Summer Internship Project Report

On

A STUDY OF NIFTY AND ITS

POSITION

By

YATHARTH YADAV

BBA(FIA) Class of 2017

(14369)

In Partial Fulfillment of the

Requirements for the Award of
the Degree in
Bachelor of Business Studies

SHAHEED SUKHDEV COLLEGE OF BUSINESS STUDIES

VIVEK VIHAR
(University of Delhi)
 DECLARATION

NIFTY: INDIA’S INTEGRAL INDEX

I declare

That the work presented for assessment in this Summer Internship Report is my own
and original in nature that it has not previously been presented for another
assessment and that my debts (for words, data, arguments and ideas) have been
appropriately acknowledged

th YATHARTH YADAV
Date : 4 August, 2016
Class of 2017 14369
BBA(FIA)3B

ii
 ACKNOWLEDGEMENT

I take this opportunity to express my profound gratitude and deep regards

to my mentor, Mr Rahul Kumar, for his exemplary guidance, monitoring
and constant encouragement throughout the course of this project and the
report.

I also take this opportunity to express a deep sense of gratitude to our

parents and colleagues, for their cordial support, valuable information and
guidance, which helped me in completing this task through various
stages.

iii
 TABLE OF CONTENTS

DECLARATION..............................................................................................................
ii

\ACKNOWLEDGEMENT…………………………………………………………………..
iii

TABLE OF CONTENTS.................................................................................................
iv

LIST OF FIGURES.........................................................................................................
v

LIST OF TABLES...........................................................................................................
vi

ABSTRACT……………………………………………………………………….. vii

EXECUTIVE SUMMARY

PREFACE
\
CHAPTER 1: INTRODUCTION......................................................................................
1

Purpose of the Study

..................................................................................................................................
1

Context of the Study

..................................................................................................................................
1

Significance of the Study

..................................................................................................................................
1

Theoretical Framework
..................................................................................................................................
2

CHAPTER 2: REVIEW OF LITERATURE......................................................................

5

CHAPTER 3: RESEARCH METHODS AND PROCEDURES..........................................

7

Objectives
..................................................................................................................................
7

Research Questions
 ..................................................................................................................................
7

Data Collection
..................................................................................................................................
8

Procedure
..................................................................................................................................
8

Data Analysis
..................................................................................................................................
8

CHAPTER 4: DATA ANALYSIS AND FINDINGS...........................................................

9

CHAPTER 5: RECOMMENDATIONS..........................................................................
28

Recommendations & Conclusion

..................................................................................................................................
29

REFERENCES...............................................................................................................
31

LIST OF FIGURES

Figure 1: Sector wise Constituents of NIFTY....…..……………………………..6

Figure 2: Comparison of NIFTY with SENSEX…..….…………………………........9

v
 LIST OF TABLES

Table 1.1 NIFTY constituents .........................…………………………………......3

Table 1.2 NIFTY Over last 15 years…….........................................................………17

vi
 EXECUTIVE SUMMARY

This report is about my internship program with Sharekhan Pvt.Ltd.

Sharekhan Pvt. Ltd .specialises in trading at the National Stock Exchange.

The NIFTY 50 index is National Stock Exchange of India's benchmark stock market
index for Indian equity market. From 1000 in 1995 to 8600 in 2016
This report deals with various aspects of NIFTY.

In this report you will find the details about the tools and concepts that are utilized to
analyse a NIFTY and make a remark about its returns, market performance and
volatility. Tools like correlation,CAGR etc are some of the parameters which help us
judge an index.Nifty covering 22 sectors of Indian economy is indeed integral.

Hopefully this encourages you to invest in the financial markets, stabilising the economy
 Preface

Internship is the integral and basic requirement of the BFIA curriculum, because it
involves practical implementation of the theoretical knowledge which is received
from formal education by going through practical practices adapted by industries. And
this rationale brought me to Sharekhan Ltd, which is the best brokerage firm of the
country.

I was always interested in investment analysis. I received guidance and practical

training from my mentor and this report is an overview of what I have learned.
Information in this report is gathered from different sources like instruction manual,
project proposals, online websites and notes provided by the mentor.

This document would give the reader an insight to NIFTY, how it is an emerging
index, thus helping an investor to make an well-informed decision.

I have tried my best to eliminate all mistakes and misinterpretations, in case if any
mistakes are found, I beg your pardon.
 Yatharth Yadav
NIFTY: INDIA’S INTEGRAL
INDEX

ABSTRACT

The NIFTY 50 index is National Stock Exchange of India's benchmark stock market

index for Indian equity market. Nifty is owned and managed by India Index Services
and Products (IISL), which is a wholly owned subsidiary of the NSE Strategic
Investment Corporation Limited. 

NIFTY 50 Index has shaped up as a largest single financial product in India, with an
ecosystem comprising: exchange traded funds (onshore and offshore), exchange-
traded futures and options , other index funds and OTC derivatives (mostly offshore).

NIFTY 50 is the world’s most actively traded contract. WFE, IOMA and FIA surveys
endorse NSE’s leadership position. The NIFTY 50 covers 22 sectors of the Indian
economy and offers investment managers exposure to the Indian market in one
portfolio. During 2008-12, NIFTY 50 50 Index share of NSE market capitalisation
fell from 65% to 29% due to the rise of sectoral indices like NIFTY Bank, NIFTY IT,
NIFTY Next 50, etc. The NIFTY 50 Index gives 29.70% weightage to financial
services, 0.73% weightage to industrial manufacturing and nil weightage to
agricultural sector.

(Source: Wikipedia)

vii
 CHAPTER 1: INTRODUCTION

Purpose of the Study

The given research is an attempt to study the growth of NIFTY with special
emphasis on its role in Indian economy, and to assess the future prospects.

Context of the Study

The CNX Nifty (also known as NSE Nifty or NSE-50 or 'Nifty') is a stock index of
National Stock Exchange in India. Nifty consists of 50 stocks representing 23 industry
sectors. The constituents of the index change periodically, depending on liquidity,
availability of floating stock, turnover and volume of transactions.

S&P CNX Nifty, which is owned and managed by India Index Services and Products
Ltd. (IISL), is India's first company to focus upon a stock index as a core product.

Significance of the Study

The market index reflects expectations about the behavior of economy as a

whole. It is a precursor of economic cycles. The function of stock index is to
provide investors with information regarding the average share price in the
market.
A well constructed index captures the overall behavior of the market and
represents the return obtained by a typical portfolio investing in the market.
An ideal index must represent changes in the prices of scrips and reflect price
movements of typical shares for better market representations.
Nifty is an important indicator of Indian stock market
1

Theoretical Framework

The criteria for the selection of stocks to be included in Nifty are as follows:
1. For inclusion in the index, the security should have traded at an average impact
cost of 0.50% or less during the last six months for 90% of the observations for a
basket size of Rs. 2 Crores. Impact cost is cost of executing a transaction in a security
in proportion to the weightage of its free float market capitalization as against the
index free float market capitalization at any point of time. This is the percentage mark
up suffered while buying / selling the desired quantity of a security compared to its
ideal price (best buy + best sell) / 2
2. Companies eligible for inclusion in CNX Nifty should have atleast 10% floating
stock. For this purpose, floating stock shall mean stocks which are not held by the
promoters and associated entities (where identifiable) of such companies.
3. A company which comes out with a IPO will be eligible for inclusion in the index,
if it fulfills the normal eligibility criteria for the index like impact cost, market
capitalization and
floating stock, for a 3 month period instead of a 6 month period.
4. A stock may be replaced from the index reasons may be compulsory changes like
corporate actions, delisting etc. In such a scenario, the stock having largest free float
market capitalization and satisfying other requirements related to liquidity, turnover
and free float will be considered for inclusion.

Base value of Nifty = 1000

Base year of Nifty = 1995

2
TABLE 1.1
CONSTITUENT
S OF NIFTY AS
ON 1-08-2016

Weight
Sector Constituents (%) Sector Constituents Weight (%)

Cigarettes ITC 4.93 Automobile Bajaj Auto 1.31

Pharmaceuticals Cipla 0.76 Bosch 1.16

Dr. Reddy’s Lab 0.95 Hero MotoCorp 1.1

Mahindra &
Lupin 1.22 Mahindra 1.43

Sun
Pharmaceutical 3.63 Maruti Suzuki 2.06

Aurobindo
  Pharma 0.82 Eicher Motors  0.98

Information HCL
Technology Technologies 2.19 Tata Motors 2.34

Tata Motors Ltd.

Infosys 5.28   (DVR)  0.27

TCS 9.01 Financial Services Axis Bank 1.96

Tech Mahindra 0.84 Bank of Baroda 0.64

  Wipro 2.59 HDFC 3.23

Cements ACC 0.49 HDFC Bank 5

Ambuja
Cements 0.66 ICICI Bank 2.57

Grasim
Industries 0.67 IndusInd Bank 1.06

UltraTech Kotak Mahindra

  Cement 1.61 Bank 2.33

State Bank of
Metals Coal India 3.33 India 2.8

Hindalco
Industries 0.45   Yes Bank 0.68

NMDC 0.27 Telecom Bharti Airtel 2.57

  Tata Steel 0.58 Idea Cellular 0.75

Energy BPCL 1.19   Bharti Infratel  1.34

GAIL (India) 0.82 Consumer Goods Asian Paints 1.57

Hindustan
NTPC 2   Unilever 3.49

ONGC 3.28 Construction Larsen & Toubro 2.13

Industrial
Power Grid 1.34 Manufacturing BHEL 0.53

Reliance Media & Zee

Industries 6.2 Entertainment Entertainment 0.7

  Tata Power 0.34

4
Figure 1 Sector wise Constituents of Nifty

5
CHAPTER 2: REVIEW OF LITERATURE
Following are some of the important studies on the concerned subject:
Kaurs study- The study by Kaur (2004) describes the extent and pattern of stock
return, volatility of Indian stock market during the last decade of previous
millennium, that is, 1999- 2000

Debjiban Mukherjee (2007)- The study captures the trend, similarities and patterns in
the activities and movements of the Indian Stock Market in comparison to its
international counterparts.
Karvy Research Reports giving the fundamewntals and technicals of dtocks listed in
various indices.
 CHAPTER 3: 6

RESEARCH METHODS AND

PROCEDURES

Objectives

The objectives of the study can be defined as follows:

1. Study of the historical prices of Nifty w.r.t Sensex

a. Studying the Growth over the years

b. Compare the returns of Nifty with the other popular index SENSEX
2. Analysis of the current scenario

3. Understand the role of NIFTY in the Indian Economy

Data Collection
Since this is a secondary research, the data collected was from secondary
sources like the Internet, newspapers, magazines, and through correspondence with
experts.
 7

Procedure

 Basic theoretical understanding was first gained about stock market as an

entity.
 This understanding was used to further compare NIFTY
 The recent trends were then studied.
 With the help of this basic knowledge, an attempt was made to understand the
role of NIFTY(capital markets as a whole) in the Indian economy as drivers
of sub-urban growth and upliftment.

Data Analysis

Suitable data, in order to fulfil the objectives of the study was collected from
various sources as mentioned above. This data has then been analysed through the
following, wherever necessary:

i. Bar Graphs
ii. Flow Charts
iii. Trend Lines
iv. Pie Charts
8
 CHAPTER 4: DATA ANALYSIS AND
FINDINGS

Figure 2 Comparison of NIFTY With SENSEX

NIFTY has been a more stable index than Sensex in the timeframe2000-12.

CORRELATION BETWEEN NIFTY AND SENSEX

DURATION OF THE INTERNSHIP WAS TAKEN AS TIMEFRAME

20-06-2016 TO 29-07-2016
 FIGURE 2 NIFTY- SENSEX CLOSING PRICE FROM 20-06-16 TO 29-07-16
Correlation coefficient= 0.9987
This indicates a very high degree of positive correlation between Sensex and NIFTY.

It is a great achievement by Indian stock markets to be so closely linked.

10
GROWTH OF NIFTY AS COMPARED TO SENSEX

CAGR(Compounded Annual Growth Rate) was determined.

The CAGR means the year over year growth rate of an investment over a
specified period of time. The CAGR is calculated by taking the nth root of the
total percentage growth rate. Where “n” is no. of years in the period being
considered? This can be calculated as follow:

CAGR = (Ending value/Beginning value) (1/no. of years) -1

The CAGR is an imaginary number that describes the rate at which an investment
would have grown if it grew at a steady rate.
The calculated CAGR of SENSEX and NIFTY is 12.94% and 12.59%
respectively.

The CAGR of Sensex is slightly more than Nifty indicating a better index for
investment purposes. The Sensex and Nifty movements almost show a similar
trend. This is evident from the coefficient of Correlation (r=0.99), almost a perfect
one. The indices reflect the overall market sentiments and are hereby called as
BENCHMARK INDICES of Indian Economy.
 12
How has Nifty performed over the past few years and what
is the current scenario?

15th years back on November 9th 1999, Nifty was trading at 1364 points and
today it is closed on 8389 almost six time more. In 15 years Nifty gave 511 %
absolute return and 12.83% of annualized return. It is quite revealing from
tracking nifty performance that certain stock had outperformed in 15 years
while others are under performer.
Let’s consider that you have invested 1,000 Rs/- in every stock of Nifty 15
years back.
 Amount invested in each stock of Nifty 50 – Rs.1,000
 Total Investment – Rs.50, 000
 50,000 investment in 19999 – Grown to Rs.5,22,000 in 2014
So, money grew from fifty thousand to 5 lakhs in just 15 years.

13
 TOP GAINERS

ICICI Bank
ICICI Bank gave absolute return of 4869% over 15 years. If Rs.1,000 was invested in
ICICI Bank before 15 years it would have grown to Rs 49,696.

HDFC Bank
HDFC Bank gave absolute return of 4836% over 15 years. If Rs.1,000 was invested in
HDFC Bank before 15 years it would have grown to Rs 49,366.
HDFC
HDFC gave absolute return of 4065% over 15 years. If Rs.1,000 was invested in
HDFC before 15 years it would have grown to Rs 41,657.

All Top performers are from Finance industry.

TOP LOSERS

TVS Motor
TVS Motor gave absolute return of -63% over 15 years. If Rs.1,000 was invested in
TVS before 15 years it would have become Rs 364.
MTNL
MTNL gave absolute return of -82% over 15 years. If Rs.1,000 was invested in
MTNL before 15 years it would have become Rs 179.
NIIT
NIIT gave absolute return of -82% over 15 years. If Rs.1,000 was invested in NIIT
before 15 years it would have become Rs 178.
14
TABLE 1.2

NIFTY OVER THE LAST 15 YEARS

(Source: moneyexcel.com)

(NOTE: dividends are not taken into

account for this)
 CURRENT SCENARIO

NIFTY is currently trading in the 8400-8600 range.

After globalisation, the world markets have got more and more integrated.
The NSE has its fair share of FIIs and FDI.

Equities
 Volume: 1,03,40,02,519
 Turnover *   ( crs):20,650.86

Index Futures
 Volume: 2,23,588
 Turnover *   ( crs):15,315.17

Index Options
 Volume: 23,66,513
 Turnover *   ( crs):1,61,088.97
 Premium Turnover  ( crs):1,043.37

(Source:NSEindia.com)

With these volumes of transactions occurring, NIFTY has become one of the most actively
traded indexes in the world.

16
Some examples of how NIFTY is linked to the world markets:

On the following dates, the NIFTY 50 index suffered major single-day falls (of 150 or

more points)

1. 24 June 2016 --- 181.85 Points (driven by the Brexit referendum)

2. 24 Aug 2015 --- 490.95 Points (driven by meltdown in the Chinese stockmarket)

3. 16 Aug 2013 --- 234.45 Points(because of rupee depreciation)

4. 06 May 2015 - NSE Nifty slipped below the 8,200-level by falling 179.25 points or

2.15 per cent to 8145.55. Besides, overnight losses in the US markets on worries

about surging oil prices, poor trade data and growing tensions over the Greek debt

crisis weighed on sentiments

17
REGULATORY FRAMEWORK
NIFTY is an index of the National Stock Exchange(NSE)

Indian Capital Markets are regulated and monitored by the Ministry of Finance, The
Securities and Exchange Board of India and The Reserve Bank of India.
The Ministry of Finance regulates through the Department of Economic Affairs -
Capital Markets Division. The division is responsible for formulating the policies
related to the orderly growth and development of the securities markets (i.e. share,
debt and derivatives) as well as protecting the interest of the investors. In particular, it
is responsible for
 institutional reforms in the securities markets,
 building regulatory and market institutions,
 strengthening investor protection mechanism, and
 providing efficient legislative framework for securities markets.
 
The Division administers legislations and rules made under the
 Depositories Act, 1996,
 Securities Contracts (Regulation) Act, 1956 and
 Securities and Exchange Board of India Act, 1992.

THE REGULATORS

1. Securities & Exchange Board of India (SEBI)

2. Reserve Bank Of India (RBI)
3. NSE rules and regulations

18
 CHAPTER 5: RECOMMENDATIONS
We have seen that NIFTY is the index for the future. It gives us a glance of the
condition of Indian markets and their economic repercussions.
The Indian stock exchanges hold a place of prominence not only in Asia but also at
the global stage. The Bombay Stock Exchange (BSE) is one of the oldest exchanges
across the world, while the National Stock Exchange (NSE) is among the best in
terms of sophistication and advancement of technology. The stock market index is the
most important indices of all as it measures overall market sentiment through a set of
stocks that are representative of the market. The stock market is a barometer of market
behaviour.

Here are some recommendations for smooth functioning of equity markets ,especially
NSE.
 Increased accountability
 Increased transparency
 Ease of entry for FDIs,FIIs etc
 Attracting investment by simplifying the norms
 Financial inclusion
 Spreading financial awareness
 Ease of doing business
 Investors should receive information as soon as possible
 Reduce the leakages from economy

NIFTY is touching 8600 now.

The economy is maturing but there is a huge potential for expansion.
So the conclusion is if you invest for long period of time,the returns are bound to
increase, losses usually occur in trading.(short period of time)
This makes investor awareness more crucial.
And nifty is indeed India ‘s integral index.
 19

REFERENCES

 www.rbi.org.in
 www.nse.in
 www.moneycontrol.com
 www.india-financing.com
 www.yahoofinance.com

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