Project on volatility in Indian stock market

PREFACE A project report on stock market is being prepared in attempts to interpret in-depth study of volatility in Indian stock market. This report helps us to understand various terminologies in stock market. This report gave me opportunity to have complete idea about volatility in stock market. This gave me idea about technical and fundamental analysis in stock market and how trading is being done in stock market. This project report helps in following aspects, Build understanding of central ideas and theories of stock market. Develop familiarity with the analysis of stock market. Furnish institutional material relevant for understanding the environment in which trading decisions are taken. This project will guide to investors for an investment in stock market. This project deployed a lot time for collections of information from various sources. This project will be very helpful to know volatility from January 2006 to December 2006 and reasons for such high volatility and would be able to take decisions for investment in volatile stock market

EXCUTIVE SUMMARY Stock market is an avenue for growth of earnings. This project includes how broking is being done in stock market. It involves stock market analysis such as fluctuations in Sensex & nifty, reasons for fluctuations in stock market, fluctuations in stock market and reasons for the same. Stock market has been the best avenue for investment in securities since last 10 years. Mostly future and option trading was the worst trading in stock market in these sessions. I have covered various sessions for analysis from July 2006 to December 2006In these sessions, stock market was most volatile so that I have covered various analyses with most affected factors to the global market. Various stock indices in BSE such as BANKEX, BSE Metal, BSE IT, BSE FMCG, BSE PSU have been most affected due to panic market in these sessions and I have made analysis of these indices. In this project, I have included most gainer period and most loser period with reasons for the same. I also included comparison between Bond yields and foreign investments by foreign investors.

RESEARCH PLAN
Volatility in Indian Stock Market

Objectives: To study volatility in Indian stock market while taking SENSEX of Bombay stock exchange as a source of secondary data which broadly represent Indian stock market along with NIFTY of National stock exchange? To study the factors which are making Indian stock market volatile? To furnish institutional material relevant for understanding the environment in which stock market fluctuation are occurring.

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

Hypothesis: This is the exploratory research which tries to shows the factors which are making stock market volatile. Any fluctuation in foreign market has more effect on Indian stock market than that of domestic market. In the given volatile economic conditions, the market is efficient to any news and information.

Sources of data: Data used in this study is of secondary in nature. Sensex and Nifty is taken as a source of information which widely describes Indian stock market. Here monthly prices of both indexes are taken for the study purpose.

INTRODUCTION
Stock exchanges to some extent play an important role as indicators, reflecting the performance of the country's economic state of health. Stock market is a place where securities are bought and sold. It is exposed to a high degree of volatility; prices fluctuate within minutes and are determined by the demand and supply of stocks at a given time. Stockbrokers are the ones who buy and sell securities on behalf of individuals and institutions for some commission. The Securities and Exchange Board of India (SEBI) is the authorized body, which regulates the operations of stock exchanges, banks and other financial institutions. The past performances in the capital markets especially the securities scam by Harshad Mehta has led to tightening of the operations by SEBI. In addition the international trading and investment exposure has made it imperative to better operational efficiency. With the view to improve, discipline and bring greater transparency in this sector, constant efforts are being made and to a certain extent improvements have been made. As the condition of capital markets are constantly improving, it has started drawing attention of lot more people than before. On the career related aspects, professionals have opportunities to choose from for a wide range of jobs available in a number of organizations in this sector and one can expect to have good times ahead of him.

INDIAN CAPITAL MARKET OVERVIEW

Evolution Indian Stock Markets are one of the oldest in Asia. Its history dates back to nearly200 years ago. The earliest records of security dealings in India are meager and obscure. The East India Company was the dominant institution in those days and business in its loan securities used to be transacted towards the close of the eighteenth century. Thus, at present, there are totally twentyone recognized stock exchanges in India excluding the Over The Counter Exchange of India Limited (OTCEI) and the National Stock Exchange of India Limited (NSEIL).

Trading Pattern of the Indian Stock Market Trading in Indian stock exchanges is limited to listed securities of public limited companies. They are broadly divided into two categories, namely, specified securities (forward list) and nonspecified securities (cash list). Equity shares of dividend paying, growth-oriented companies with a paid-up capital of at least Rs.50 million and a market capitalization of at least Rs.100 million and having more than 20,000shareholders are, normally, put in the specified group and the balance in non-specified group. Two types of transactions can be carried out on the Indian stock exchanges: (a) spot delivery transactions "for delivery and payment within the time or on the date stipulated when entering into the contract which shall not be more than 14 days following the date of the contract: and (b) forward transactions "delivery and payment can be extended by further period of 14 days each so that the overall period does not exceed 90 days from the date of the contract". The latter is permitted only in the case of specified shares. The brokers who carry over the outstanding pay carryover charges (can tango or backwardation), which are usually determined by the rates of interest prevailing. A member broker in an Indian stock exchange can act as an agent, buy and sell securities for his clients on a commission basis and also can act as a trader or dealer as a principal, buy and sell securities on his own account and risk, in contrast with the practice prevailing on New York and London Stock Exchanges, where a member can act as a jobber or a broker only. The nature of trading on Indian Stock Exchanges are that of age old conventional style of face-to-face trading with bids and offers being made by open outcry. However, there is a great amount of effort to modernize the Indian stock exchanges in the very recent times.

Over The Counter Exchange of India (OTCEI)

The traditional trading mechanism prevailed in the Indian stock markets gave way to many functional inefficiencies, such as, absence of liquidity, lack of transparency ,unduly long settlement periods and benami transactions, which affected the small investors to a great extent. To provide improved services to investors, the country's first ring less, scrip less, electronic stock exchange - OTCEI - was created in 1992 by country's premier financial institutions - Unit Trust of India, Industrial Credit and Investment Corporation of India, Industrial Development Bank of India, SBI Capital Markets, Industrial Finance Corporation of India, General Insurance Corporation and its subsidiaries and Can Bank Financial Services. Trading at OTCEI is done over the centers spread across the country. Securities traded on the OTCEI are classified into

Listed Securities - The shares and debentures of the companies listed on the OTC can be bought or sold at any OTC counter all over the country and they should not be listed anywhere else.

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

Initiated debentures - Any equity holding at least one-lakh debentures of particular scrip can offer them for trading on the OTC.OTC has a unique feature of trading compared to other traditional exchanges. That is, certificates of listed securities and initiated debentures are not traded at OTC. The original certificate will be safely with the custodian. But, a counter receipt is generated out at the counter, which substitutes the share certificate and is used for all transactions. In the case of permitted securities, the system is similar to a traditional stock exchange. The difference is that the delivery and payment procedure will be completed within 14 days. Compared to the traditional Exchanges, OTC Exchange network has the following advantages

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

Greater transparency and accuracy of prices is obtained due to the screen-based scrip less trading. since the exact price of the transaction is shown on the computer screen, the investor gets to know the exact price at which s/he is trading.

Faster settlement and transfer process compared to other exchanges.

In the case of an OTC issue (new issue), the allotment procedure iscompleted in a month and trading commences after a month of the issue closure, whereas it takes a longer period for the same with respect to other exchanges.

Thus, with the superior trading mechanism coupled with information transparency investors are gradually becoming aware of the manifold advantages of the OTCEI.

National Stock Exchange (NSE)

With the liberalization of the Indian economy, it was found inevitable to lift the Indian stock market trading system on par with the international standards. On the basis of the recommendations of high-powered Pherwani Committee, Industrial Development Bank of India, Industrial Credit and Investment Corporation of India, Industrial Finance Corporation of India, all Insurance Corporations, selected commercial banks and others incorporated the National Stock Exchange in 1992.Trading at NSE can be classified under two broad categories:(a) Wholesale debt market and(b) Capital market. Wholesale debt market operations are similar to money market operations -institutions and corporate bodies enter into high value transactions in financial instruments such as government securities, treasury bills, public sector unit bonds, commercial paper, certificate of deposit, etc. There are two kinds of players in NSE:(a) Trading members and(b) Participants. Recognized members of NSE are called trading members who trade on behalf of themselves and their clients. Participants include trading members and large players like banks who take direct settlement responsibility. Trading at NSE takes place through a fully automated screen-based trading mechanism, which adopts the principle of an order-driven market. Trading members can stay at their offices and execute the trading, since they are linked through a communication network. The prices at which the buyer and seller are willing to transact will appear on the screen. When the prices match the transaction will be completed and a confirmation slip will be printed at the office of the trading member.

NSE has several advantages over the traditional trading exchanges. They are as follow
market trading network across the nation.

Investors can trade at the same price from anywhere in the country since inter-market operations are streamlined coupled with the countrywide access to the securities. in communication, late payments and the malpractices prevailing in the traditional trading mechanism can be done away with greater operational efficiency and informational

transparency in the stock market operations, with the support of total computerized network. Unless stock markets provide professionals service, small investors and foreign investors will not be interested in capital market operations. And capital market being one of the major sources of long-term finance for industrial projects, India cannot afford to damage the capital market path. In this regard NSE gains vital importance in the Indian capital market system.

Bombay Stock Exchange (BSE) Sensex

For the premier Stock Exchange that pioneered the stock broking activity in India,128 years of experience seems to be a proud milestone. A lot has changed since1875 when 318 persons became members of what today is called "The Stock Exchange, Mumbai" by paying a princely amount of Re1.Since then, the country's capital markets have passed through both good and bad periods. The journey in the 20th century has not been an easy one. Till the decade of eighties, there was no scale to measure the ups and downs in the Indian stock market. The Stock Exchange, Mumbai (BSE) in 1986 came out with a stock index that subsequently became the barometer of the Indian stock market. SENSEX is not only scientifically designed but also based on globally accepted construction and review methodology. First compiled in 1986, SENSEX is a basket of30 constituent stock representing a sample of large, liquid and representative companies. The base year of SENSEX is 1978-79 and the base value is 100. The index is widely reported in both domestic and international markets through print as well as electronic media.

The Index was initially calculated based on the "Full Market Capitalization "methodology but was shifted to the free-float methodology with effect from September 1, 2003. The "Free-float Market Capitalization" methodology of index construction is regarded as an industry best practice globally. All major index providers like MSCI, FTSE, STOXX, S&P and Dow Jones use the Free-float methodology. Due to is wide acceptance amongst the Indian investors; SENSEX is regarded to be the pulse of the Indian stock market. As the oldest index in the country, it provides the time series data over a fairly long period of time (From 1979 onwards). Small wonder, the SENSEX has over the years become one of the most prominent brands in the country. The growth of equity markets in India has been phenomenal in the decade gone by. Right from early nineties the stock market witnessed heightened activity in terms of various bull and bear runs. The SENSEX captured all these events in the most judicial manner. One can identify the booms and busts of the Indian stock market through SENSEX.

4.0 STOCK MARKET ANALYSIS In this stock market analysis, I have taken data of Sensex and Nifty for the period of6 months from July 2006 to December 2006 After taking into consideration data of stock market, I compared Nifty with Sensex through graphical presentation and also did analysis of fluctuations in stock market week wise.

Nifty July 2013

Date 7/31/2013 7/30/2013 7/29/2013 7/26/2013 7/25/2013 7/24/2013 7/23/2013 7/22/2013 7/19/2013 7/18/2013 7/17/2013 7/16/2013 7/15/2013 7/12/2013 7/11/2013 7/10/2013 7/9/2013 7/8/2013 7/5/2013 7/4/2013 7/3/2013 7/2/2013 7/1/2013 Open High Low Close Volume Adj Close 235500 5742 5755.05 5831.65 5886.2 5907.5 5990.5 6077.8 6031.8 6029.2 6038.05 5973.3 5955.25 6030.8 6009 5935.1 5816.7 5859 5811.55 5867.9 5836.95 5770.9 5857.55 5898.85 5738.35 5752.1 5836.05 5861.3 5869.95 5886 5907.5 5970.4 6077.8 6064.3 6029.2 5675.75 5742 5747.6 5825.8

5755.05 181500 5831.65 0 5886.2 5907.5 5990.5 6077.8 0 0 0 0 0 0

5944.25 5869.7 5990.65 5896.4 6077.8 5962.8

6093.35 6061.3

6064.05 6004.75 6031.8

6038.05 6063.95 6020.55 6029.2 5973.3 6050.75 5973.3

6038.05 0 5973.3 0

5955.25 5989.75 5927 6030.8 6009 5935.1 5816.7 5859 5834.6 5867.9 6030.8 6037.9 6018.5 5948.8 5879.2 5912.7

5955.25 0 0 0 0 0 0

5980.95 6030.8 5935.1 5816.7 5803 6009 5935.1 5816.7 5859

5864.95 5834.6 5867.9 5775.7

5811.55 0 0

5836.95 5900.3 5794.75 5848.2

5836.95 5867.9

5786.05 5836.95 0 0

5857.55 5857.55 5760.55 5770.9

5898.85 5898.85 5852.35 5857.55 0 5842.2 5904.05 5829.15 5898.85 0

Sensex july 2013

Data 1/7/2013 2/7/2013 3/7/2013 4/7/2013 5/7/2013 8/7/2013 9/7/2013 10/7/2013 11/7/2013 12/7/2013 Open High Low Close

19,352.48 19,598.43 19,347.57 19,577.39 19,573.93 19,589.14 19,442.75 19,463.82 19,347.11 19,347.11 19,147.31 19,177.76 19,256.12 19,445.02 19,245.01 19,410.84 19,568.79 19,640.27 19,477.74 19,495.82 19,418.98 19,422.69 19,185.92 19,324.77 19,399.37 19,486.00 19,380.25 19,439.48 19,482.66 19,505.93 19,237.91 19,294.12 19,468.46 19,723.51 19,468.46 19,676.06 19,898.69 19,991.94 19,785.59 19,958.47

15/07/2013 19,926.10 20,072.44 19,883.19 20,034.48 16/07/2013 19,788.09 19,890.63 19,649.58 19,851.23 17/07/2013 19,928.95 19,983.22 19,778.54 19,948.73 18/07/2013 19,999.51 20,176.90 19,956.20 20,128.41 19/07/2013 20,213.45 20,256.60 20,111.13 20,149.85 22/07/2013 20,096.71 20,264.90 20,065.69 20,159.12 23/07/2013 20,249.98 20,351.06 20,249.98 20,302.13 24/07/2013 20,200.20 20,252.70 19,994.25 20,090.68 25/07/2013 20,062.00 20,110.81 19,763.90 19,804.76 26/07/2013 19,892.47 19,907.45 19,699.76 19,748.19 29/07/2013 19,714.42 19,751.03 19,570.87 19,593.28 30/07/2013 19,577.75 19,672.72 19,328.54 19,348.34 31/07/2013 19,304.07 19,387.50 19,126.82 19,345.70

After a spirited rally the previous week, the Nifty moved in a band of 150 points between 5750 and 5900, ending with modest gains of 0.53 percent at 5868. It may seem small but the extreme volatility within this band caught traders on the wrong foot. Time and again, markets prove that predicting them in the short run is hazardous. Investors welcomed the governments bold decision to increase gas prices but reacted negatively to its ordinance on the food security bill. The already weak rupee cracked further to 60.35 against the dollar as the election gimmick could cost the state exchequer over $20 billion. In addition to the rupee, oil also made an upward move after the political crisis in Egypt and crossed $100 after a long time. U.S. jobs data showed that employment growth was stronger than expected. U.S. markets rallied on Friday and the 10-year benchmark yield rose to 2.73 percent, the highest in 24 months. This could again lead to withdrawal by FIIs, starting another wave of correction in emerging markets, especially India. The weakness in rupee, already down 9 percent during the last quarter, will affect company earnings. Operating margins are likely to see reversals due to the overall slowdown in the economy and higher interest costs while MTM losses on foreign exchange liabilities could further suppress net margins. Metals, cement and the construction sectors are expected to be worst hit and profits may plunge by about 40-50 percent annually. Owing to weak vehicle sales, profits of all auto companies, except Mahindra & Mahindra, may decline. Pharma, telecom and private banks could be the only sectors which could post growth of over 10 percent. Unilevers open offer for its Indian unit evoked a mixed response with most shareholders staying away. Only a third of public shareholding was tendered despite the offer price being at a nearly 30 percent premium to the pre-offer market price in April. Among the most plausible reasons from the institutional angle was to find another compelling investment opportunity to replace HUL, which would continue to have a decent weightage in the index. The money flowing to retail investors may not find its way into equity markets. Some of Kingfisher chairman Vijay Mallyas assets are being off-loaded by banks. Mangalore Chemicals has been bought by Deepak Fertilizers as well as Zuari Agro. It needs to be seen who would finally get control of the company. Gitanjali Gems continued to crack from circuit to circuit nearly 65 percent in the last month as word got around that financiers could be selling the stock.

Every bull run brings with it a new set of entrepreneurs so enchanted by market capitalization that they concentrate more on reverse engineering to achieve their goals than through performance of their business. The heady concoction of market operators, financiers, PR agencies and willing promoters create a maze showcasing temporary wealth, attracting gullible investors. The story more often than not leaves a trail of bloodied investors. We have seen a number of examples recently. In the coming week, the Nifty would remain in a broad range of 5600 to 5970 with a negative bias on fears of FII pullout. The results season would also contribute to market caution but, as mentioned earlier, volatility is here to stay.

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

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

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

There was encouraging news from the eurozone as Purchasing Manager surveys continued to show improvement. The flash composite eurozone PMI for July was above 50.0 for the first time since January 2012.

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

Nifty august 2013

Date

Open

High

Low 5360.2 5303

Close 5471.8

Volume Adj Close 336400 5471.8 5409.05 5285 5287.45 5476.5 5471.75 5408.45 5302.55 5401.45 5414.75 5507.85 5742.3 5742.3 5699.3 5612.4 5565.65 5565.65 5519.1 5542.25 5685.4 5677.9 5727.85

8/30/2013 5407.45 5493.3 8/29/2013 5316.5 5428.9

5409.05 326500 336000

8/28/2013 5233.45 5317.7 8/27/2013 5426.5 8/26/2013 5499.4 5427.4 5528.7

5118.85 5285

5274.25 5287.45 306000 5454.45 5476.5 5377.8 242000

8/23/2013 5428.75 5478.8 8/22/2013 5282.8

5471.75 251500

5418.95 5254.05 5408.45 284500 5268.45 5302.55 255000 5306.35 5401.45 261100

8/21/2013 5494.45 5504.1 8/20/2013 5353.45 5417.8

8/19/2013 5497.55 5499.65 5360.65 5414.75 219700 8/16/2013 5705.45 5716.6 8/15/2013 5742.3 8/14/2013 5715.4 5742.3 5496.05 5507.85 248100 5742.3 5742.3 5742.3 5699.3 5612.4 0 223700 223000 195700

5754.55 5690.2

8/13/2013 5600.25 5704.75 5578.9 8/12/2013 5606.7 8/9/2013 8/8/2013 8/7/2013 8/6/2013 8/5/2013 8/2/2013 8/1/2013 5644.1 5557.1

5565.65 5565.65 5565.65 5565.65 0 5510.05 5577.6 5549.3 5664.9 5682.4 5510.05 5565.65 204900 245000

5561.45 5486.85 5519.1 5664.9 5721 5521.8 5661.5

5542.25 216200 5685.4 5677.9 197200 222500

5750.05 5761.85 5649 5776.9 5808.5

5676.85 5727.85 216800

Sensex August2013

Date 1/8/2013 2/8/2013 5/8/2013 6/8/2013 7/8/2013 8/8/2013 12/8/2013

Open

High

Low

Close

19,443.29 19,569.20 19,170.46 19,317.19 19,399.55 19,451.70 19,078.72 19,164.02 19,178.06 19,306.51 19,141.68 19,182.26 19,127.10 19,131.92 18,667.30 18,733.04 18,758.53 18,811.46 18,551.35 18,664.88 18,687.30 18,829.26 18,621.67 18,789.34 18,898.94 19,066.97 18,796.01 18,946.98

13/08/2013 18,895.26 19,248.11 18,864.81 19,229.84 14/08/2013 19,299.42 19,392.56 19,203.63 19,367.59 16/08/2013 19,297.11 19,310.95 18,559.65 18,598.18 19/08/2013 18,587.38 18,587.38 18,139.15 18,307.52 20/08/2013 18,142.83 18,306.46 17,970.98 18,246.04 21/08/2013 18,545.44 18,567.70 17,807.19 17,905.91 22/08/2013 17,896.84 18,349.82 17,759.59 18,312.94 23/08/2013 18,386.53 18,546.60 18,210.75 18,519.44 26/08/2013 18,602.56 18,728.19 18,488.93 18,558.13 27/08/2013 18,460.72 18,460.72 17,921.82 17,968.08 28/08/2013 17,851.44 18,101.84 17,448.71 17,996.15 29/08/2013 18,073.66 18,455.66 18,071.22 18,401.04 30/08/2013 18,424.72 18,679.26 18,272.76 18,619.72

Stocks have been in free fall this month, the rupee has been hitting record low levels and investors are running scared.

The Mumbai Sensex index swung wildly on Wednesday, at first popping into positive territory but then falling by 760 points to close with a loss of nearly 2% for the day. This is the fourth consecutive day of losses, with the index down by 7.5% over the period. In the past month, the benchmark index has tumbled by just over 11%. Investors are growing increasingly concerned about the U.S. Federal Reserve cutting back on its massive bond-buying program, which has generated a wave of liquidity around the world and propped up global markets. As the Fed looks to taper its $85-billion-per-month stimulus program, emerging markets -- and India in particular -- have suffered damaging capital outflows. Related: Nissan resurrects Datsun in India

Local factors are making the situation worse. Investors are losing faith in India's sluggish economy and worry about its large current account deficit, which reflects the nation's tendency to import more goods than it exports and leaves it heavily reliant on foreign capital. The economy grew at its slowest pace in a decade in 2012 and forecasters have been downgrading their expectations for future growth. "There is no dynamism in India right now that will allow the free flow of capital," said Stephen Pope, managing partner at Spotlight Ideas. Pope pointed to the extreme bureaucracy, which is slowing economic and political progress. "Everything seems to make some progress and then it stops because of the level of bureaucracy. And this is what is killing the potential of India. It should be challenging China, but it's not," he said. Others have voiced concerns that elections due by May 2014 will do little to strengthen India's political leadership. "Whatever new coalition assumes power by next spring will be very weak, deepening India's political paralysis and reducing already paltry chances for reforms needed to re-energize the lagging economy," said David Sloan, director for Asia at Eurasia Group. Related: Fed provokes run for the hills ... in China and India Investors are selling the rupee, pushing the currency on Wednesday to a record low versus the U.S. dollar. Economists and traders said the sell-off was exacerbated by indecisive moves from the Indian central bank. The Reserve Bank of India announced Tuesday that it would inject over $1 billion into the markets, just days after saying it was working to tighten liquidity. The announcement came after yields on Indian government bonds spiked above 9%. "It's taking neither a hot nor cold stance to protect its currency and this indecision is fueling the market's selling bias when it comes to the rupee," said Kathleen Brooks, a research director at FOREX.com. Ishaq Siddiqi, a market strategist at ETX Capital, said the central bank was doing little to secure stability for the Indian economy and currency. "This is seen as a sign of desperation from the Reserve Bank of India," he said

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

nvestments into Indian shares through participatory notes (P-Notes) hit a three-month high of Rs 1.65 lakh crore (about $26 billion) in August. P-Notes, mostly used by overseas High Networth Individuals (HNIs), hedge funds and other foreign institutions, allow them to invest in Indian markets through registered Foreign Institutional Investors (FIIs) while saving on time and costs associated with direct registrations. According to the latest data released by the Securities and Exchange Board of India (Sebi), the total value of P-Note investments in Indian markets (equity, debt and derivatives) rose to Rs 1,64,817 crore at the end of August. At the end of July, foreign investments into Indian markets through P-Notes stood at Rs 1.48 lakh crore, against Rs 1.47 lakh crore in June. Notably, investments into Indian shares through P-Notes climbed to Rs 1.68 lakh crore in May, highest in six months, due to improved global liquidity situation but investment declined in the succeeding two months (June-July) because of a slew of global and domestic factors like deprecating rupee and widening current account deficit (CAD), among others.

Besides, the value of P-Notes issued with derivatives as underlying, stood at Rs 1,02,224 crore at August-end. The quantum of FIIs investments through P-Notes increased to a nine month high of 13.27 per cent in August from 11.45 per cent in July. Till a few years ago, P-Notes used to account for more than 50 per cent of total FII investments, but their share has fallen after Sebi tightened disclosure norms and other regulations for such investments. P-Notes have been accounting for mostly 15-20 per cent of total FII holdings in India since 2009 while it used to be much higher, in the range of 25-40 per cent, in 2008. It was as high as over 50 per cent at the peak of Indian stock market bull run during a few months in 2007. FIIs, the key drivers of Indian markets, pulled out Rs 5,922 crore (around $902 million) from the Indian stock market last month. Additionally, FIIs withdrew Rs 9,773 crore ($1.55 billion) from the debt market in August.

Nifty September 2013

Date Open High Low Close Volume Adj Close 318600 6012.1 6115.55 5899.45 5850.2 5840.55 5850.6 5850.7 5913.15 5896.75 5680.4 5680.4 5592.95 5448.1 5341.45 5550.75

9/20/2013 6104.55 6130.95 5932.85 6012.1 9/19/2013 6044.15 6142.5 9/18/2013 5872.75 5916.9 9/17/2013 5824.2 9/16/2013 5930.3 9/13/2013 5828 5857.8

6040.15 6115.55 287200 5840.2 5804.9 5899.45 153600 5850.2 157900

5957.25 5798.15 5840.55 219500 5884.3 5822.9 5815.8 5850.6 5850.7 190800 273000

9/12/2013 5931.15 5932

9/11/2013 5887.25 5924.35 5832.7 9/10/2013 5738.5 9/9/2013 9/6/2013 9/5/2013 9/4/2013 9/3/2013 9/2/2013 5680.4 5904.85 5738.2 5680.4 5680.4

5913.15 265000 5896.75 275200 5680.4 0 253000

5617.45 5688.6

5566.15 5680.4

5553.75 5625.75 5552.7 5358.65 5460.25 5318.9 5574.7

5592.95 274900 5448.1 0

5580.95 5323.75 5341.45 250300 5478.85 5550.75 0

5480.25 5564.9

Sensex September 2013

Data 2/9/2013 3/9/2013 4/9/2013 5/9/2013 6/9/2013 10/9/2013 11/9/2013 12/9/2013

Open

High

Low

Close

18,691.83 18,942.06 18,678.93 18,886.13 19,002.77 19,007.31 18,166.17 18,234.66 18,314.68 18,612.60 18,188.43 18,567.55 18,857.60 19,117.52 18,847.02 18,979.76 19,072.02 19,293.96 18,929.38 19,270.06 19,448.39 20,012.69 19,444.66 19,997.10 19,999.77 20,055.53 19,777.63 19,997.45 20,046.05 20,052.05 19,676.49 19,781.88

13/09/2013 19,744.54 19,899.37 19,675.68 19,732.76 16/09/2013 19,977.38 20,086.43 19,596.15 19,742.47 17/09/2013 19,721.90 19,819.10 19,635.44 19,804.03 18/09/2013 19,865.99 20,013.33 19,775.29 19,962.16 19/09/2013 20,354.73 20,739.69 20,347.30 20,646.64 20/09/2013 20,616.35 20,677.99 20,051.43 20,263.71

Stocks plunge as Fed minutes cause volatility

In a volatile trading session, stocks took a beating as investors continue to worry about the timing and scope of a paring back on the Federal Reserve's bond-buying stimulus program. Stocks took a dive immediately after the 2 p.m. ET release of the minutes from the Federal Reserve's last meeting but then quickly recovered and then plunged all over again late in the session. In the minutes, Fed policymakers indicated they are still on track to slow the central bank's massive stimulus this year and end it in mid-2014, but gave no signal whether the scale-back could begin next month.

The Dow Jones industrial average fell 105.44, or 0.7%, to close at 14,897.55. The Dow is now riding a six-session losing streak and closed below 15,000 for the first time since July 3. It's the Dow's first six-day drop since July 2012. The Standard & Poor's 500 index fell 9.55, or 0.6%, to 1,642.80 and the Nasdaq composite index dropped 13.80, or 0.4%, to 3,599.55.

While the Fed minutes did not send a clear message of exactly when quantitative easing (QE) will start to be pulled back, the kneejerk reaction of stock investors suggest investors expect tapering to begin in September. Even if the Fed does start to taper in September, one Wall Street expert thinks the stock market will take it in stride, partly because the central bank has telegraphed its intentions to Wall Street. . "If I was a betting man I think they will start in the fall," says Frank Fantozzi, president and CEO of Planned Financial Services in Cleveland, adding that the Fed will probably ease off the stimulus pedal slowly. "It might be more of a 'Taper Lite.' They will probably start small, reducing their current $85 billion in monthly asset purchases by $15 billion" or less. I am confident that the economy will be able to handle the change." Treasury yields spiked higher after the release. The yield on the benchmark 10-year Treasury note rose to 2.89% from 2.82% as investors sold bonds. Wall Street is keeping an eye on the key 3% level, a yield that hasn't been seen since July 25, 2011. Rising bond yields have also been giving investors pause, as higher borrowing costs on mortgages, for example, and for corporations can slow down the economy. "However you want to parse the minutes today, the take-away is the same: the end of QE is upon us," says Andy Busch, editor of The Busch Update. As a result, interest rates will continue to "normalize" and move higher. A risk for stocks, Busch adds, is if the rate rise continues to be quick and large, citing the recent damage to stocks caused by the rapid move up in the yield on the 10-year Treasury note from 1.63% in early May. If rates continue to spike, it "means stocks don't look so cheap."

The Federal Reserve has been buying $85 billion a month in government securities and mortgage-backed bonds in order to help keep interest rates down and spur borrowing and investment. Improvement in the U.S. economy has raised expectations the Fed will begin reducing its monetary stimulus next month. On Tuesday, the Dow fell slightly to 15,002.99. The S&P 500 added 0.4% to 1,652.35. The Nasdaq rose 0.7% to 3,613.59. Investors were also parsing through earnings releases from more American retailers. Shares of home improvement retailer Lowe's rose 3.9% after it topped quarterly earnings forecasts and upped its full-year outlook. But Target shares dipped 3.6% after it provided a downbeat outlook for the balance of 2013. Global markets have been shaky this week as traders, worried about a potential pullback in bond purchases by the Fed, began dumping bonds. Money has also flowed out of emerging stock markets, sending the currencies of countries such as Malaysia, Indonesia and India sharply lower. On Wednesday, Indonesia's benchmark index rose 1% after dropping a total of more than 8% on Monday and Tuesday. Elsewhere in Asia, Japan's Nikkei 225 index swung between gains and losses for most of the trading session. The benchmark ended 0.2% higher at 13,424.733. South Korea's Kospi fell 1.1% to 1,867.46. Hong Kong's Hang Seng lost 0.7% to 21,817.73. Regional benchmarks across Europe mostly declined. The U.K.'s FTSE 100 index was off 1.0% to 6,390.84. Benchmark oil for October delivery was down $1.24 to $103.88 per barrel in electronic trading on the New York Mercantile Exchange.

Stock markets may remain volatile on RBI move

Stock markets are likely to remain volatile this week as investors come to terms with an unexpected hike in interest rate by the RBI and portfolio churning ahead of the September derivatives contract expiry, according to experts. The surprise move from the RBI has reversed the bullish tone of the markets as the 25 basis point rise in repo rate caught market participants completely off-guard, brokers said. The RBI raised the short-term policy repo rate to 7.5 per cent from 7.25 per cent, saying inflation had to be lowered to more tolerable levels. The RBI also partially eased its liquidity-tightening steps that were unveiled to defend a weakening rupee. "This week will see expiry of September month's F&O contracts (on Thursday) so volatility will tend to remain high. Meanwhile, the markets are likely to consolidate in the broad range of 5,800-6,150 and form a base for next directional move," said Jayant Manglik, President Retail Distribution, Religare Securities Ltd. Stock markets would also monitor trend in foreign fund investment and global cues for further direction. Overseas investors have pumped in over Rs 11,000 crore (USD 1.7 billion) in the Indian stock market so far this month. The BSE benchmark had lost 383 points on Friday, the most in three weeks, after RBI monetary policy review. The Sensex had surged 684.48 points to an almost 3-year high on Thursday after the US Federal Reserve refrained from easing its stimulus programmer. For the entire week, the index gained 2.69 per cent to close at 20,263.71. "The deferment in withdrawal of quantitative easing by the US has given Indian policy makers a breathing space of three months at the least and six months at the best," said P H Ravi Kumar, Managing Director, Capri Global Capital Ltd.

FII exit hit the Indian stock market

Foreign institutional investors (FIIs) have played a very important role in shaping our markets' fortunes with their money flows. A large part of the 25 per cent-plus rally in Sensex in the year 2012 can be attributed to the $20billion-plus of inflows from FIIs. For the year 2013 so far, they have poured in over Rs 60,000 crore. FIIs turned net sellers in June, with the net equity outflow amounting to Rs 21,657 crore, indicating a change in sentiment, ET reported. Between June and August 2013, India saw its sharpest bout of FII outflow since the global financial crisis, leading to fears of a possible capitulation by FIIs, say experts.

Does it mean that Indian markets are likely to face fresh bouts of selling by FIIs amid global headwinds?
Deutsche Bank is of the view that it would be premature to conclude if the worst of the FII selling is over. They collectively hold close to 40 per cent of the outstanding free float in Indian markets. "Following incoming governor Raghuram Rajan's announcements on assuaging pain in the currency markets, we have seen the rupee partially recovering losses and FIIs emerging as net buyers to the tune of close to $1 billion over the past eight trading sessions (recouping close to 25% of outflow seen over June-August)," said Deutsche Bank in a report. Most analysts continue to reiterate that currency stability remains the key determinant for the equity market certainty. Recent announcements over the FCNR-B, supportive trade data and easing investment facilitation in debt markets have resulted in improving investor sentiment and concerns over CAD. "The market has come back largely because of the stopping of selling by FIIs as the rupee factor has worked in their favour," said Deven Choksey, MD, KR Choksey Securities in an interview with ET Now.

"I agree that speaking of fundamentals, things have not changed beyond a point. If one looks at the advance tax data, it suggests that the growth has been somewhere around 7-8 per cent," he added. One would probably try to argue that if fundamentally things have not changed, why exactly markets are moving higher after a sharp fall? Given the fact the fundamentals have not changed much, analysts peg rally in equity markets based on a couple of factors. One is attractive valuations after the recent sell-off and other is stability (appreciation) in currency. Choksey is of the view that if the rupee goes down further and stabalises near its real value of around 59-60, the market could remain relatively in the positive zone. So, any correction in the market in the coming days would bring new money into the market for investment. A more sustainable return of faith will come back to the markets on government's commitment on drawing a line on the fiscal deficit at 4.8 per cent of GDP. Investors are keenly expecting a fuel price hike (both one-time hike as well as a higher monthly calibrated hike) as an endorsement of the commitment to fiscal discipline. Convergence of political will on critical economic issues also bodes well.

FII ownership in Sensex

The FII ownership in the 30 companies that comprise the Sensex went up to 18.35 per cent in June 2013, from 16.36 per cent a year ago, said an ET report. This is also the highest level of FII holding in the Sensex in the past five years. This means that if FIIs decide to exit, the Indian equities will take a severe hit. If look at top ten stocks which have maximum FII holding, banks/financials have been the worst hit. IT and pharma stocks as well as auto companies with export background have managed to buck the trend supported by sharp depreciation in Indian currency.

What should investors do amid uncertainty of FII flows?

Until there is a more stable environment around domestic macro, Deutsche Bank advises investors to focus on key themes. One is the global recovery play; by focusing on companies deriving significant revenues from non-India geographies. The other is by focusing on companies which benefit from rupee depreciation. These include Hindalco, TCS, Wipro, Infosys, Tech Mahindra, RIL, United Phosphorous and Bharat Forge. Investors can also look at rural plays focusing on firms that derive a substantial component of revenues from 'Rurban India', likely to benefit from one of the best monsoons in India over many years. Companies which will benefit include stocks like ITC, HDFC Bank, Maruti Suzuki, M&M, MMFSL and UltraTech Cements.

FIIs are of the view that some private sector banks have entered a very attractive valuation zone and they were open to having an exposure to them, says Macquarie report. The recent correction in the Indian stock market has made them bullish on certain stocks with compelling valuations. According to the brokerage, long-only funds are still invested in large names and are not looking to exit them at current levels; but there has been some sector rotation - from financials to IT, consumers and/or pharmaceuticals.

Impact Of Rupee Depreciation On Various Industries In India

Recently in the last one quarter, Rupee has depreciated almost 18% from what it used to be a quarter back. There are multiple factors which have contributed to the fall down of the Indian Currency. Some of them are increasing CAD, weaker GDP of the country translating into increasing gap between Imports and exports which has cumulatively boosted the outflow of the foreign currency from the country. Apparently, RBI has not been able to intervene aggressively due to the limited foreign reserve and hasnt been able to take any decisive steps. However, amidst the currency hedging, one of the question that continues to remain unanswered is the impact of this crisis over the various industries. We try to think in another dimension analyzing who all are the gainers and looser behind the unsterilized Rupee and high end fluctuations. Gaining sectors / Industries Software Industry Most of the Indian

Software firms derive half of their revenue from US; a weaker rupee would definitely have contributed to the gains. According to the analyst, On average, one percentage point

depreciation in the rupee translates into a 30-50 bps gain in operating margins for information technology (IT) companies. The three biggest gainers are the major IT companies - TCS, Infosys and Wipro. The three companies will approximately gain an additional 5,700 crore, 3,600 crore and 2,700 crore, respectively, on net dollar earnings for 2013-14.

In the mid tier IT Companies , HCL Tech and Tech Mahindra will continue to be the big gainers. Over the last three quarters, HCL has signed large deals (over $3 billion) when rupee was between 54 and 59, while Tech Mahindra guided to keeping margins stable at around 21 per cent if the rupee held at near 60 levels.

Pharmaceutical Industry In pharmaceutical industry as well, most companies in the sector will gain from the rupee's fall, since a substantial proportion of their revenues comes from exports. A strong US dollar and yen will boost net sales and operating margins. Indian pharma industry evaluates to $20 billion, or Rs 1 lakh crore, with exports accounting for $9 billion, or Rs 45,000 crore. Many domestic companies such as Lupin, Sun Pharmaceutical and Dr Reddy's Laboratories have high exposure to the west for their exports will gain from rupee depreciation.

Losing sectors/Industries

Oil & Gas Industry Oil and gas industry is likely to have the mixed impact. It is most likely to be on the negative side for the importers. The most affected will be government oil marketing companies such as HPCL and BPCL. This is because of limited ability to pass on higher crude oil (which they import) prices to consumers due to price controls (except on petrol). Automobile Industry

The automobile industry, which majorly relies on import of auto components, could be affected because of a fall in the rupee not only against the US dollar but also against other global currencies. The reasons are higher cost for importing components, higher royalty to foreign parent firms and paying off their debt of ECB and FCCB.

Maruti Suzuki, Hyundai, Honda are most likely to be affected by the Rupee fall precisely because of the higher foreign currency borrowings and large import of components which will result into the net loss. Aviation Industry Rupee depreciation will considerably impact airlines as their dollar revenue is less while most of their expenses are in dollars. With the tumbling currency, there is increase in costs of aviation turbine fuel (ATF) and lease rentals and because of that airlines faced financial pressure. Airlines industry also expected that margins and profits will strike in the coming period. As consequences, airlines have decided to increase their fares by 20-25 per cent across the board. FMCG Raw material costs for Hindustan Unilever, Godrej Consumer Products, Colgate Palmolive and Dabur are likely to gradually move up with rupee fall. Consumer goods companies will have to pay more for imported commodities like palm oil, packaging and crude-linked raw materials that have a global impact on pricing. In nut shell majority of the sectors are having negative impact of rupee depreciation and the higher cost for the companies will get pass on to the end consumers. So it will have a off-putting impact on economy, industries and the consumers at large.

A Turning Tide?
In the equity markets, sentiments play an important part. However, it is equally true that the sentiments do not take much time to change. This is exactly what the Indian markets have experienced over the last few trading sessions. The kind of up-move that the equity indices have witnessed since September 4, 2013 has taken the street by surprise. Two important factors played a pivotal role in the upsurge. First and the foremost was the slight appreciation in the rupee against the dollar. While most on the street only hoped for the new RBI Governor to arrest the fall, the actions taken by the governor actually helped the currency appreciate. After hitting an all-time low against the USD few days ago, the rupee has now bounced back to the 63.58 level. The question now is how much more appreciation can we expect to see going ahead? But before that question is answered, we need to understand that apart from the actions taken by Dr Raghuram Rajan, there are certain other economic aspects to the recovery. The basic reason has been what is known as Exchange Rate Overshooting in exchange rate jargon. In simple terms, this means that considering the fundamental factors, if there is a consensus of the rupee depreciating to certain levels (say 68) and it overshoots that target, some pullback happens and the rupee may again come back to the 62 levels. So, there is a possibility of the rupee touching the 62 mark against the USD. However, this level is not sustainable, as it will finally settle between 65-68 per USD. We have stated several times in the past that it is not the fall in the rupee but the volatility and the sharp fall which shakes up the markets. As the currency settles down at a certain levels (which we feel is around 65-68), India Inc. would get good time to play its strategy.

Another factor has been the return of FIIs on the scene. In the last four trading sessions, FIIs have been net buyers to the tune of Rs 5191 crore. Selling in the debt market has also been arrested, or at least reduced. This has been another of the prime factors that has helped the rupee appreciate. It is a known fact that whenever FIIs have turned net buyers, they have taken the markets to a new orbit. However, it now remains to be seen whether or not FII inflows would continue. We feel it would be difficult to make a prediction on this before the FOMC meet scheduled on September 17 and 18. The impact of the same has been such that even the RBI postponed its mid-quarter review until after the FMOC meet. We expect the markets to remain range-bound till the FOMC and RBI meets are over as no one would like to take a bold step ahead of these two crucial meetings. Till then, expect the markets to remain choppy.

SENSEX MILSESTONES

The Sensex crossed the 1,000 mark on July 25, 1990; the 2,000 mark on January15, 1992; the 3,000 mark on February 29, 1992; the 4,000 mark on March 30, 1992; the 5,000 mark on October 11, 1999; the 6,000 mark on January 2, 2004; the 7,000mark on June 21, 2005; the 8,000 mark on September 8, 2005; the 9,000 mark on December 09, 2005; and finally the historic 10,000 mark on February 7, 2006 . It created another landmark when it touched 11,000 on March 27, 2006. The Sensex closed at a high of 12,903 on 28 Oct 2006. To reach from the 11,000 mark to the12000 mark only took 19 working days, the shortest time interval for a 1000 points climb in BSE Sensex history, surpassing the just set record of 29 days that it took to reach 11,000 from 10,000.

Here is a timeline on the rise and rise of the Sensex through Indian stock market history. 1000, July 25, 1990 - On July 25, 1990, the Sensex touched the four-digit figure for the first time and closed at 1,001 in the wake of a good monsoon and excellent corporate results. 2000, January 15, 1992 - On January 15, 1992, the Sensex crossed the 2,000-markand closed at 2,020 followed by the liberal economic policy initiatives undertaken by the then finance minister and current Prime Minister Dr Manmohan Singh. 3000, February 29, 1992 - On February 29, 1992, the Sensex surged past the 3000mark in the wake of the market-friendly Budget announced by the then Finance Minister, Dr Manmohan Singh. 4000, March 30, 1992 - On March 30, 1992, the Sensex crossed the 4,000-mark and closed at 4,091 on the expectations of a liberal export-import policy. It was then thatthe Harshad Mehta scam hit the markets and Sensex witnessed unabated selling.

5000, October 11, 1999 - On October 8, 1999, the Sensex crossed the 5,000-markas the BJP-led coalition won the majority in the 13th Lok Sabha election. 6000, February 11, 2000 - On February 11, 2000, the InfoTech boom helped the Sensex to cross the 6,000-mark and hit and all time high of 6,006. 7000, June 21, 2005 - On June 20, 2005, the news of the settlement between the Ambani brothers boosted investor sentiments and the scrips of RIL, Reliance Energy, Reliance Capital and IPCL made huge gains. This helped the Sensex crossed 7,000points for the first time. 8000, September 8, 2005 - On September 8, 2005, the Bombay Stock Exchange's benchmark 30-share index -- the Sensex -- crossed the 8000 level following brisk buying by foreign and domestic funds in early trading. 9000, December 09, 2005 - The Sensex on November 28, 2005 crossed 9000 to touch 9000.32 points during mid-session at the Bombay Stock Exchange on the back of frantic buying spree by foreign institutional investors and well supported by local operators as well as retail investors. 10,000, February 7, 2006 - The Sensex on February 6, 2006 touched 10,003 points during mid-session. The Sensex finally closed above the 10K-mark on February 7, 2006. 11,000, March 27, 2006 - The Sensex on March 21, 2006 crossed 11,000 and touched a life-time peak of 11,001 points during mid-session at the Bombay Stock Exchange for the first time. However, it was on March 27, 2006 that the Sensex first closed at over 11,000 points. 12,000, April 20, 2006 - The Sensex on April 20, 2006 crossed 12,000 and touched a life-time peak of 12,004 points during mid-session at the Bombay Stock Exchange for the first time.

13,000, October 30, 2006 - The Sensex on October 30, 2006 crossed 13,000 and still riding high at the Bombay Stock Exchange for the first time. It took 135 days to reach 13,000 from 12,000. And 124 days to reach 13,000 from 12,500. On 30thOctober 2006 it touched a peak of 13,039.36 & closed at 13,024.26. 14,000, December 5, 2006 - The Sensex on December 5, 2006 crossed 14,000 and touched a life-time peak of 14028 at 9.58AM(IST) while opening for the day December 5, 2006.On May 22, 2006, the Sensex plunged by a whopping 1100 points during intra-day trading, leading to the suspension of trading for the first time since May 17, 2004.The volatility of the Sensex had caused investors to lose Rs 6 lakh crore ($131billion) within seven trading sessions. The Finance Minister of India, P.Chidambaram, made an unscheduled press statement when trading was suspended to assure investors that nothing was wrong with the fundamentals of the economy, and advised retail investors to stay invested. When trading resumed after there assurances of the Reserve Bank of India and the Securities and Exchange Board of India, the Sensex managed to move up 700 points, still 450 points in the red. This is the largest ever intra-day crash (in points terms) in the history of the Sensex. The Sensex eventually recovered from the volatility, and on October 16, 2006, the Sensex closed at an all-time high of 12,928.18 with an intra-day high of 12,953.76. This was a result of increased confidence in the economy and reports that India's manufacturing sector grew by 11.1% in August 2006

CONCLUSIONS India has been witness to a four-year up and down cycle in the stock markets. Since1992, the Indian markets have peaked every fourth year and then dropped 35-45%during the next three years. What is surprising though is that the Dalal Street has bucked the trend this time around. Some of the major conclusions derived in the study are as under.

Declaration of any financial result and other information of the company has direct effect on its stock price.

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

In short, The following hypothesis have been tested and proved positive.

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

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

At the end it is concluded that following are Major factors, which have generally contributed to fall & rise in SENSEX & NIFTY:

1. US economic growth 2. Crude oil prices 3. Emerging market valuations 4. Foreign direct investment (FDI) 5. Capital spending6.Equity supply 7. Government policy toward foreign firms 8. Politics 9. Domestic risk 10. Foreign institutional investors (FII) withdrawals

11. US Fed interest rates 12. Indian industry growth 13. Budget 2006-07 and finance bill 14. Tax circular regarding transaction tax to FII.

Bibiliography

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