Introduction:

Indian economy at its height compelled the world to change its viewpoint towards
India. Out of the several factors which changed the face of modern India, we are
going to discuss the most roaring of them i.e. our share market. The earlier reform
procedures adopted by India gave India the two most sought after world-class
brands i.e. SENSX and NIFTY. The magical figures displayed by our market turned
all the heads on India. And India became one of the most favoured places for
investment. Now we are going to deal with the ups and downs in the share market
since last two years i.e. since year 2007.our share market has went through many
phases in there 2 years. We saw the investors getting overjoyed at 21K and we saw
them crying too when it crashed. We saw how the market rewarded the undervalued
shares and how the overvalued shares fell down to demonstrate the saying
“everything which rise more than expected, has to fall.” So to analyze the saga of
Indian share market, we had two indices to followed by BSE sensex and NSE nifty.
Though NSE nifty is a more advanced option and has left BSE sensex far behind,
still we call BSE sensex as the barometer of our economy. That’s why we have
followed the BSE sensex. It was not possible to track each and everyday figure of
the sensex since last two years. The performance of the sensex is analyzed with the
help of data and graphs collected from various sources and some of the most talked
about movements of sensex starting with the secondary market summary of each
year, firstly year 2007 and then year 2008.

SENSEX:

The SENSEX, short form of the BSE-Sensitive Index, is a "Market Capitalization-

Weighted" index of 30 stocks representing a sample of large, well-established and
financially sound companies.

Objectives of SENSEX

To measure market movements Benchmark for funds performance For index based
derivative products

Calculation of SENSEX

SENSEX is calculated using a "Market Capitalization-Weighted" methodology. As

per this methodology, the level of index at any point of time reflects the total market
value of 30 component stocks relative to a base period. The market capitalization of
a company is determined by multiplying the price of its stock by the number of
shares issued by the company. An index of a set of a combined variables such as
price and number of shares is commonly referred as a 'Composite Index' by
statisticians. A single indexed number is used to represent the results of this
calculation in order to make the value easier to work with and track over time. The
calculation of SENSEX involves dividing the total market capitalization of 30
 companies in the Index by a number called the Index Divisor. The Divisor is the only
link to the original base period value of the SENSEX. It keeps the Index comparable
over time and is the adjustment point for all Index maintenance adjustments.

Monthly SENSEX changes in 2007 :

YEAR JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

2007 1336 1293 1241 1245 1376 1400 1466 1398 1542 1732 1852 1908
2 8 5 5 5 3 4 9 2 9 6 0

An overview of year 2007:

Sensex entered into 2007 with a promising figure of 14000+, though the year started
on a rather tentative note with a marked slowdown being observed in the FII inflows
into the country. The inflows received from FIIs in January and February 2007 was
48 per cent less than what was received during the same period in 2006. The return
provided by the BSE Sensex for 2007 turned into negative territory following the 389-
point tumble on Friday, February 23rd; the year-to-date return generated by the
Sensex was negative 0.97 percent. FIIs have pressed substantial sales over those
days in contrast to an intermittent surge in inflow in February 2007. As a result, the
sensex which closed at 14091 on January 31st, closed at 12938 on February 28th

As per provisional data FIIs were net sellers to the tune of Rs 613 crore on Friday 2
March, the day when Sensex had lost 273 points. Their net outflow was worth Rs
3080.80 crore in four trading sessions from 26 February to 1 March 2007. Market
continued to reel under selling pressure on 5th march 2007 taking cue from weak
global markets and heavy FII sales as a result of fall over 400 points, all the indices
were in red. On April 24th, The Sensex again crossed the 14K mark and was trading
at 14,150.18 having gained 221.85 points or 1.59%. The midcap and small cap
indices were rather moving slow indicating that the actual movers are the large cap
stocks but at the month end it finally closed at 13872. Further we can see May and
June having month end figures at 14544 and 14651 respectively

The benchmark BSE 30-Share Sensitive Index (Sensex) breached the 15,000-
mark, to reach a record high of 15007.22, for the first time intra-day on Friday,
July 06 2007 before closing at 14964.12. Despite weak global cues, Indian
stocks were in great demand, especially auto, pharma, IT and metals stocks.
On Friday, this lifted the Bombay Stock Exchange's benchmark 30-share
Sensex past the magical 15,000-mark. The Sensex took 146 sessions to cover
the 1,000 point distance from 14,000 till 15,000. This is the highest since the index
took 371 trading sessions to move up from 6,000 to 7,000.The sensex experienced
its second bigger ever fall on 2nd August 2007. The fall came in after the Fed
Reserve cut its discount interest rate at an emergency meeting and JPMorgan
Chase agreed to buy Bear Stearns for USD 2 a share. Sensex closed down
951.03 points or 6.03% at 14809.49, When FIIs were pumping money in stock
market and were Net Buyers of Equity worth Crores; the Sensex was moving Up ,
Up and Up on weekly basis. Many thought that FIIs were playing blind in Indian stock
market. But when FIIs have turned Net Sellers of Equity and have started booking
profit backed by massive sell off of shares in global markets; Sensex has to go
down. As expected; the Sensex plunged by 600 Points in early trading on 16th
August and most of the shares were down by 4 to 5 per cent. But very soon the
sensex surpassed the gloomy days and Stock markets on Wednesday, September
19th, 2007 gave thumbs up to the decision of the U.S. Fed Reserve to reduce
the rates by 50 basis points, as the benchmark 30-share BSE Sensex moved
up sharply by 653.63 points or 4.17 per cent at 16322.75. By staying well above
the 16000-mark, it outperformed most Asian peers and it was the biggest single day
gain. Thistrend shows that global cues had an influential effect on our market. On the
auspicious occasion of Ganesh chaturathi, India experienced a flow of good news.
The festive spirit did not end with the immersion of Ganapati On Wednesday, it
boiled over to the streets of Mumbai and its financial district, the Sensex touched the
magical 17,000 number. It took Dalal Street just 5 days to travel 1,000 points.
Suddenly, tech stocks, which were the whipping boys till Tuesday, became hot
favourites. Why? Hopes that the rupee will soften as a result of RBI's latest
announcements to allow more outflow sparked a rally in tech stocks, pushing
the Sensex to a new high of 17,073.87 during the day. At the end of the day,
RBI's measures may not be enough to rein in the rupee. But there were no takers for
this. The bellwether index finally settled at 16,921.39.On October 9th, 2007, Sensex
hits a record high of 18,280 on the back of eye-popping rallies in Reliance &
Reliance. At the height of the dotcom mania in 1999-00, the easiest way to
maximize returns was to buy into any stock with the suffix ‘Software’ or
‘Technologies’. Eight years on, the same seems to hold true for any stock with
the prefix ‘Reliance’, given their baffling run-up over the past one month. Eye-
popping rallies in Reliance Industries, Reliance Energy and Reliance
Communications lifted the 30- share Sensex to a record high of 18,327.42 intra-
days. On October 15th 2007, amidst heavy buying by investors, the bull roared to
breach the 19000 mark in just 4 sessions Sensex was up by 639.63 points or 3.47
per cent at 19058.67. This rise came on the back of some strong sectors for which
the macro picture is quite bright — power, capital goods, infrastructure and telecom.
Foreign Institutional Investors were pumping in huge money in the equity market and
this too was pushing up the index. Since September, they nearly pumped in more
than Rs. 30,000 crore in the cash market. After the U.S. Federal Reserve cut
interest rates by 50 basis points, a re-rating of the emerging markets had been
seen wherein liquidity flows were quite robust. Then suddenly happened the
second biggest crash the sensex ever experienced when the sensex crashed
by 1743 points on 17th October 2007 within minutes of opening, prompting
suspension of trade for hour fallout of regulator Sebi's move to curb Foreign
Institutional Investors. In a knee-jerk reaction to the cap proposed by the market
regulator for the Participatory Notes, an overseas derivative instrument (ODI), used
by foreign institutional investors (FIIs), the stock market crashed by 1743 points in
intra-day, but recovered substantially later to close with a loss of 336.04 points or
1.76 per cent at 18715.82. but it was followed by a huge one-day gain as on
October 23 when the BSE barometer rose 878.85 points after market regulator
SEBI allowed sub-accounts of Foreign Institutional Investors (FIIS) to trade It
took the index a little over 20 years to reach the first 10,000 mark, but just a
little over 20 months to double that score and the sensex made history with
touching the 20000 mark on October 29 2007. Significantly, it was the local
institutions that were in the driver’s seat. As per BSE data, foreign funds have
net sold over Rs 1,100 crore worth of shares over the last three trading
sessions while local funds have net bought over Rs 2,300 crore worth of
shares. Sceptics point to the fact that there were only a handful of stocks that
was driving the market higher. On 13t November, BSE Sensex registered its
biggest ever gain in a single of 893.58 points to settle at the third-highest level
ever on buying by investors in bank counters and blue chip companies such
as Reliance Industries.
 The market gain was because of global cues. Besides, the political development also
gelled well with the sentiment. The rally was driven by short covering, strong buying
by domestic investors. However, there was not much involvement of foreign
investors. But in December 2007, sensex again experienced a black Monday on
17th December. The market succumbed to profit booking, that came in due to
weak global cues as well as profit booking by FIIs in the holiday season. The
Sensex ended losing 769 points from the previous close, at 19,261

Sensex during year 2008:

YEAR JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

2008 1673 1660 1480 1534 1627 1346 1257 1404 1259 8510 8451 8739
0 8 9 3 6 2 6 8 6
After scaling new heights of 20000+, sensex entered year 2008 with rosy
pictures. The trade pundits, brokers and even investors predicted new heights
for the year. And they felt their predictions coming true when sensex touched
the 21000 mark on 8th January 2008. It’s interesting if one sees in terms of
flows; the journey from 20,000 to 21,000 is dominated by domestic institutional
investors; FIIs were negative sellers, they sold in the cash market to the tune
of USD 45 billion.

So if one has to take out some pointers from this journey from 20,000 to
21,000, it is the longest journey which we have seen in the last 5,000 marks,
the midcaps and small caps have been outperformers and in terms of flows, it
has been domestic institutional investors which have been really putting the
money But the rosy picture soon turned gloomy. The skyrocketing sensex
suddenly started heading south and Sensex saw the biggest absolute fall in
history, shedding 2062 points intra-day. It closed at 17,605.35, down 1408.35
points or 7.4 per cent. It fell to a low of 16,951.50. The fall was triggered as a
result of weakness in global markets, but the impact of the global rout was the
biggest in India. The market tumbled on account of a broad based sell-off that
emerged in global equity markets. Fears over the solvency of major Western banks
rattled stocks in Asia and Europe. After the worst January in the last 20 years for
Indian equities, February turned out to be a flat month with the BSE sensex down
0.4%. India finished the month as the second worst emerging market. The
underperformance can partly be attributed to the fact that Indian markets
outperformed global markets in the last two months of 2007and hence we were
seeing the lagged impact of that outperformance. In the shorter term, developments
in the US economy and US markets continued to dominate investor sentiments
globally and we saw volatility move up sharply across most markets. The Bombay
Stock Exchange (BSE) Sensex fell 4.44 percent on Monday, 31st march the last day
of the financial quarter, to end the quarter of March down 22.9 percent, its biggest
quarterly fall since the June 1992 quarter, as reports of rising inflation and global
economic slowdown dampened market sentiments. Financial stocks led the Sensex
slide along with IT. According to market analysts, IT stocks fell on worries about the
health of the US economy. Indian IT firms depend on the US clients for a major
share of their revenues

Reasoning for the slowdown (2008-09):

The first month of the financial year 08-09 proved to be a good one for investors with
the month ending on a positive note. The BSE sensex showed a gain of 10.5% to
close at 17287 points. A combination of firming global markets and technical
factors like short covering were the main reasons for the up move in the
markets. Though inflation touched a high of 7.57% against 6.68% in march 2008 as
a result RBI hiked CRR by 50 bps to take the figure to 8%, still emergence of retail
investors was also seen; a fact reinforced by the strong movement in the mid-cap
and small- cap index that rose 16% and 18% respectively .So April was the last
month to close positive. Then after nobody saw a stable sensex even. Sometimes it
surged by 600+ points, but very next day it The 30-share BSE Sensex fell 117.89
points or 0.67% at 17,373.01 on Tuesday, 6 May 2008. The key benchmark indices
ended lower as investors resorted to profit booking due to lack of positive triggers in
the market. On 30th May an imminent hike in domestic retail fuel prices due to
soaring crude oil prices weighed on the market last week. Foreign institutional
investors sold close to Rs 2204 crore in the first three trading sessions of the
week which accentuated the downfall. However better than expected Q4 gross
domestic product figures provided some relief to the bourses on Friday. IT stocks
gained on slipping rupee. BSE Sensex rose in two out of five trading sessions.
In May, Indian inflation stood at 8.2%. The market declined sharply as a hike in
fuel prices by about 10% announced by the Union government on Wednesday,
4 June 2008, triggered possibility of a surge in inflation to double digit level.
The BSE Sensex declined 843.39 points or 5.14% to 15,572.18 in the week ended 6
June 2008. The S&P CNX Nifty fell 242.3 points or 4.97% to 4627.80 in the week.
On 6 June 2008, local benchmark indices underperformed their global peers,
hit by rumours that the Reserve Bank of India (RBI) may hike cash reserve
ratio (CRR) or interest rate later in the day to tame runaway inflation. The 30-
share BSE Sensex declined 197.54 points or 1.25% to settle at 15,572.18.On 9th
June 2008, Bombay’s Sensex index closed 506.08 points down at 15,066.10,
having earlier fallen 4.4% and slipped below 15,000 for the first time since
March

Oil prices surged to record levels, fanning fears that they will keep climbing and hurt
world growth. Central banks across the globe warned that interest rates may have to
rise as they look to keep inflation under control, despite the fact that economic
growth is slowing in key nations such as the US and UK. On the week ending
27thJune 2008 Sensex declined 769.07 points or 5.28% to 13,802.22. The S&P
CNX Nifty lost 210.90 points or 4.85% to 4136.65 in the week. Equities extended
losses for the fifth straight day on 24 June 2008 with the barometer index BSE
Sensex falling below the psychologically important 14,000 mark for the first time in
10 months since late August 2007. On 25 June 2008, equities staged a solid
rebound after touching fresh calendar 2008 lows in early trade.

The initial jolt was caused by the Reserve Bank of India's move to hike the key
lending rate. A setback to stocks in Asia and US, sharp spurt in crude oil prices and
political uncertainty due to Indo-US nuclear deal rattled bourses on 27 June 2008.On
July 15th 2008, Indian shares fell 4.9 per cent to their lowest close in 15
months, joining a world equities rout as investors dumped financials on
concerns about the fallout from worsening global credit turmoil. Although
Indian banks have no direct exposure to the US subprime mortgage sector, the
global financial sector turmoil impacts sentiment in the local market and raises
worries of more withdrawals by foreign funds. An 800+ point surge was
experienced in the market on the day following UPA gaining vote of
confidence but the very next day market couldn’t maintain the momentum and
since then its in a doldrums’ position. Presently, we can saw market plunging
after the RBI announced further hikes in Repo rate as well as CRR both increased to
9%. Also, the serial blasts at Ahmadabad and Bangalore adding to the worries and
enhancing the negative sentiments. And above all we can't see any positive trigger
that can dilute the flow of negative news.

Current Situation of year 2008:

With major financial crisis erupting in the U.S., Indian Stock Market benchmark index
(Sensex) fell by 469.54 points or 3.35 per cent on Monday to close at 13531.27.
Realty stocks led the fall with a loss of 7.65 per cent. The National stock exchange,
the NSE Nifty lost 155.55 points or 3.68 per cent. All sectoral indices closed in the
negative territory. An eventful week of turmoil has begun in the global financial
scenario as stock prices plunged across much of the globe on news that investment
bankers, Lehman Brothers Holdings filed for bankruptcy and Merrill Lynch & Co’s
forced sale to Bank of America. Even American International Group (AIG), the
world’s largest insurance company, asked the U.S. Federal Reserve for an
emergency funding before announcing a major restructuring plan. The investments
in Indian firms by these U.S. investment bankers are a major worry for Indian
investors. Investor confidence is at its lowest ebb. Investors are worried that all these
are likely to trigger another round of troubles for banks and financial institutions
around the globe. Six months ago, in March, Bear Stearns, the fifth biggest U.S.
investment bank, witnessed a full circle before its fall and sell-off to JP Morgan
Chase & Co for a rock bottom price of $2 per share.

Sensex during 2009:

YEAR JAN FEB MAR APR MAY JUN JUL

2009 8674 8822 8160 9902 1168 1426 1464

3 6 5

BSE SENSEX Index Chart

Indian stock market had the best month with gains of 28% in both the Sensex and
Nifty driven by the election outcome and FII flows. Indian markets have caught
up with other emerging markets as they have rallied now by over 80% from the lows
of March, 2009. During the month, FII inflows stood at US$2.8bn; however domestic
institutions were net buyers to the tune of only US$275 mn. The rally in the market
was led by sectors like Realty (80% rise) and Metals (58%) while FMCG (flat) and
Healthcare (12%) were relative underperformers. The rally was also driven by surge
in interest across market caps including small and mid cap stocks.

Indian stock market celebrate the wining of congress led UPA in 2009
parliament election by breaking all past records forcing the regulator to halt
the trading for day.

It is being considered that the main reason for such a bonus is the expectations of
stable economy after the UPA is coming in the center. The expectation were so high
that it created a world wide record of made BSE Sensex as the index with highest
one day percent gainer across the world. BSE Sensex reach at 14284.21 (2110.79)
when market was open.

BUDGET 2009 AND ITS IMPACT ON STOCKMARKET

"The Union Budget has fallen short of high market expectations. The market has
reacted negatively to issues such as high projected fiscal deficit of 6.8% (and more
importantly there is no roadmap of bring it down), no mention of reforms in petroleum
and insurance sectors, and absence of focus on aggressively pushing ahead the
divestment program."
while the Budget did not stand true to all of market expectations, Thus, expect the
stock market to reflect this afect . Indian shares were down by 4 percent following
presentation of the union budget for 2007-08 on Wednesday.

Conclusion:

After going through all the analysis regarding the stock market in last 2 years, we
can say that stock market touched its peak at 21000 but then crashed badly. Now it
is revolving around a 14000-16000 figure. Though the sensex is a barometer and
after seeing such fluctuations one could be afraid of investing. Still we can say that
people can play safe by investing the blue-chips and undervalued shares. During
year 2006, if we keep aside that brief period of loss that the market witnessed from
may 10 2006 to June 14 2006, investors’ wealth seem to have grown double fold
with the Sensex touching the 10000, 11000, 12000, 13000 and 14000 levels in the
same calendar year. Investor wealth in terms of market capitalization has been
growing in the range of 6.84-12.41%And talking about year 2007, we can summarize
the happenings of year 2007 as a year which redefined the resistance levels at
sensex. Strong crashed badly. Now it is revolving around a 14000-16000 figure.
Though the sensex is a barometer and after seeing such fluctuations one could be
afraid of investing. Still we can say that people can play safe by investing the blue-
chips and undervalued shares. During year 2006, if we keep aside that brief period
of loss that the market witnessed from may 10 2006 to June 14 2006, investors’
wealth seem to have grown double fold with the Sensex touching the 10000, 11000,
12000, 13000 and 14000 levels in the same calendar year. Investor wealth in terms
of market capitalization has been growing in the range of 6.84-12.41%And talking
about year 2007, we can summarize the happenings of year 2007 as a year which
redefined the resistance levels at sensex. Strong economic data, heavy inflow of
funds from FIIs towards the close of previous calendar year and decent to highly
encouraging surge in earnings of top notch companies all pointed to a rosy 2007.
The rupee's rise against the US dollar the regulator's decision to restrict investments
made through participatory notes, rising crude oil prices, the sub-prime mortgage
woes in US, concerns over a slowing down US economy and The Left parties'
opposition to the Indo-US nuclear pact, did halt the market's progress at times. But
the inherent strength of the Indian economy, fairly buoyant results quarter after
quarter, the various chops and subsidies announced by the government and
sustained efforts made by the market regulator to keep investor confidence in the
system alive kept the momentum going. Presently the hike and seek being played by
crude prices, inflation and RBI is affecting our market to a great extent. And adding
to the worries are global slowdown, political instability, serial bomb blasts, negative
public sentiments etc. It is indeed surprising that though the epicenter of the sub-
prime crisis is the US, the tremors are being felt in India. The loss of market cap in
the US is only 14 per cent vis-À-vis 38 per cent in India. But even after analyzing the
causes for downturn, we can say that India story has not ended; else $200 billion
with institutional investors would have fled for safer waters. Exports being 14 per
cent of GDP, India is less vulnerable to external shocks than many other Asian
nations. Political uncertainties too have narrowed down. Savings in India have risen
at a historic rate of 35 per cent on the growing GDP base; 17 per cent of this is in
gold, commodities and real-estate while financial savings represent 18 per cent of
GDP. Even this is skewed towards deposits both banking and non-banking, while the
percentage of savings in shares and debentures is a mere 6.3 per cent. If this
percentage goes to 25 per cent, it would amount to $40 billion of incremental money
being diverted to capital markets. Indian markets today are facing extremely
negative sentiments on the back of financial crises across the globe. US red ink led
bloody session on market. Indian markets bounced back after the mid sessions to
recover smartly from the dip fall on the back of Finance Minister’s strong statement
about India’s financial health led to sustained buying across the sectors. Also the
bounce back in Asian markets from days low on relaxation in policies in China for
second time this week and along with further pump of $28 billion money into the
markets by Japan, Australia and India, also added to positive sentiment. So even
after such downturns, we can be hopeful for a positive market.