Neha Singh PGDM-FINANCE Roll No.

-108

Assignment 2
Q1) 10 reasons for movement in SENSEX area) b) c) d) e) f) g) h) i) j) Natural calamities leads to decrease in sensex Terrorist attacks leads to decrease in sensex Huge buying by FII leads to increase in sensex Mergers & acquisition of big companies leads to increase in sensex Sudden death of any VIP leads to decrease in sensex Any particular sectors performance leads to increase/decrease in sensex Any big scam in corporate sector leads to decrease in sensex Budget leads to increase/decrease in sensex Inflation ,IIP ,GDP data leads to increase/decrease in sensex Global economic actions leads to increase/decrease in sensex

Q2).A 30 Shares in sensex Code Company Classification Infrastructure Capital Goods Telecom Infrastructure Cement Finance Banking Metal,Metal Products & Mining FMCG

500410 ACC Ltd. 500103 Bharat Heavy Electricals Ltd. 532454 Bharti Airtel Ltd. 532868 DLF Ltd. 500300 Grasim Industries Ltd. 500010 HDFC 500180 HDFC Bank Ltd. 500440 Hindalco Industries Ltd. 500696 Hindustan Unilever Ltd.

532174 ICICI Bank Ltd. 500209 Infosys Technologies Ltd. 500875 ITC Ltd. 532532 Jaiprakash Associates Ltd. 500510 Larsen & Toubro Limited 500520 Mahindra & Mahindra Ltd. 532500 Maruti Suzuki India Ltd. 532555 NTPC Ltd. 500312 ONGC Ltd. 500359 Ranbaxy Laboratories Ltd. 532712 Reliance Communications Limited 500325 Reliance Industries Ltd. 500390 Reliance Infrastructure Ltd. 500376 Satyam Computer Services Ltd. 500112 State Bank of India 500900 Sterlite Industries (India) Ltd. 532540 Tata Consultancy Services Limited 500570 Tata Motors Ltd. 500400 Tata Power Company Ltd. 500470 Tata Steel Ltd. 507685 Wipro Ltd.

Banking Information Technology FMCG Infrastructure Capital Goods Automobile Automobile Power Oil & Gas Pharmaceutical Telecom Oil & Gas Infrastructure Information Technology Banking Metal ,Metal Products & Mining Information Technology Automobile Power Metal,Metal Products & Mining Information Technology

B) 50 Shares in Nifty

Sr no 1 2 3

Company ABB Ltd. ACC Ltd. Ambuja Cements Ltd.

Sector

CEMENT CEMENT BANKS

4 Axis Bank Ltd. 5

Bharti Airtel TELECOMMUNICATION Ltd. SERVICES Bharat Heavy Electricals Ltd.

Bharat 7 Petroleum Corporation Ltd. 8 Cairn India Ltd. 9 10 11 Cipla Ltd. DLF Ltd. GAIL (India) Ltd. Grasim Industries Ltd.

Oil & gas

OIL & gas PHARMACEUTICALS Infrastructure Oil & gas

12

CEMENT

HCL 13 Technologies Ltd. Housing Development 14 Finance Corporation Ltd. 15 HDFC Bank Ltd.

Information technology

FINANCE

BANKS

16

Hero Honda Motors Ltd. Hindalco Industries Ltd. Hindustan Unilever Ltd.

AUTOMOBILES

17

ALUMINIUM

18

FMCG BANKS

19 ICICI Bank Ltd. 20

Idea Cellular TELECOMMUNICATION Ltd. SERVICES

Infrastructure 21 Development Finance Co. Ltd. Infosys 22 Technologies Ltd. 23 24 I T C Ltd. Jindal Steel & Power Ltd. Jaiprakash Associates Ltd. Larsen & Toubro Ltd. Mahindra & Mahindra Ltd. Maruti Suzuki India Ltd. NTPC Ltd.

FINANCIAL

Information technology

FMCG STEEL

25

Infrastructure

26

Capital goods

27

AUTOMOBILES

28 29

AUTOMOBILES POWER

Oil & Natural 30 Gas Corporation Ltd.

OIL & gas

31

Punjab National Bank

BANKS

Power Grid 32 Corporation of India Ltd. Ranbaxy 33 Laboratories Ltd.

POWER

PHARMACEUTICALS

Reliance TELECOMMUNICATION 34 Communications SERVICES Ltd. 35 Reliance Capital Ltd. Reliance Industries Ltd. FINANCE

36

Oil & gas

Reliance 37 Infrastructure Ltd. 38 Reliance Power Ltd. Steel Authority of India Ltd State Bank of India

Infrastructure

POWER

39

STEEL

40

BANKS

41 Siemens Ltd. Sterlite Industries (India) Ltd.

42

METALS

Sun 43 Pharmaceutical Industries Ltd.

PHARMACEUTICALS

44

Suzlon Energy Ltd. AUTOMOBILES POWER STEEL

45 Tata Motors Ltd. 46 Tata Power Co. Ltd.

47 Tata Steel Ltd. Tata 48 Consultancy Services Ltd. 49 Unitech Ltd. 50 Wipro Ltd.

Infrastructure Information technology

Q3) The Bombay Stock Exchange (BSE), Indias leading stock exchange, has classified Equity scripts into categories A, B1, B2, S, T, TS, & Z to provide guidance to the investors. The classification is on the basis of several factors like market capitalization, trading volumes and numbers, track records, profits, dividends, shareholding patterns, and some qualitative aspects. As on February 2008 following criterion are used for classifying stocks into various categories by the Bombay Stock Exchange (BSE). Group A: It is the most tracked class of scripts consisting of about 200 scripts. Market capitalization is one key factor in deciding which scrip should be classified in Group A. At present there are 216 companies in the A group. Group S: The Exchange has introduced a new segment named BSE Indonext w.e.f. January 7, 2005. The S Group represents scripts forming part of the BSE-Indonext segment. S group consists of scripts from B1 & B2 group on BSE and companies exclusively listed on regional stock exchanges having capital of 3 crores to 30 crores. All trades in this segment are done through BOLT system under S group. Group Z: The Z group was introduced by the Exchange in July 1999 and includes the companies which have failed to comply with the listing requirements of the Exchange and/or have failed to resolve investor complaints or have not made the required arrangements with both the Depositories, viz., Central Depository Services (I) Ltd. (CDSL) and National Securities Depository Ltd. (NSDL) for dematerialization of their securities. Group B1 & B2: All companies not included in group A, S or Z are clubbed under this category. B1 is ranked higher than B2. B1 and B2 groups will be merged as a single Group B effective from March 2008. Group T:

It consists of scripts which are traded on trade to trade basis. Penny Stock: A stock that trades at a relatively low price and market capitalization, usually outside of the major market exchanges. These types of stocks are generally considered to be highly speculative and high risk because of their lack of liquidity, large bid-ask spreads, small capitalization and limited following and disclosure. They will often trade over the counter through the OTCBB and pink sheets.

Q4) Mutual funds is a relatively low-risk investment scheme that is professionally managed wherein funds from different investors are pooled and again invested in short term money market schemes, stocks, precious metal or commodities, bonds or other mutual fund schemes. Types Of Mutual Funds:The types of mutual funds are based on maturity period and investment patterns. Open ended funds and close ended funds are based on the maturity period. Growth / equityoriented funds, income or debt oriented funds, balanced funds, index funds and gilt funds are based on the investment patterns. Money Market Funds The money market consists of short-term debt instruments, mostly Treasury bills. This is a safe place to park your money. You won't get great returns, but you won't have to worry about losing your principal. A typical return is twice the amount you would earn in a regular checking/savings account and a little less than the average certificate of deposit (CD). Bond/Income Funds Income funds are named appropriately: their purpose is to provide current income on a steady basis. When referring to mutual funds, the terms "fixed-income," "bond," and "income" are synonymous. These terms denote funds that invest primarily in government and corporate debt. While fund holdings may appreciate in value, the primary objective of these funds is to provide a steady cashflow to investors. As such, the audience for these funds consists of conservative investors and retirees. Bond funds are likely to pay higher returns than certificates of deposit and money market investments, but bond funds aren't without risk. Because there are many different types of bonds, bond funds can vary dramatically depending on where they invest. For example, a fund specializing in high-yield junk bonds is much more risky than a fund that invests in government securities. Furthermore, nearly all bond funds are subject to interest rate risk, which means that if rates go up the value of the fund goes down. Balanced Funds The objective of these funds is to provide a balanced mixture of safety, income and capital appreciation. The strategy of balanced funds is to invest in a combination of fixed income and equities. A typical balanced fund might have a weighting of 60% equity and 40% fixed income.

The weighting might also be restricted to a specified maximum or minimum for each asset class. A similar type of fund is known as an asset allocation fund. Objectives are similar to those of a balanced fund, but these kinds of funds typically do not have to hold a specified percentage of any asset class. The portfolio manager is therefore given freedom to switch the ratio of asset classes as the economy moves through the business cycle. Equity Funds Funds that invest in stocks represent the largest category of mutual funds. Generally, the investment objective of this class of funds is long-term capital growth with some income. There are, however, many different types of equity funds because there are many different types of equities. A great way to understand the universe of equity funds is to use a style box, an example of which is below.

The idea is to classify funds based on both the size of the companies invested in and the investment style of the manager. The term value refers to a style of investing that looks for high quality companies that are out of favor with the market. These companies are characterized by low P/E and price-to-book ratios and high dividend yields. The opposite of value is growth, which refers to companies that have had (and are expected to continue to have) strong growth in earnings, sales and cash flow. A compromise between value and growth is blend, which simply refers to companies that are neither value nor growth stocks and are classified as being somewhere in the middle. Global/International Funds An international fund (or foreign fund) invests only outside your home country. Global funds invest anywhere around the world, including your home country. It's tough to classify these funds as either riskier or safer than domestic investments. They do tend to be more volatile and have unique country and/or political risks. But, on the flip side, they can, as part of a well-balanced portfolio, actually reduce risk by increasing diversification. Although the world's economies are becoming more inter-related, it is likely that another economy somewhere is outperforming the economy of your home country. Specialty Funds This classification of mutual funds is more of an all-encompassing category that consists of funds that have proved to be popular but don't necessarily belong to the categories we've

described so far. This type of mutual fund forgoes broad diversification to concentrate on a certain segment of the economy. Sector Funds They are targeted at specific sectors of the economy such as financial, technology, health, etc. Sector funds are extremely volatile. There is a greater possibility of big gains, but you have to accept that your sector may tank. Regional Funds Make it easier to focus on a specific area of the world. This may mean focusing on a region (say Latin America) or an individual country (for example, only Brazil). An advantage of these funds is that they make it easier to buy stock in foreign countries, which is otherwise difficult and expensive. Just like for sector funds, you have to accept the high risk of loss, which occurs if the region goes into a bad recession. Socially-responsible Funds (or ethical funds) Invest only in companies that meet the criteria of certain guidelines or beliefs. Most socially responsible funds don't invest in industries such as tobacco, alcoholic beverages, weapons or nuclear power. The idea is to get a competitive performance while still maintaining a healthy conscience. Index Funds The last but certainly not the least important are index funds. This type of mutual fund replicates the performance of a broad market index such as the S&P 500 or Dow Jones Industrial Average (DJIA). An investor in an index fund figures that most managers can't beat the market. An index fund merely replicates the market return and benefits investors in the form of low fees. Q5) A) Retail Individual Investor (RII) In retail individual investor category, investors can not apply for more then Rs one lakh (Rs 1,00,000) in an IPO. Retail Individual investors have an allocation of 35% of shares of the total issue size in Book Build IPO's. NRI's who apply with less then Rs 1,00,000 /- are also considered as RII category. B) Qualified Institutional Bidders (QIB's) Financial Institutions, Banks, FII's and Mutual Funds who are registered with SEBI are called QIB's. They usually apply in very high quantities.

QIBs are mostly representatives of small investors who invest through mutual funds, ULIP schemes of insurance companies and pension schemes. QIB's have an allocation of 50% of shares of the total issue size in Book Build IPO's.

C) Non-institutional bidders Individual investors, NRI's, companies, trusts etc who bid for more then Rs 1 lakhs are known as Non-institutional bidders. They need not to register with SEBI like RII's. Noninstitutional bidders have an allocation of 15% of shares of the total issue size in Book Build IPO's.

Q6) Name of the countries Germany UK France Australia Japan New Zealand Russia China Brazil Cannada South Africa Bahrain Kuwait Zimbabwe Venezuela Saudi Arabia South Korea Singapore Hongkong Iceland Name of Indexs DAX FTSE CAC SGP/ASX NIKKEI NZX MICEX SHANGHAI BOVESPA TSX FTSE/JSE BHSEASI KSX INDUSTRIAL INDEX IBVC TADAWUL KOSPI STRAITS HANG SENG OMX

Portugal Greece Spain

PSI ASE IBEX

Q7) Name of the countries Germany UK France Australia Japan New Zealand Russia China Brazil Cannada South Africa Bahrain Kuwait Zimbabwe Venezuela Saudi Arabia South Korea Singapore Hongkong Iceland Portugal Greece Spain Exchange Rates(in INR) 62.97 71.76 62.97 47.47 0.562 37.44 1.58 6.88 28.25 46.47 6.45 118.4 162.58 8.30 10.36 12.07 0.042 36.52 5.71 6.37 62.97 62.97 62.97

Q8) A)Crude Oil prices

b) Gold Prices

c) Bse Sensex Chart July 2010 to July 2011

Q9) Months GDP (%) Quar terly INFLATI ON (%) Appx. FISCA IIP L NOS. DEFICI Appx. T (rupees crore) 54158 36600 33544 34252 23736 15485 47300 61146 3759 39558 17.00 10.00 7.00 15.00 7.00 5.00 12.50 4.00 3.00 4.50 FORE X RESER VES (in USD Billion) 279.6 273.5 275.7 284.1 283.1 292.8 297.9 292.3 297.3 299.2 BALAN CE OF PAYME NT INTE REST RATE S (REPO )% Appx 12.00 12.00 12.00 13.50 13.50 14.00 14.00 14.70 14.70 15.10

April 10 May 10 June 10 July 10 August 10 September 10 October 10 November 10 December 10 January 11

9.40

9.30

8.90

8.00 7.10 7.00 7.10 6.90 7.00 7.90 8.00 8.70 8.30

February 11 March 11

8.30

8.40 9.00

31363 4.25 31406

301.5 305.4

15.10 16.00

Q10) GDP stands for Gross Domestic Product. A nation's Gross Domestic Product refers to the value of all final goods and services produced within a nation in a given year. To prevent distortions, a system called purchasing power parity (PPP) is used to calculate the GDP estimates. The PPP method involves the use of standardized international dollar price weights to determine the value goods and services produced in a given economy. The amounts listed below are in billions of U.S. dollars. country United States China Japan India Germany France Italy Brazil Russia South Korea Canada Mexico Spain Indonesia Australia Turkey Iran Netherlands South Africa Thailand Argentina Taiwan Poland Philippines 10,400 5,700 3,550 2,660 2,180 1,540 1,440 1,340 1,270 931 923 900 828 687 528 468 456 434 432 429 391 391 368 356 GDP in billions of US dollars

United Kingdom 1,520

Q11) Gilts are government bonds used to make loans to companies, the government and local authorities, the bonds carry a twice annually fixed rate of interest and the capital is paid back at the end of an agreed, stated period. Gilts refers to gilt edged stocks or bonds that are issued by the UK Government. Because gilt edged stocks are only issued by the government, companies and local authorities regard gilts as a safe way of investing their money as it is unlikely that the government will not make the interest payments nor have the investments go bust. Although the deal is that the investor gets their capital back at the end of a stated period, there is no guarantee that companies and local authorities will get back all of the money that they invested. Q12) Government debt, especially that held in bonds denominated in foreign currencies. Under the doctrine of sovereign immunity, the repayment of sovereign debt cannot be forced by the creditors and it is thus subject to compulsory rescheduling, interest rate reduction, or even repudiation. The only protection available to the creditors is threat of the loss of credibility and lowering of the international standing (the sovereign debt rating) of a country, which may make it much more difficult to borrow in the future. Q13) When the total expenditure of a government goes beyond the revenues generated, it is termed as a fiscal deficit or budget deficit. In simple terms, it is the difference between what the government earns and what it spends. Normally it is described as a percentage of GDP Q14) Eurodollars are US dollar denominated bank deposits that are deposited in banks/jurisdictions that are not subject to US banking regulations, specifically control by the Federal Reserve Board. Originally, these deposits were held, almost exclusively, in Europe; hence their collective name Eurodollars. However, Eurodollars are now used as a collective name for US dollars held anywhere other than the US. Eurolibor London Interbank Offer Rate denominated in euros. This is the interest rate that banks offer each other for large short-term loans in euros. The rate is fixed once a day by a small group of large London banks but fluctuates throughout the day. This market makes it easier for banks to maintain liquidity requirements because they are able to quickly borrow from other banks that have surpluses.

Q15) Price/Earnings ratio: The most common measure of how expensive a stock is. The P/E ratio is equal to a stock's market capitalization divided by its after-tax earnings over a 12-

month period, usually the trailing period but occasionally the current or forward period. The value is the same whether the calculation is done for the whole company or on a per-share basis. The P/E ratio is defined as:

Significance of Price Earning Ratio: Price earnings ratio helps the investor in deciding whether to buy or not to buy the shares of a particular company at a particular market price. Generally, higher the price earning ratio the better it is. If the P/E ratio falls, the management should look into the causes that have resulted into the fall of this ratio. High and Low Price Earning ratios: It is often assumed that a Low PE means that the stock in question is a low growth stock, whereas a High PE stock is a high growth stock. This may not necessarily be the case. In his book "The Intelligent Investor", Benjamin Graham is categorically against Growth Stocks. He points out that their stock prices often grow at faster rates than profits and command high PE multiples based on inflated expectations, but that these stocks usually decline in the same way and are consequently too risky for the Defensive Investor. This PE contraction was experienced by many Growth Fund Managers during the 2000-2003 Bear Market, who were no match for their Value Driven peers In his various strategies, Graham tried to gain from what we now recognize as persistent anomalies in the Efficient Market Hypothesis, such as the Low PE effect. Oppenheimer, who analyzed Graham's methodology, says that "Graham viewed the PE as a ratio of price paid to value received and was an indicator of current market optimism about a security's future earnings". Graham believed in the market's mispricing of individual securities. Only later did the academic world start paying attention to the outperformance of low P/E stocks after Basu's article in the Journal of Finance in 1977. Graham counselled that growth rates cannot be accurately predicted by analysts confirmed later by Malkiel and Cragg's study in 1970. Accordingly, the prices of growth stocks will eventually be revised downward, while low PE stocks will be revised upward. Q16) A) Stop Loss

It is a price level or a mechanism that forces a trader to take/book losses in a losing position instead of letting them grow any bigger. Ideally a Stop-loss level should be decided as soon as a trade is executed. For example, If a stock say ABC is bought at 25$, Stop-loss for it can be kept at a price level somewhat lower than 25$. It can be 24, 23, 20 or even 15$. Let us assume the Stop-loss is kept at 20$. This means if the price of ABC, after having bought at 25$, goes below 20$, one should close the position by selling it. 5$ is the loss the buyer is limiting to. it involves closing a position willingly at a loss! Remember: In a long position, the Stop-loss level is usually lower than the entry price. Normally, It means sell first even if you don't own the stock with the hope to buy it back later at a lower price. Circuit: It is applied to control the movement in share price or market price C)Types of Circuit a) Upper circuit If the stock or index moves in upward direction and violates the upper limit then that stock or index will come under upper circuit breaker. b) Lower circuit If the stock or index moves in downward direction and violates the lower limit then that stock or index will come under lower circuit breaker How Circuit is calculated? a) In case of 10% movement in either direction In case of a 10% movement of either of these indices, there would be a one-hour market halt if the movement takes place before 1:00 p.m. In case the movement takes place at or after 1:00 p.m. but before 2:30 p.m. there would be trading halt for hour. In case movement takes place at or after 2:30 p.m. there will be no trading halt at the 10% level and market shall continue trading. b) In case of 15% movement in either direction In case of a 15% movement of either index, there shall be a two-hour halt if the movement takes place before 1 p.m. If the 15% trigger is reached on or after 1:00p.m. but before 2:00 p.m., there shall be a one-hour halt. If the 15% trigger is reached on or after 2:00 p.m. the trading shall halt for remainder of the day.

c) In case of 20% movement in either direction In case of a 20% movement of the index, trading shall be halted for the remainder of the day.

Q17). Important ratios for Decision making to invest in script of listed company a) Price-Earnings ratio: This ratio is the most popular ratio for valuation of a company by the investors. This ratio indicates market confidence in the company and its future prospects. b) Return on Investment Ratio: This ratio indicates the return earned by the company on its total investment. This is very important to shareholders and other stake holders as it is the ultimate measure of the companys overall performance. This ratio when compared with industry average gives an indication about the financial performance of the company. c) Return on Equity: This ratio indicates the return earned by equity shareholders. High ratio means high dividend, better growth prospects and high valuation in capital market. d) Earnings per Share (EPS): This ratio gives the return earned on each share. It is an important measure of profitability for the investors. This ratio is the basis for valuation of companies in the event of mergers etc, strategic investments by owners. Higher ratio shows company in a positive light. Higher ratio indicates higher returns. Q18) INVESTMENT AVENUES IN INDIA There are a large number of investment instruments available today. To make our lives easier we would classify or group them under 4 main types of investment avenues. We shall name and briefly describe them. 1. Financial securities: These investment instruments are freely tradable andnegotiable. These would include equity shares, preference shares, convertibledebentures, non-convertible debentures, public sector bonds, savings certificates, gilt-edged securities and money market securities. 2. Non-securitized financial securities: These investment instruments are nottradable, transferable nor negotiable. And would include bank deposits, post officedeposits, company fixed deposits, provident fund schemes, national savings schemesand life insurance. 3. Mutual fund schemes: If an investor does not directly want to invest in the markets,he/she could buy units/shares in a mutual fund scheme. These schemes are mainlygrowth (or equity) oriented, income (or debt) oriented or balanced (i.e. both growth anddebt) schemes. 4.Real assets: Real assets are physical investments, which would include real estate, gold & silver, precious stones, rare coins & stamps and art objects.

Before choosing the avenue for investment the investor would probably want toevaluate and compare them. This would also help him in creating a well diversifiedportfolio, which is both maintainable and manageable.

Q19)A)Commodity Exchanges in India MCX Multi Commodity Exchange of India Limited (MCX) is an independent and de-mutulised exchange with a permanent recognition from Government of India. NMCEIL National Multi Commodity Exchange of India Limited (NMCEIL) is the first demutualized, Electronic Multi-Commodity Exchange in India.

NCDEX National Commodity & Derivatives Exchange Limited (NCDEX) is a public limited company in Mumbai and the only commodity exchang in the country promoted by national level institutions. It is managed by online multi commodity exchange. B) The top 5 frequently traded commodities in India Crude Oil Gold Silver Metal Agriculture (Grains and food)

Q20). ETF stands for exchanged traded fund which is an investment fund traded on stock exchanges. An ETF can hold stocks, commodities, bonds and trades close to the net asset value. ETFs are the most popular type of exchanged traded product. Only authorized participants can buy or sell shares of ETF from the fund manager. That also only happens in blocks of tens of thousands of ETF shares. ETFs also track indexes like the NASDAQ-100 Index, S&P 500, Dow Jones, etc. When you buy shares of an ETF, you are buying shares of a portfolio that tracks the yield and return of its native

index. ETFs dont try to outperform their corresponding index. ETFs have been around since the early 1980s

REFERENCES: http://www.x-rates.com/d/INR/table.html http://www.goldetfindia.com http://ezinearticles.com/?Gilt-Funds---Meaning-and-Benefits&id=3113845 http://www.daytradingshares.com/quick_learning/fiscal_deficit_revenue_deficit.html http://www.indiansharemarket.org/list-of-bse-30-stocks-with-script-code-that-makes-sensex/ http://nse2rich.com/list-of-nifty-50-stocks-in-nse-along-with-equity-capital/ http://nse2rich.blogspot.com http://www.answers.com/topic/stop-loss-order http://nseindia.com/content/equities/eq_circbreakers.htm http://www.stockmarketmessages.com/commodity.htm