expect the currency you are buying to increase in value relative to the currency you are selling. If the currency you are buying does increase in value, you must sell back the other currency in order to lock in a profit. An open trade (also called an open position) is a trade in which a trader has bought or sold a particular currency pair and has not yet sold or bought back the equivalent amount to close the position. However, it is estimated that anywhere from 70%-90% of the FX market is speculative. In other words, the person or institution that bought or sold the currency has no plan to actually take delivery of the currency in the end; rather, they were solely speculating on the movement of that particular currency. Forex-Forecasting This article provides insight into the two major methods of analysis used to forecast the behavior of the Forex market. Technical analysis and fundamental analysis differ greatly, but both can be useful forecast tools for the Forex trader. They have the same goal - to predict a price or movement. The technician studies the effect while the fundamentalist studies the cause of market movement. Many successful traders combine a mixture of both approaches for superior results.

Analysis:Technical analysis is a method of predicting price movements and future market trends by studying charts of past market action. Technical analysis is concerned with what has actually happened in the market, rather than what should happen and takes into account the price of instruments and the volume of trading, and creates charts from that data to use as the primary tool. One major advantage of technical analysis is that experienced analysts can follow many markets and market instruments simultaneously. Technical analysis is built on three essential principles: 1. Market action discounts everything! This means that the actual price is a reflection of everything that is known to the market that could affect it, for example, supply and demand, political factors and market sentiment. However, the pure technical analyst is only concerned with price movements, not with the reasons for any changes. 2. Prices move in trends Technical analysis is used to identify patterns of market behavior that have long been recognized as significant. For many given patterns there is a high probability that they will produce the expected results. Also, there are recognized patterns that repeat themselves on a consistent basis. 3. History repeats itself Forex chart patterns have been recognized and categorized for over 100 years and the manner in which many patterns are repeated leads to the conclusion that human psychology changes little over time. Forex charts are based on market action involving price. There are five categories in Forex technical analysis theory: Indicators (oscillators, e.g.: Relative Strength Index (RSI) Number theory (Fibonacci numbers, Gann numbers)

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 Waves (Elliott wave theory) Gaps (high-low, open-closing) Trends (following moving average). Some major technical analysis tools are described below:

Fundamental analysis:Fundamental analysis is a method of forecasting the future price movements of a financial instrument based on economic, political, environmental and other relevant factors and statistics that will affect the basic supply and demand of whatever underlies the financial instrument. In practice, many market players use technical analysis in conjunction with fundamental analysis to determine their trading strategy. Fundamental analysis focuses on what ought to happen in a market. Factors involved in price analysis: Supply and demand, seasonal cycles, weather and government policy. Fundamental analysis is a macro or strategic assessment of where a currency should be trading based on any criteria but the movement of the currency's price itself. These criteria often include the economic condition of the country that the currency represents, monetary policy, and other "fundamental" elements. Many profitable trades are made moments prior to or shortly after major economic announcements. What happened in 2008? 1.Sensex was crossed 21,000 levels in January and analysts predicted 25,000 levels but Sensex fell to 7,800 in October. Experts are now talking about 7,000 targets in 2009. But todays it has been touch the point 14000 due to government stability. 2. Rupee strengthened to 39 against dollar and analysts like ICICI Kamat predicted 35 levels but rupee fell to 50 levels. Experts are now talking about 55 against dollar in 2009. 3. Crude Oil prices touched $147 per barrel and Goldman Sachs talked about $200 per barrel but crude oil in now trading around $45 levels. Experts are now talking about $30 per barrel in 2009 4. Inflation moved to 13% and analysts talked about 15% but inflation fell to 8% in December. Experts are now talking about 4% levels in 2009. They are actually now talking about deflation. 5. Indian GDP grew at 9% in 2007-08 and analysts predicted about 10% growth in 2009. Experts are now talking about 7% GDP growth in 2008-09 and 5% GDP growth in 2009-10.

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6. Commodities traded around all time high levels in June, 2008 but they collapsed to 2003 levels in December, 2008. Companies are now shutting down plants and are removing employees due to lack of demand and piling up of inventories. 7. Investment banking is the most sought after industry in early 2008. They are now either disappeared or merged with banks. 8. Real Estate prices reached stratospheric levels in early 2008 but investors bought them as if there will be no land available for purchase in 2009. They are now announcing bonuses and free offers to attract buyers. Many real estate stocks were corrected by 70-90% in this year alone. We will hear some bankruptcies in 2009 in this sector. DLF and Unitech will cut prices by 30% in 2009. Investment lessons from 2008: 1. Unlike in past, stock markets now become more dynamic, more volatile and more unpredictable due to more global integration of economy and money flows. 2. Stock market investors will never react normally they will either overreact or under react to the economic or political events. One should take into consideration this psychological aspect along with business fundamentals in arriving at price target. 3. As I said in my previous posts, stock markets always move much ahead of real economy. If real economy will suffer in early 2009, stocks fell by October, 2008. If economic conditions will improve by early 2010, stocks will rise by late 2009. 4. Timing: It is very difficult to time the stock market investments. 80% of price variations occur in 20% of days time of maximum profits and losses. On 18 May we have been seen more variation in recession time market has been touched the level of 14000 with growth of 2100 points 5. Significant falls or rises do not occur in slow motion. They are steep and severe. 6. Never follow herds. Believe in your research and gut feeling. Just see what happened to investors in Reliance Power IPO. 7. Biggest investment lesson: When investors are in panic mood, even good companies with strong growth prospects also fall along with bad overvalued stocks. Positive Stock market news: 1. Government stability is big positive reason for sensex. 2. Global Telecom Companies are planning to buy 20-25% stake in Reliance Communications. R-Com stock lost 70% of value in 2008. Anil Ambani family holds 67% stake in the company. This deal is beneficial for investors as only 12% of shares are available for trading after this purchase in the secondary market. Promoter will not reduce his holding.

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3. Manpower survey: India is the second most optimistic employment market in the world but there will freezing in hiring in the next 3 months. IT and Hospitality sectors are the worst affected while Telecom is the most optimistic one.

Effect of fluctuation on Indian stock market:Nothing actually. The economy is as sound as it was in the boom time. The companies are as profitable as they were a few days ago. Yet, the market crashed because the Government tried to instill some sort of regulation in it. Let me explain it a bit : As I wrote in my last article that a major portion of the money being invested into the share market is coming from FIIs (Foreign Institutional Investors). The cause of concern for the Government was that in this major share of FIIs, more than half was in the form of hot money being invested into the market by anonymous investors who pump money into the market by utilizing the Participatory Note (PN) facility. All those foreign investors who are not registered with the SEBI (Stock Exchange Board of India), the regulatory body for stocks in India, can not directly deal in buying/selling of sticks. So they took a sort of permission from registered FIIs by buying Participatory Notes (PN) from them in exchange of dollars, which ultimately allows them trade in the market. Though, this concept of allowing anonymous investors in the market broaden the reach of the market, it also ensure free entry of dollars into Indian economy as well as increase the percentage of hot money in the market. The hot money is that kind of money which is invested only for a short time to make some quick buck. It is not invested with a long term mindset. Since the continuous inflow of dollar into Indian economy is making the Indian currency (Rupee) stronger and thus making the export costlier, the Government was looking for someway to curb this inflow of dollars. Making the availability of Participatory Notes some difficult for foreign investors was one step Government thought would help control the inflow of dollars. So a few days ago the SEBI contemplated on a draft policy to make the issuing of PN difficult for FIIs. This was the step which gave a jolt to the buying spree of FIIs. As people found that it would be difficult to trade in the market in future owing to non-availability of PN, they started exiting form the market by selling their stock. Result- the market fell more than a 1000 point in a few hours and had to shut down for some time. Ultimately the Government had to rush in to alleviate the growing concern of Investors by stating that it would not control the issuing of PN to investors. This news will from the Business standard give you some detail of this exercise done by the Government. As of now the market is still fluctuating and is yet to be stabilized. However, I think that in all probability, it will continue its upward swing despite such momentary crash. The main reason of my belief is that the Indian economy as a whole is performing very well Same is the case with most Indian companies listed in the market. With the above note, here are some of my observations on what can happen if the stock market boom continues for lone in India:

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Stock markets & recession:The economy and the stock market are closely related. The stock markets reflect the buoyancy of the economy. In the US, a recession is yet to be declared by the Bureau of Economic Analysis, but investors are a worried lot. The Indian stock markets also crashed due to a slowdown in the US economy. The Sensex crashed by nearly 13 per cent in just two trading sessions in January. The markets bounced back after the US Fed cut interest rates. However, stock prices are now at a low ebb in India with little cheer coming to investors. When the global economy has been cooling down, and the financial sector in particular has been heading from one cold shower to the next, it was inevitable that stock markets around the world would start catching the chill. The way in which Asian stock prices responded last week to the fall of the Dow Jones and Nasdaq indices by 4 per cent, hitting a 10-month low, has also punctured a hole in then decoupling argument (which said Asia would not be hit by an America-based problem) that had become fashionable in recent weeks. Investors around the world have taken note of the fact that the broad-based S&P 500 index is at a 16-month low, along with European stocks. And investors seem to have little faith in the Bush rescue plan's ability to ward off a recession in the US. The Fed will almost certainly respond with sharp cuts in interest rates towards the end of the month, but the market has already discounted for that.

Indian markets worst hit

It is interesting that Indian markets were hit the most, among all Asian markets. This may have been because the correction in the overheated Chinese stock market began some weeks ago. Investors will also have noticed that the third-quarter corporate numbers show significant deceleration in both sales and profit growth, when compared to the same quarter a year earlier. When coupled with the data showing that the export target for the year will be missed by a wide margin, and that the industrial sector has suffered a sharp slowdown, it was inevitable that stock prices would have to come off their dizzy highs. What began with profit-booking and unwinding of long positions cascaded on Friday into a 3.5 per cent decline in the Sensex. Foreign institutional investors had moved to the sidelines in the secondary markets even earlier, and FIIs have been net sellers to the tune of Rs 2,200 crore (Rs22 billion) in January. Also relevant was the Reliance Power IPO, which pulled in a record amount of application money (Rs 1,15,000 crore (Rs 1,150 billion)). Even if a third or a fourth of that was being garnered by sale of stocks, it is a large enough sum for the market to go into correction mode. There is no doubt that valuations had become expensive. Even after the 10 per cent correction from the market's peak, the Sensex trades at a trailing P/E multiple of 24.5, which is not cheap in anyone's book.

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SWOT ANALYSIS
Strength: High return Large investment Acquire capital for expanding the business Secure the future losses

Weakness: High risk Based on the fluctuation. It becomes high loss when market goes down. Cant predict future Opportunity: Lot of people wants to invest but dont invest due to insufficient knowledge. Market is providing new opportunities and new options to invest. Threat : Recession New government Bubble burst Fluctuates dollar prices

Conclusion:
Through this research we can conclude that: Stock market fluctuates by the external environment. Stock market is all about future prediction. Stock market is very sensitive market. It is based on high risk and high return. Comparatively stock market is less risky than the other market and generates more money for the economy One who have good knowledge in stock market, may survive in the market and generates profits or good return whether the market is down Investors should not invest on the basis of rumors they must observe the market condition or trends Indian economy and than invest If they wanna generate good return.

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Bibliography
Text books: Investment Analysis and portfolio management-M Raghunathan, Madhumati Websites: www.tdd.ltslnewsStock_ExchangesStock.htm www.stockmarkets.com www.bseindia.com http://econ.worldbank.org www.icai.org http://en.wikipedia.org www.tradingstock.com The economics times

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