CHAPTER-1

INTRODUCTION

INTRODUCTION
TECHNICAL ANALYSIS: Technical analysis is one of the tools of the Security analysis. Security Definition:

A security is generally a fungible, negotiable financial instrument representing financial value. Securities are broadly categorized into:

debt securities (such as banknotes, bonds and debentures), equity securities, e.g., common stocks; and, Derivative contracts, such as forwards, futures, options and swaps.

Analysis definition:

An examination of data and facts to uncover and understand cause-effect relationships, thus providing basis for problem solving and decision making.

Security Analysis:
For making proper investment which involves both return and risk, the investor has to make a study of the alternative avenues of investment, their return and risk characteristics and make proper expectations of the risk and return of the alternative investment. Under consideration he has to tune the expectations to his preferences of the risk and return for making proper investment choice. The process of analyzing the individual securities and the market as a whole and estimating the risk and return
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expected from each of the investments with a view to identifying undervalued securities for buying and overvalued securities for selling is both an art and science and that is what is called security analysis. Security analysis is done for making decisions regarding whether to invest or not. This security analysis helps the investor to estimating the risk and return expected from each of the investments with a view to identify undervalued securities for buying and overvalued securities for selling Security analysis can be done in two ways they are: (1) Fundamental analysis (2) Technical analysis

Fundamental Analysis:
This method used to analyze the securities and make investment decisions. Fundamental analysis involves analyzing the characteristics of a company in order to estimate its real value. Fundamental analysis attempts to find the actual value of a stock i.e. its ability to generate future cash flows to make long-term investment decisions. Mainly it involves in study everything that can affect the security value; including macro economic factors (like the overall economy and industry condition & specific factors).Fundamental analysis is performed on historical and present data but with the goal of making financial forecasts.

Technical Analysis:
Technical analysis is a security analysis discipline for forecasting the future direction of prices through the study of past market data, primary price and volume. Technical analysis takes a completely different approach which involves in movement of shares in the market i.e. Technical analysis is based on present data. Technical analysis will help in taking decisions regarding when to buy and sell stocks. Technical analysis is applicable to stocks, indices, commodities, futures or any tradable instrument where the price is influenced by the forces of demand and supply. Price refers to any combination of the open, high, low, close for a given security over a specific time frame. This time frame can be based on intraday, daily, weekly, monthly and yearly price data. Traditional theory of capital market says that entry into the market at any time would lead to the some average returns. But in the real world there are so many investors who have burnt their figures by entry in to the market in the wrong time. So investment timing is very crucial in the stock market because it is different than other markets. Entry and exit in the market will make all the difference to the spread between close price and open price & profit and loss. So timing in investment is very important for trading in the stock market Therefore this technical analysis helps us in determining investment timing.

Technical Tools:
Daily fluctuations (or) volatility: Open, high, low and close are quoted changes between open and close (or) high and low can be taken in absolute points or in percentages to reflect the daily volatility.

Such fluctuations can be worked out on weekly, monthly, or yearly basis also, to reflect the general volatility of the market.

1. Floating stock:
Floating stock is the total number of shares available for trading with the public.

2 .Price trends and volume trends:

The charity method and moving average method can be used to depict these trends.

3. Rate of change method:

This is useful like moving average method to indicate more clearly the buy and sell signals. Rate of change is calculated by dividing the todays price by the five days back price and expresses positive or negative change.

4. Japanese candlestick method:

There are three main types of candlesticks, each days trade being shown in the form of candlesticks. Each stick has the body of the candle and a shadow. The body shows the open and close prices, while the shadow shows the high and low prices. The three main types of candlesticks are as follows: (a). closing price is higher than open price. (b). closing price is lower than open price. (c). open and close are at the same level.

5. Dow theory:
These are three major trends in this theory they are minor, intermediate, and major trends these trends representing daily, weekly, monthly and yearly price trend.

6. Theory of gaps:
Gaps in price between any two days causing a discontinuity are called a gap. The high of one day may be lower than the lower of the previous day when prices are falling.

7. Relative strength index:

It is an oscillator used to identify the strength or weakness of particular scrip
Thus RSI =100-(100/1+RS)

Where Rs= Average gain per day (or) Average loss per day

The basis of technical analysis:

At the turn of the century, the Dow Theory laid the foundations for what was later to become modern technical analysis of the many theorems put forth by Dow, three stands out: Price discounts everything Price movements are not totally random What is more important than why?

Price discounts everything:

Technical analysis believes that the current price fully reflects all information. Because all information is already reflected in price, it represents the fair value, and should from the basis for analysis. After all, the market price reflects the sum knowledge of all participants, including traders, investors, and portfolio mangers, buy side analysts, sell side analysts, market strategist, technical analysts, fundamental analysts and many others. Technical analysis utilizes the information captured by the price to interpret what the market is saying with the purpose of forming a view on the future.

Price movements are not totally random:

Most technicians agree that prices trend. However, most technicians also acknowledge that there are periods when prices do not trend. If prices were always random, it would be extremely difficult to make money using technical analysis. The goal of chartist is to identify those periods.

What is more important than why?

The price is the end result of the battle between the forces of supply and demand for the companys stock. The objective of the analysis is to forecast the direction of the future price .By focusing on price and only price, technical analyst represents the direct approach. Fundamentals are concerned with why the price is what it is. Technicians believe it is best to concentrate on what and never mind why, why did the price go up? It is

simple, more buyers (demand) than sellers (supply) .after all the value of any asset is only what someone is willing to pay for it then who needs to know why?

Strength of technical analysis:

1.

Focus on price :
If the objective is to predict the future price, then it makes sense to focus on

price movements. Price movements usually precede fundamental developments .by focusing on price action, technicians are automatically focusing on the future.
2.

Supply, demand and price action :

Many technicians use the high low, open, and close when analyzing the price

action of a security. There is information to be gleaned from each bit of information. Separately, these will not be telling much. However, taken together the open, high, low and close reflect forces of supply and demand.
3.

Assist with entry point :

Technical analysis can help with timing and a proper entry point .some analysts

use fundamental analysis to decide what to buy, and technical analysis to decide when to buy. It is no secret that timing can play an impotent role in performance .Technical analysis can help spot demand and supply levels as well as break outs .simply breakout above resistance or buying near support levels can improve returns.

Weakness of Technical Analysis: Analyst bias:

Just as with fundamental analysis, technical analysis is subjective and our personnel biases can be reflected in the analysis. It is important to be aware of these biases when analyzing a chart .If the analyst is a perceptual bull, and then a bullish bias will overshadow the analysis. On the other hand, if the analyst is a disgruntled eternal bear, then the analysis will probably have a bearish tilt.

(1)Open to interpretation:
Furthering the bias argument is the fact that technical analysis is open to interpretation .even though there are standards, many times two technicians will look at the same chart and print two different scenarios .Both will be able to come up with logical support and resistance levels as well as key breaks to justify their position.

(2)Too late:
Technical analysis has been criticized for being too late .by the time the trend is identified; a substantial portion of the move has already taken place .after such a larger move, the reward to risk ratio is not great. Lateness is a particular criticism of Dow Theory.

Conclusion:
Technical analysts consider the market to be 80% psychological and 20% logical.fundamental analysts consider the market to be 20% psychological and 80% logical .technical analysis focuses directly on the bottom line: what is the price? Where has it been? Where is it going? Even though there are some universal principles and rules that can be applied, it must be remembered that technical analysis is more an art form than a science. As an art form, it is subjected to interpretation. However, it is also flexible in its approach and each investor should only that which suits his or her style. developing a style takes time, effort and dedication, but the rewards can be significant.

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Need of the Study:

This study is needed to give proper idea about investment in stock market to the investors. Since all investors are interested in investing their savings on different portfolios which can give maximum profits, at moderate risk, the study is opted to suggest them how to invest their investment.

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Objectives of the Study:

1. To know how to take decisions regarding buying and selling of stocks in short period. 2. To observe the relationship between risk and return. 3. To analyze the price fluctuations of various companies using technical analysis.

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Scope of the Study:

India has emerged as one of the good investment avenues and successful working of stock markets .Hence, there is much scope to study about security analysis. India being a developed country having increased per capita income, every person in our country wishes to divert their savings to stocks by expecting high returns at moderate risk. The study focuses on finding out risk and return of the stocks of 5 selected banks in the banking sector.

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Methodology Data collection:

The present project work has been undertaken to a study on technical analysis of selected banking sectors of equity. The sources of information broadly classified into 1. Primary data collection 2. Secondary data collection

Primary data collection:

The first hand information available is known as primary data. It is prepared using surveys, observations, questioners. The present study does not use primary data.

Secondary data collection:

Already available (or) made (or) published data is known as secondary data. The different sources of secondary data used for the study are: 1. Text books 2. Journals 3. News papers 4. Websites etc The present project work has taken the help of above sources of information.

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Data Analysis:
The collected data is analyzed to represent in a report from using some statistical tools & techniques.

Formulas: Returns = average returns Risk= d2/n-1 where d = return-average, n= no of months. Coefficient of variation= average returns / risk

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Limitations:

1. The available time period 45 days is very short and cannot allow me to do full length study. 2. The study is confined to only 5 selected banks stocks of banking sector. 3. The study considers only 20 months (i.e. from 2010 January to 2011 August) stock values of the selected banking stocks.

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CHAPTER-2 INDUSTRY PROFILE

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INDUSTRY OVERVIEW Industry Overview

The securities market achieves one of the most important functions of channeling idle resources to productive resources or from less productive resources to more productive resources. Hence in the broader context the people who save and investors who invest focus more towards the economys abilities to invest and save respectively. This enhances savings and investments in the economy, the two pillars for economic growth. The Indian Capital Market has come a long way in this process and with a strong regulator it has been able to usher an era of a modern capital market regime. The past decade in many ways has been remarkable for securities market in India. It has grown exponentially as measured in terms of amount raised from the market, the number of listed stocks, market capitalization, trading volumes and turnover on stock exchanges, and investor population. The market has witnessed fundamental institutional changes resulting in drastic reduction in transaction costs and significant improvements in efficiency, transparency and safety.

DEPENDENCE OF SECURITIES MARKET: Three main sets of entities depend on securities market- the corporate, the government & households. While the corporate and governments raise resources from

the securities market to meet their obligations, the households invest their savings in securities.

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PRIMARY MARKET & SECONDARY MARKET:

The securities market comprises two segments- primary market (new issues, offer for sale) & secondary market (trading of stocks). There are two major types of issuers who issue securities. The corporate entities issue mainly debt and equity instruments (shares, debentures, etc.), while the governments (central and state governments) issue debt securities (dated Securities, treasury bills). The two major exchanges, namely the NSE and the BSE provide trading of securities.

LAWS GOVERNING CAPITAL MARKET:

The four main legislations governing the securities market are: (a) The SEBI Act, 1992 which establishes SEBI to protect investors and develop and regulate securities market. (b) The Companies Act, 1956, which sets out the code of conduct for the corporate sector in relation to issue, allotment and transfer of securities, and disclosures to be made in public issues. (c) The Securities Contracts (Regulation) Act, 1956, read with the Securities Contracts (Regulation) Rules, 1957 which provide for regulation of transactions in securities through control over stock exchanges; and (d) The Depositories Act, 1996 which provides for electronic maintenance and transfers of ownership of d-mat securities.

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REGULATORS: SEBI is the primary regulator of the Securities Market and the entities operating therein. The SEBI Act and the Depositories Act are mostly administered by SEBI. Government and regulations by SEBI frame the rules under the securities laws. All these are administered by SEBI. The powers under the Companies Act relating to issue and transfer of securities and non-payment of dividend are administered by SEBI in case of listed public companies and public companies proposing to get their securities listed. STOCK MARKET: When investors think of the stock market, they may imagine a specific place such as a stock exchange. In fact, the stock market is the abstract idea of stock trading and stock exchange. All selling of stocks - at stock exchanges and in other ways - affects the market overall. Following stock market information in the news can help you make the right decisions about stock market investing. NEED OF STOCK MARKET: The stock market is simply a term for the overall market or industry that is concerned with buying and selling company stock, both private and publicly traded securities. The stock market does many things. It helps to set prices of stocks. The more a stock is traded on the market and the more in demand the stock, the higher is its value. Having a stock market that is interconnected with stock markets around the world helps traders and investors to see how Specific stocks are doing of course; the stock market is mainly present to create money. Through the market, investors - both companies and individuals - can buy stocks, which effectively make them own a small part of a
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company. If the company prospers, investors are rewarded with dividends and profits. Companies, by becoming public and offering stocks to the public, can raise money and improve their profile through business expansions which can help them make great profit. HOW TO INVEST IN STOCK MARKET: Most financial experts recommend that investors must consult a full-service financial advisor initially. This type of advisor can provide advice and can help ensure that an investor's money gets a good return. More experienced investors may be interested in one of the online investing options. These allow almost anyone with a fast internet connection and a subscription to an investment site to buy and sell stocks when they wish. THE STOCK MARKET: One of the most basic advices that people give when speaking about the stock market is to buy low, sell high. But this is a short-term view of the mechanics of how the stock market works (another example of this short-term view is short selling stocks). In reality, shares are more complex than that. Stock market is the term given to the act of trading company shares, stocks, and other securities and its derivatives. The stock market has a number of players, which could be range from an individual stockholder to a very large corporate trader. These players can be anybody coming from any part of the world. Trading in the stock market can be done privately with an attorney or with a professional stock exchange dealer who have the power to execute the order.For the most part, stock market is very volatile in nature and that's the reason why it is so hard to predict. But due to persistent studies, the changes in the stock market can now be calculated in a relatively
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acceptable precision. Here are the various efforts carried out by stock market experts to predict the market's movements. BSE: Bombay Stock Exchange Limited (the Exchange) is the oldest stock exchange in Asia with a rich heritage. Popularly known as "BSE", it was established as "The Native Share & Stock Brokers Association" in 1875. It is the first stock exchange in the country to obtain permanent recognition in 1956 from the Government of India under the Securities Contracts (Regulation) Act, 1956.The Exchange's pivotal and pre-eminent role in the development of the Indian capital market is widely recognized and its index, SENSEX, is tracked worldwide. Earlier an Association of Persons (AOP), the Exchange is now a demutualised and corporative entity incorporated under the provisions of the Companies Act, 1956, pursuant to the BSE (Corporatizations and Demutualization) Scheme, 2005 notified by the Securities and Exchange Board of India (SEBI). Bombay Stock Exchange Limited received its Certificate of Incorporation on 8th August, 2005 and Certificate of Commencement of Business on 12th August, 2005. The 'Due Date' for taking over the business and operations of the BSE, by the Exchange was fixed for 19th August, 2005, under the Scheme. The Exchange has succeeded the business and operations of BSE ongoing concern basis and its recognition as an Exchange has been continued by SEBI with demutualization, the trading rights and ownership rights have been de-linked effectively addressing concerns regarding perceived and real conflicts of interest.

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The Exchange is professionally managed under the overall direction of the Board of Directors. The Board comprises eminent professionals, representatives of Trading Members and the Managing Director of the Exchange. The Board is inclusive and is designed to benefit from the participation of market intermediaries. In terms of organization structure, the Board formulates larger policy issues and exercises over-all control. The committees constituted by the Board are broad-based. The Managing Director & CEO and a management team of professionals manage the day-today operations of the Exchange. The Exchange has a nation-wide reach with a presence in 417 cities and towns of India. The systems and processes of the Exchange are designed to safeguard market integrity and enhance transparency in operations. During the year 2004-2005, the trading volumes on the Exchange showed robust growth. The Exchange provides an efficient and transparent market for trading in equity, debt instruments and derivatives. The BSE's On Line Trading System (BOLT) is a proprietary system of the Exchange and is BS 7799-2-2002 certified. The surveillance and clearing & settlement functions of the Exchange are ISO 9001:2000 certified. Bombay Stock Exchange Limited (BSE), which was founded in 1875 with six brokers, has now grown into a giant institution with over 874 registered Broker-Members spread over 380 cities across the country. Today, BSEs Wide Area Network (WAN) connecting over 8000 BSE Online Trading (BOLT) System Trader workstations (TWS) is one of the largest of its kind in the country. With a view to provide efficient and integrated services to the investing public through the members and their associates in the operations pertaining to the Exchange, Bombay Stock Exchange Limited (BSE) has set

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up a unique Member Services and Development to attend to the problems of the BrokerMembers. The journey of BSE is as eventful and interesting as the history of Indias securities markets. Indias biggest bourse, in terms of listed companies and market capitalization, BSE has played a pioneering role in the Indian Securities Market - one of the oldest in the world. Much before actual legislations were enacted, BSE had formulated comprehensive set of Rules and Regulations for the Indian Capital Markets. It also laid down best practices adopted by the Indian Capital Markets after India gained its Independence. Perhaps, there would not be any leading corporate in India, which has not sourced BSEs services in resource mobilization.

BSE as a brand is synonymous with capital markets in India. The BSE SENSEX is the benchmark equity index that reflects the robustness of the economy and finance. At par with international standards, BSE has been a pioneer in several areas. It has several firsts to its credit even in an intensely competitive environment.

First in India to introduce Equity Derivatives: F in India to launch a Free Float Index First in India to launch US$ version of BSE Senses First in India to launch Exchange Enabled Internet Trading Platform First in India to obtain ISO certification for Surveillance, Clearing & Settlement 'BSE On-Line Trading System (BOLT) has been awarded the globally recognized the Information Security Management System standard BS7799-2: 2002.
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First to have an exclusive facility for financial training

Moved from Open Outcry to Electronic Trading within just 50 days

An equally important accomplishment of BSE is the launch of a nationwide investor awareness campaign - Safe Investing in the Stock Market - under which nationwide awareness campaigns and dissemination of information through print and electronic medium was undertaken. BSE also actively promoted the securities market awareness campaign of the Securities and Exchange Board of India.

In 2002, the name The Stock Exchange, Mumbai, was changed to BSE. BSE, which had introduced securities trading in India, replaced its open outcry system of trading in 1995, when the totally automated trading through the BSE Online trading (BOLT) system was put into practice. The BOLT network was expanded, nationwide, in 1997. It was at the BSE's International Convention Hall that Indias 1st Bell ringing ceremony in the history Capital Markets was held on February 18th, 2002.

It was the listing ceremony of Bharti Tele ventures Ltd. BSE with its long history of capital market development is fully geared to continue its contributions to further the growth of the securities markets of the country, thus helping India increase its sphere of influence in international financial markets.

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VISION: "Emerge as the premier Indian stock exchange by establishing global benchmarks" Listing means admission of the securities to dealings on a recognized stock exchange. The securities may be of any public limited company, Central or State Government, quasi governmental and other financial institutions/corporations, municipalities, etc. The objectives of listing are mainly to:

provide liquidity to securities; mobilize savings for economic development; Protect interest of investors by ensuring full disclosures.

A company intending to have its securities listed on the Exchange has to comply with the listing requirements prescribed by the Exchange. Some of the requirements are as under:1. 2. 3. Minimum Listing Requirements for new companies Minimum Listing Requirements for companies listed on other stock exchanges Minimum Requirements for companies delisted by this Exchange seeking relisting of this Exchange. 4. 5. 6. 7. Permission to use the name of the Exchange in an Issuer Company's prospectus Submission of Letter of Application Allotment of Securities Trading Permission

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8. 9. 10. 11.

Requirement of 1% Security Payment of Listing Fees Compliance with Listing Agreement Cash Management Services (CMS) - Collection of Listing Fees.

STOCK MARKET Definitions:

1.

A market for the buying and selling of stocks, such as the Bombay Stock exchange.

2. 3.

An institution that facilitates the buying and selling of stocks. Where stocks (shares) are bought and sold. A share is a portion of the total ownership of a corporation. The more shares you own in a corporation, the more ownership you have in that corporation.

4.

Stocks are bought or sold. The market refers to this activity. There are organized exchanges, such as The Bombay Stock exchange, that buyers and sellers go through to place the transactions (or trades).

5.

Stock exchange: an exchange where professional stockbrokers conduct security trading.

6.

A stock market is a market for the trading of company stock, and derivatives of it; both of these are securities listed on a stock exchange as well as those only traded privately.

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7. The organized trading of stocks, bonds, or other securities, or the place where such trading occurs. 8. Where stocks (shares) are bought and sold. A share is a portion of the total ownership of a corporation. The more shares you own in a corporation, the more ownership you have in that corporation. 9. The set of institutions that facilitate the exchange of stocks between buyers and sellers. A stock market can be an actual place, but with the growth of electronic transactions a large fraction of stock market transactions are not centrally located in a particular location. 10. Particulars market where stocks and bonds are traded. 11. Stock market may be a physical place, sometimes known as a stock exchange, where brokers gather to buy and sell stocks and other securities. The term is also used more broadly to include electronic trading that takes place over computer and telephone lines. 12. Is a market for the trading of publicly held company stocks or shares and associated financial instruments (including stock options, convertibles and stock index futures). Traditionally such markets were open-outcry where trading occurred on the flour of exchange. 13. In relation to a securities exchange or a stock exchange, includes, in the case of the exchange, a stock market of a securities exchange or of a stock exchange, as the case may be, that is a subsidiary of the Exchange.

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14. Stock exchange an exchange where security trading is conducted by professional Stock market and organized marketplace where members gather to trade securities members. May act either as agents for customers, or as principals for their own... 15. An organized marketplace for securities featured by the centralization of supply demand .for the transaction of orders by member brokers for institutional and individual investors.

An organized market established to facilitate the buying and selling of stocks. An organized marketplace where securities are bought and sold. The stock exchange is an organized marketplace where stocks are bought and sold. Stock exchanges operate under strict rules, regulations and guidelines.

An organized marketplace, in which securities are bought and sold, prices being controlled by supply and demand

Is such Financial Assets trading environment where the Financial Assets that constitute the object of a Transaction are listed, as well as the clearinghouse servicing the stock exchange? Licensed market for the buying and selling of listed securities. An organized marketplace where specific types of securities, such as common stock and bonds, are bought and sold by members of the exchange.

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STOCK EXCHANGE: 1. A place where stocks, bonds, or other securities are bought and sold. 2. An association of stockbrokers who meet to buy and sell stocks and bonds according to fixed regulations. 3. A place where stocks, bonds, or other securities are bought and sold. An association of stockbrokers who meet to buy and sell stocks and bonds according to fixed regulations. DIFFERENCES BETWEEN THE INDICES: The indices are different from each other to a certain extent. Some time the sensex may move up 100 point but NSE nifty may move up only 40 points. The main factors that differentiate one index from the other are give below. 1. The number of the component stocks 2. The composition of the stocks 3. The weights 4. Base year

1. The Number of the Component Stocks: The number of stock in an index influences the behavior of index. If the number of component stocks is larger, it would be a representative sample capable of reflecting the market movement. The Sensex has 30 scrips like the Dow Jones Industrial average in (338 stocks) and Nifty (50 stocks) are

also widely used. BSE National Index is considered to be more representative than

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Sensex because it has 100 stocks. Out of 100 stocks. Out of 100, 22 are quoted on the rest are listed on the BSE and the rest are listed on the BSE and other exchanges.

2. The Composition of the stocks: The composition of the stocks in the index should reflect the market movement as well as the macroeconomic changes. The centre for monitoring Indian Economy maintains an index. It often changes the composition of the index so as to reflect the market movement in a better manner. Some of the scrips traded volume may fall down and at the same time some other stock may attract the market interest. In such a case the scrip that has lost the market interest should be dropped and other must be added. Only then, the index would representative. 3. The weight: The weight assigned to each companys scrip also influences the movement of the index. The indices may be weighted with the price or value. The Dow Jones industrial Average and Nikkei Stock Average of 225 scrips of Tokyo stock exchange are weighted with the price. A price weight index is computed by adding the current prices of the stocks exchange and dividing the sum by the total number of stocks. The stocks with high price influence the index more than the low priced stock in the sample. In the value weighted index the total market value of the share is the weight. In an unweighted index, all stocks carry equal carry equal weights. The price or market volume of the scrip does not affect the index. The movement of the price is based on the percentage change in the average price of the stocks in the particular index. become more

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4. Base year: The choice of base year also leads to variations among the index. The base year differs from each other in the various indices. The base year should be free from any unnatural fluctuations in the market. If the base year is close to the current year, the index would be more effective in reflecting the changes in the market movement. At the same time if it is too close, the investor cannot make historical comparison. The sensex has the base year as 1978-79 and the next oldest one is the RBI index of ordinary shares with 1980-81 as base year. The following table gives the summary of major stock market indices.

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Major Stock Indices. Indian stock market Indices Weighting Base No. of stock Base year

Economic Time Index 85

Unweighted

72

1984-

Ordinary share Prices BSE sensex 79 Market Value 30 1978-

BSE National Index 84

Market Value

100

1983-

BSE-200 90

Market Value

200

1989-

Dollex 90

Market Value

200

1989-

S&P Nifty (NSE-50) 1995

Market Value

50

Nov

S&P CNX Nifty Junior

Market Value

50

S&P CNX-500

Market Value

500

1994

CNX Midcap-200

Market Value

200

1994

CMI

Market Value
33

72

1994

THE BSE SENSITIVE INDEX The BSE Sensitive Index has long been known as the barometer of the daily temperature Indian bourses. In 1978-79 stock market contained only private sector complies and they were mostly geared to commodity production. Hence, a sample 30 was draw from them. With the passage of time more and more companies private as well as public came in to the market. Even though the number of scrips in the sensex basket remained the same 30, representations were give to new industrial sectors such as services, telecom, consumer goods, 2 and 3 wheeler auto sector. The continuity and integrity of the index are kept intact, so that a comparison of the current market analysis is avoided. The criteria adopted in the selection of 30 scripts are listed. 1. Industry Representation: The Index should be able to capture the macro- industrial situation through price movement of individual scripts. The companys scrip should reflect the present state of the industry and its future prospects. Companies chosen should be representative of the industry. Care is taken in selecting scrips across all the major industries major industries to make the index act as a real barometer to the economy

2. Market Capitalization: The market capitalization of the stock indicates the true value of the stock, as the outstanding number of share is multiplied by the price. Price Indicate the demand and growth potential for the stock. The outstanding shares depend on the equity base. The selected scrip should have a wide equity base too 3. Liquidity: The liquidity factor is based on the average number of deal of scrip. The average number of deal in the two previous years is taken in to account. The market fancy for the share can be found out by the trading volumes. The Financial Express
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Equity Index is weighted by trading volume and not by market capitalization. The market depth: the market depth factor is the average deal as a percentage of companys shares outstanding. The market depth depends upon the wide equity base. If the equity base is broad based then number of deals in the market would increase. For example Reliance Industries has a wide equity base and large number of outstanding shares. 4. Floating stock depth: The floating stock depth factor is the average of deals as a percentage of floating stock. Low floating stock is able to command high price. Its sound finance and internal generation of funds led growth may be the reason for the low flotation. Trading volumes are directly linked to the public holding in the company. Wide public holding is a pre-requisite for high trading volume. Reliance industries are a good example. The free float of company is 45 percent and it has its positive effect on the trading volume.

Revision of sensex scripts:

In 1998, the Index committee of the BSE decided to give a wide representation to the four market favorites at its meeting. They need to have broad-based and liquid index futures on its way. The average sector a weight of 12.75 per cent with the market cap at Rs.21, 113 corers. Health care industry has been given a weight of 4.70 percent, consumer nondurable-21.74 percent and industry 7.92 percent. IT accounts for a weight of 4.33 percent, oil and gas -6.22 per cent, petrochemicals-6.70 percent, telecom-7.71 percent, power-1.98 percent and hotel -11.10 per cent.

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NSE:
Logo of NSE

The logo of the NSE symbolizes a single nationwide securities trading facility ensuring equal and fair access to investors, trading members and issuers all over the country. The initials of the Exchange viz., N, S and E have been etched on the logo and are distinctly visible. The logo symbolizes use of state of the art information technology and satellite connectivity to bring about the change within the securities industry. The logo symbolizes vibrancy and unleashing of creative energy to constantly bring about change through innovation. MISSION OF NSE: NSE's mission is setting the agenda for change in the securities markets in India. The NSE was set-up with the main objectives of: Establishing a nation-wide trading facility for equities, debt instruments and hybrids,

Ensuring equal access to investors all over the country through an appropriate communication network,

Providing a fair, efficient and transparent securities market to investors using electronic trading systems,

Enabling shorter settlement cycles and book entry settlements systems, and
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Meeting the current international standards of securities markets.

The standards set by NSE in terms of market practices and technology has become industry benchmarks and is being emulated by other market participants. NSE is more than a mere market facilitator. It's that force which is guiding the industry towards new horizons and greater opportunities. PROMOTORS OF NSE: NSE has been promoted by leading financial institutions, banks, insurance companies and other financial intermediaries:

Industrial Development Bank of India Limited Industrial Finance Corporation of India Limited Life Insurance Corporation of India State Bank of India ICICI Bank Limited IL & FS Trust Company Limited Stock Holding Corporation of India Limited SBI Capital Markets Limited Bank of Baroda Canara Bank General Insurance Corporation of India National Insurance Company Limited The New India Assurance Company Limited
37

The Oriental Insurance Company Limited United India Insurance Company Limited Punjab National Bank Oriental Bank of Commerce Indian Bank Union Bank of India Infrastructure Development Finance Company Ltd.

Corporate Structure:

NSE is one of the first de- mutualised stock exchanges in the country, where the ownership and management of the Exchange is completely divorced from the right to trade on it. Though the impetus for its establishment came from policy makers in the country. It has been set up as a public limited company, owned by the leading institutional investors in the country. From day one, NSE has adopted the form of a demutualised exchange - the ownership, management and trading is in the hands of three different sets of people. NSE is owned by a set of leading financial institutions, banks, insurance companies and other financial intermediaries and is managed by professionals, who do not directly or indirectly trade on the Exchange.

38

This has completely eliminated any conflict of interest and helped NSE in aggressively pursuing policies and practices within a public interest frame work. The NSE model however, does not preclude, but in fact accommodates involvement, support and contribution of trading members in a variety of ways. Its Board comprises of senior executives from promoter institutions, eminent professionals in the fields of law, economics, accountancy, finance, taxation, and etc, public representatives, nominees of SEBI and one full time executive of the Exchange While the Board deals with broad policy issues, decisions relating to market operations are delegated by the Board to various committees constituted by it. Such committee includes representatives from trading members, professionals, the public and the management. The day-to-day management of the Exchange is delegated to the Managing Director who is supported by a team of professional staff. COMMITTEES: The Exchange has constituted various committees to advise it on areas such as good market practices, settlement procedures, risk containment systems etc. These committees are manned by industry professionals, trading members, Exchange staff as also representatives from the market regulator.

Executive Committee Committee On Trade Related Issues (COTI) Advisory Committee - Listing of Securities

39

GROUP OF NSE:

NSCCL

NCCL

NSETECH

IISL

NSE

NSE.IT

Dotex Intl. Ltd.

NSDL

The National Stock Exchange (NSE) is India's leading stock exchange covering various cities and towns across the country. NSE was set up by leading institutions to provide a modern, fully automated screen-based trading system with national reach. The Exchange has brought about unparalleled transparency, speed & efficiency, safety and market integrity. It has set up facilities that serve as a model for the securities industry in terms of systems, practices and procedures. NSE has played a catalytic role in reforming the Indian securities market in terms of microstructure, market practices and trading volumes. The market today uses state-of-art information technology to provide an efficient and transparent trading,
40

clearing and settlement mechanism, and has witnessed several innovations in products & services viz. demutualization of stock exchange governance, screen based trading, compression of settlement cycles, dematerialization and electronic transfer of securities, securities lending and borrowing, professionalization of trading members, fine-tuned risk management systems, emergence of clearing corporations to assume counterparty risks, market of debt and derivative instruments and intensive use of information technology.

NSE MILESTONES: November 1992 April 1993 May 1993 June 1994 : : : : Incorporation Recognition as a stock exchange Formulation of business plan Wholesale Debt Market segment goes live

November 1994

Capital Market (Equities) segment goes live

March 1995

Establishment of Investor Grievance Cell

April 1995

Establishment of NSCCL, the first Clearing Corporation

June 1995 Members

Introduction of centralized insurance covers for all trading

41

July 1995

Establishment of Investor Protection Fund

October 1995

became largest stock exchange in the country

April 1996

Commencement of clearing and settlement by NSCCL

April 1996

Launch of S&P CNX Nifty

June 1996

Establishment of Settlement Guarantee Fund

November 1996

setting up of National Securities Depository Limited, first Depository in India, co-promoted by NSE

November 1996

Best IT Usage award by Computer Society of India

December 1996

Commencement of trading/settlement in dematerialized Securities

December 1996

Dataquest award for Top IT User

December 1996

Launch of CNX Nifty Junior

February 1997

Regional clearing facility goes live

42

November 1997

Best IT Usage award by Computer Society of India

May 1998

Launch of NSE's Web-site: www.nse.co.in

July 1998

Launch of NSE's Certification Programmed in Financial Market

August 1998

CYBER CORPORATE OF THE YEAR 1998 award

February 1999

Launch of Automated Lending and Borrowing Mechanism

April 1999

CHIP Web Award by CHIP magazine

October 1999

setting up of NSE.IT

January 2000

Launch of NSE Research Initiative

February 2000

Commencement of Internet Trading

June 2000

Commencement of Derivatives Trading (Index Futures)

43

November 2000

Launch of Broker Plaza by Dotex International, a joint Venture between NSE.IT Ltd. and i-flex Solutions Ltd.

December 2000

Commencement of WAP trading

June 2001

Commencement of trading in Index Options

July 2001 securities November 2001 Securities

Commencement of trading in Options on Individual

Commencement of trading in Futures on Individual

December 2001

Launch of NSE VAR for Government Securities

January 2002

Launch of Exchange Traded Funds (ETFs)

May 2002

NSE wins the Wharton-Infosys Business Transformation Award in the Organization-wide Transformation category

October 2002

Launch of NSE Government Securities Index

January 2003

Commencement of trading in Retail Debt Market

44

June 2003

Launch of Interest Rate Futures

August 2003

Launch of Futures & options in CNXIT Index

June 2004

Launch of STP Interoperability

August 2004

Launch of NSEs electronic interface for listed companies

March 2005

India Innovation Award by EMPI Business School, New Delhi

June 2005

Launch of Futures & options in BANK Nifty Index

December 2006

'Derivative Exchange of the Year', by Asia Risk magazine

January 2007

Launch of NSE CNBC TV 18 media centre

March 2007

NSE, CRISIL announce launch of IndiaBondWatch.com

June 2007

NSE launches derivatives on Nifty Junior & CNX 100

45

STOCK MARKET CRASH:

Many would-be investors simply refuse to enter the stock market, because of the risks involved. When asked what they fear most, most respond by saying that they fear a stock market crash.

WHAT HAPPENS WHEN THE STOCK MARKET CRASHES?

A stock market, strangely, really begins to crash years before the actual market downturn. When the market is peaking and investors are buying and making profits, the market is commonly known as a bull market. However, as many economists point out, strong economic times are often followed by bad times. Whenever the stock market surges and profits are good, economic downturn eventually happens. Sometimes, stock markets crash because of a specific economic or political situation. For example, in 2002, the famous Enron scandal shook investor confidence and caused a downturn in the market. More often, however, crashes are caused by nothing more than panic. What we say that a market crashes, what we mean is that the value of stocks drops dramatically across the board. Rather than just one corporation being affected, the stocks of many or all corporations fall dramatically. This, in turn, causes investor panic and many people rush to sell their stocks. The more people try to sell their stocks lower stock value falls, making the problem worse.

46

WHO IS INVOLVED IN A STOCK MARKET CRASH?

Many people are involved in a stock market downturn. At the base level, it is shareholders or those who own stocks who are most involved. In many cases, it is investors themselves can contribute to a crash. Investors may borrow money to buy stocks or may invest in stocks without thoroughly understanding the stock market. Investors who are not disciplined and who do not understand the market may be among the first panic and try to sell their stock, pushing a temporary downturn into an actual crash. More significantly, however, investors are often part of speculation. This means that they buy stock in the hopes that it will increase in profit. When some sort of economic news seems to suggest that they will lose money, again, they often rush to sell their stock, driving stock prices down. Companies selling stock are also involved in the stock market crash. As their stock values drop, many companies will tighten their belts and reduce spending. Often, this can lead to job cuts and other types of cutbacks which can affect the economy overall and can reduce customer and investor confidence. Investments and finance professionals also involved in a crash. They're the ones that not only report the incidents to the media and explain it to reporters, but they are also the ones that people often turn to when their stocks fall.

47

WHO IS AFFECTED BY A CRASH?

In short, everyone is affected by a crash. When the stock market takes a downturn, job loss, slow GDP growth, slow economic growth, and devastated consumer confidence are often the results. Investors and companies are making less money, companies are closing, and therefore people are buying less. This affects virtually every aspect of the economy and causes overall economic depression. Since the crash often follows a bull market, many people are panicked by the sudden economic downturn and may become even more cautious with their money, which can further hinder financial growth. The Descriptions of Major American Indices: Indices of the NASDAQ Stock Market:

The following common type securities are eligible for index inclusions. There is no distinction between either the NASDAQ National Market vs. The NASDAQ Capital Market, or domestic US vs. Non-US securities.

NASDAQ -100 INDEX

The NASDAQ-100 Index includes 100 of the largest domestic and international nonfinancial securities listed on The NASDAQ Stock Market based on market capitalization. The Index reflects companies across major industry groups including computer hardware and software, telecommunications, retail/wholesale trade and biotechnology. It does not contain securities of financial companies including investment companies. The

48

NASDAQ-100 methodology.

Index

is

calculated

under

modified

capitalization-weighted

On January 31, 1985, the NASDAQ-100 Index began with a base of 250.00. On January 1, 1994, division of a factor of 2.00 to 125.00 reset the NASDAQ-100 base.

NASDAQ-100EQUALWEIGHTEDINDEX: The NASDAQ-100 Equal Weighted Index is the equal weighted version of the NASDAQ-100 Index which includes 100 of the largest non-financial securities listed on The NASDAQ Stock Market based on market capitalization. The Index contains the same securities as the NASDAQ-100 Index, but each of the securities is initially set at a weight of 1.00% of the Index which is rebalanced quarterly. On June 20, 2005, the NASDAQ-100 Equal Weighted Index began with a base value of 1000.00.

NASDAQ-100TechnologySectorIndex: The NASDAQ-100 Technology Sector Index is an equal weighted index based on the securities of the NASDAQ-100 Index that are classified as Technology according to the Industry Classification Benchmark (ICB) classification system. This index is calculated on a price return basis. On February 22, 2006, the NASDAQ-100 Technology Sector Index began with a base value of 1000.00.

NASDAQ Financial-100 Index:

The NASDAQ Financial-100 Index includes 100 of the largest domestic and international financial securities listed on The NASDAQ Stock Market based on market capitalization. They include companies classified according to the Industry Classification
49

Benchmark as Financials, which are included within the NASDAQ Bank, Insurance, and Other Finance Indexes. On January 31, 1985, the NASDAQ Financial-100 Index began with a base of 250.00.

NASDAQ Biotechnology Index:

The NASDAQ Biotechnology Index contains securities of NASDAQ-listed companies classified according to the Industry Classification Benchmark as either Biotechnology or Pharmaceuticals, which also meet other eligibility criteria. The NASDAQ Biotechnology Index is calculated under a modified capitalization-weighted methodology. On November 1, 1993, the NASDAQ Biotechnology Index began with a base of 200.00.

NASDAQ BANK INDEX:

The NASDAQ Bank Index contains securities of NASDAQ-listed companies classified according to the Industry Classification Benchmark as Banks. They include banks providing a broad range of financial services, including retail banking, loans and money transmissions. On February 5, 1971, the NASDAQ Bank Index began with a base of 100.00.

NASDAQ COMPUTER INDEX:

The NASDAQ Computer Index contains securities of NASDAQ-listed companies classified according to the Industry Classification Benchmark as Technology

50

excluding Telecommunications Equipment. They include computer services, internet, software, computer hardware, electronic office equipment, and semiconductors.

On November 1, 1993, the NASDAQ Computer Index began with a base of 200.00.

NASDAQ INDUSTRIAL INDEX:

The NASDAQ Industrial Index contains securities of NASDAQ-listed companies not classified in one of the NASDAQ sector Indexes. These include firms that are involved in oil and gas productions, oil equipment, services & distribution, chemicals, forestry and paper, industrial metals, mining, construction and materials, aerospace and defense, general industrials, electronic and electrical equipment, industrial engineering, support services, automobiles and parts, beverages, food producers, household goods, leisure goods, personal goods, tobacco, food and drug retailers, general retailers, media, gambling, hotels, recreational services, restaurants and bars, travel & tourism, electricity, gas distribution, water, and multi utilities.

On February 5, 1971, the NASDAQ Industrial Index began with a base of 100.00.

NASDAQ Telecommunications Index:

The NASDAQ Telecommunications Index contains securities of NASDAQ-listed companies classified according to the Industry Classification Benchmark as Telecommunications and Telecommunications Equipment. They include providers of fixed-line and mobile telephone services, and makers and distributors of high-technology communication products.

51

On November 1, 1993, the NASDAQ Utility Index was renamed the NASDAQ Telecommunications Index. The former NASDAQ Utility Index was reset to a base of 200.00, using a factor of 5.74805.

NASDAQ Index Calculation Description:

The formula used for determining the Index values is as follows:

Current Index Market Value Index Level = ----------------------------------------------------Adjusted Base Period Market value * Base value

The level of an index will only change as a result of price changes occurring between the openings and closing of the market. Adjustments for securities being added to or deleted from an index or capitalization changes are adjustments which take place during the system maintenance process which occurs after the market has closed. These adjustments will result in value changes to the Current Index Market Value and Adjusted Base Period Market Value, but will not in and of them alter the level of an index.

Stock splits and stock dividends are likewise adjusted for during the system maintenance process. However, the system makes a price adjustment to account for the increased number of shares with the result being that the Current Index Market Value does not change. As an example, assume that ABC Corp. has 1,000,000 shares outstanding with a NOCP of $20 (market value - $20,000,000) the company has declared a 2 for 1 stock split. During system maintenance on the day prior to the effective date of

52

the split, the system will adjust the shares outstanding to 2,000,000 and will correspondingly adjust the price to $10. The result is the same Current Index Market Value of $20,000,000.

In the case of cash dividends, no system adjustment is made unless an index is a total return index. Neither the Current Index Market Value nor the Adjusted Base Period Market Value is adjusted to reflect cash dividends. The Index formula relies on market forces to determine the level of an index.

MAJOR AMERICAN STOCK MARKETS:

By the turn-of-the-millennium about half of the world's stock market capitalization was trading in the United States -- up from about 30% a decade earlier. During the same period Japan's share shrank from 40% in 1990 to 11%. In the American market the technology sector had doubled from 10% in 1990 to 20%. Most American common stock trades either on the New York Stock Exchange (NYSE) or The NASDAQ Stock Market. The American Stock Exchange (AMEX) was rapidly diminishing in importance until the emergence of Exchange-Traded Funds (ETF s), index-tracking funds known as Unit Investment Trusts (UIT s) that trade like stocks. So-called "Cubes" (QQQ s) which tracked the Nasdaq-100 Index were by far the most heavily traded stocks on the AMEX.

53

THE DOW JONES INDUSTRIAL AVERAGE (DJIA, "The DOW") :

In 1882 Charles Henry Dow founded Dow Jones & Company with his partner Edward Jones. On July 3, 1884 he published his first stock market average composed of 11 stocks: 2 manufacturing & 9 railroad companies (railroads were among the largest & sturdiest companies and industrials were considered more speculative). Dow's purpose in creating an index was to identify trends that could be used to guide investment. He used only closing prices to eliminate the effects of day-trading. (For details concerning Dow Theory an On May 26, 1896 Dow created a 12-stock industrial index separate from his 20-stock railroad index. The first DOW industrial price average was 40.94. At first the average was published irregularly, but when THE WALL STREET JOURNAL began being published daily on October 7, 1986, the DOW began being published daily as well. The DOW indexes allowed investors to gauge the over-all movement of the market -- as opposed to individual stocks -- and created the opportunity to compare the movements of individual stocks with the broader market. By choosing only the most heavily-traded stocks it became possible to quote the index intra-day, because all of the stocks would have had recent trade prices.

54

INDIAN INFOLINE LTD

Date of Establishment Revenue Market Cap Corporate Address 1995 156.75 ( USD in Millions ) 20149.29999675 ( Rs. in Millions ) 75 Nirlon Complex, Off Western Express Highway,Goregaon (E) Mumbai-400063, Maharashtra www.indiainfoline.com Management Details Chairperson - Nirmal Jain MD - R Venkataraman Directors - A K Purwar, Falguni Sanghvi, Kapil Krishan, Kranti Sinha, Nilesh Vikamsey, Nirmal Jain, R Venkataraman, R Venkatraman, Sat Pal Khattar, Sunil Lotke Business Operation Background Finance - Stock Broking India Infoline (IIL) is engaged in business of equities broking, wealth advisory services and portfolio management services. The company was incorporated in October 1995 as Probity Research & Services and later in April 2000 the name was changed to India Infoline.com. Then in March 2001 the company again changed its name to India Infoline.

The company is part of India Infoline Group.

55

Financials

Total Income - Rs. 7998.667211 Million ( year ending Mar 2011) Net Profit - Rs. 1223.618546 Million ( year ending Mar 2011)

Company Secretary Bankers Auditors

Sunil Lotke

Sharp & Tannan Associates

56

COMPANY HISTORY:

Products and Services

India Info line provides a gamut of financial products and services. The company offers broking services in the Cash and Derivatives segments of the NSE and BSE.

India Info line Media and Research Services- This Company offers content support to India Info line in area of broking, commodities, and mutual fund and portfolio management services. India Info line Commodities- This Company is engaged in broking services for commodities segment.

India Info line Marketing & Services- This is holding company of India Info line Insurance Services and India Info line Insurance Brokers. The company is the largest Corporate Agent for ICICI Prudential Life Insurance Company. It is also engaged in insurance broking.

India Info line Investment Services- This subsidiary is engaged in business such as loans against securities, SME financing, distribution of retail loan products, consumer finance business and housing finance business.

IIFL (Asia) Pte- This subsidiary is engaged in carrying out financial sector activities in other Asian markets.

57

Awards India Info line has been awarded the Best Broker in India by Finance Asia. Companys Rs. 5 billion short-term debt programmes have received an A1+ rating from ICRA. This reflects highest -credit-quality of short-term debt instruments.

Outlook

India Info line has received approval from SEBI for sponsoring mutual fund. Through this, the company wants to expand its product offerings.

KEY EXECUTIVES

S.No 1 3 2 4 5 6

Name Nirmal Jain R Venkataraman Sunil Lotke Kranti Sinha Nilesh Vikamsey A K Purwar

Designation Chairman Managing Director Company Secretary Independent Director Independent Director Independent Director

PRODUCT
Product Name Mutual Funds Shares Year Month 2010 2010 Sales Sales % of STO Quantity Value(Rs.Million) 174795.00 63761.88 2624.58 957.40

03 17411647.00 03 426637187.00

58

COMPETITORS
Sales Current Change (Rs.Million) Price (%) 1203.46 435.50 1.98 P/E Market 52-Week Ratio Cap.(Rs.Million) High/Low 0.00 59573.29 529/424

Company Religare Enterprises Edelweiss Financial India Infoline Motilal Oswal Fin Geojit BNP Paribas Tilak Finance Tilak Finance Inventure Growth&Sec DB Intnl.StockBroker Indiabulls Securities EmkayGlobal Finl.Ser Fortune Financial Aditya Birla Money Natraj Finl.Servic Microsec Financial Services

4487.39 6989.47 495.28

28.30 69.95 80.85

0.18 0.29 -0.55

31.30 18.42 25.38

21373.14 20149.30 11741.28

68/28 130/62 232/80

2365.73 24.56 24.56 243.90

18.40 307.00 307.00 164.15

1.10 -0.97 -0.97 -0.79

9.32 0.00 0.00 62.73

4156.15 3788.20 3788.20 3474.45

40/18 326/22 326/22 257/92

111.29

94.50

-0.16 154.87

3312.75

102/35

3368.91

8.92

1.83

5.42

2024.55

31/8

1040.64 74.10 974.68 127.53

46.25 93.00 17.65 34.70

0.11 1.20 4.13 3.58

20.62 21.14 0.00 7.63

1128.70 1128.47 939.03 800.88

118/37 210/74 59/16 76/29

271.26

27.00

8.22

5.11

793.67

141/24

59

Sharyans Resources Lohia Securities Munoth Capital Mkts. Almondz Global Sec Arihant Capital Mkt. Prime Securities DJS Stock & Shares Action Fin Serv (I) Stampede Capital RR Fin. Consultants CFL Capital Finl.Ser Frontline Securities Joindre Capital Serv Khandwala Securities Swastika Investment Inani Securities Cil Securities

73.15 1059.82 37.21

50.95 130.00 72.00

9.69 0.00

52.61 0.00

690.71 647.79 647.35

129/43 200/75 73/45

-0.76 215.78

26293.26

23.85

6.00

11.14

582.41

83/20

487.49 177.41 11.08

24.20 17.25 85.00

7.56 2.99 -0.76

9.06 7.70 86.00

468.51 443.43 430.85

86/21 47/16 179/69

20.03 128.38 73.23

39.45 68.00 31.15

-4.94 3.98 3.32

0.00 0.00 5.06

393.75 369.37 333.48

54/21 100/12 81/28

7.97

2.29

-1.72

0.00

317.57

5/2

53.31

29.40

5.00

7.46

266.14

33/21

986.51

13.25

0.84

8.30

181.81

26/11

54.10

13.80

-1.78

23.74

164.76

26/14

188.81 18.17 70.07

50.00 16.40 14.70

0.00 -4.93 -4.55

60

13.04 19.41 7.10

147.99 78.62 73.50

81/41 19/13 26/14

Gogia Capital Serv KJMC GlobalMarket(I) Alka Sec Modern Shares &Stock BN Rathi Sec Munoth FinancialServ Uniworth Securities Uniworth Securities Hingir Rampur Coal

35.81

20.85

4.77

11.82

65.60

68/20

6.84 38.48 99.82 67.83 12.55

19.80 0.62 18.60 18.00 5.23

-1.00 3.33 -4.86 4.35 -4.91

0.00 99.25 2.18 6.37 0.00

62.10 57.56 57.30 43.47 26.86

25/14 4/1 23/16 31/16 15/5

21.77

10.05

0.00

0.00

12.51

10/10

21.77

10.05

0.00

0.00

12.51

10/10

0.00

54.05

1.98

0.00

6.49

54/50

61

INDIAN INFOLINE LTD

Date of Establishment Revenue Market Cap Corporate Address

1995 156.75 ( USD in Millions ) 20149.29999675 ( Rs. in Millions ) 75 Nirlon Complex, Off Western Express Highway,Goregaon (E) Mumbai-400063, Maharashtra www.indiainfoline.com

Management Details

Chairperson - Nirmal Jain MD - R Venkataraman Directors - A K Purwar, Falguni Sanghvi, Kapil Krishan, Kranti Sinha, Nilesh Vikamsey, Nirmal Jain, R Venkataraman, R Venkatraman, Sat Pal Khattar, Sunil Lotke

Business Operation Background

Finance - Stock Broking India Infoline (IIL) is engaged in business of equities broking, wealth advisory services and portfolio management services. The company was incorporated in October 1995 as Probity Research & Services and later in April 2000 the name was changed to India Infoline.com. Then in March 2001 the company again changed its name to India Infoline.

62

The company is part of India Infoline Group. Financials Total Income - Rs. 7998.667211 Million ( year ending Mar 2011) Net Profit - Rs. 1223.618546 Million ( year ending Mar 2011) Company Secretary Bankers Auditors Sharp & Tannan Associates Sunil Lotke

63

CHAPTER-3 LITERATURE REVIEW

64

LITERATURE REVIEW

The principles of Technical Analysis derive from the observation of Financial Markets over the hundred of years .The oldest known example of technical analysis was a method by Homa Munehisa during early 18th century which evolved into the use of Candlestick techniques, and is today a main charting tool. Dow theory is based on the collected writings of Dow Jones co-founder and

editor Charles Dow ,and Inspired the use and development of Modern Technical Analysis from the end of the century .Other pioneers of analysis techniques include Ralph Nelson Elliott and William Delbert Gann who developed their responsive techniques in the early 20th Century. Many more technical tools and Theories have been developed and enhanced in recent decades with an increasing emphasis on computer assisted techniques.

EMPERICAL EVIDENCE:

Whether technical analysis actually works is a matter of controversy .methods varies greatly, and different technical analysts can some times make contradictory predictions from the same data. Many investors claim that they experience positive returns, but academic appraisals often find that it has little predictive power .modern studies may be more positive :of 95 modern studies ,56 concluded that technical analysis had positive results ,although data snooping bias and other problems make the analysis difficult. Nonlinear predictions using neural networks occasionally produce statistically significant prediction results. A Federal Reserve working paper regarding support and resistance levels in short -term foreign exchange rates offers strong evidence that the
65

levels help to predict intraday trend interruptions .although the predictive power of those levels was found to vary across the exchange rates and firms examined Technical trading strategies were found to be effective in the Chinese

marketplace by a recent study that states ,Finally , we find significant positive returns on buy trades generated by the contrarian version of the moving average crossover rule, the channel breakout rule ,and the Bollinger band trading rule, after accounting for transaction costs of 0.50 percent Nauzer j . Balsara, Gary Chen and Lin Zhen the Chinese stock market: An Examination of the Random Walk Model and Technical Trading Rules. Critics of Technical analysis include well-known fundamental analysts. For example, Peter Lynch once commented, Charts are great for predicting the Past. Warren Buffet has said, I realized technical analysis didnt work when I turned the charts upside down and didnt get a difference answer and If past history was all there was to the game, the richest people would be librarians. An influential 1992 study by Brock et al. which appeared to find support for technical trading rules was tested for data snooping and other problems in 1999, the sample covered by Brock ET always robust to data snooping. Subsequently, a comprehensive study of the questions by Amstar Dam economist Gerwin Griffon concludes that: for the U. S.Japanese and most Western European stock market indices the recursive out of sample forecasting procedure does not show to be profitable, after implementing little transaction costs. Moreover, for sufficiently high transaction costs it is found, by estimating CAPMs that technical trading shows no statistically significant

66

risk-corrected out-of-sample forecasting power for almost all of the stock market indesis,Transaction costs are particularly applicable to momentum strategies; a comprehensive 1996 review of the data and studies concluded that even small transaction costs would lead to an inability to capture any excess from such strategies. In a paper published in the Journal of Finance Dr. Andrew W. LO.director MIT Laboratory for Financial Engineering, working with Harry Mamaysky and Jiang wang found that Technical Analysis, also known as Charting, has been a part of financial practice for many decades, but this discipline has not received the same level of academic scrutiny and acceptance as more traditional approaches such as fundamental analysis. One of the main Obstacles is the highly subjective nature of technical analysis; the presence of geometric shapes in historical price charts is often in the eyes of the beholder. In this paper, we propose a systematic and automatic approach to technical pattern recognition using nonparametric kernel regression, and apply this method to a large member of U.S stock from 1962 to 1996 to evaluate the effectiveness of technical analysis. By comparing the un conditional empirical distribution of daily stock returns to the conditional Distribution _conditioned on specific technical indicators such as head and shoulders or double bottoms _we find that over the 31-year sample period ,several technical indicators do provide incremental information and may have some practical value In that same paper Dr.Lo wrote that several academic studies suggest thattechnical analysis may well be an effective means for extracting useful information from market prices. Some techniques such as Drummond Geometry attempt to overcome the past data bias by projecting support and resistance levels from differing

67

time frames into the near-time future and combining that with revision to the mean Techniques.

EFFICIENT MARKET HYPOTHESIS:

The efficient market hypothesis (EMH) contradicts the basic tenets of technical analysis by starting that past prices cannot be used to profitably predict future prices. Thus it holds that technical analysis cannot be effective. Economist Eugene fama published the seminal paper month EMH in the journal of finance in 1970,and said In short, the evidence in support of the efficient markets model is extensive, and(somewhat uniquely in economics) contradictory evidence is sparse.EMH advocates say that if prices quickly reflect all relevant information. No meted (including technical analysis) can beat the market. Developments which influence prices occur randomly and are unknowable in advance. The vast majority of academic papers find that technical trading rules, after consideration for trading costs, are not profitable. Technicians say that EMH ignores the way markets work, in that many investors base their expectations on past earnings or track record, for example. Because future stock prices can be strongly influenced by investor expectations, technicians claim it only follows that past prices influenced future prices. They also point to research in the field of behavioral finance, specifically that people are not the rational participants EMH makes them out to be. Technicians have long said that irrational human behavior influences stock prices. And that this behavior leads to predictable outcomes. Author David Aaronson says that the theory of behavioral finance blends with the practice of technical analysis.
68

By considering the impact of emotions, errors, irrational preferences, and the dynamics of group behavior, behavioral finance offers succinct explanations of excess market volatility as well as the excess returns earned by stale information strategies. Cognitive errors may also explain the existence of market inefficiencies that spawn the systematic price movements that allow objective TA (technical analysis) methods to work. EMH advocates reply that while individual market participants do not always act rationally (or have complete information), their aggregate decisions balance each other, resulting in a rational outcome (optimists who buy stock and bid the price in equilibrium). Likewise, complete information is reflected in the price because all market participants bring their own individual, but incomplete, knowledge together in the market.

69

CHAPTER-4 DATA ANALYSIS

70

DATA ANALYSIS
Statement showing calculation of return and risk of HDFC

Open Month 10-Jan 10-Feb 10-Mar 10-Apr 10May 10-Jun 10-Jul 10-Aug 10-Sep 10-Oct 10-Nov 10-Dec 11-Jan 11-Feb 11-Mar 11-Apr 11May 11-Jun 11-Jul 11-Aug Price 1,690.25 1,615.00 1,720.00 1,939.00 1,990.00 1,880.00 1,910.00 2,127.45 2,140.00 2,482.00 2,300.00 2,298.00 2,369.00 2,059.80 2,062.00 2,346.10

Close Price 1,630.85 1,704.65 1,932.50 1,991.60 1,885.40 1,914.65 2,127.45 2,132.45 2,480.80 2,278.10 2,289.20 2,346.50 2,042.85 2,049.70 2,342.95 2,292.50 RETURNS -3.51427 5.551084 12.35465 2.712739 -5.25628 1.843085 11.38482 0.235023 15.92523 -8.21515 -0.46957 2.110531 -13.7674 -0.49034 13.62512 -2.28464 3.83913 4.970429 -80.7123 -5.86857 -2.30133 AVERAGE D -2.30133 -2.30133 -2.30133 -2.30133 -2.30133 -2.30133 -2.30133 -2.30133 -2.30133 -2.30133 -2.30133 -2.30133 -2.30133 -2.30133 -2.30133 -2.30133 -2.30133 -2.30133 -2.30133 -2.30133 -1.21294 7.852414 14.65598 5.014069 -2.95495 4.144415 13.68615 2.536353 18.22656 -5.91382 1.831765 4.411861 -11.4661 1.810991 15.92645 0.016687 6.14046 7.271759 -78.411 -3.56724 D2 1.471231 61.6604 214.7978 25.14088 8.731738 17.17618 187.3106 6.433087 332.2076 34.97326 3.355362 19.46452 131.471 3.279689 253.6518 0.000278 37.70525 52.87848 6148.281 12.72519 7552.716

2,300.00 2,388.30 2,384.10 2,502.60 2,527.00 487.4 490.75 461.95

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Average return=-2.30133 Risk =d2/ (n-1) =7552.716/19 =397.5113 =19.9376

3,000.00

2,500.00

2,000.00 Open Price Close Price 1,000.00

1,500.00

500.00

0.00 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

INTERPRETATION: The above table shows the calculations of Return and Risk of HDFC for the months of January 2010 to August 2011. The average Return is -2.30133 and the Risk is 19.9376. The heist price is 2.527 on July-11, the least price is 461.95 on August-11 .It has more fluctuations.

72

Statement showing calculation of return and risk of SBI

Month 10-Jan 10-Feb 10-Mar 10-Apr 10-May 10-Jun 10-Jul 10-Aug 10-Sep 10-Oct 10-Nov 10-Dec 11-Jan 11-Feb 11-Mar 11-Apr 11-May 11-Jun 11-Jul 11-Aug * Spread

Open Price 2,265.00 2,045.00 1,990.00 2,085.00 2,291.00 2,260.00 2,290.00 2,520.00 2,772.00 3,250.00 3,187.00 2,998.00 2,830.05 2,651.90 2,651.00 2,772.00 2,811.50 2,308.00 2,419.80 2,366.90

Close Price 2,058.00 1,975.85 2,079.00 2,297.95 2,268.35 2,302.10 2,503.80 2,764.85 3,233.20 3,151.20 2,994.10 2,811.05 2,641.05 2,632.00 2,767.90 2,805.60 2,297.80 2,405.95 2,342.00 2,039.90

RETURN -9.13907 -3.38142 4.472362 10.21343 -0.98865 1.862832 9.336245 9.71627 16.63781 -3.04 -6.05271 -6.23582 -6.67833 -0.75041 4.409657 1.212121 -18.2714 4.243934 -3.21514 -13.8155 -0.47319

AVERAGE -0.47319 -0.47319 -0.47319 -0.47319 -0.47319 -0.47319 -0.47319 -0.47319 -0.47319 -0.47319 -0.47319 -0.47319 -0.47319 -0.47319 -0.47319 -0.47319 -0.47319 -0.47319 -0.47319 -0.47319

D -8.66588 -2.90823 4.945552 10.68662 -0.51546 2.336022 9.809435 10.18946 17.111 -2.56681 -5.57952 -5.76263 -6.20514 -0.27722 4.882847 1.685311 -17.7982 4.717124 -2.74195 -13.3423

D2 75.09753 8.457791 24.45848 114.2038 0.2657 5.456998 96.22501 103.8251 292.7862 6.588514 31.13109 33.20795 38.50373 0.076848 23.84219 2.840274 316.7758 22.25126 7.518299 178.0183 1381.531

Average return =-0.47319 Risk=d2/(n-1) =1381.531/19 =72.7121 =8.5271

73

3,500.00 3,000.00 2,500.00 2,000.00 1,500.00 1,000.00 500.00 0.00 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Open Price Close Price

INTERPRETATION: The above table shows the calculations of Return and Risk of SBI for the months of January 2010 to August 2011.The average return is -0.47319 .And the Risk is 8.5271.The highest price is 3250 on October-10,The least price is 1975 on February-10.It has more fluctuations.

74

Statement showing calculation of return and risk of ANDHRA BANK

Open Month 10-Jan 10-Feb 10Mar 10-Apr 10May 10-Jun 10-Jul 10Aug 10-Sep 10-Oct 10Nov 10Dec 11-Jan 11-Feb 11Mar 11-Apr 11May 11-Jun 11-Jul 11Aug * Spread Price

Close Price RETURNS AVERAGE 0.094384 -6.74528 7.029703 21.93548 3.219697 -5.34934 9.731801 3.790984 4.613874 10.59006 -12.0056 -4.46344 -8.68852 -4.47183 9.067919 -7.91653 2.437276 -6.2216 0.184843 -10.6985 0.306769 0.306769 0.306769 0.306769 0.306769 0.306769 0.306769 0.306769 0.306769 0.306769 0.306769 0.306769 0.306769 0.306769 0.306769 0.306769 0.306769 0.306769 0.306769 0.306769 0.306769 D D2

105.95 106.05 106 98.85 101 108.5 108.1 132.3

-0.21238 0.045107 -7.05205 49.73144 6.722934 45.19784 21.62871 467.8013 2.912928 8.485149 -5.65611 31.99163 9.425032 88.83122 3.484215 12.13975 4.307105 18.55116 10.28329 105.7461 -12.3123 151.5937 -4.77021 22.75487 -8.99529 80.91531 -4.7786 22.83502 8.76115 76.75775 -8.2233 67.62262 2.130507 4.53906 -6.52837 42.61961 -0.12193 0.014866 -11.0053 121.1166 1419.29

132 136.25 137.4 130.05 130.5 143.2 146.4 151.95 152.8 159.85 161 178.05 179.5 157.95 157.95 150.9 152.5 139.25 142 135.65 138.4 150.95 150.95 139 139.5 142.9 143.05 134.15 135.25 135.5 136 121.45

75

Average return =0.306769 Risk=d2/(n-1) =1419.29/19 =74.6994 =8.6428

200 180 160 140 120 100 80 60 40 20 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 Price Price

INTERPRETATION: The above table shows the calculation of Return and Risk of Andhra bank for the months of January2010 to August2011. The average Return is 0.306769 and the Risk is 8.6428.The heist price is 179 on November-10; the least price is 98.85 on February-10.

76

Statement showing calculation of return and risk of PUNJAB NATIONAL BANK

Month 10-Jan 10-Feb 10-Mar 10-Apr 10-May 10-Jun 10-Jul 10-Aug 10-Sep 10-Oct 10-Nov 10-Dec 11-Jan 11-Feb 11-Mar 11-Apr 11-May 11-Jun 11-Jul 11-Aug

Open Price 913.7 891 916 1,014.40 1,031.35 994 1,045.00 1,072.90 1,182.50 1,299.00 1,324.00 1,220.00 1,215.00 1,109.00 1,066.90 1,220.15 1,188.15 1,105.00 1,096.00 1,141.00

Close Price 899.5 901.45 1,013.45 1,037.70 999.9 1,046.75 1,069.00 1,182.15 1,291.85 1,290.50 1,216.70 1,221.85 1,102.40 1,054.75 1,220.15 1,185.85 1,099.70 1,089.60 1,124.25 993.7

RETURNS -1.55412 1.17284 10.63865 2.296924 -3.0494 5.306841 2.296651 10.18268 9.247357 -0.65435 -8.10423 0.151639 -9.26749 -4.89179 14.36405 -2.81113 -7.44435 -1.39367 2.577555 -12.9097 0.307746

AVERAGE 0.307746 0.307746 0.307746 0.307746 0.307746 0.307746 0.307746 0.307746 0.307746 0.307746 0.307746 0.307746 0.307746 0.307746 0.307746 0.307746 0.307746 0.307746 0.307746 0.307746

D -1.86187 0.865094 10.3309 1.989178 -3.35715 4.999095 1.988905 9.874936 8.939611 -0.9621 -8.41198 -0.15611 -9.57524 -5.19954 14.0563 -3.11888 -7.75209 -1.70141 2.269809 -13.2175

D2 3.466547 0.748387 106.7275 3.95683 11.27044 24.99095 3.955742 97.51437 79.91665 0.925628 70.76133 0.024369 91.68514 27.03522 197.5796 9.727386 60.09493 2.8948 5.152032 174.7016 973.1294

Average return =0.307745 Risk=d2/(n-1) =973.1294/19 =51.2173 =7.1566

77

1400 1200 1000 800 Open Price 600 400 200 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 Close Price

INTERPRETATION:
The above table shows the calculation of Return and Risk of Punjab national bank for the months of January 2010 to August 2011. The average Return is 0.307745 and the Risk is 7.156.The heist price is 1324 on November-10,the least price is 98.85 on February-10.

78

Statement showing calculation of return and risk of ICICI bank Open Month 10-Jan 10Feb 10Mar 10Apr 10May 10-Jun 10-Jul 10Aug 10-Sep 10-Oct 10Nov 10Dec 11-Jan 11Feb 11Mar 11Apr 11May 11-Jun 11-Jul 11Aug * Spread Price 888 822 885.1 952 945 865 854 Close Price 830.4 871.85 952.7 950.5 867.05 862 904.45 RETURNS AVERAGE -6.48649 6.064477 7.637555 -0.15756 -8.24868 -0.34682 5.907494 6.465494 12.84045 3.71875 -3.59115 -0.37859 -11.5351 -4.89716 13.19939 0.382883 -2.72739 0.951238 -5.90715 -21.0284 -0.40684 -0.40684 -0.40684 -0.40684 -0.40684 -0.40684 -0.40684 -0.40684 -0.40684 -0.40684 -0.40684 -0.40684 -0.40684 -0.40684 -0.40684 -0.40684 -0.40684 -0.40684 -0.40684 -0.40684 -0.40684 D -6.07965 D2 36.9621

6.471317 41.87794 8.044395 64.71229 0.249277 0.062139 -7.84184 61.49441 0.060019 0.003602 6.314334 39.87082 6.872334 47.22897 13.24729 175.4906 4.12559 17.02049 -3.18431 10.13982 0.02825 0.000798 -11.1283 123.8387 -4.49032 20.16297 13.60623 185.1295 0.789723 0.623662 -2.32055 5.384975 1.358078 1.844375 -5.50031 30.25345 -20.6216 425.2502 1287.352

917.95 977.3 984 1,110.35 1,120.00 1,161.65 1,186.25 1,143.65 1,149.00 1,144.65 1,153.00 1,020.00 1,021.00 971

983 1,112.75 1,110.00 1,114.25 1,116.45 1,086.00 1,082.80 1,093.10 1,102.90 1,037.75 1,055.00 833.15

79

Average return =-0.40684 Risk=d2/ (n-1) =1287.352/19 =67.7553 =8.2313

1400 1200 1000 800 Open Price 600 400 200 0 1 2 3 4 5 6 7 8 9 101112131415161718192021 Close Price

INTERPRETATION: The above table shows the calculation of Return and Risk of HDFC for the months of January 2010 to August2011.The average Return is 0.40684 and the Risk is 8.2315.The heist price is 1186.25 on November-10; the least price is 822 on February-10.

80

CHAPTER-5 FINDINGS OF THE STUDY

81

FINDINGS

The present project work has been undertaken to study Technical Analysis. During the analysis the following facts have been identified.

HDFC bank has an Average Return of -2.30133 and Risk is 19.9376.And the coefficient of variation is -0.1154.

SBI bank has an Average Return of -0.47319 and Risk is 8.5271.And the coefficient of variation is -0.0554.

Andhra Bank has an average Return of 0.306769 and Risk is 8.6428.And the coefficient of variation is 0.0354.

Punjab national bank has an average Return of 0.307745 and Risk is 7.1566.And the coefficient of variation is 0.0430.

ICICI bank has an Average Return of 0.40684 and risk is 8.2315.And the coefficient of variation is 0.0494.

82

SUGGESTIONS OF THE STUDY

83

SUGGESTIONS

According to my study, I suggested strongly to the small investors to invest on the stocks of Punjab national bank. Because return in Punjab national bank is very high when compared to other banks. If the investor is able to bear a bit risk then they can prefer ICICI bank. Because it is yielding highest average return at bit higher risk. And I suggested the small investors to not invest on HDFC and ICICI banks because they are yielding negative returns.

GENERAL SUGGESTIONS ARE:

INVEST EARLY: The best time to start investing is the minute you start earning money

INVEST CONSISTENTLY : Investing consistently over time is one of the best ways to build wealth in the stock market.

CONSIDER MUTUAL FUNDS AND ETFS : Investing in Exchange Traded Funds and Mutual Fund is an excellent way to diversify your risk and eliminate the risk of under performance.

84

 As per the calculations and analysis, the investors, who want to invest in equity market through the technical analysis, using coefficient of variation can invest in the following equities.

PUNJAB NATIONAL BANK ICICI ANDHRA BANK

85

CHAPTER-6 CONCLUSION

86

CONCLUSION

Depending upon the calculations done on the basis of the available statistics of 5 selected banks for 20 months, the study concluded and suggested strongly to the small investors to invest on the stocks of Punjab National Bank. Because PNB stocks yielded better return when compared to remaining stocks except ICICI bank. The risk on Punjab national banks stock is minimum when compared to other banks .The comparison of coefficient of variation of 5 banks, Andhra bank stock registered minimal variation.If the investor is able to bear a bit risk they can prefer ICICI banks stock because it is yielding highest average return at bit higher risk.

87

CHAPTER-7 BIBLIOGRAPHY

88

BIBILOGRAPHY

WEBSITES:

www.nseindia.com www.bseindia.com www.sebi.gov.in www.888options.com www.sharekhan.com www.mininova.org www.bambooweb.com www.google.com www.wikipedia.com www.hdfcsec.com www.getpedia.com

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AUTHOUR NAME

TITLE

PUBLICATIONS

PAGE NUMBERS

Bhalla,v.k

Investment Management

s.chand and company Ltd.

525-548

Prasanna Chandra

Investment Analysis and portfolio management

Tata MC Graw hill publishing company

95-107

Puneethavathi Pandyam

Security analysis and portfolio management

Vikas publishing house Pvt Ltd.

257-264

90