A STUDY ON INDIAN STOCK MARKET: NSE AND BSE

Project report submitted to

CHRIST COLLEGE (AUTONOMOUS) IRINJALAKUDA
in partial fulfilment of the requirement for the award of the degree of
BACHELOR OF ARTS IN ECONOMICS
Submitted By

ADHARSH TOM
(Reg. no. CCASAECR05)

Under the supervision of

Sr. Rosy V.O.

RESEARCH DEPARTMENT OF ECONOMICS

CHRIST COLLEGE (AUTONOMOUS), IRINJALAKUDA
UNIVERSITY OF CALICUT
MARCH 2021

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 CERTIFICATE

This is to certify that the project report entitled “A STUDY ON INDIAN STOCK
MARKET: “NSE AND BSE” is a bonafied record of project work done by Ms. Ummul
Khulsu C H in partial fulfilment of requirement for the award of the degree of Bachelor of
Arts in Economics under my guidance and supervision and that it has not previously formed
the basis for awarding for any degree, diploma, associate ship, or fellowship.

Place: Irinjalakuda Sr. Rosy V.O

Date: 30/03/2021 Head of the department
Department of Economics
Christ College (Autonomous)
Irinjalakuda

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 DECLARATION

I, Ummul Khulsu C H, hereby declare that this project work entitled “A STUDY ON
INDIAN STOCK MARKET: NSE AND BSE” is a bonafide research paper in partial
fulfillment of requirement for the award of degree of Bachelor of Arts in Economics under
the guidance and supervision of Rev. Sr. Rosy V.O, Assistant Professor, Research
Department of Economics, Christ College (Autonomous) Irinjalakuda. We also declare that
this project report has not previously formed the basis for the award of any degree, diploma,
associate ship, fellowship or other similar type of recognition.

Place: Irinjalakuda Ummul khulsu c h

Date: 30/03/2021

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 ACKNOWLEDGEMENT

I acknowledge our profound gratitude and gracious thanks to Rev. Sr. Rosy V.O, Assistant
Professor, HOD Research Department of Economics, Christ College (Autonomous)
Irinjalakuda for her valuable guidance and encouragement throughout the preparation of
the project report.

I express our sincere thanks to all the faculty members of Department of Economics,
Christ College (Autonomous) Irinjalakuda for their cooperation and help.

I acknowledge our sincere gratitude to Rev. Dr. Jolly Andrews, Principal Christ College
(Autonomous) Irinjalakuda.

I would like to express our gratitude to our parents, brothers, sisters, friends for their
timely support and cooperation.

Place: Irinjalakuda Ummul khulsu C H

Date: 30/03/2021

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 CONTENTS

Sl. No. CHAPTER 1 Page no.

Design of the study

1.1 Introduction 10

1.2 Significance of study 11

1.3 Objectives 12

1.4 Methodology 12

1.5 Review of literature 13

1.6 Limitations 20

1.7 Chapter scheme 20

Sl. No. Chapter 2 Page no.

Stock market an over view

2.1 Stock market 21

2.2 How stock market works 21

2.3 Functions of stock market 23

2.4 Stock market participants 25

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 2.5 Types of stock market 26

2.6 Overview of stock market 30

2.6.1 Stock market at global level 30

Sl. No. Chapter 3 Page No.

Data Analysis

3.1 Emerging stock market in India 34

3.1.1 NSE Emerge 34

3.1.2 Bombay stock exchange 36

3.2 Year effect of stock markets 38

3.2.1 Year effect of NSE 38

3.2.2 Year effect of BSE 43

3.3 Market capitalisation of stock markets 47

3.3.1 Market capitalisation of NSE 48

3.3.2 Market capitalisation of BSE 52

3.4 Risk and returns of stock markets 56

3.4.1 Risk and returns of NSE 57

3.4.2 Risk and returns of BSE 60

3.5 Analysing the trading pattern of stockholders. 65

3.5.1 Reason for trading in stock market 65

3.5.2 Source of information on stock market 66

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3.5.3 Time horizon preferred for trading 68

3.5.4 Year of experience in trading 69

3.5.5 Mode of trading 70

Sl. No. Chapter 4 Page no.

Findings

4.1 Findings of the study 71

4.2 Conclusion 73

4.3 Bibliography 74

4.4 Websites 74

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 LIST OF TABLES

Table No. Title Page No.

3.1 Year effect of NSE 42

3.2 Year effect of BSE 46

3.3 Top 10 companies based on market capitalisation 48

3.4 Market capitalisation of Nifty 49

3.5 Market capitalisation of Sensex 53

3.6 Annual return of Nifty 58

3.7 Annual return of Sensex 62

3.8 Reason for investing in stock market 65

3.9 Source of information on stock market 66

3.10 Time horizon preferred for trading 68

3.11 Year of experience in trading 69

3.12 Mode of trading 70

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 LIST OF FIGURES

Fig. No. Title Page No.

3.1 Year effect of NSE 43

3.2 Year effect of BSE 47

3.3 Risk and returns of NSE 59

3.4 Risk and returns of BSE 63

3.5 Reason for trading in stock market 65

3.6 Source of information on stock market 67

3.7 Time horizon preferred for stock market 68

3.8 Year of experience in stock market 69

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 CHAPTER 1
DESIGN OF THE STUDY
1.1 INTRODUCTION

The stock market refers to the collection of markets and exchanges where regular activities
of buying, selling, and issuance of shares of publicly-held companies take place. Such
financial activities are conducted through institutionalized formal exchanges or over-the-
counter (OTC) marketplaces which operate under a defined set of regulations. There can
be multiple stock trading venues in a country or a region which allow transactions in stocks
and other forms of securities. The stock market or equity market and is primarily known
for trading stocks/equities, other financial securities - like exchange traded funds (ETF),
corporate bonds and derivatives based on stocks, commodities, currencies, and bonds - are
also traded in the stock markets. While both terms - stock market and stock exchange - are
used interchangeably, the latter term is generally a subset of the former. If one says that
she trades in the stock market, it means that she buys and sells shares/equities on one (or
more) of the stock exchange(s) that are part of the overall stock market. The leading stock
exchanges in the U.S. include the New York Stock Exchange (NYSE), Nasdaq, and the
Chicago Board Options Exchange (CBOE). These leading national exchanges, along with
several other exchanges operating in the country, form the stock market of the U.S.

Stock market is a place where people buy/sell shares of publicly listed companies. It offers
a platform to facilitate seamless exchange of shares. In simple terms, if A wants to sell

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shares of Reliance Industries, the stock market will help him to meet the seller who is
willing to buy Reliance Industries. However, it is important to note that a person can trade
in the stock market only through a registered intermediary known as a stock broker. The
buying and selling of shares take place through electronic medium. We will discuss more
about the stock brokers at a later point.

There are two main stock exchanges in India where majority of the trades take place -
Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). Apart from these
two exchanges, there are some other regional stock exchanges like Bangalore Stock
Exchange, Madras Stock Exchange etc but these exchanges do not play a meaningful role
anymore.

National Stock Exchange (NSE)

NSE is the leading stock exchange in India where one can buy/sell shares of publicly listed
companies. It was established in the year 1992 and is located in Mumbai. NSE has a
flagship index named as NIFTY50. The index comprises of the top 50 companies based on
its trading volume and market capitalisation. This index is widely used by investors in
India as well as globally as the barometer of the Indian capital oil markets.

Bombay Stock Exchange (BSE)

BSE is Asia’s first as well as the oldest stock exchange in India. It was established in 1875
and is located in Mumbai. It has a total of ~5,295 companies listed out of which ~3,972 are
available for trading as on August 21, 2017. BSE Sensex is the flagship index of BSE. It
measures the performance of the 30 largest, most liquid and financially stable companies
across key sectors.

Historically, stock trades likely took place in a physical marketplace. With the invent of
new technologies and due to the covid-19 pandemic, the stock market works electronically,
through the internet and online stockbrokers. Each trade happens on a stock-by-stock basis,
but overall stock prices often move in tandem because of news, political events, economic
reports and other factors.

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1.2 SIGNIFICANCE OF THE STUDY

Stock market is the best indicator of how well the economy is doing. Stock markets cover
all industries across all sectors of the economy. This means they serve as a barometer of
what cycle the economy is in and the hopes and fears of the population who generate
growth and wealth. Stock market have been the regulated where people can buy and sell
shares of different companies. Stock markets today are emerging as a very popular and a
better financial market instrument for a large number of investors. A large variety of stocks
or shares are available in Indian stock market to cater the needs and expectations of all
types of investors. The rapid growth in the number of intermediaries and stock market
applications indicate the increasing importance of stock market investments. Still large
section of Indian investors has little information to take prudent investment decisions. Such
information drought is the breeding grounds for misguidance, leading the investors to opt
for a particular stock or share without an in-depth analysis, resulting in the dissatisfaction
over the return. Stock market enable companies to be traded publicly and raise capital. The
transfer of capital and ownership is traded in a regulated, secure environment. Stock
markets promote investment. The raising capital allows companies to grow their
businesses, expand operations and create jobs in the economy. The present study analyses
the important Indian stock market (NSE and BSE) with respect to their market
capitalisation, year effect, risk and return from 2000 to 2020.The study also includes the
much more data regarding the history and functioning of BSE and NSE.

1.3 OBJECTIVES:

1. To study about the emerging stock markets in india such as NSE and BSE.
2. To study about the year effect of the Indian stock market (BSE and NSE) from
2000 to 2020.
3. To examine the market capitalisation of Indian stock market (NSE and BSE)
from 2000 to 2020.
4. To examine the trend of risk and return of Indian stock market (NSE and BSE)
from 2000 to 2020.
5. To study about the type of trading preferred by the investors in stock market.
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1.4 METHODOLOGY

The purpose of this study is to analyse the market capitalisation, year effect and the risk
and returns of the important stock market (NSE and BSE) of about 20 years from 2000 to
2020 and to analyse the investment pattern of traders in stock market. In order to assess the
objective both primary data and secondary data were used. The primary data was collected
from 30 respondents from Thrichur district by using google form. The secondary data was
collected from various journals, articles, publications and online websites.

1.5 REVIEW OF LITERATURE

Kian –Pinhg Lim & Robert Brooks (2011) provides a systematic review of the weak‐form
market efficiency literature that examines return predictability from past price changes,
with an exclusive focus on the stock markets. Our survey shows that the bulk of the
empirical studies examine whether the stock market under study is or is not weak‐form
efficient in the absolute sense, assuming that the level of market efficiency remains
unchanged throughout the estimation period. However, the possibility of time‐varying
week‐form market efficiency has received increasing attention in recent years. We
categorize these emerging studies based on the research framework adopted, namely non‐
overlapping sub‐period analysis, time‐varying parameter model and rolling estimation
window.
Anju Bala (2013) evaluated that stock market is one of the most vibrant sectors in the
financial system, marketing an important contribution to economic development. Stock
market is a place where buyers and sellers of securities can enter into transaction to
purchase and sell shares, bonds, debentures etc. In other words, stock market is a platform
for trading various securities and derivatives. Further, it preforms an important role of
enabling corporate, entrepreneurs to raise resource for their companies and business
venture through public issues. Today long-term investors are interested to invest in the
stock market rather than invest anywhere.

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Ross Levine & Sara Zervos empirically evaluate the relationship between stock market
development and long-term growth. The data suggest that stock market development is
positively associated with economic growth. Moreover, instrumental variables procedures
indicate a strong connection between the predetermined component of stock market
development and economic growth in the long run. While cross-country regressions imply
a strong link between stock market development and economic growth, the results should
be viewed as suggestive partial correlations that stimulate additional research rather than
as conclusive findings. Much work remains to be done to shed light on the relationship
between stock market development and economic growth. Careful case studies might help
identify causal relationships and further research could be done on the time-series property
of such relationships. Research should also be done to identify policies that facilitate the
development of sound securities markets.

Samveg Patel is an Assistant Professor in S. K. Patel Institute of Management and

Computer Studies, Gandhinagar. His areas of interest include Financial Econometrics and
Financial Management. His most recent publication was in IUP Journal of Applied
Finance. The study investigates the effect of macroeconomic determinants on the
performance of the Indian Stock Market using monthly data over the period January 1991
to December 2011 for eight macroeconomic variables, namely, Interest Rate, Inflation,
Exchange Rate, Index of Industrial Production, Money Supply, Gold Price, Silver Price &
Oil Price, and two stock market indices namely Sensex and S&P CNX Nifty.

Aman Srivastava (2010) evaluated that Stock market is an important segment of the
financial system of any country as it plays an important role in channelizing savings from
deficit sector to surplus sector. These stock markets have always been an area of serious
concern for policy makers, economists and researchers. They are often defined as the
barometer of any economy because they reflect the change and direction of pressure on the
economy. The movement and volatility in stock markets often reflect the direction of any
economy. The available literature suggests that since the inception of stock markets
researchers are making attempts to establish relationship between change in
macroeconomic factors and stock market returns.

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Charles K.D, Adjasi, Nicholas B. Biekpe (2006) studies the effect of stock market
development on economic growth in 14 African countries in a dynamic panel data
modelling setting. Results largely show a positive relationship between stock market
development and economic growth. Further analyses, based on the level of economic
development and stock market capitalization, are also conducted. The results reveal that
the positive influence of stock market development on economic growth is significant for
countries classified as upper middle-income economies. On the basis of market
capitalization groupings, stock market developments play a significant role in growth only
for moderately capitalized markets. The general trend in results shows that low-income
African countries and less developed stock markets need to grow more and develop their
markets to elicit economic gains from stock markets.

L.M.C.S. (2006) study investigates the effects of macroeconomic variables on stock prices
in emerging Sri Lankan stock market using monthly data for the period from September
1991 to December 2002. The multivariate regression was run using eight macroeconomic
variables for each individual stock. The null hypothesis which states that money supply,
exchange rate, inflation rate and interest rate variables collectively do not accord any
impact on equity prices is rejected at 0.05 level of significance in all stocks. The results
indicate that most of the companies report a higher R2 which justifies higher explanatory
power of macroeconomic variables in explaining stock prices.

Roman Horvath& Dargan Petrovski (2012) examine the international stock market
commovements between Western Europe vis-à-vis Central (Czech Republic, Hungary and
Poland) and South Eastern Europe (Croatia, Macedonia and Serbia) using multivariate
GARCH models in the period 2006–2011. Comparing these two groups, we find that the
degree of comovements is much higher for Central Europe. The correlation of South
Eastern European stock markets with developed markets is essentially zero. An exemption
to this regularity is Croatia, with its stock market displaying a greater degree of integration
toward Western Europe recently, but still below the levels typical for Central Europe.

Najeb M.H. Masoud (2013) tries to explore the causal link between stock market
performance and economic growth in terms of a simple theoretical and empirical literature

15
framework. Researchers hold diverse opinions regarding the importance of stock markets
playing a significant role in economic growth processes by performing the following
functions: improving liquidity, aggregating and mobilising capital, observing managers
and exerting corporate control, providing risk-pooling and sharing services including
investment levels. The growing theoretical literature argues that stock markets are crucially
linked to economic growth. The findings suggest a positive relationship between efficient
stock markets and economic growth, both in short run and long run and there is evidence
of an indirect transmission mechanism through the effect of stock market development on
investment. They are seen as providing a service that boosts economic growth

Rafaqet Ali and Muhammad Afzal (2012) devastating global financial crisis started from
United States, spread all over the world and adversely affected real and financial sectors of
developed as well as developing countries. This crisis is called the first largest crisis after
the recession of 1930s. The prime aim of this study is to envisage the impact of recent
global financial crisis on stock markets of Pakistan and India. For this purpose, daily data
from 1st January 2003 to 31st August 2010 of KSE-100 and BSE-100 indices, representing
stock markets’ indices of Pakistan and India respectively, are used.

Avijan Dutta, Gautam Bandopadhyay & Suchismita Sengupta (2012) use logistic
regression (LR) and various financial ratios as independent variables to investigate
indicators that significantly affect the performance of stocks actively traded on the Indian
stock market. The study sample consists of the ratios of 30 large market capitalization
companies over a four-year period. The study identifies and examines eight financial ratios
that can classify the companies up to a 74.6% level of accuracy into two categories –
“good” or “poor” – based on their rate of return.

Gagan Deep Sharma & B.S Bodla (2010) states that financial markets of the world for
foreign capital has led to the increased financial integration among different countries. This
paper reviews and summarizes the research on the subject of integration and dynamic
linkages between stock markets in different parts of the world. Majority of the studies
suggested that market integration has increased significantly over the years, within an
international context. We find that not many studies have concentrated on the interaction

16
of Indian markets with the foreign markets, and most of the studies concerning Indian have
concentrated at the inter-relationship of Indian stock market with those of the Developed
nations. Therefore, there is a scope to study the inter-linkages between Indian stock markets
and those of the other SAARC nations.

Peter Sellin (2002) gives a comprehensive view on the interaction between real stock
returns, inflation, and money growth, with a special emphasis on the role of monetary
policy. This is an area of research that has interested monetary and financial economists
for a long time. Monetary economists have been interested in the question whether money
has any effect on real stock prices, while financial economists have investigated whether
equity is a good hedge against inflation. Empirical studies show that money can be helpful
in predicting future stock returns. Empirical evidence also suggest that equity is not a good
hedge against inflation in the short run but may be so in the long run.

Alok Kumar Mishra (2004) attempts to examine whether stock market and foreign
exchange markets are related to each other or not. The study uses Granger’s Causality test
and Vector Auto Regression technique on monthly stock return, exchange rate, interest rate
and demand for money for the period April 1992 to March 2002. The major findings of the
study are (a) there exists a unidirectional causality between the exchange rate and interest
rate and between the exchange rate return and demand for money; (b) there is no Granger’s
causality between the exchange rate return and stock return.

Mara Madaleno & Carlos Pinho (2011) accounts for the time‐varying pattern of price
shock transmission, exploring stock market linkages using continuous time wavelet
methodology. In order to sustain and improve previous results regarding correlation
analysis between stock market indices, namely FTSE100, DJIA30, Nikkei225 and
Bovespa, we extend here such analysis using the Coherence Morlet Wavelet, considering
financial crisis episodes. Results indicate that the relation among indices was strong but
not homogeneous across scales, that local phenomena are more felt than others in these
markets and that there seems to be no quick transmission through markets around the
world, but yes, a significant time delay.

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Vivek Rajput & Sarika Bobde (2016) study different techniques to predict stock price
movement using the sentiment analysis from social media, data mining. In this paper we
will find efficient method which can predict stock movement more accurately. Social
media offers a powerful outlet for people’s thoughts and feelings it is an enormous ever-
growing source of texts ranging from everyday observations to involved discussions. This
paper contributes to the field of sentiment analysis, which aims to extract emotions and
opinions from text. A basic goal is to classify text as expressing either positive or negative
emotion. Sentiment classifiers have been built for social media text such as product
reviews, blog posts, and even twitter messages. With increasing complexity of text sources
and topics, it is time to re-examine the standard sentiment extraction approaches, and
possibly to redefine and enrich the definition of sentiment.

Vanita Tripathi & Shruthi Sethi (2010) evaluated the Financial integration is one of the
buzz words in financial world. The co movement of share prices across the stock markets
in the world is a frequently experienced phenomenon. Especially during the times of crisis,
it is observed that the stock markets crash together. The oil crisis of 1973, the October 1987
crash, the South East Asian crisis of 1997 and the present financial crisis evidence the same.

Marxia Oli Sigao (2007) investigated the effect of weather (temperature) factor, on the
returns and volatility of the Indian stock indices (BSE Sensex and S&P CNX Nifty). This
study examined how weather (temperature) affected the volatility of top stock market
indices in India. The study used the monthly data of weather in five sample cities (Chennai,
Mumbai, Delhi, Kolkata and Hyderabad) in India. This study applied statistical tools like
Descriptive Statistics, ADF Test and GARCH (1, 1) model and found that the returns of
sample stock market indices were influenced by weather (temperature) factor in Chennai,
Mumbai, Kolkata and Hyderabad in India. But the returns of stock indices were not
influenced by the temperature in Delhi City.

Juhi Ahuja (2012) presents a review of Indian Capital Market & its structure. In last
decade or so, it has been observed that there has been a paradigm shift in Indian capital
market. The application of many reforms & developments in Indian capital market has
made the Indian capital market comparable with the international capital markets. Now,

18
the market features a developed regulatory mechanism and a modern market infrastructure
with growing market capitalization, market liquidity, and mobilization of resources. The
emergence of Private Corporate Debt market is also a good innovation replacing the
banking mode of corporate Nance.

Suresh G Lalwani (1999) emphasized the need for risk management in the securities
market with particular emphasis on the price risk. He commented that the securities market
is a 'vicious animal' and there is more than a fair chance that far from improving, the
situation could deteriorate

Debjit Chakraborty (1997) in his study attempts to establish a relationship between major
economic indicators and stock market behaviour. It also analyses the stock market reactions
to changes in the economic climate. The factors considered are inaction, money supply,
and growth in GDP, scal debit and credit deposit ratio. To nd the trend in the stock markets,
the BSE National Index of Equity Prices (Natex) which comprises 100 companies was
taken as the index. The study shows that stock market movements are largely inuenced by,
broad money supply, ination, C/D ratio and scal decit apart from political stability.

Bhanwar Singh, Sahil Narang, (2020) in his study examines the impact of the COVID-
19 outbreak on the stock markets of G-20 countries. We find statistically significant
negative ARs in the four sub-event windows during the 58 days. Negative ARs are
significant for developing as well as developed countries. The findings of this study reveal
that cumulative average abnormal return (CAAR) from day 0 to day 43, ranging from –
0.70 per cent to –42.69 per cent, is a consequence of increased panic in the stock markets
resulting from an increased number of COVID-19 positive cases in the G-20 countries.

Rosy Call (2020) examines the herding behaviour at the industry level from national stock
exchange (NSE). Using daily stock closing prices of 191 firms, which constitute the 12
industry indices for the period from 1 January 2015 to 1 June 2020, the results for the full
sample period (1 January 2015 to 1 June 2020) and before COVID-19 outbreak period (1
January 2015 to 29 January 2020) indicate the non-existence of herding formation at the
industry level, but they do suggest a strong evidence of anti-herding behaviour. Further,
the findings suggest that COVID-19 pandemic caused the formation of herding behaviour
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at the industry level. The study facilitates investors to devise their trading strategies in the
regime of the COVID-19 pandemic.

Krishna Reddy Chittedi examined the stock market integration between India and
developed countries such as USA, UK, Japan, France and Australia. The objective is to
examine the stock indices of the above-mentioned developed countries with relation to
India for a period of 10 years (1 October 1997-1 October, 2007) out the integration between
them. For this purpose, Unit Roots, Granger Causality, cointegration and Error correction
Mechanism are used. To examine the short-run and long-run relationships between India
and the developing counties. The study found that co integration existing between India
and developed countries. (USA, UK, Japan, France and Australia

T. P Madhusoodan in his study applies the variance ratio tests under the null hypotheses
of homoscedasticity as well as heteroscedasticity, to the Indian stock market. The tests are
conducted at the aggregate level of market indices and disaggregate level of individual
stocks. The results indicate that random walk hypothesis cannot be accepted in the Indian
market. Both the market indices the author tested showed persistent behaviour, while most
of the individual stocks also showed evidence on persistence. The variance ratios were
significant under heteroscedasticity in most of the cases where it was significant under
homoscedasticity assumption. This implies that heteroscedasticity does not play a major
role in the Indian market.

1.6 LIMITATION

The study was conducted mainly based on the secondary data. As our study was during the
time covid-19 pandemic and lock down, the data collection was narrowed by online
sources. Many online sites have given insufficient information and data. So, there was a
dependency on various sites. The unavailability of books and other physical materials had
been a major limitation of our project.

1.7 CHAPTER SCHEME

The first chapter shows the introduction, significance of the study, objective of the study,
review of literature, methodology, limitation and chapter scheme. The second chapter
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includes stock market, How stock market works, functions of stock market, stock market
participants, Types of stock market, Overview of stock market. The third chapter includes
Indian stock market: Nse and Bse, Year effect of Nse and Bse, Market capitalization of
Nse and Bse, Risk and Return of Nse and Bse, Analysis of trading pattern among
stockholders. The fourth chapter includes Findings of the study, Bibliography, Websites,
Conclusion.

CHAPTER 2
STOCK MARKET AN OVER VIEW
2.1 STOCK MARKET

A stock market, equity market, or share market is the aggregation of buyers and sellers
of stocks (also called shares), which represent ownership claims on businesses; these may
include securities listed on a public stock exchange, as well as stock that is only traded
privately, such as shares of private companies which are sold to investors through equity
crowdfunding platforms. Investment in the stock market is most often done
via stockbrokerages and electronic trading platforms. Investment is usually made with
an investment strategy in mind.

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Stocks can be categorized by the country where the company is domiciled. For
example, Nestlé and Novartis are domiciled in Switzerland and traded on the SIX Swiss
Exchange, so they may be considered as part of the Swiss stock market, although the stocks
may also be traded on exchanges in other countries, for example, as American depositary
receipts (ADRs) on U.S. stock markets.

2.2 HOW THE STOCK MARKET WORKS

stock markets provide a secure and regulated environment where market participants can
transact in shares and other eligible financial instruments with confidence with zero- to
low-operational risk. Operating under the defined rules as stated by the regulator, the stock
markets act as primary market and as secondary markets.

As a primary market, the stock market allows companies to issue and sell their shares to
the common public for the first time through the process of initial public offerings (IPO).
This activity helps companies raise necessary capital from investors. It essentially means
that a company divides itself into a number of shares (say, 20 million shares) and sells a
part of those shares (say, 5 million shares) to common public at a price (say, $10 per share).

To facilitate this process, a company needs a marketplace where these shares can be sold.
This marketplace is provided by the stock market. If everything goes as per the plans, the
company will successfully sell the 5 million shares at a price of $10 per share and collect
$50 million worth of funds. Investors will get the company shares which they can expect
to hold for their preferred duration, in anticipation of rising in share price and any potential
income in the form of dividend payments. The stock exchange acts as a facilitator for this
capital raising process and receives a fee for its services from the company and its financial
partners.

Following the first-time share issuance IPO exercise called the listing process, the stock
exchange also serves as the trading platform that facilitates regular buying and selling of
the listed shares. This constitutes the secondary market. The stock exchange earns a fee for
every trade that occurs on its platform during the secondary market activity.

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The stock exchange shoulders the responsibility of ensuring price
transparency, liquidity, price discovery and fair dealings in such trading activities. As
almost all major stock markets across the globe now operate electronically, the exchange
maintains trading systems that efficiently manage the buy and sell orders from various
market participants. They perform the price matching function to facilitate trade execution
at a price fair to both buyers and sellers.

A listed company may also offer new, additional shares through other offerings at a later
stage, like through rights issue or through follow-on offers. They may
even buyback or delist their shares. The stock exchange facilitates such transactions.

The stock exchange often creates and maintains various market-level and sector-specific
indicators, like the S&P 500 index or Nasal 100 index, which provide a measure to track
the movement of the overall market. Other methods include the Stochastic Oscillator and
Stochastic Momentum Index.

The stock exchanges also maintain all company news, announcements, and financial
reporting, which can be usually accessed on their official websites. A stock exchange also
supports various other corporate-level, transaction-related activities. For instance,
profitable companies may reward investors by paying dividends which usually comes from
a part of the company’s earnings. The exchange maintains all such information and may
support its processing to a certain extent. (For related reading, see "How Does the Stock
Market Work?")

2.3 FUNCTIONS OF A STOCK MARKET

A stock market primarily serves the following functions:

Fair Dealing in Securities Transactions: Depending on the standard rules of demand and
supply, the stock exchange needs to ensure that all interested market participants have
instant access to data for all buy and sell orders thereby helping in the fair and transparent
pricing of securities. Additionally, it should also perform efficient matching of appropriate
buy and sell orders.
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For example, there may be three buyers who have placed orders for buying Microsoft
shares at $100, $105 and $110, and there may be four sellers who are willing to sell
Microsoft shares at $110, $112, $115 and $120. The exchange (through their computer
operated automated trading systems) needs to ensure that the best buy and best sell are
matched, which in this case is at $110 for the given quantity of trade.

Efficient Price Discovery: Stock markets need to support an efficient mechanism for price
discovery, which refers to the act of deciding the proper price of a security and is usually
performed by assessing market supply and demand and other factors associated with the
transactions.

Say, a U.S.-based software company is trading at a price of $100 and has a market
capitalization of $5 billion. A news item comes in that the EU regulator has imposed a fine
of $2 billion on the company which essentially means that 40 percent of the company’s
value may be wiped out. While the stock market may have imposed a trading price range
of $90 and $110 on the company’s share price, it should efficiently change the permissible
trading price limit to accommodate for the possible changes in the share price, else
shareholders may struggle to trade at a fair price.

Liquidity Maintenance: While getting the number of buyers and sellers for a particular
financial security are out of control for the stock market, it needs to ensure that whosoever
is qualified and willing to trade gets instant access to place orders which should get
executed at the fair price.

Security and Validity of Transactions: While more participants are important for
efficient working of a market, the same market needs to ensure that all participants are
verified and remain compliant with the necessary rules and regulations, leaving no room
for default by any of the parties. Additionally, it should ensure that all associated entities
operating in the market must also adhere to the rules, and work within the legal framework
given by the regulator.

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Support All Eligible Types of Participants: A marketplace is made by a variety of
participants, which include market makers, investors, traders, speculators, and hedgers. All
these participants operate in the stock market with different roles and functions. For
instance, an investor may buy stocks and hold them for long-term spanning many years,
while a trader may enter and exit a position within seconds. A market maker provides
necessary liquidity in the market, while a hedger may like to trade in derivatives for
mitigating the risk involved in investments. The stock market should ensure that all such
participants are able to operate seamlessly fulfilling their desired roles to ensure the market
continues to operate efficiently.

Investor Protection: Along with wealthy and institutional investors, a very large number
of small investors are also served by the stock market for their small number of
investments. These investors may have limited financial knowledge, and may not be fully
aware of the pitfalls of investing in stocks and other listed instruments. The stock exchange
must implement necessary measures to offer the necessary protection to such investors to
shield them from financial loss and ensure customer trust.

For instance, a stock exchange may categorize stocks in various segments depending on
their risk profiles and allow limited or no trading by common investors in high-risk stocks.
Exchanges often impose restrictions to prevent individuals with limited income and
knowledge from getting into risky bets of derivatives.

Balanced Regulation: Listed companies are largely regulated and their dealings are
monitored by market regulators, like the Securities and Exchange Commission (SEC) of
the U.S. Additionally, exchanges also mandate certain requirements – like, timely filing of
quarterly financial reports and instant reporting of any relevant developments - to ensure
all market participants become aware of corporate happenings. Failure to adhere to the
regulations can lead to suspension of trading by the exchanges and other disciplinary
measures.

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Regulating the Stock Market
A local financial regulator or competent monetary authority or institute is assigned the task
of regulating the stock market of a country. The Securities and Exchange
Commission (SEC) is the regulatory body charged with overseeing the U.S. stock markets.
The SEC is a federal agency that works independently of the government and political
pressure. The mission of the SEC is stated as: "to protect investors, maintain fair, orderly,
and efficient markets, and facilitate capital formation."1

2.4 STOCK MARKET PARTICIPANTS

Along with long-term investors and short-term traders, there are many different types of
players associated with the stock market. Each has a unique role, but many of the roles are
intertwined and depend on each other to make the market run effectively.

• Stockbrokers, also known as registered representatives in the U.S., are the licensed
professionals who buy and sell securities on behalf of investors. The brokers act as
intermediaries between the stock exchanges and the investors by buying and selling
stocks on the investors' behalf. An account with a retail broker is needed to gain
access to the markets.
• Portfolio managers are professionals who invest portfolios, or collections of
securities, for clients. These managers get recommendations from analysts and
make the buy or sell decisions for the portfolio. Mutual fund companies, hedge
funds, and pension plans use portfolio managers to make decisions and set the
investment strategies for the money they hold.
• Investment bankers represent companies in various capacities, such as private
companies that want to go public via an IPO or companies that are involved in
pending mergers and acquisitions. They take care of the listing process in
compliance with the regulatory requirements of the stock market.

2.5 TYPES OF STOCK MARKET

1.Classification based on stock classes

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There are some stocks that do not give the shareholders the power to vote at the annual
meetings where the decisions regarding the management of the company and such issues
take place. Unlike these stocks, there are some other stocks that allow shareholders to
participate in the decision making in the company matters, by casting their votes. Another
kind of stocks offer shareholders the opportunity to cast multiple votes in matters pertaining
to different aspects of the company.

2.Classification based on market capitalization

Stocks can be classified on the basis of the market capitalization of the company, which is
the total shareholding of a company. This is calculated by multiplying the current price of
the company stock with the total number of shares outstanding in the market. Listed below
are the types of stocks based on market capitalization.

i. Large Cap Stocks

These are often stocking of Blue-chip companies which are established enterprises with
large reserves of cash at their disposal. It is interesting to note that the larger size of the
large cap companies does not mean that they grow more rapidly. In fact, it is the small
stock companies that tend to outperform them over the longer time frame. But large cap
stocks do come with the benefit of allowing the investors to reap higher dividends in
comparison to the smaller and mid cap companies’ stocks, ensuring that the capital is
preserved over the long-term period.

ii. Mid Cap Stocks

These are the stocks of medium sized companies that have a market capitalization of INR
250 Crore to about INR 4000 crore. These companies have a well recognize name in the
market which brings along the benefit of potential for growth, as well as the stability that
is usually accompanied with being a seasoned player in the market. Mid cap companies
have a good track record of steady growth and are very similar to blue chip stocks barring
their size. In the long term these stocks do and grow well.

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iii. Small Cap Stocks

As is suggestive of the name, small cap stocks have the smallest value in the market as
compared to its counterparts. These are small sized companies that have a market
capitalization of up to INR 250 and have the potential to grow at a good pace in the future.
Investors who are willing to commit to a long term and are not very particular about the
current dividends, and are willing to stand their ground during price volatility, can make
significant gains in the future. As an investor you can buy these stocks when they are
available at a cheap price during the initial stage of the company. There is no surety about
the how the company will perform in the market since they are relatively new. Because
these small cap companies are new, they are highly volatile and their growth impacts the
value and revenue of the company to a huge extent.

3. Classification based on ownership

Based on wonder ship, there are three types of stocks that investors can own which offer
them different rights and growth potential.

i. Preferred & common stocks

Preferred stocks offer investors a fixed amount of dividend every year unlike common
stocks. The price of preferred stocks is not as volatile as a common stock but it is common
stock that gets the benefit of priority when the company has surplus money to distribute.
At the time of company liquidation, it is the company’s creditors, its bond holders,
debenture holders who get priority over the preferred shareholders. Common stockholders
have voting rights, a privilege preferred shareholder do not enjoy.

ii. Hybrid Stocks

There are companies that offer preferred shares with the option of converting them to
common shares, with conditions, at a certain point in time. These are known as hybrid
stocks or convertible preferred shares and may or may not have voting rights.

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iii. Stocks with embedded derivative options

Stocks that come with the embedded derivative option means that they can be ‘callable’ or
‘potable’ and are not as commonly available. A ‘callable’ stock has the option of being
bought back by the company for a certain price at a certain point in time. Similarly, a
‘potable’ stock offers its holder to sell it to the company at a certain price and time.

4. Classification based on dividend payment

I. Growth Stocks

These stocks do not pay high dividends as the company prefers to reinvest the earnings to
enable it to grow faster, hence, the name growth stocks. The value of the shares of the
company rises with the fast growth rate which in turn allows investors to profit through
higher returns. It is best suited for those investors who seek long term growth potential and
not an immediate second source of income. Growth stocks carry higher risk than their
counterpart.

ii. Income Stocks

In comparison to growth stocks, income stocks hand out a higher dividend in relation to
the price of the share. Higher dividends translate to higher income; hence, the name Income
Stocks. Income stocks are indicative of a stable company that can afford consistent
dividends but these are also companies that do not promise very high growth. This means
that the stock price of such companies may not rise much. Income stocks also includes
preferred stocks. IT is a good investment for those investors who seek a secondary source
of income through relatively low risk stocks. The dividend income in income stocks is not
taxed and thus is great for investors of low risk profile who want long term investment. You
may want to use the dividend yield measure to find such stocks that offer high dividends.

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5. Classification based on fundamentals

Investors who believe that a share price must equal the intrinsic value of the company’s
share, the value investing investors, compare the share prices with components like per
share earnings, profits etc. to reach at an intrinsic value per share.

I. Overvalued Shares

These are shares with prices that exceed the intrinsic value and are considered overvalued.

ii. Undervalued Shares

These types of shares are popular amongst the value investors as they believe that the price
of the share would rise in the future.

6. Classification based on Risk

The risk level of stocks differs depending on the share price fluctuations. Stocks with
higher risk reward the investor with higher returns, while low risk stocks generate low
returns.

I. Beta Stocks

The beta or the measure of risk is derived by calculating the price volatility of the stock.
Beta can be positive or negative which denotes whether it moves in sync with the market
or against it. The higher the beta, higher is the risk quotient of the stock. If the beta value
is more than 1 it means that the stock is more volatile than the market. A lot of investors
with knowledge of this measure use it to make their investment decisions.

ii. Blue Chip Stocks

Blue chip stocks are stocks of those companies that have lower liabilities and stable
earnings and which pay regular dividends. These very large and well-recognised companies
that have a long history of sound financial performance are a good bet for Investors who
seek safer avenues of investment.

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7. Classification based on price trends

This classification is based on the movement of stock prices in tandem with or against the
company earnings.

I. Defensive Stocks

These are stocks that are somewhat unfazed by economic conditions and are preferred
when the market conditions are poor. Food and beverage companies are a common
example.

ii. Cyclical Stocks

Stocks of companies that are greatly affected by economic conditions and see high price
fluctuations with market changes are cyclical stocks. These types of stocks grow rapidly
during the boom cycle but the growth is slowed down in the slow economy. Automobile
stocks fall in this category.

2.6 OVERVIEW OF STOCK MARKET

2.6.1 STOCK MARKET AT GLOBAL LEVEL

Stock markets are some of the most important parts of today’s global economy. Countries
around the world depend on stock markets for economic growth. However, stock markets
are a relatively new phenomenon. They haven’t always played an important role in global
economics.

The first genuine stock markets didn’t arrive until the 1500s. However, there were plenty
of early examples of markets which were similar to stock markets. In the 1100s, for
example, France had a system where courtiers de change managed agricultural debts
throughout the country on behalf of banks. This can be seen as the first major example of
brokerage because the men effectively traded debts. Later on, the merchants of Venice were
credited with trading government securities as earl y as the 13th century. Soon after, bankers
in the nearby Italian cities of Pisa, Verona, Genoa, and Florence also began trading
government securities. The world’s first stock markets are generally linked back to

31
Belgium. Bruges, Flanders, Ghent, and Rotterdam in the Netherlands all hosted their own
“stock” market systems in the 1400s and 1500s.However, it’s generally accepted that
Antwerp had the world’s first stock market system. Antwerp was the commercial centre of
Belgium and it was home to the influential Van der Buerse family. As a result, early stock
markets were typically called Beursen.All of these early stock markets had one thing
missing: stocks. Although the infrastructure and institutions resembled today’s stock
markets, nobody was actually trading shares of a company. Instead, the markets dealt with
the affairs of government, businesses, and individual debt. The system and organization
were similar, although the actual properties being traded were different.

The top 10 biggest stock exchanges in the world.

1) New York Stock Exchange

The New York Stock Exchange (NYSE) is additionally referred to as ‘The Big Board’.
The NYSE is the first on the list of the largest stock exchanges in the world and is a
highly esteemed stock exchange in the USA. The NYSE has remained the largest stock
exchange in the world by market capitalisation ever since the end of World War. It is
located at 11, Wall Street, Lower Manhattan, New York City. It consists of 2,400 listed
companies which span sectors such as finance, healthcare, consumer goods and energy.
The blue-chip companies which are listed under NYSE are Berkshire Hathaway Inc,
Coca-Cola, Walt Disney Company, Mc Donald’s Corporation, etc. Date of
establishment: May 17, 1792. Valuation: $19.3 Trillion

2) NASDAQ
Second on the list of the largest stock exchange in the world is NASDAQ, an
abbreviation of National Association of Securities Dealers Automated Quotations.
Nasdaq, an American stock exchange is headquartered at 151 W, 42nd Street, New
York City. Nasdaq never operated on a usual open outcry system, instead, it has always
used a computer and telephone-based system of trading, which has made the NASDAQ
the world’s first electronically traded stock market. The enlistment of the world’s
humongous tech giants such as Apple, Microsoft, Google, Facebook, Amazon, Tesla,
and Intel make NASDAQ ‘The Mecca of Technology Companies’. Date of
establishment: February 4, 1971. Valuation: $13.8 Trillion

3) Tokyo Stock Exchange

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The Tokyo Stock Exchange (TSE) which is also known as TYO and Tōshō is located
in Tokyo, Japan. It is listed as the third-largest stock exchange in the world. TSE has
around 3,575 listed companies which has taken its market capitalization to a whooping
US$ 5.67 trillion. The TSE’s benchmark index is Nikkei 225 and it is home to Japanese
giants with international exposure, including Toyota, Suzuki, Honda, and Mitsubishi
and Sony. Date of establishment: January 1, 2003. Valuation: $5.7 Trillion

4) Shanghai Stock Exchange

The Shanghai Stock Exchange (SSE) is a Chinese stock exchange situated in the city of
Shanghai, China. It is one of the three stock exchanges plying autonomously in the
People’s Republic of China. Date of establishment: November 26, 1990. Valuation:
$4.9 Trillion

5) Hong Kong Stock Exchange

The Hong Kong Stock Exchange (SEHK) is located in Hong Kong and is the world’s
fifth-largest and Asia’s third-largest stock exchange on the basis of market
capitalization. It is one of the three stock exchanges in China. SEHK consists of 2,315
listed companies with a wholesome market capitalization of HK$29.9 trillion. It is
reported as the fastest-growing stock exchange in Asia. Date of establishment: February
3, 1891. Valuation: $4.4 Trillion

6) EURONEXT
EURONEXT stands for European New Exchange Technology. With it’s registered
office in Amsterdam and corporate address at La Défense in Greater Paris, EURONEXT
was established in 2000 to represent Europe’s economy which is also the reason why it
operates in euros. It is the sixth-largest stock exchange in the world with a market
capitalization worth €4.1 trillion. Date of establishment: September 22, 2000.
Valuation: $3.9 Trillion.

7) Shenzen Stock Exchange

The Shenzhen Stock Exchange (SZSE) is one of the three independently working stock
exchanges in China. Although it was founded in 1987, it wasn’t established until 1990.
It is the 7th largest stock exchange in the world and has approximately 1,300 listed
companies with a combined market capitalization of $3.92 trillion. Date of
establishment: December 1, 1990. Valuation: $3.5 Trillion

8) London Stock Exchange

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The London stock exchange (LSE) is based in London and is the sixth-largest stock
market within the world. It was established in 1571 and is the oldest stock exchange in
the world. It has more than 3,000 listed companies with a combined market
capitalization of $4.59 trillion. Date of establishment: January 23, 1571. Valuation: $3.2
Trillion

9) Toronto Stock Exchange

The Toronto Stock Exchange (TSX) is situated in Toronto, Canada. It was introduced
in 1852 and is held and wielded as a subsidiary of the TMX Group. Enlistment of 2,207
companies with a combined market capitalization of $2.3 trillion. Date of
establishment: October 25, 1861. Valuation: $2.1 Trillion

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 CHAPTER 3
DATA ANALYSIS

3.1 EMERGING STOCK MARKETS IN INDIA

3.1.1 NSE EMERGE

NSE EMERGE is NSE’s new initiative for Small and medium-sized enterprises (SME) &
Start-up companies in India. These companies can get listed on NSE without an Initial
public offering (IPO). This platform will help SME’s & Start-ups connect with investors
and help them with the raising of funds. On 8 July 2015, Sucheta Dalal wrote an article on
Money life alleging that some NSE employees were leaking sensitive data related to high-
frequency trading or co-location servers to a select set of market participants so that they
could trade faster than their competitors. NSE alleged defamation in the article by Money
life. On 22 July 2015, NSE filed a ₹1 billion (US$14 million) suit against Money life.
However, on 9 September 2015, the Bombay High Court dismissed the case and fined NSE
₹5 million (US$70,000) in this defamation case against Money life (The High Court asked
NSE to pay ₹150,000 (US$2,100) to each journalist Debashis Basu and Sucheta Dalal and
the remaining ₹4.7 million (US$66,000) to two hospitals.

The Bombay High Court has stayed the order on costs for a period of two weeks, pending
the hearing of the appeal filed by NSE. In May 2019 SEBI has debarred NSE from
accessing the markets for a period of 6 months. While NSE confirmed this will not impact
their functioning, they won’t be able to list their IPO or introduce any new trading products
for that period. Additionally, the watchdog also ordered NSE to disgorge Rs 624.9 crores
(along with accrued interest for the period), an amount equivalent to the profits it made
from the unfair trade practice of co-location servers they provided during the period from
2010–11 to 2013–14. The board also passed orders against 16 individuals including former
managing directors and CEOs Ravi Narain and Chitra Ramakrishna ordering them to
disgorge 25% of their salaries during that period along with interest. All money is to be

35
paid into the Investor protection and education fund. These individuals have also been
debarred from the markets or holding any position in a listed company for a period of five
years. Crash of 1991After economic liberalisation in India in 1991, the stock market saw a
number of cycles of booms and busts, some related to scams such as those engineered by
players such as Harshad Mehta and Ketan Parekh, some due to global events and a few due
to circular trading, rigging of prices and the irrational exuberance of investors leading to
bubbles that finally burst.

Crashes of 2020

On 1 February 2020, as the FY 2020-21 Union budget was presented in the lower house of
the Indian parliament, Nifty fell by over 3% (373.95 points) while Sensex fell by more than
2% (987.96 points). The fall was also weighed by the global breakdown amid coronavirus
pandemic cantered in China. On 28 February 2020, Sensex lost 1448 points and Nifty fell
by 432 points due to growing global tension caused by coronavirus, which W.H.O said has
a pandemic potential. Both BSE and NSE fell for the entire five days of the week ending
with the worst weekly fall since 2009.

On March 4 and 6, markets fell by around 1000 points and several crores of wealth was
wiped out. On 6 March 2020, Yes Bank was taken over by RBI under its management for
reconstruction and will be merged with SBI. This was done to ensure smooth functioning
of the bank as it was struggling for couple of years to cope up with heavy pressure due to
cleaning of bad loans. On 9 March 2020, the Sensex fell by 1,941.67 points, while Nifty-
50 broke down by 538 points. The fear of COVID-19 outbreak has created havoc all over
the globe and India is no exception. Further, the recent Yes, Bank crisis also made the
markets fell. The markets ended in red with Sensex closing on 35,634.95 and Nifty-50 on
10,451.45.

On 12 March 2020, the Sensex fell by 2919.26 points (-8.18%), the worst continuation of
the week in the history while Nifty-50 broke down by 868.25 points (-8.30%) amid World
Health Organisation (WHO) declaring Coronavirus outbreak as “pandemic”. Sensex ended
to 33-month low of 32778.14.On 16 March 2020, Sensex plunged by 2,713.41 points
(around 8%), the second worst fall in its history. On the other hand, Nifty ended below
36
9200–mark at 9,197.40 due to global economic recession. However, the Sensex continued
to fall straight for 4–continuous days till 19 March 2020, losing 5815 points during the
period. On 23 March 2020, Sensex lost 3,934.72 points (13.15%) and Nifty plunges 1,135
points (12.98%) at 7610.25 as coronavirus-led lockdowns across the world triggered fears
of a recession. These are now the lowest levels since 2016. It’s witnessing the biggest
weekly loss since October 2008, as the increasing number of coronavirus cases in India as
well as globally.

3.1.2 BOMBAY STOCK EXCHANGE (BSE)

BSE Limited, formerly known as the Bombay Stock Exchange is an Indian government
owned stock exchange located on Dalal Street in Mumbai. Established in 1875, it is Asia's
oldest stock exchange. The BSE is the world's 7th largest stock exchange with an overall
market capitalization of more than US$2.8 trillion on as of February 2021. While Bombay
Stock Exchange Limited is now synonymous with Dalal Street, it was not always so. In the
1850s, five stock brokers gathered together under Banyan tree in front of Mumbai Town
Hall, where Horniman Circle is now situated. A decade later, the brokers moved their
location to another leafy setting, this time under banyan trees at the junction of Meadows
Street and what was then called Esplanade Road, now Mahatma Gandhi Road. With a rapid
increase in the number of brokers, they had to shift places repeatedly. At last, in 1874, the
brokers found a permanent location, the one that they could call their own. The brokers
group became an official organization known as "The Native Share & Stock Brokers
Association" in 1875. The Bombay Stock Exchange continued to operate out of a building
near the Town Hall until 1928. The present site near Horniman Circle was acquired by the
exchange in 1928, and a building was constructed and occupied in 1930. The street on
which the site is located came to be called Dalal Street in Hindi (meaning "Broker Street")
due to the location of the exchange.

On 31 August 1957, the BSE became the first stock exchange to be recognized by the
Indian Government under the Securities Contracts Regulation Act. Construction of the
present building, the Phiroze Jeejeebhoy Towers at Dalal Street, Fort area, began in the late
1970s and was completed and occupied by the BSE in 1980. Initially named the BSE

37
Towers, the name of the building was changed soon after occupation, in memory of Sir
Phiroze Jamshedji Jeejeebhoy, chairman of the BSE since 1966, following his death.

BSE established India INX on 30 December 2016. India INX is the first international
exchange of India. Mr. Ashish Kumar Chauhan. Shri Ashish Kumar Chauhan is the MD &
CEO of BSE (Bombay Stock Exchange), the first stock exchange of Asia. He is one of the
founders of India's National Stock Exchange ("NSE") where he worked from 1992 to 2000.
Based in Mumbai, India, the BSE lists close to 6,000 companies and is one of the largest
exchanges in the world, along with the New York Stock Exchange (NYSE), Nasdaq,
London Stock Exchange Group, Japan Exchange Group, and Shanghai Stock Exchange.
The BSE has helped develop India's capital markets, including the retail debt market, and
has helped grow the Indian corporate sector. The BSE is Asia's first stock exchange and
also includes an equities trading platform for small-and-medium enterprises (SME). BSE
has diversified into providing other capital market services including clearing, settlement,
and risk management. The BSE has been instrumental in developing India's capital markets
by providing an efficient platform for the Indian corporate sector to raise investment
capital. In the 1850s, stockbrokers would conduct business under a banyan tree in front of
the Mumbai town hall. After a few decades of various meeting locations, Dalal Street was
formally selected in 1874 as the location for the Native Share and Stock Brokers'
Association, the forerunner organization that would eventually become the BSE. Mumbai
is now a major financial center in India and Dalal Street is home to a large number of banks,
investment firms, and related financial service companies. The importance of Dalal Street
to India is simisimiz.

In the third week of January 2008, the SENSEX experienced huge falls along with other
markets around the world. On 21 January 2008, the SENSEX saw its highest ever loss of
1,408 points at the end of the session. The SENSEX recovered to close at 17,605.40 after
it tumbled to the day's low of 16,963.96, on high volatility as investors panicked following
weak global cues amid fears of a recession in the US.

38
The next day, the BSE SENSEX index went into a free fall. The index hit the lower circuit
breaker in barely a minute after the markets opened at 10 am. Trading was suspended for
an hour. On reopening at 10.55 am, the market saw its biggest intra-day fall when it hit a

low of 15,332, down 2,273 points. However, after reassurance from the market bounced
back to close at 16,730 with a loss of 875 points. Over the course of two days, the BSE
SENSEX in India dropped from 19,013 on Monday morning to 16,730 by Tuesday evening
or a two-day fall of 13.9%. Less than a month later, on 11 February 2008, the SENSEX
lost 833.98 points, when Reliance Power fell below its IPO price in its debut trade after a
high-profile public offer. On 2015, The index crossed the historical mark of 30,000 after
repo rate cut announcement by RBI. The index plummeted by over 1,624.51 points on 24
August 2015, the then worst one-day point plunge in the index's history. On 9 March 2020,
Sensex tumbled down by 1941.67 points amid the fears of and crisis. This was the second
worst single-day fall in the history, where the investors lost ₹ 6.50 lakh crores.
While on 12 March 2020, the index plunged down by 2919.26 points, the second–worst
fall in the history, ending in red to a 33-month low at 32,778.14. The fall wiped off ₹ 11.2
lakh crores wealth. On March, trading was halted for 45 minutes for the first time in 12
years since January 2008 due to lower circuit. Sensex touched a low of 29,687.52 down
by 3090.62 points (or 9.43%). However, after the 45-minute halt, the index saw biggest
intra-day recovery by 5,380 points to end up by 1325 points. Continuing the losing streak,
wealth worth ₹14.22 lakh crore was erased on 23 March 2020 as BSE SENSEX lost
3,934.72 points to end at 25,981.24. As on 21 January 2021, Sensex has recovered to
50,167.71

3.2 YEAR EFFECT OF STOCK MARKETS

3.2.1 YEAR EFFECT OF NSE

Indian benchmark indices posted their biggest daily percentage decline in 10 months on
Friday, as a North Korean threat to carry out a hydrogen bomb test in the Pacific Ocean
rattled global markets. The Indian government’s stimulus spending plan and jitters that it

39
would widen the fiscal deficit also contributed to the decline, which was led by bank stocks.
The National Stock Exchange’s 50-share Nifty index dipped 1.56% to close below the
psychological 10,000-point mark at 9,964.40 points. The BSE Sensex tumbled 1.38% to
end at 31,922.44 points. North Korea struck back at US President Donald Trump’s threats
to destroy it, with Kim Jong Un warning of the “highest level of hard-line countermeasure
in history" and his foreign minister suggesting that could include testing a hydrogen bomb
in the Pacific Ocean.

Indian stocks are the most expensive among peers, prompting concerns about valuations
overshooting fundamentals amid slow economic growth and an elusive corporate earnings
recovery. “Impact of good and services tax (GST) could be more prolonged and earnings
recovery could be delayed by a quarter or two. As a result, a market correction at this
juncture should not come as a surprise," said Ravi Gopala Krishnan, head of equities at
Canara Robeco Mutual Fund. The price-to-earnings ratio for FY19 is 18.48 and 18.18 for
the Sensex and Nifty respectively, whereas that for MSCI Emerging Markets is 12.76 and
MSCI World 16.50. Analysts described the correction in the Indian markets as healthy and
long overdue.

Most stocks in the capital goods, healthcare and metals sectors were under pressure on
Friday. Among sectoral indices, the BSE Metal index fell 3.9%, reacting to China’s credit
downgrade by S&P Global Ratings, triggering concerns that demand from the world’s
second-biggest economy may decline. So far this year, FIIs have bought a net $6.4 billion
worth of stocks, but sold $761.55 million worth of Indian equities in September.

Even as the Nifty surged to fresh record high on April 3 2019, it’s intriguing to note that
the index has grown by a whopping 11.70 times in the last 25 years. Notably, the Nifty
surged past its earlier high of 11,760.20 in the morning trade on Tuesday, on the back of
sustained FII flows ahead of the general elections due to fresh optimism that PM Narendra
Modi will return to power in 2019, say experts. Investors are convinced that Modi will
retain power in the upcoming election 2019, veteran investor Raamdeo Agrawal said in an
interview to ET Now.

40
Journey to 10,000: After the Narendra Modi-led government rose to power, the Nifty scaled
the 7,000-mark on 12 May 2014. On the back of a euphoria, it soon surged past the 8000-
mark on 01 September 2014. The next 1,000 took a while, as the Nifty breached 9,000 on
14 March 2017. “In 2017, Nifty spurred too the 9,000-mark backed by strong buying from
foreign investors,” noted a Kotak report. The Nifty finally crossed the much awaited 5-
figure mark of 10,000 on 25th July 2017, amid good monsoons, strong corporate earnings
and the rollout of Goods and Services Tax (GST).

Gain to 11,000: Nifty crossed the 11,000-mark on January 23rd 2018, on the back of fall
in US crude oil prices and the World Bank’s positive update on Indian economy. The move
was significant. as it came ahead of Union Budget 2018 presented on February 1 later that
year. Record high of 11,761, the Nifty hit a fresh record high of 11,761 on Monday. The
index gained nearly 17% from record lows hit on October 26, 2018. In the near-term, the
Nifty could top the crucial 12,000-mark. “We remain positive on markets in long-term, but
one can expect some profit booking from 12,000 levels, and near-term volatility from
events like credit policy, election results etc. cannot be ruled out. Any decline to around
the 11,200 levels would be a good opportunity to create long positions,” B Gopkumar, ED
& CEO, Reliance Securities said as it came ahead of Union Budget 2018 presented on
February 1 later that year.

Record high of 11,761

This morning, the Nifty hit a fresh record high of 11,761 on Monday. The index gained
nearly 17% from record lows hit on October 26, 2018. In the near-term, the Nifty could top
the crucial 12,000-mark. “We remain positive on markets in long-term, but one can expect
some profit booking from 12,000 levels, and near-term volatility from events like credit
policy, election results etc. cannot be ruled out. Any decline to around the 11,200 levels
would be a good opportunity to create long positions,” B Gopkumar, ED & CEO, Reliance
Securities said. The S&P BSE Sensex and NSE Nifty 50 indices ended on a flat note on
last session of 2020 as losses in FMCG, IT and state-run banking offset gains in metal,
pharma and media shares. Both benchmarks traded on a choppy note for the most part of
the day, as derivatives (futures and options) contracts for the month of December expired

41
at the end of the session. The Nifty touched a record high of 14,024.85 during the session
and the Sensex touched an all-time high of 47,896.97.

The Sensex ended 5 points higher at 47,751 and Nifty 50 index closed unchanged at 13,982.
In the calendar year 2020, the Sensex rallied 15.75 per cent and the Nifty climbed 14.90
per cent, making it the best year for the indices since 2017, news agency Reuters reported.
For the decade ended 2020, the Sensex has gained a whopping 173 per cent and Nifty
surged 169 per cent. A gush of liquidity by foreign investors has lifted the benchmarks to
new highs, according to analysts. On Wednesday, foreign institutional investors (FIIs) had
net bought Indian shares worth ₹ 1,824 crore. So far this calendar year, FIIs have net
purchased domestic equities worth $22.44 billion but net sold assets worth $14 billion in
the debt markets, NSDL data showed.

Six of 11 sector gauges compiled by the National Stock Exchange ended higher, led by the
Nifty Metal and Pharma indices, which rose 0.7 per cent each. Auto, financial services,
media and realty shares also witnessed buying interest. On the other hand, PSU banking,
FMCG, IT and private banking shares witnessed mild selling pressure. Mid- and small-cap
shares witnessed buying interest, with the Nifty Midcap 100 index rising 0.5 per cent and
the Nifty Small cap 100 index gaining 0.3 per cent. HDFC was the top Nifty gainer, rising
1 per cent to close at ₹ 2,550 apiece on the BSE. Sun Pharma, Divi's Labs, ICICI Bank,
Asian Paints, Dr Reddy's Labs, Hindalco and HCL Technologies were also among the
gainers. NSE believes that Small and Medium Enterprises (SME) are crucial not only for
economic growth, but also critical for employment and inclusive growth. As of March 31,
2019, there are 189 SME companies listed on NSE Emerge (SME Platform), of which 62
were listed during 2018-19 raising more than H1,048 crores. During fiscal 2019, the
aggregate value of Initial Public Offerings (IPOs) and Offer for Sale (OFS) was around
H208.33 billion. During FY2019, the number of listed companies available for trading on
NSE was 1,884 compared to 1,758 at the end of March 31, 2018. The market capitalisation
of securities available for trading on the Capital Market segment has increased by 6.34%
during 2018-19.

42
 Table 3.1 YEAR EFFECT OF NSE

Year Year effect

2000 1264
2001 1059
2002 1094
2003 1880
2004 2081
2005 2837
2006 3966
2007 6139
2008 2959
2009 5201
2010 6185
2011 4624
2012 5905
2013 6304
2014 8283

43
 2015 7946
2016 8786
2017 10531
2018 10863
2019 12168
2020 13982
Source:www.nseindia.com

Fig: 3.1

TREND OF YEAR EFFECT OF NSE

16000

14000

12000

10000

8000

6000

4000

2000

Out of the total market capitalisation of H1,49,34,227 crores as on March 29, 2019,
H1,05,921 crores were contributed by newly listed companies. Introduction of an electronic
platform for the IPO process has resulted in paperless filing and significantly easing the
process for the issuers. Intermediaries and issuers no longer need to be present at Exchange
premises for completing the activity of allotment. NSE has taken proactive measures by

44
sending email alerts to shareholders of listed companies alerting them on non-compliances
and impending suspension of the listed company in which they hold shares which
shareholders have found to be very valuable. NSE has accorded high priority for resolution
of investor complaints and the Investor Services Cell facilitates resolution of complaints of
investors against the listed corporate entities and NSE members.

3.2.2 YEAR EFFECT OF BSE

Ariel (1987) found that, on an average, rates of return were significantly lower during the
second half of the month as compared to the first half. This research found that month of
the year effect occurred in USA as well as few other developed countries. The research
revealed that the return was higher in January month and in December was generally lower
in comparison to returns in other months. Similar results were found by Jeffrey Jaffe and
Randolph Westfield (1988) in their investigation of stock markets of Australia, UK, Japan,
and Canada. This research found that returns over the second half of the month were lower
than the returns over the first half for Australia, UK and Canada. Wachtel (1942) was the
first researcher to investigate the January Effect. Haugen and Lakonishok (1988) studied
the January Effect in detail and has authored a book on this well-known calendar effect.
Kok Kim Lian (2002) studied the Year of Month Effect and Half Month Effect in the Asia
Pacific stock markets.

The government had proposed to increase the surcharge levied on top of the applicable
income tax rate from 15 per cent to 25 per cent for those with taxable incomes between Rs
2 crore and Rs 5 crore, and to 37 per cent for those earning over Rs 5 crore, taking the
effective tax rate for them to 39 per cent and 42.74 per cent, respectively. The Sensex
rallied 1,922 points, or 5.3 per cent, to end at 38,015, while the Nifty surged 569 points, or
5.3 per cent, to close at 11,274.2.That apart, the government announced a slew of policy
reforms, which included strategic sales of select public sector enterprises (PSEs) merger of
select public sector banks (PSBs), and an alternative investment fund of Rs 25,000 crore
for the realty sector among others. US-China trade talks: At the global level, flip-flop by
the United States (US) on trade related issues, especially with China, kept market
participants on tenterhooks throughout the year.

45
In November, market scaled fresh peaks one after another on the optimism around trade
talks between the two largest economies. In the latest development, both the countries have
agreed on the terms of a “phase one” trade deal that reduces some US tariffs on Chinese
goods while boosting Chinese purchases of American farm, energy and manufactured
goods. Pre COVID-19, market capitalisation on each major exchange in India was about
$2.16 trillion. The 2019 stock market rally was limited to 8-10 stocks within the large caps.
The Sensex returned around 14% (excluding dividends) for the year 2019 but prominently
featured blue-chip companies such as HDFC Bank, HDFC, TCS, Infosys, Reliance,
Hindustan Unilever, ICICI Bank and Kotak Bank, without which Sensex returns would
have been negative? However, in the start of 2020, there was overall recovery which led to
both NSE and BSE traded at their highest levels ever, hitting peaks of 12,362 and 42,273
respectively. At the beginning of the year, there were close to 30 companies that were
expected to file IPO’s. The market conditions were generally favourable as they witnessed
record highs in mid-January.

Ever since COVID 19 strike, markets loom under fear as uncertainty prevails. lt has sent
markets around the world crashing to levels not witnessed since the Global Financial Crisis
of 2008. Following the strong correlation with the trends and indices of the global market
as BSE Sensex and Nifty 50 fell by 38 per cent. The total market cap lost a staggering
27.31% from the start of the year. The stock market has reflected the sentiments this
pandemic unleashed upon investors, foreign and domestic alike. Companies have scaled
back; layoffs have multiplied and employee compensations have been affected resulting in
negligible growth in the last couple of months. Certain sector such as hospitality, tourism
and entertainment have been impacted adversely and stocks of such companies have
plummeted by more than 40%. While the world has witnessed many financial crises in the
past, the last one being the global recession of 2008, the current coronavirus crisis is
different from the past fallouts. In response to current turmoil, RBI and the Government of
India has come up with a slew of reforms such as reductions of repo rate, regulatory
relaxation by extending moratorium and several measures to boost liquidity in the system
howsoever the pandemic has impacted the premise of the corporate sector. Payment’s
deferrals, subdued loan growth, rising cases of bad loans and sluggish business conditions
46
have impaired the growth and the health of the economic activity. Deceleration of GDP
growth, demand-supply chain, cut in discretionary expenses and CAPEX has been the
observed during the lockdown, which has led to falling in household incomes, marketing
spends, reduced travel cost and hiring freeze.

Companies with innovative products, increasing distribution reach, technology-driven

processes and healthy balance sheet would revive the growth momentum post lockdown.
Lower oil prices and high capital expenditure by the government in turn creating capital
which will provide a platform to flourish when we overcome COVID 19 pandemic.

Table 3.2 YEAR EFFECT OF BSE

Year Year effect

2000 5006
2001 3972

2002 3262

2003 3377

2004 5839

2005 6603

2006 7378

2007 13787

2008 20187

2009 9647

2010 17465

47
 2011 20509

2012 15455

2013 19427

2014 21171

2015 27499

2016 26118

2017 26626

2018 34057

2019 36054

2020 41306
Source: www.bseindia.com

Fig :3.2

TREND OF YEAR EFFECT OF BSE

50000

40000

30000

20000

10000

-10000

3.3 MARKET CAPITALISATION OF STOCK MARKETS (2000-2020)

Market capitalisation Market capitalization is one of the most effective ways of

evaluating the value of a company. The evaluation of a company’s value is done based
on a company’s stocks. Essentially, this is defined by the total market value of the

48
outstanding shares of a company. This simple fact also means that publicly owned
companies are the only ones which can be evaluated by this method of evaluation.
Fluctuating market conditions and stock prices also impact the evaluation of a company
when this method of evaluation is being used.

Large-cap: These are some of the most stable groups of companies in the market.
Consequently, investing in these companies is the least risky option.

Mid-cap: Companies which have had a certain growth and are somewhat stable; and yet
have immense potential of growth, come under this group of evaluation by market
capitalization.
Small-cap: Constituting companies which have the least market cap are the riskiest of
all stocks.

Table: 3.3 Top 10 Indian companies based on market cap

Company name Market capitalization (in crore)

Reliance Industries Limited Rs.8,49,234

Tata Consultancy Services Limited Rs.7,91,772

HDFC Bank Limited Rs.6,22,521

ITC Limited Rs.3,73,950

Hindustan Unilever Limited Rs.3,72,708

Development Finance Corporation Rs.3,46,629

Infosys Limited Rs.3,16,410

State Bank of India Rs.2,81,705

Kotak Mahindra Bank Limited Rs.2,61,730

ICICI Bank Limited Rs.2,53,192

49
 Source: www.businessinsider.in
India's stock market is now the seventh biggest, up three spots, in the world as total market
capitalisation increased to $2.7 trillion. The BSE Sensex crossed the 51,000, while the NSE
benchmark Nifty crossed the 15,000 level for the first time on February 2021. The
benchmark Nifty has gained 6.9% so far in 2021. India's stock market is now bigger than
Canada, Germany and Saudi Arabia. India's stock market is the second-best performer
among the top 15 countries in 2021 and soon it may overtake France to become the sixth
biggest in the world.
3.3.1. MARKET CAPITALISATION OF NSE (NIFTY)
NIFTY 50 is NSE's diversified index comprising stocks from top 50 Indian companies
across 14 sectors. It tracks the market performance of the largest cap companies & hence,
broadly reflects the Indian economy. The NIFTY 50 index is India’s premier stock index.
Launched on April 1, 1996, it's computed using the free float market capitalization method.

50
 Table 3.4 Nifty 50 companies as on 18-Mar-2021

Company P/ EV/
Price Market 52W 52W RO
Name (M. CMP P/E B EBIT
Change % Cap (Cr) High Low E
Cap) V DA

Shree
26,659 -0.59 96,759 29,098 15,500 13.60 45.38 6.99 26.31
Cement(L)

55.3
Nestle(L) 16,203 -1.55 1,58,682 18,821 12,589 70.26 76.20 54.62
7

Bajaj
9,460 -0.89 1,51,894 10,586 3,986 21.78 41.21 4.51 -
Finserv(L)

Maruti
7,114 0.72 2,13,364 8,400 4,002 7.13 47.72 4.36 28.86
Suzuki(L)

Ultratech
6,514 -0.09 1,88,167 6,946 2,913 15.64 27.43 4.62 22.22
Cement(L)

Bajaj
5,372 0.24 3,22,908 5,922 1,783 19.13 87.60 9.61 -
Finance(L)

Dr. Reddys
4,211 -3.34 72,455 5,515 2,498 13.41 33.31 4.35 29.10
Lab(L)

Bajaj Auto(L) 3,663 2.46 1,03,462 4,361 1,793 23.05 22.20 4.36 19.67

Britannia 31.2
3,439 -0.84 83,525 4,015 2,101 31.13 44.56 45.54
Inds(L) 3

10.7
Divis Lab(L) 3,270 -3.19 89,682 3,913 1,633 17.94 47.95 48.52
8

Hero
3,108 -2.62 63,770 3,629 1,475 21.32 23.45 4.36 14.83
MotoCorp(L)

12.3
TCS(L) 3,037 -2.44 11,68,005 3,345 1,547 36.47 37.40 26.89
8

51
 Eicher
2,664 0.67 72,342 3,036 1,246 19.49 64.30 7.01 30.45
Motors(L)

HDFC(L) 2,517 0.11 4,53,378 2,895 1,473 22.02 40.92 4.52 -

Asian 21.0
2,404 -0.76 2,32,380 2,871 1,432 27.51 84.53 55.57
Paints(L) 7

Hindustan 11.1
2,215 -0.63 5,23,765 2,614 1,756 84.35 71.51 52.50
Unilever(L) 9

Reliance
2,010 -2.22 13,89,707 2,369 867.5 9.85 32.89 2.26 18.28
Industries(L)

Kotak
Mahindra 1,831 -1.96 3,70,157 2,049 1,000 13.08 56.52 6.22 -
Bank(L)

HDFC Bank(L) 1,490 -0.35 8,24,226 1,650 738.9 16.54 26.87 4.29 -

185.5 19.9
Titan Co(L) 1,468 -0.33 1,30,740 1,621 720.0 23.00 54.78
0 3

Larsen &
1,428 -0.68 2,01,993 1,593 661.0 11.32 86.56 3.45 29.33
Toubro(L)

Grasim
1,394 1.79 90,106 1,409 380.0 7.49 22.25 1.50 8.93
Industries(L)

Infosys(L) 1,336 -3.67 5,91,039 1,406 511.1 24.90 31.78 8.32 25.50

Indusind
1,003 -0.63 78,037 1,119 235.6 14.71 34.49 1.98 -
Bank(L)

Tech
996.1 -2.36 98,772 1,081 470.2 16.70 23.80 4.16 16.15
Mahindra(L)

HCL Tech.(L) 948.3 -3.97 2,67,974 1,074 375.5 23.73 20.28 4.73 15.07

SBI Life
890.1 0.15 88,886 984.0 520.0 0.00 61.13 9.20 -
Insuran(L)

52
Mahindra &
845.4 1.03 1,04,024 952.1 245.8 1.08 0.00 3.02 17.36
Mahindra(L)

Cipla(L) 754.9 -2.32 62,327 878.5 363.9 13.05 23.44 3.31 22.68

Axis Bank(L) 717.9 -1.37 2,22,968 800.0 285.0 2.15 88.35 2.28 -

Tata Steel(L) 705.0 0.08 84,818 782.0 250.9 9.40 12.90 1.07 8.17

HDFC Life 102.8 17.8

680.5 -1.26 1,39,265 746.0 339.1 0.00 -
Insurance(L) 6 0

Adani Ports
679.9 -1.31 1,39,967 768.4 203.4 19.74 34.64 5.04 22.78
&Special(L)

UPL(L) 602.4 -0.85 46,419 639.2 240.3 12.48 19.14 2.44 10.04

ICICI Bank(L) 578.4 -1.85 4,07,463 679.3 269.0 7.25 31.32 3.02 -

Sun Pharma
574.5 -1.83 1,40,409 653.7 315.2 8.93 58.27 3.12 19.67
Inds.(L)

Bharti
526.0 0.60 2,85,244 623.0 381.1 -7.33 0.00 3.44 17.66
Airtel(L)

BPCL(L) 426.9 -1.16 93,690 482.4 252.0 13.24 16.32 2.47 16.32

JSW Steel(L) 423.1 0.04 1,02,248 435.0 132.5 18.29 22.15 2.57 11.10

Wipro(L) 410.8 -2.09 2,29,876 467.2 159.6 16.76 22.65 3.94 16.55

SBI(L) 366.6 -0.39 3,28,470 426.4 149.6 7.16 18.73 1.48 -

Hindalco(L) 331.2 1.47 73,343 361.2 85.05 6.19 32.98 1.23 7.93

Tata -
306.9 0.34 1,01,552 357.0 63.60 0.00 1.87 8.74
Motors(L) 16.69

Power Grid
221.1 0.23 1,15,409 239.0 129.8 15.80 11.70 2.22 8.15
Corpn.(L)

53
 ITC(L) 217.4 3.25 2,59,142 239.2 139.0 25.01 19.88 4.50 13.08

Coal India(L) 137.1 -2.04 86,217 162.9 109.5 57.06 6.76 2.32 2.92

GAIL India(L) 135.2 -2.31 62,398 157.9 65.70 14.13 10.40 1.37 8.22

ONGC(L) 110.0 0.55 1,37,628 122.3 57.55 9.11 83.22 0.70 5.21

NTPC(L) 104.3 -1.97 1,03,221 114.8 74.00 9.79 15.60 0.92 9.52

Indian oil
97.30 -0.92 92,447 105.0 71.15 12.77 11.75 0.90 8.30
Corp.

Source: www.nseindia.com

Benefits of investing in NIFTY50 Index Funds:

Diversification – It deploys the investment in multiple companies and sectors thereby

reducing risk compared to investing in a single or small set of companies. Over time Nifty
50 replaces the underperforming companies at a market level with performing one.
Wide market presence – Nifty 50 Index funds are quite popular in India and have a
substantial market presence.
Low cost - These funds have lower operating expenses as fund managers simply need to
replicate the index.
Inflation + returns - Index funds have consistently generated inflation beating returns
over the long term. Coupled with low costs it becomes excellent value for investors.

3.3.2 MARKET CAPITALISATION OF BSE (SENSEX)

The sum of the market value of BSE-listed companies crossed Rs 200 trillion for the first
time, on February 2021. The Sensex, ended at 50,614.29, up 358.54 points. In dollar terms,
the market cap figure of BSE-listed firms is $2.75 trillion -- the seventh highest globally.
The country’s market cap-to-GDP ratio is now more than 100 per cent. Its nominal GDP
(revised estimate for FY21) at current prices is around Rs 195 trillion.

54
The combined market cap of BSE-listed companies had topped the Rs 100 trillion-mark in
December 2014. Back then, the market cap-to-GDP ratio was at 80 per cent. In September
2007, when the market cap crossed Rs 50 trillion, the ratio was similar to the current level.
The markets had come off more than 50 per cent in the following year due to the global
financial crisis. In less the one year, India’s market cap (based on BSE-listed companies)
has nearly doubled. At the peak of the coronavirus-induced sell-off in March 2020, the
market cap had plunged to Rs 102 trillion.

BSE MD and CEO, Ashishkumar Chauhan said, "It is heartening to note BSE continues to
remain the primary wealth creator of the nation. It is also good to note that no other
developing country at the stage of India’s development has a thriving capital market as
compared to India. BSE has also become the world's 9th largest exchange in terms of listed
companies market capitalization, as on date." The four recently listed companies which
include Antony Waste Handling, Indian Railway Financing Corporation, Indigo Paints, and
Home First Finance Company, added ₹52562.21 crore in total m-cap. The table below is
an important data on BSE 30 Companies Share prices, 52-week High and Low, PE ratio
etc.

Table 3.5 BSE 30 companies as on Mar-2021

Company Market
Price 52W 52W EV/
Name (M. CMP Cap ROE P/E P/BV
Change High Low EBITDA
Cap) (Cr)

Power Grid
227.5 2.89% 1,15,670 239.0 129.8 15.80 11.73 2.22 8.16
Corpn.(L)

NTPC(L) 105.7 1.83% 1,00,603 114.8 74.00 9.79 15.20 0.90 9.43

Hindustan
2,250 1.56% 5,20,464 2,614 1,756 84.35 71.06 11.12 52.17
Unilever(L)

ITC(L) 220.3 1.36% 2,67,573 239.2 139.0 25.01 20.53 4.65 13.55

HCL Tech.(L) 960.5 1.29% 2,57,337 1,074 375.5 23.73 19.47 4.55 14.45

55
 Table 3.5 BSE 30 companies as on Mar-2021

Company Market
Price 52W 52W EV/
Name (M. CMP Cap ROE P/E P/BV
Change High Low EBITDA
Cap) (Cr)

TCS(L) 3,071 1.14% 11,39,524 3,345 1,547 36.47 36.48 12.08 26.21

Nestle(L) 16,368 1.02% 1,56,219 18,821 12,589 70.26 75.02 54.51 53.76

Kotak
Mahindra 1,847 0.87% 3,62,904 2,049 1,000 13.08 55.41 6.10 -
Bank(L)

Bharti
529.1 0.60% 2,86,962 623.0 381.1 -7.33 0.00 3.46 17.74
Airtel(L)

Reliance
2,020 0.54% 13,58,838 2,369 867.5 9.85 32.16 2.21 17.93
Industries(L)

Sun Pharma
577.1 0.45% 1,37,842 653.7 315.2 8.93 57.21 3.06 19.30
Inds.(L)

SBI(L) 367.0 0.11% 3,27,176 426.4 149.6 7.16 18.65 1.47 -

Infosys(L) 1,335 -0.12% 5,69,331 1,406 511.1 24.90 30.62 8.02 24.52

Asian
2,400 -0.16% 2,30,615 2,871 1,432 27.51 83.89 20.91 55.14
Paints(L)

ICICI
577.0 -0.23% 3,99,926 679.3 269.0 7.25 30.74 2.97 -
Bank(L)

Titan Co(L) 1,464 -0.24% 1,30,314 1,621 720.0 23.00 184.90 19.86 54.60

Axis Bank(L) 716.0 -0.26% 2,19,920 800.0 285.0 2.15 87.14 2.25 -

HDFC
1,486 -0.29% 8,21,305 1,650 738.9 16.54 26.77 4.28 -
Bank(L)

HDFC(L) 2,505 -0.46% 4,53,865 2,895 1,473 22.02 40.96 4.52 -

56
 Table 3.5 BSE 30 companies as on Mar-2021

Company Market
Price 52W 52W EV/
Name (M. CMP Cap ROE P/E P/BV
Change High Low EBITDA
Cap) (Cr)

Indusind
997.2 -0.54% 77,546 1,119 235.6 14.71 34.28 1.97 -
Bank(L)

Tech
990.3 -0.59% 96,444 1,081 470.2 16.70 23.24 4.06 15.74
Mahindra(L)

Ultratech
6,473 -0.61% 1,87,999 6,946 2,913 15.64 27.41 4.61 22.20
Cement(L)

Tata
700.4 -0.65% 84,884 782.0 250.9 9.40 12.91 1.07 8.17
Steel(L)

Bajaj
9,365 -0.68% 1,50,059 10,586 3,986 21.78 40.71 4.45 -
Finserv(L)

Bajaj
3,637 -0.72% 1,06,008 4,361 1,793 23.05 22.75 4.47 20.17
Auto(L)

ONGC(L) 109.0 -0.91% 1,38,383 122.3 57.55 9.11 83.68 0.70 5.24

Mahindra &
835.5 -1.16% 1,05,093 952.1 245.8 1.08 0.00 3.05 17.55
Mahindra(L)

Maruti
7,003 -1.56% 2,14,904 8,400 4,002 7.13 48.06 4.39 29.06
Suzuki(L)

Bajaj
5,276 -1.78% 3,23,686 5,922 1,783 19.13 87.81 9.64 -
Finance(L)

Larsen &
1,398 -2.13% 2,00,617 1,593 661.0 11.32 85.97 3.43 29.14
Toubro(L)

Source: www.bseindia.com

Benefits of investing in SENSEX top 30 companies include:

57
• 1. Better returns – A historical back test on the top indices in India viz. the Nifty 50 and
BSE Sensex, reveals that investing in the Sensex can return slightly higher returns than the
Nifty 50. Keep in mind to choose a Sensex based index fund with high liquidity.
• 2. Diversification – Investing in an index fund automatically extends you the benefit of
portfolio diversification, thereby reducing portfolio risk.
• 3. Less expensive - Being a passively managed fund you are required to pay minimal fees.
This essentially means lesser expenses to eat into your returns.

3.4 RISK AND RETURN OF INDIA STOCK MARKETS (2000-2020)

One of the major objectives of investment is to earn and maximize the return. Return on
investment may be because of income, capital appreciation or a positive hedge against
inflation. The expected return may differ from realized return. In security analysis, we are
primarily concerned with returns from the investor perspective. Our main concern is to
compute or estimate the returns for an investor on a particular investment.

According to the dictionary, Risk means existence of volatility in the occurrence of an

expected incident. Higher the unpredictability greater is the risk. According to this
definition risk may or may not involve money. All investments involve risk of one type or
the other. Risk and return are of two sides of the investment coin. Risk is associated with
the possibility of not realizing return or realizing less return than expected. The degree of
risk varies on the basis of features of the assets, investment instruments, the mode of
investment, the issuer of the securities etc. Thus, risk of an investment is the variance
associated with its returns. The chance that an investment's actual return will be different
than expected. Risk includes the possibility of losing some or all of the original investment.
Different versions of risk are usually measured by calculating the standard deviation of the
historical returns or average returns of a specific investment. A high standard deviation
indicates a high degree of risk. We can distinguish between expected return and realized
return from an investment. The expected return is uncertain future return that an investor
expects to get from his investment. The realized return, on contrary, is the certain return
that an investor makes the investment decision based on expected returns from the

58
investment. The actual return realized from an investment may not correspond to expected
return. This possibility of variation of the actual return from the expected return is termed
as risk. Where realization corresponds to expectations exactly, there would be no risk.

The empirical evidence against the CAPM by Fama and French (1992) has generated a lot
of debate in the west and has called for major re-examination of the CAPM model. While
many studies have been conducted on CAPM in the capital markets of the western
countries, there are few studies in the Indian context. Studies by Varma (1988), Yalwar
(1988), Srinivasan (1988) have generally supported the CAPM theory. Sudies by Basu
(1977), Gupta and Sehgal (1993), Vaidyanathan (1995), Madhusudhan (1997), Sehgal
(1997), Ansari (2000), Rao (2004), Manjunatha and Mallikarjunappa (2006,2007) have
questioned the validity of CAPM in Indian markets. But Ansari (2000) has opined that the
studies of CAPM on the Indian markets are scanty and no robust conclusions exist on this
model.

3.4.1 RISK AND RETURN OF NSE

Nifty50 is a broader index compared to Sensex, consisting of 50 large companies listed on

National Stock Exchange of India (NSE). Over the years, Nifty50 has be-come the most
widely used benchmark for exchange traded products in Indian equity market. Growth rate
of India’s GDP is fairly captured in the growth story of Nifty50. Over the years, India has
been one of the fastest growing large economies of the world which is also reflected in the
rise of Nifty50 Index.

Nifty 50 returns and Nifty 50 total returns index

The dividends of the stocks in the Nifty 50 are assumed to be reinvested in the index after
the close of the ex-date. Such an index is called the Total Returns index. The Nifty 50 has
a TRI version also available and the same is used as a benchmark for several mutual funds.
The total returns index therefore has a higher return than the Nifty 50 when considered for
any period of time.

59
 Table 3.6

Annual returns of Nifty

Year Annual return

2000 -14.65%
2001 -16.18%
2002 3.25%
2003 71.90%
2004 10.68%
2005 36.34%
2006 39.83%
2007 54.77%
2008 -51.79%
2009 75.76%
2010 17.95%
2011 -24.62%
2012 27.70%
2013 6.76%
2014 31.39%
2015 -4.06%
2016 3.01%
2017 28.65%

60
 2018 3.15%
2019 12.02%
2020 14.17%
Source: www.nseindia.com

Fig: 3.3

TREND OF RISK AND RETURN OF NSE

1

0.8

0.6

0.4

0.2

-0.2

-0.4

-0.6

Nifty has a CAGR of 11.1% in the last 20 years (since 1999) and 8.87% in the last 10 years
(since 2009 – this is an aberration as it came on back of monster recovery from the lows of
March 2009 to Dec 2009 and thereby depressing the returns from Dec 2009 to Dec 2019
period). s at 1205 on February 27, 2002, just before a lacklustre budget dashed investors’
hope. The annual low came in late October with Nifty at 920. With an average value of
1056 for Nifty and a standard deviation of 68 points, this is a very narrow range. But the
returns were a lot better than in calendar year 2001 (minus 20 per cent) and 2000 (minus

61
23 per cent). That’s too bad years, followed by a marginal recovery. The market pulled
above it

The annual high of Nifty was own 200 DMA in the last quarter and has stayed above that
benchmark. This is a reliable signal of a new bull market. The moving average signal is
reinforced by the breach of a falling minus 40-degree trend line that connected successively
lower tops between February and November. The recovery has come on decent volumes,
which suggests that it's based on rising demand and, hence, sustainable.

"Oil is a big question mark -- there will be volatility here but we don't know the direction.
The Iraq situation will affect global prices and the speed of divestment of public sector
units will affect domestic sentiments. If India's economy does show strong overall
recovery, there will be turnarounds in many other sectors". Devangshu Datta, independent
analyst.

Nifty has shed over 29 per cent since May 11, 2006. The mid-cap and small-cap stocks
continue to be the worst affected in this market. The CNX mid-cap index is lighter by 35
per cent since May. The market saw the beginning of a bullish formation, an Ascending
Triangle, on the monthly chart at the beginning 2007. This formation took seven years to
complete. In 2014, the Nifty50 achieved a positive breakout. This Ascending Triangle
formation was between 3,818 on the lower side and 6,350 on the higher side.

3.4.2 RISK AND RETURN OF BSE

The 2+ decades-long journey has been a volatile one. In the last 20 years, we have had:

• 15 years with positive returns

• 5 years with negative returns

In 2002-2003, the annual index returns after that have been 3.5%, 72.9%, 13.1%, 42.3%,
46.7%, 47.1%. And this is not normal. This was unprecedented and chances are high that
such a sequence of high positive returns, might not get repeated again for many years if not
decades. So do not have such expectations of multi-year high returns from stock markets.
Infact, we should be ready to face ugly years like 2008-2009 – when index itself fell by

62
more than 50% and individual stocks crashed by 80-90%. I have said countless times that
one should invest more in market crashes or when everyone else is giving your reasons to
not invest. But that is easier said than done. When a crisis like the one in 2008-2009 comes,
it is not easy to combine your cash with courage.

Intense selling today brought the BSE Sensex to its lowest closing of 2006. Weak global
markets and worries over inflation and higher interest rates continued to drag stock prices
down to sharply lower levels on the major Indian bourses.

During the financial crisis of 2007–2008, the stock markets in India fell on several
occasions in 2007 as well as 2008. In 2007, there were five sharp falls in the stock markets.
On 2 April 2007, The Sensex fell by 617 points to 12,455 though during the course of the
day, it fell further. As per the analysts at rediff, "The Sensex opened with a huge negative
gap of 260 points at 12,812 following the Reserve Bank of India [Get Quote] decision to
hike the cash reserve ratio and repo rate. Unabated selling, mainly in auto and banking
stocks, saw the index drift to lower levels as the day progressed. The index tumbled to a
low of 12,426 before finally settling with a hefty loss of 617 points (4.7%) at 12,455.

On 21 November 2007, trying to explain the fall, rediff recounted that "Mirroring weakness
in other Asian markets, the Sensex saw relentless selling." The index tumbled to a new low
of 18,515 - down 766 points from the previous day's close. It finally ended with a loss of
678 points at 18,603. " On 21 Jan 2008, the BSE fell by 1408 points to 17,605 leading to
one of the largest erosions in investor wealth. The BSE stopped trading for a while at 2:30
pm due to a technical snag although its circuit filter allows swings of up to 15% before
stopping trading for an hour. Referred to in the media as "Black Monday", the fall was
blamed by analysts at HSBC mutual fund and JP Morgan on a large variety of reasons
including change in the global investment climate, fears of United States' economy going
into a recession, FIIs and foreign hedge funds selling in order to reallocate their funds from
risky emerging markets to stable developed markets, a cut in US interest rates, global
bourses (often referred to as event related volatility), volatility in commodities markets, a
combination of global and local factors ("...other emerging markets were down nearly 20%
so India is playing catch-up..."), huge build-ups in derivatives positions leading to margin

63
calls and that many IPOs had sucked out liquidity from the primary market into the
secondary market. HSBC mutual funds analysts predicted further falls in the stock market,
and the analysts at JP Morgan were of the opinion that market would fall a further 10-15%.

On the next day on 22 January 2008, the Sensex again fell by 875 points to 16,729. Jan 22,
2008: The Sensex saw its biggest intra-day fall on Tuesday when it hit a low of 15,332,
down 2,273 points. However, it recovered losses and closed at a loss of 875 points at
16,730. The Nifty closed at 4,899 at a loss of 310 points. Trading was suspended for one
hour at the Bombay Stock Exchange after the benchmark Sensex crashed to a low of
15,576.30 within minutes of opening, crossing the circuit limit of 10 per cent.

On 24 August 2015, the BSE Sensex crashed by 1,624 points. Finally, the indices closed
at 25,741 points and the Nifty to 7,809 points. The reason given for this crash was given as
a ripple effect due to fears over a slowdown in China, as the Yuan had been devalued two
weeks ago leading to a fall in the currency rates of other currencies and the rapid selling of
stocks in China and India. The Shanghai stock exchange too fell by 8.5%. A variety of
other reasons too were given for this fall by analysts including disappointing earnings in
the first quarter for many Indian companies, somber commentaries by their management
leading to doubts regarding their recovery and a below average monsoon for that year.

Table 3.7 Annual returns of Sensex

Year Annual return

2000 -20.6%
2001 -17.9%
2002 3.5%
2003 72.9%
2004 13.1%
2005 42.3%
2006 46.7%
2007 47.1%
2008 -52.4%
2009 81.0%
2010 17.4%
2011 -24.6%
2012 25.7%
2013 9.0%

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 2014 29.6%
2015 -5.0%
2016 1.9%
2017 27.9%
2018 5.9%
2019 14.38%
2020 15.75%
Source: www.bseindia.com

Fig : 3.4

Trend of Risk and return of BSE

0.8

0.6

0.4

0.2

-0.2

-0.4

-0.6

The stock markets in India continued to fall in 2016. By 16 February 2016, the BSE had
seen a fall of 26% over the past eleven months, losing 1607 points in four consecutive days
of February. The reasons given for this included NPAs of Indian banks, "global
weaknesses" and "global factors". In the four months from November 2015 to February
2016, FIIs were reported to have sold equities worth Rs 17,318 crore as, in the opinion of
analysts, concerns grew over growth in China and as crude oil prices tumbled below $30
per barrel.

On 9 November 2016, crashed by 1689 points, believed by analysts to be due to the crack
down on black money by the Indian government, resulting in franctic selling. The Sensex

65
nosedived by 6% to 26,902 and the Nifty dropped by 541 points to 8002. These were said
to be due to the demonetization drive by the Modi government. The Hindu was of the
opinion that the weakening rupee and the US presidential election too had some bearing on
the behavior of investors. The S&P had also fallen by 4.45%. Although not classified as a
crash, the BSE and NSE fell sharply on 2 and 5 February 2018, sparked by the comments
of the Finance minister's proposal in the budget speech to introduce a 10% long term capital
gains tax (LTCG) on equity shares sold after 12 months. The BSE Sensex fell by 600 points
in two days, and the Nifty 50 fell by about 400 points to 10,676 on 5th. Earlier, the BSE
Sensex had fallen by 570 points to 35,328 on 2 February and the NSE Nifty by 190 points
to a low of 10,826.

On 1 February 2020, as the FY 2020-21 Union budget was presented in the lower house of
the Indian parliament, Nifty fell by over 3% (373.95 points) while Sensex fell by more than
2% (987.96 points). The fall was also weighed by the global breakdown amid coronavirus
pandemic centered in China. On 28 February 2020, Sensex lost 1448 points and Nifty fell
by 432 points due to growing global tension caused by coronavirus, which W.H.O said has
a pandemic potential. Both BSE and NSE fell for the entire five days of the week ending
with the worst weekly fall since 2009.On March 4 and 6, markets fell by around 1000
points and several crores of wealth was wiped out. On 6 March 2020, Yes Bank was taken
over by RBI under its management for reconstruction and will be merged with SBI. This
was done to ensure smooth functioning of the bank as it was struggling for couple of years
to cope up with heavy pressure due to cleaning of bad loans. On 9 March 2020, the Sensex
fell by 1,941.67 points, while Nifty-50 broke down by 538 points. The fear of COVID-19
outbreak has created havoc all over the globe and India is no exception. Further, the recent
Yes Bank crisis also made the markets fell. The markets ended in red with Sensex closing
on 35,634.95 and Nifty-50 on 10,451.45.

On 12 March 2020, the Sensex fell by 2919.26 points (-8.18%), the worst continuation of
the week in the history while Nifty-50 broke down by 868.25 points (-8.30%) amid World
Health Organization (WHO) declaring Coronavirus outbreak as "pandemic”. Sensex ended
to 33-month low of 32778.14. On 16 March 2020, Sensex plunged by 2,713.41 points

66
(around 8%), the second worst fall in its history. On the other hand, Nifty ended below
9200–mark at 9,197.40 due to global economic recession. However, the Sensex continued
to fall straight for 4–continuous days till 19 March 2020, losing 5815 points during the
period. On 23 March 2020, Sensex lost 3,934.72 points (13.15%) and Nifty plunges 1,135
points (12.98%) at 7610.25 as coronavirus-led lockdowns across the world triggered fears
of a recession. These are now the lowest levels since 2016. It's witnessing the biggest
weekly loss since October 2008, as the increasing number of coronavirus cases in India as
well as globally.

3.5 ANALYSIS OF INVESTMENT PATTERN OF STOCK HOLDERS

3.5.1 Reason for investing in stock market

Table 3.8 Reason for investing in stock market

Source: survey data

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 Fig 3.5 Reason for investing in stock market

According to the above diagram, the major reason for trading in stock market is mainly due
to Higher returns( 80%). Another main reason behind stock market trading is for safety(
16.7%). None of the respondent has selected liquidity as the reason for stock market
trading.
3.5.2 source/medium of information on stock market

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Table 3.9 source of information on stock market

Fig 3.6 source of information on stock market

69
 The above diagram give us an idea about the source of information about the source
of information about the stock market investment. About 50% respondents gave the
credit to their financial advisors or brokers who introduced them or gave them
monthly information. 3% respondents got their information from Newspaper and
financial journals. The rest of the respondents got their information from
TV/Internet and from friends/relatives.

3.5.3 Time horizon preferred for trading

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 Table 3.10 Time horizon preferred for trading

Fig 3.7 Time horizon preferred for trading

The above figure shows that 63% of the respondents prefer to have a long term trading as
long term trading is considered as safer and it involves lower risk. Another 17% prefer
small term trading. 13% prefer medium term trading. Only 7% of the respondents prefer
intraday trading and it involves huge risk.
3.5.4 Year of experience in trading

71
Table 3.11 Year of experience in trading

Fig 3.8 Year of experience in trading

72
From the above chart it is clear that 37% of the respondents have 1 to 3 years of experience.
27% of respondents have 3 to 5 years of experience. 23% of the respondents have less than
1 year of experience. And only 13% of the respondents are having experience above 5 years
in stock market trading.

3.5.5 Mode of trading

Table 3.12 Mode of trading

From the above table it is clear that 100% of the respondents are prefer online trading. With
the advancement of technology, most of the stock market are working under online mode.

CHAPTER 4
73
 FINDINGS AND SUGGESTIONS
Stock market is the physically existing institutionalised set up where instruments of
security stock market like shares, debentures, bonds, securities are traded. Stock market
makes a floor available to the buyers and sellers of stocks and liquidity comes to the stocks.
At this scenario the importance of investing in stock market is getting higher. The number
of investors and the number of stock market out of which a majority are online markets ,
are increasing day to day. Currently investing in stock market and having an intraday
trading is considered as the best way to earn money. Considering its importance the present
study concentrate on ‘A Study on Indian Stock Market: NSE and BSE’. The
objectives of the study are to study about the emerging stock markets in India such as
NSE and BSE, to study about the trend of year effect of the Indian stock market (BSE and
NSE) from 2000 to 2020, to examine the market capitalisation of Indian stock market (NSE
and BSE) from 2000 to 2020, to examine the trend of risk and return of Indian stock market
(NSE and BSE) from 2000 to 2020 and to study about the type of trading preferred by the
investors in stock market. In order to assess the objective both primary data and secondary
data were used. The primary data were collected from 30 respondents from Thrichur district
by using google form. The secondary data was collected from various journals, articles,
publications and online websites.

4.1 Findings of the study

• Due to covid-19 pandemic, Sensex lost 3,934.72 points (13.15%) to 25, 981.24 and
Nifty lost 1,135 points (12.98%) to 7610.25.
• The biggest stock market crashes in India were caused mainly due to covid19
pandemic, 2008 financial crisis, Harshad Mehta scam.
• Nifty has less risk and higher liquidity than Sensex. Nifty suffer lower market
impact cost than Sensex.
• Covid-19, strong correlation with the trends and indices of the global market as BSE
Sensex and Nifty 50 fell by 38%. The total market cap lost a staggering 27.3% from
the start of the year.

74
• Pre covid-19, market capitalisation on each major exchange in India was about $2.6
trillion. The Sensex returned around 14% for the year 2019 prominently featured
blue chip companies such as HDTV bank, TCS, Infosys, Reliance, ICICI, without
which Sensex return would have been negative.
• Despite a population of over 1.2 billon, there exist only 20 million active trading
accounts in India.
• The banking sector have maximum risk and return of 1.9 and 10 respectively ICICI
in automobile sector Eicher motor have maximum return of 35.9 Ashok Leyland
have maximum risk of 1.9 IT sectors have maximum return of 17.7 and maximum
risk of Oracle of 6.6 and in fast moving consumer goods sector, Godrej have
maximum return of 14.8 and highest risk in ITC of 0.5.
• The stock of bank of India, HDTV bank, Mahindra bank are less volatile in nature.
The stock of federal bank, Indus land bank, Canara bank, ICICI bank, PNB, SEBI
are moderately volatile in nature. The stock of yes bank and axis Bank have high
volatile in nature.
• Among all the investment avenues in the stock market banking is considered as the
most sensitive investment avenue the fine stocks of banking sectors shows Arch
effect which means period of high vitality is followed by similar high volatility and
low is followed by low volatility.
• The S&P 500 experienced it’s fastest ever bear market, clocking in at just 33 days
before it’s third fastest recovery to a break-even level in about 5 months.
• 80% of the stockholders invest/trade in stock market for higher return rather than
safety and liquidity.
• 50% of the stockholders got information regarding stock market from financial
advisors or brokers.
• 63% of the stockholders prefer to have long term trading as it involves less risk.
Intraday trading has higher risk thus only 7% preferred intraday trading.
• All the stockholders prefer to have online mode of trading. As the advancement of
technology and the pandemic scenario have made stock market into an online node
of trading.
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4.2 CONCLUSUON

Indian stock market now grown into a great material with a lot of qualitative inputs and
emphasis on investor protection and disclosure norms. The market has become
automated, transparent and self-driven. It has integrated with global markets, with
Indian companies seeking listing on foreign capital markets exchange, off shore
investments coming to India and foreign funds floating their schemes and thus bringing
expertise in to our markets. India has achieved the distinction of possessing the largest
population of investors next to the U.K., perhaps ours is the country to have the largest
number of listed companies with around several equity fund management avenues and
National Fund managers most of them automated. India now has world class regulatory
system in place. Thus, at the dawn of the new millennium, the equity funds market has
increased the wealth of Indian companies and investors. No doubt strong economic
recovery, upturn in demand, improved market structure, and other measures have also
been the contributory driving forces. Even though Covid pandemic has fall in India
stock market, it recovered with huge hikes along with the economic recovery of the
nation.

76
 BIBLIOGRAPHY

BOOKS/JOUNALS

• Anju balan (2013), Indian stock market- review of literature, TRANS Asian journal
of marketing and management research
• Avijan Datta, gautham bandopadhyay, prediction of stock performance in the
Indian stock market using logistic regression, international journal of business and
information.
• Gangan deep sharma &B. S Bodla, Inter linkages among stock market of south
Asia, Asia Pacific journal of business administration
• Peter sellin, monetary policy and stock market: theory and empirical evidence
sveriges riskbank working paper series.
• Alok kumar Mishra, stock market and foreign exchange market in india: are they
related? South Asia economic journal
• Mara madalino & carlo pinho, time frequency effects on market indices: world
commovements paris, 2009 finance international meeting AFFI -EUROFIDAI
• Vivek rajput & sarika bobde, stock market predictions using hybrid approach,
international journal of computer science and mobile computing.
• Vanita tripathi & shruthi sethi, integration of Indian stock market with world stock
markets, Asian journal of business and accounting.
• Marcia oli sigao, effects of temperature on stock market indices: a study on BSE &
NSE in India, international journal of economic research.

4.4 WEBSITES:

• www.nseindia.com
• www.bseindia.com
• www.businessinsider.in

77
 QUESTION SCHEDULE

1. Name
2. Address
3. Age
4. Gender
5. Occupation
6. Monthly income
7. Name of the stock
8. Why do you invest in stock market?
• Safety
• Liquidity
• High returns
• Other

9. How do you get information on stock market?

• TV/ Internet
• Newspaper/ Financial Journal
• Financial advisor/ Brokers
• Friend/ Relative
• Other

10. Name the type of trading

• Long term
• Medium term
• Short term
• Intraday

78
11. Year of experience in trading
• Less than 1 year
• 1 – 3 years
• 3 – 5 years
• Above 5 years

12. Mode of trading

• Offline
• Online

79