ABSTRACT

This study aims to identify the impact of most basic factors in the market
share price of listed companies in Amman Stock Exchange from the
respondent's opinions. These factors are: Internal factors and external
factors. The population of the study included the (227) listed companies
in Amman Stock Exchange. A random sample that of 60 companies was
withdrawn.  The study adopted descriptive and analytical method. To
achieve the objectives of this study the researchers depended on two
types of data: Secondary data and Primary data. For the purpose of testing
hypotheses the study relied on statistical package for Social Sciences
(SPSS) by using appropriate statistical methods. These are: Descriptive
Statistic measures and ANOVA analysis test.   Results of the study
showed that there are impacts of internal and external factors in
determining the stock prices of the listed companies in Amman Stock
Exchange. The most impact was  the inflation rate, while     the least one
was the nature of firm business. According to the objectives and results of
the study, researcher recommended a several recommendations such as,
strengthening the role of companies through their involvement in the
drafting of laws and legislations

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CONTENTS
S. No. Particulars Page No.

Chapter-I Introduction 07-17

Objectives of the study 18

Limitations of the study 21

Research and methodology 22

Chapter-II Review of Literature 46-58

A study on stock exchange 47

History of stock exchange 49

The securities & exchange board of India 53

National stock exchange 55

Chapter-III Company profile 59-97

Chapter -IV Analysis and Interpretation

Transaction cycle 62

Settlement processing cm segment of NSE 66

Dematerialization 68

National securities depository limited 95

Chapter-V Findings & suggestions conclusion 98-102

Chapter-VI Bibliography 103-104

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CHAPTER I

3
 INTRODUCTION
Like any other commodity, in the stock market, share prices are also
dependent on so many factors. So, it is hard to point out just one or two factors that
affect the price of the stocks. There are still some factors that are that directly
influence the share prices.

Demand and Supply – This fundamental rule of economics holds good for the equity
market as well. The price is directly affected by the trend of stock market trading.
When more people are buying a certain stock, the price of that stock increases and
when more people are selling he stock, the price of that particular stock falls. Now it
is difficult to predict the trend of the market but your stock broker can give you fair
idea of the ongoing trend of the market but be careful before you blindly follow the
advice.

News – News is undoubtedly a huge factor when it comes to stock price. Positive
news about a company can increase buying interest in the market while a negative
press release can ruin the prospect of a stock. Having said that, you must always
remember that often times, despite amazingly good news, a stock can show least
movement. It is the overall performance of the company that matters more than news.
It is always wise to take a wait and watch policy in a volatile market or when there is
mixed reaction about a particular stock.

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Earning Per Share – Earning per share is the profit that the company made per share
in the last quarter. It is mandatory for every public company to publish the quarterly
report that states the earning per share of the company. This is perhaps the most
important factor for deciding the health of any company and they influence the buying
tendency in the market resulting in the increase in the price of that particular stock.

Price/Earning Ratio - Price/Earning ratio or the P/E ratio gives you fair idea of how
a company’s share price compares to its earnings. If the price of the share is too much
lower than the earning of the company, the stock is undervalued and it has the
potential to rise in the near future. On the other hand, if the price is way too much
higher than the actual earning of the company and then the stock is said to overvalued
and the price can fall at any point.

Price Prediction:

Traders don’t take positions in the futures market without an informed opinion about
where the market appears to be headed. They won’t go long without some kind of
signal that prices are moving up, and they won’t go short without a signal that prices
are headed down. They don’t operate blindly, and they don’t throw darts at a dart
board orholdséances to form an opinion about price movement (at least we hope not).

What are these signals?

Where do they come from, and how do traders use them to form educated opinions?
The signals come from two very different kinds of research — the analysis of external
events that affect the markets (fundamental analysis) and the analysis of historical
patterns of price movements (technical analysis). Each approach has its followers
among hedgers and speculators. While some people are purists who advocate one type
of analysis over the other, many others engage in both.

Fundamental Analysis

Fundamental analysis focuses on cause and effect — causes external to the

5
trading markets that are likely to affect prices in the market. These factors may
include the weather, current inventory levels, government policies, economic
indicators, trade balances and even how traders are likely to react to certain events. Of
course, fundamentalists have to know what to look at (the factors differ for each
commodity) and how to interpret the information available. Suppose, for example,
that you take a fundamentalist approach to buying a house in a certain area. You
would start by looking at factors affecting prices in that area. You might
discover there’s been too much new construction this season, and that there are also
many older homes on the market because of cutbacks at a local corporation. You’d
note that sales are sluggish compared to earlier years and that currently there are more
houses available than buyers — supply is greater than demand. Your fundamental
research tells you that homes in that area will be priced at value or possibly even
under-priced, so you’re likely to get a good deal if you act before the situation
changes.

Supply Demand Because fundamentalists hope to predict which way prices will
move, they’re interested in identifying factors that are likely to affect supply and
demand. When the supply of a commodity increases and demand decreases or stays
the same, the price falls(just like those tomatoes we talked about earlier). When
supply decreases and demand increases or stays the same, the price of that commodity
rises. If the supply stays the same, changes in demand will cause prices to rise or fall.

The fundamentalist studies how events change the value of the commodity — whether
it becomes more valuable or less as a result of an event — and whether prices can be
expected to go up or down because of the event. Because all public information about
a commodity ultimately will be reflected in its price, fundamentalists try to determine
how and when these factors will affect the market price, so they can trade
accordingly. Fundamentalists also study the psychological effects of various kinds of
information on traders. In other words, how and when do traders respond to a certain
type of event or release of information? The fundamentalist analyzes this response
and hopes to trade before the information is incorporated into the price. This lag time
between an event and its resulting market response presents a trading opportunity.

Financial Fundamentals Fundamentalists in the financial futures markets — whether

in foreign currencies, interest rate products, or index products — work with a

6
complex array of supply and demand factors to predict price movement. The
foundation for financial fundamental analysis is the study of the overall health of the
economy that affects each of these markets. Financial fundamentalists watch a
number of economic indicators to determine changes in the state of the economy.
Some examples are listed here, but there are many others.

The supply and demand for money determines interest rates, and changes in the
economy’s direction normally precede major interest rate turning points. Financial
fundamentalists study economic indicators and prevailing economic policies to
determine the direction of the economy. They use these indicators to forecast interest
rates and, subsequently, the prices of interest rate products such as U.S. Treasury
Bills. In general, the demand for money rises during economic expansion, causing
interest rates to rise. Like wise, the demand for money falls during economic
recession, causing interest rates to fall. Analysis of long-term versus short-term
interest rates can also signal the direction of interest rate movement. Fundamentalists
trading in the currency markets study the U.S. economy as well as that of other
countries. The price of one currency in relation to another shift as supply and demand
factors shift. For example, fundamentalists trading CME British pound futures
consider the strength of the British economy, its fiscal and economic policies, budget
deficits, balance of trade levels, inflation trends and general political situation —
factors that are reflected in the value of the British pound.

Market psychology plays an important role in the financial markets, and it pays for
the fundamentalist to be familiar with the market’s response to economic indicators
and news. Rumor, expectations and human behavior have a tremendous impact on
price movement. The fundamentalist needs to be smart enough to tell when the market
is over sold or over bought due to the excitability of the traders.

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OBJECTIVES OF THE STUDY

As the investors are loosing their hard earned money in the stock

market because Economic, Political, Natural, Psychological and Artificial

factors are influencing the stock market.

 study the effect of these factors on the stock market

 Acquaint the investors how the fluctuations or variations takes

place in the stock market.

 This study guides the investors how to react to different market

situations

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 LIMITATIONS OF THE STUDY

 The period of study was limited to 60 days.

 Only 7 factors are taken for this study.

 Very few and randomly selected scripts / companies are analyzed from BSE/NSE

listings.

 Detailed study of the topic was not possible due to limited size of the project.

There was a constraint with regard to time allocation for the research study

i.e. for a period of two months

`RESEARCH METHODOLOGY

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SOURCES OF DATA

The data used in this study is both primary as well as secondary in nature.
The main sources of the data were books, Websites, Newspapers and personal
instruction with the experts and brokers of stock exchange.

Period

This study is based on the observations of stock price movements during November
07 to January, 08. Apart from this historical data is used to show the effect of certain
factors

Tools
Stock price movements during a certain events are collected from various sites based
on the stocks listed in National Stock Exchange and Bombay Stock Exchange.

10
CHAPTER II

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DEFINITION OF FINANCIAL MARKETS:
1. Organizations that facilitate the trade in financial products. i.e. Stock exchanges
facilitate the trade in stocks, bonds and warrants.

2. The coming together of buyers and sellers to trade financial products. i.e. stocks
and shares are traded between buyers and sellers in a number of ways including: the
use of stock exchanges; directly between buyers and sellers etc.

TYPES OF FINANCIAL MARKETS

The financial markets can be divided into different subtypes:

 Capital markets which consist of:

o Stock markets, which provide financing through the issuance of shares
or common stock, and enable the subsequent trading thereof.
o Bond markets, which provide financing through the issuance of Bonds,
and enable the subsequent trading thereof.
 Commodity markets, which facilitate the trading of commodities.
 Money markets, which provide short term debt financing and investment.
 Derivatives markets, which provide instruments for the management of
financial risk.
o Futures markets, which provide standardized forward contracts for
trading products at some future date; see also forward market.
 Insurance markets, which facilitate the redistribution of various risks.
 Foreign exchange markets, which facilitate the trading of foreign exchange.

The capital markets consist of primary markets and secondary markets. Newly formed
(issued) securities are bought or sold in primary markets. Secondary markets allow
investors to sell securities that they hold or buy existing securities

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 PRIMARY MARKET

The primary market provides the channel for sale of new securities. Primary market
provides opportunity to issuers of securities; Government as well as corporate, to raise
resources to meet their requirements of investment and/or discharge some obligation.
They may issue the securities at face value, or at a discount/premium and these
securities may take a variety of forms such as equity, debt etc. They may issue the
securities in domestic market and/or international market.

Primary market• 
The primary is that part of the capital markets that deals with the issuance of new
securities. Companies, governments or public sector institutions can obtain funding
through the sale of a new stock or bond issue. This is typically done through a
syndicate of securities dealers. The process of selling new issues to investors is called
underwriting. In the case of a new stock issue, this sale is an initial public offering
(IPO). Dealers earn a commission that is built into the price of the security offering,
though it can be found in the prospectus. Features Of Primary Market are:-

1. This is the market for new long term capital. The primary market is the market
where the securities are sold for the first time. Therefore it is also called New Issue
Market (NIM).

2. In a primary issue, the securities are issued by the company directly to investors.

3. The company receives the money and issue new security certificates to the
investors.

4. Primary issues are used by companies for the purpose of setting up new business or
for expanding or modernizing the existing business.

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5. The primary market performs the crucial function of facilitating capital formation
in the economy.

6. The new issue market does not include certain other sources of new long term
external finance, such as loans from financial institutions. Borrowers in the new issue
market may be raising capital for converting private capital into public capital; this is
known as ‘going public’.

INITIAL PUBLIC OFFER (IPO)

An Initial Public Offer (IPO) is the selling of securities to the public in the primary market.
It is when an unlisted company makes either a fresh issue of securities or an offer for sale of
its existing securities or both for the first time to the public. This paves way for listing and
trading of the issuer’s securities. The sale of securities can be either through book building
or through normal public issue.

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 SECONDARY MARKET

Introduction:

Secondary market refers to a market where securities are traded after being initially
offered to the public in the primary market and/or listed on the
Stock Exchange. Majority of the trading is done in the secondary market. Secondary
market comprises of equity markets and the debt markets.

Role of the Secondary Market:

For the general investor, the secondary market provides an efficient platform for
trading of his securities. For the management of the company,
Secondary equity markets serve as a monitoring and control conduit—by facilitating
value-enhancing control activities, enabling implementation of
incentive-based management contracts, and aggregating information (via price
discovery) that guides management decisions.

Difference between the Primary Market and the

Secondary Market:

In the primary market, securities are offered to public for subscription for the purpose
of raising capital or fund. Secondary market is an equity trading venue in which
already existing/pre-issued securities are traded among investors. Secondary market
could be either auction or dealer market. While stock exchange is the part of an
auction market, Over-the-Counter (OTC) is a part of the dealer market.

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STOCK EXCHANGE

“In no sense is the stock market a great gambling enterprise like a lottery. But it is
an exercise in mass psychology, in trying to guess better than the crowd how the
crowd will behave.”

---Adam Smith, the money gme, 1968.

The investors want liquidity for their investments. The securities, which they
hold, should easily be sold when they need cash. Similarly, there are others who
want to invest in new securities. There should be a place where the securities
may be purchased and sold. Stock exchange is a body of persons, whether
incorporated or not, formed with a view ton helping, regulating and controlling
the business of buying and selling securities.

Stock exchanges are organized and regulated markets for various securities
issued by corporate sector and other institutions. The Stock exchanges enable
free purpose and sale of securities as Commodity exchanges allow trading in
commodities.

Stock exchanges are an organized market place where securities are traded.
The government issues these securities, semi government bodies, public sector
undertakings and companies for borrowing funds and raising resources.

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 Securities are defined as any monetary claims and include stock shares,
debentures, bonds etc., if these securities are marketable in the case of
government stock; they are transferable by endorsement an are like movable
property, They are tradable on the stock exchange. So is the case with the shares
of companies.

DEFINITIONS:

Securities contract (regulation) Act, 1956, “Stock Exchange means anybody of individuals
whether incorporated or not, constituted for the purpose of assisting, regulating or on
trolling the business of buying and selling securities.”

PYLE, “Security Exchange is market places where securities that have been listed thereon
may be bought and sold for either investment or speculation.

Hartley Withers - “A Stock Exchange is something like a vast warehouse where securities
are taken away from the shelves and sold across the countries at a fixed price in a catalogue
which is called the official list.”

Husband and Dockeray - “Securities of Stock Exchanges are privately organized

marketism which are used to facilitate trading securities.”

BSE(Bombay Stock Exchange)

Bombay Stock Exchange Limited (the Exchange) is the oldest stock exchange
in Asia with a rich heritage. Popularly known as "BSE", it was established as "The
Native Share & Stock Brokers Association" in 1875. It is the first stock exchange in
the country to obtain permanent recognition in 1956 from the Government of India
under the Securities Contracts (Regulation) Act, 1956.The Exchange's pivotal and
pre-eminent role in the development of the Indian capital market is widely recognized
and its index, SENSEX, is tracked worldwide. Earlier an Association of Persons

17
(AOP), the Exchange is now a demutualised and corporative entity incorporated under
the provisions of the Companies Act, 1956, pursuant to the BSE(Corporatisation and
Demutualisation) Scheme, 2005 notified by the Securities and Exchange Board of
India (SEBI).Bombay Stock Exchange Limited received its Certificate of
Incorporation on 8th August, 2005 and Certificate of Commencement of Business on
12th August, 2005. The 'Due Date' for taking over the business and operations of the
BSE, by the Exchange was fixed for 19th August, 2005, under the Scheme. The
Exchange has succeeded the business and operations of BSE on going concern basis
and its recognition as an Exchange has been continued by SEBI.

The Exchange has a nation-wide reach with a presence in 417 cities and towns of
India. The systems and processes of the Exchange are designed to safeguard market
integrity and enhance transparency in operations. During the year 2004-2005, the
trading volumes on the Exchange showed robust growth.

PREFACE

For the premier Stock Exchange that pioneered the stock broking activity in India ,
125 years of experience seem to be a proud milestone. A lot has changed since 1875
when 318 persons became members of what today is called "Bombay Stock Exchange
Limited" by paying a princely amount of Re1.

Since then, the stock market in the country has passed through both good and bad
periods. The journey in the 20th century has not been an easy one. Till the decade of
eighties, there was no measure or scale that could precisely measure the various ups
and downs in the Indian stock market. Bombay Stock Exchange Limited (BSE) in
1986 came out with a Stock Index that subsequently became the barometer of the
Indian Stock Market.

SENSEX, first compiled in 1986 was calculated on a "Market Capitalization-

Weighted" methodology of 30 component stocks representing a sample of large, well-
established and financially sound companies. The base year of SENSEX is 1978-79.
The index is widely reported in both domestic and international markets through print
as well as electronic media. SENSEX is not only scientifically designed but also

18
based on globally accepted construction and review methodology. From September
2003, the SENSEX is calculated on a free-float market capitalization methodology.
The "free-float Market Capitalization-Weighted" methodology is a widely followed
index construction methodology on which majority of global equity benchmarks are
based.

The growth of equity markets in India has been phenomenal in the decade gone by.
Right from early nineties the stock market witnessed heightened activity in terms of
various bull and bear runs. More recently, the bourses in India witnessed a similar
frenzy in the 'TMT' sectors. The SENSEX captured all these happenings in the most
judicial manner. One can identify the booms and bust of the Indian equity market
through SENSEX.

The launch of SENSEX in 1986 was later followed up in January 1989 by

introduction of BSE National Index (Base: 1983-84 = 100). It comprised of 100
stocks listed at five major stock exchanges in India at Mumbai, Calcutta, Delhi,
Ahmedabad and Madras. The BSE National Index was renamed as BSE-100 Index
from October 14, 1996 and since then it is calculated taking into consideration only
the prices of stocks listed at BSE. The Exchange launched dollar-linked version of
BSE-100 index i.e. Dollex-100 on May 22, 2006.

With a view to provide a better representation of the increased number of companies

listed, increased market capitalization and the new industry groups, the Exchange
constructed and launched on 27th May, 1994, two new index series viz., the 'BSE-
200' and the 'DOLLEX-200' indices. Since then, BSE has come a long way in attuning
itself to the varied needs of investors and market participants. In order to fulfill the
need of the market participants for still broader, segment-specific and sector-specific
indices, the Exchange has continuously been increasing the range of its indices. The
launch of BSE-200 Index in 1994 was followed by the launch of BSE-500 Index and
5 sectoral indices in 1999. In 2001, BSE launched the BSE-PSU Index, DOLLEX-30
and the country's first free-float based index - the BSE TECK Index. The Exchange
shifted all its indices to a free-float methodology (except BSE PSU index) in a phased
manner.

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The Exchange also disseminates the Price-Earnings Ratio, the Price to Book Value
Ratio and the Dividend Yield Percentage on day-to-day basis of all its major indices.

The values of all BSE indices are updated every 15 seconds during the market hours
and displayed through the BOLT system, BSE website and news wire agencies.

All BSE-Indices are reviewed periodically by the "Index Committee" of the

Exchange. The Committee frames the broad policy guidelines for the development
and maintenance of all BSE indices. Department of BSE Indices of the Exchange
carries out the day to day maintenance of all indices and conducts research on
development of new indices.

STOCK MARKETS IN INDIA

Stock Exchanges are intricately interwoven in the fabric of a nation’s economic life. Without
a stock exchange, the savings of the community – the sinews of economic progress and
productive efficiency would remain under utilized.
The task of mobilization and allocation of savings might have been attempted by a
much les specialized institution than stock exchanges in the olden days. As the business and
industry expanded and economy assured more complex nature, a need for “permanent
finance” arose. Entrepreneurs require money for long-term whereas demand liquidity
facilitates to convert their investments into cash at any given time. The solution to this
problem gave way for the origin of stock exchange, which is a ready market for investment
and liquidity.
Stock exchange means any body of individuals, whether incorporated or not, constituted
for the purpose of regulating or controlling the business of buying, selling or dealing in
securities.
Securities include:

1. Shares, scrip’s stocks bonds, debentures and other marketable securities.

2. Government securities
3. Rights of interests in securities

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NATURE AND FUNCTIONS OF STOCK EXCHANGE
As economic development proceeds, the scope for acquisition and ownership of capital by
private individuals also grows. Also with it, the opportunity for stock exchanges to render the
service of stimulating private savings and chanalising such savings into productive investment
exists of vastly great scale. These are the services, which the stock exchanges alone can
render efficiently.
Stock exchanges are the markets, which exist to facilitate purchase and sale of
securities of companies and the securities or bonds issued by the government in the course of
its borrowing operations, The task facing the stock exchanges is to device the means to reach
down to the masses, to draw the savings of the man in the street into productive investment, to
create conditions in which many millions of people from cities, towns and villages will find it
possible too make use of these facilities.
For these far-reaching changes both institutional as well as operational has to be
undertaken.
Aim of the stock exchange authorities is to make it as nearly perfect in the social
ethical sense as it is in economy. To protect the interest of the investing public, the authorities
of the stock exchanges have been incre3asingly subjecting not only its members to a high
degree of discipline but also those who use the facilities.
The directors for the joint stock companies have to inform fully to the shareholders
about the affairs of the company. Apart from providing a market that mobilizes ensure that
the flow of savings is utilized for the best possible purpose form the community’s point of
view. The pre-requisite for the mobilization and distribution of the nation’s savings is a free
and active market. The activities of the stock exchanges are governed by a recognized code of
conduct apart from statuary regulations.

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 TYPES OF PRODUCTS

Index Futures
A futures contract is a standardized contract to buy or sell a specific
security at a future date at an agreed price. An index future is, as the name
suggests, a future on the index i.e. the underlying is the index itself. There is
no underlying security or a stock, which is to be delivered to fulfill the
obligations as index futures are cash settled. As other derivatives, the contract
derives its value from the underlying index. The underlying indices in this
case will be the various eligible indices and as permitted by the Regulator
from time to time.

Index Options

Options contract give its holder the right, but not the obligation, to buy or sell
something on or before a specified date at a stated price. Generally index
options are European Style. European Style options are those option contracts
that can be exercised only on the expiration date. The underlying indices for
index options are the various eligible indices and as permitted by the
Regulator from time to time.

Stock Futures

A stock futures contract is a standardized contract to buy or sell a specific

stock at a future date at an agreed price. A stock future is, as the name
suggests, a future on a stock i.e. the underlying is a stock. The contract derives
its value from the underlying stock. Single stock futures are cash settled.

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 Stock Options

Options on Individual Stocks are options contracts where the underlings are
individual stocks. Based on eligibility criteria and subject to the approval from
the regulator, stocks are selected on which options are introduced. These
contracts are cash settled and are American style. American Style options are
those option contracts that can be exercised on or before the expiration date.

Weekly Options

Equity Futures & Options were introduced in India having a maximum life of
3 months. These options expire on the last Thursday of the expiring month.
There was a need felt in the market for options of shorter maturity. To cater to
this need of the market participants BSE launched weekly options on
September 13, 2004 on 4 stocks and the BSE Sensex.

Weekly options have the same characteristics as that of the Monthly Stock
Options (stocks and indices) except that these options settle on Friday of every
week. These options are introduced on Monday of every week and have a
maturity of 2 weeks, expiring on Friday of the expiring week.

ORGANIZATION ON INDIAN STOCK EXCHANGES

The recognized stock exchanges in India vary from voluntary non-profit
making organizations(Bombay, Ahmedabad, Indore) to Joint stock Companies
Limited by shares (Calcutta, Delhi, Bangalore) and companies limited by guarantee
(Madras & Hyderabad).
There is a broad uniformity in the organization of stock exchanges, since the
Article of Association defining the constitution of the recognized stock exchanges is
approved by the central government. BSE was the first Stock Exchange to get
permanent reorganization followed by Calcutta, Delhi, Madras, Ahmedabad,
Hyderabad, Indore and Bangalore. The other exchanges were official reorganization
will renew for another term.

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 As per the present guidelines, the proposed region in which the stock
exchange is to be set up must be industrially developed with a sizeable number of
industrial units and should be able to attract at least 50 companies independently.

FACTORS AFFECTING THE PRICES IN THE STOCK

MARKET

Important Factors affecting to the Prices in the Stock Market are

1. Monetary Policy
2. Inflation
3. FII (Foreign institutional investors)
4. Political Influence
5. Company Announcements
6. SEBI Regulation
7. Annual Budget

1.Monetary policy is the process by which the government, central bank, or

monetary authority manages the supply of money, or trading in foreign exchange
markets.[1] Monetary theory provides insight into how to craft optimal monetary
policy.

Monetary policy is generally referred to as either being an expansionary policy, or a

concretionary policy, where an expansionary policy increases the total supply of
money in the economy, and a concretionary policy decreases the total money supply.
Expansionary policy is traditionally used to combat unemployment in a recession by
lowering interest rates, while concretionary policy has the goal of raising interest rates
to combat inflation (or cool an otherwise overheated economy). Monetary policy

24
should be contrasted with fiscal policy, which refers to government borrowing,
spending and taxation

Overview

Monetary policy rests on the relationship between the rates of interest in an economy,
that is the price at which money can be borrowed, and the total supply of money.
Monetary policy uses a variety of tools to control one or both of these, to influence
outcomes like economic growth, inflation, exchange rates with other currencies and
unemployment. Where currency is under a monopoly of issuance, or where there is a
regulated system of issuing currency through banks which are tied to a central bank,
the monetary authority has the ability to alter the money supply and thus influence the
interest rate (in order to achieve policy goals). The beginning of monetary policy as
such comes from the late 19th century, where it was used to maintain the gold
standard.

There are several monetary policy tools available to achieve these ends. Increasing
interest rates by fiat, reducing the monetary base, and increasing reserve requirements
all have the effect of contracting the money supply, and, if reversed, expand the
money supply. Since the 1970s, monetary policy has generally been formed
separately from fiscal policy. And even prior to the 1970s, the Bretton Woods system
still ensured that most nations would form the two policies separately.

[Edit] History of monetary policy

Monetary policy is associated with interest rate and credit. For many centuries there
were only two forms of monetary policy: (i) Decisions about coinage; (ii) Decisions
to print paper money to create credit. Interest rates, while now thought of as part of
monetary authority, were not generally coordinated with the other forms of monetary
policy.

25
The advancement of monetary policy as a pseudo scientific discipline has been quite
rapid in the last 150 years, and it has increased especially rapidly in the last 50 years.
Monetary policy has grown from simply increasing the monetary supply enough to
keep up with both population growth and economic activity. It must now take into
account such diverse factors as:

 Short term interest rates;

 Long term interest rates;
 Velocity of money through the economy;
 Exchange Rates;
 Bonds and equities (corporate ownership and debt);
 Government versus private sector spending/savings;
 International capital flows of money on large scales;
 Financial derivatives such as options, swaps, futures contracts, etc.

2. INFLATION
Inflation is a rise in the general level of prices of goods and services in a given
economy over a period of time. It may also refer to the rise in the prices of some more
specific set of goods or services. In either case, it is measured as the percentage rate of
change of a price index.
[1] Mainstream economists overwhelmingly agree that high rates of inflation are
caused by high rates of growth of the money supply.[2] Views on the factors that
determine moderate rates of inflation, especially in the short run, are more varied:
changes in inflation are sometimes attributed mostly to changes in real demand for
goods and services or fluctuations in available supplies (i.e. changes in scarcity), and
sometimes to changes in the supply or demand for money. In the mid-twentieth
century, two camps disagreed strongly on the main causes of inflation (at moderate
rates): the "monetarists" argued that money supply dominated all other factors in
determining inflation, while "Keynesians" argued that real demand was often more
important than changes in the money supply.

26
A variety of inflation measures are in use, because there are many different price
indices, designed to measure different sets of prices that affect different people. Two
widely known indices for which inflation rates are commonly reported are the
Consumer Price Index (CPI), which measures nominal consumer prices, and the GDP
deflator, which measures the nominal prices of goods and services produced by a
given country or region

A movie ticket was for a few paisas in my dad’s time. Now it is worth Rs.50. My
dad’s first salary for the month was Rs.400 and over he years it has now become
Rs.75, 000. This is what inflation is, the price of everything goes up. Because the
price goes up, the salaries go up.

Inflation today is caused more by global rather than by domestic factors. Naturally, as
the Indian economy undergoes structural changes, the causes of domestic inflation too
have undergone tectonic changes.

Needless to emphasize, causes of today's inflation are complicated. However, it is

indeed intriguing that the policy response even to this day unfortunately has been
fixated on the traditional anti-inflation instruments of the pre-liberalization era.

Global imbalance the cause for global liquidity

The reason for this imbalance in the global economy is the fact that after the Asian
currency crisis; many countries found the virtues of a weak currency and engaged in
'competitive devaluation.'

Under this scenario, many countries simply leveraged their weak currency vis-à-vis
the US dollar to gain to the global (read US) markets. This mercantilist policy to
maintain their competitiveness is achieved when their central banks intervenes in the
currency markets leading to accumulation of foreign exchange, notably the US dollar,
against their own currency.

Naturally, as the players fear a fall in the value of the dollar and reach out to various
assets and commodities, the prices of these commodities and assets too will rise.

27
The psychological dimension

But as the imbalance shows no sign of correcting, players seek to shift to commodities
and assets across continents to hedge against the impending fall in the US dollar.
Thus, it is a fight between central banks and the psychology of market players across
continents.

As a corrective measure, economists are coming to the conclusion that most of the
currencies across the globe are highly undervalued vis-�-vis the dollar, which, in
turn, requires a significant dose of devaluation. For instance, a consensus exists
amongst economists and currency traders that the Yen is one of the most highly
undervalued currencies (estimated at around 60%) along with the Chinese Yuan
(estimated at 50%) followed by other countries in Asia.

This artificial undervaluation of currencies is another fundamental cause for

increasing global liquidity.

In 2005, international crude oil prices gained another 35 per cent and global demand
for oil grew by only 1.6 per cent. Nonetheless, the world's supply of dollars increased
by a further $460 billion.

Naturally, with all currencies refusing to be revalued, this leads to increased global
liquidity. While one is not sure as to whether the increase in the prices of crude led to
the increase of other commodities or vice versa, the fact of the matter is that, in the
aggregate, increased liquidity has led to the increase in commodity prices as a whole.

This Reserve Bank of India's strategy of dealing with excessive liquidity through the
Market Stabilization Scheme (MSS) has its own limitations. Similarly, the increase in
repo rates (ostensibly to make credit overextension costly) and increase in CRR rates
(to restrict excessive money supply) are policy interventions with serious limitations
in the Indian context with such huge forex inflows.

28
A consumer price index (CPI) is an index number measuring the average price
of consumer goods and services purchased by households. It is one of several price
indices calculated by national statistical agencies. The percent change in the CPI is a
measure of inflation. The CPI can be used to index (i.e., adjust for the effects of
inflation) wages, salaries, pensions, or regulated or contracted prices. The CPI is,
along with the population census and the National Income and Product Accounts, one
of the most closely watched national economic statistics.

Introduction

Two basic types of data are required to construct the CPI: price data and weighting
data. The price data are collected for a sample of goods and services from a sample of
sales outlets in a sample of locations for a sample of times. The weighting data are
estimates of the shares of the different types of expenditure as fractions of the total
expenditure covered by the index. These weights are usually based upon expenditure
data obtained for sampled periods from a sample of households. Although some of the
sampling is done using a sampling frame and probabilistic sampling methods, much is
done in a commonsense way (purposive sampling) that does not permit estimation of
confidence intervals. Therefore, the sampling variance is normally ignored, since a
single estimate is required in most of the purposes for which the index is used. Stocks
greatly affect this cause.

The coverage of the index may be limited. Consumers' expenditure abroad is usually
excluded; visitors' expenditure within the country may be excluded in principle if not
in practice; the rural population may or may not be included; certain groups such as
the very rich or the very poor may be excluded. Black market expenditure and
expenditure on illegal drugs and prostitution are often excluded for practical reasons,
although the professional ethics of the statistician require objective description free of
moral judgments. Saving and investment are always excluded, though the prices paid
for financial services provided by financial intermediaries may be included along with
insurance.

The index reference period, usually called the base year, often differs both from the
weight-reference period and the price reference period. This is just a matter of

29
 rescaling the whole time-series to make the value for the index reference-period equal
to 100. Annually revised weights are a desirable but expensive feature of an index, for
the older the weights the greater is the divergence between the current expenditure
pattern and that of the weight reference-period.

Month-wise Consumer Price Index of Metros - 2011

(BASE YEAR 2001=100)
Month Delhi Mumbai Kolkata Chennai All India
January 124 131 125 122 127
February 125 131 126 122 128
March 125 130 128 121 127
April 128 132 130 122 128
May 128 132 130 123 129
June                   128 134 130 125 130
July 130 136 133 126 132
August 131 135 135 126 133

September 132 136 136 125 133

October 131 138 138 126 134

A Whole sale Price Index (WPI) is the price of a representative basket of wholesale
goods. Some countries (like India and The Philippines) use WPI changes as a central
measure of inflation.

Indian WPI

The Indian WPI was first published in 1902, and was used by policy makers until it
was replaced by the producer price index (PPI) in 1978. The Wholesale Price Index
(WPI) is the most widely used price index in India. It is the only general index
capturing price movements in a comprehensive way.

The index is used to measure the change in the average price level of goods traded in
wholesale market. A total of 435 commodity prices make up the index. It is available
on a weekly basis, with the shortest possible measurement lag being two weeks.

30
Because of this, it is widely used in business and industry circles and in Government,
and is generally taken as an indicator of the inflation rate in the economy

3. FOREIGN INSTITUTIONAL INVESTORS

An investor or investment fund that is from or registered in a country outside of the

one in which it is currently investing. Institutional investors include hedge funds,
insurance companies, pension funds and mutual funds.
Investopedia Says... The term is used most commonly in India to refer to
outside companies investing in the financial markets of India. International
institutional investors must register with the Securities and Exchange Board of India
to participate in the market. One of the major market regulations pertaining to FIIs
involves placing limits on FII ownership in Indian companies.

Foreign Institutional Investors (FIIs), Non-Resident Indians (NRIs), and Persons of

Indian Origin (PIOs) are allowed to invest in the primary and secondary capital
markets in India through the portfolio investment scheme (PIS). Under this scheme,
FIIs/NRIs can acquire shares/debentures of Indian companies through the stock
exchanges in India.

The ceiling for overall investment for FIIs is 24 per cent of the paid up capital of the
Indian company and 10 per cent for NRIs/PIOs. The limit is 20 per cent of the paid up
capital in the case of public sector banks, including the State Bank of India.

The ceiling of 24 per cent for FII investment can be raised up to sectoral cap/statutory
ceiling, subject to the approval of the board and the general body of the company
passing a special resolution to that effect. And the ceiling of 10 per cent for
NRIs/PIOs can be raised to 24 per cent subject to the approval of the general body of
the company passing a resolution to that effect.

31
Global linkages for Indian stocks have been on the rise since 2002-03, when
foreign institutional investments began to gain traction. In the five years
before 2002, the Indian market (represented by the MSCI India Index) shared a
relatively low correlation of 0.34 with the global market (represented by the MSCI
All-Countries World Index). This indicates that the two indices did not move in the
same direction very often. Over the next five years, however, the correlation
has climbed to 0.49, suggesting a strengthening relationship between the
two. The past two years have seen a significant increase in the global
influence on Indian stocks, with a high correlation of over 0.80 between India
and the rest of the world.

Monitoring Foreign Investments

The Reserve Bank of India monitors the ceilings on FII/NRI/PIO investments
in Indian companies on a daily basis. For effective monitoring of foreign investment
ceiling limits, the Reserve Bank has fixed cut-off points that are two percentage points
lower than the actual ceilings. The cut-off point, for instance, is fixed at 8 per cent for
companies in which NRIs/ PIOs can invest up to 10 per cent of the company's paid up
capital. The cut-off limit for companies with 24 per cent ceiling is 22 per cent and for
companies with 30 per cent ceiling, is 28 per cent and so on. Similarly, the cut-off
limit for public sector banks (including State Bank of India) is 18 per cent.

Once the aggregate net purchases of equity shares of the company by FIIs/NRIs/PIOs
reach the cut-off point, which is 2% below the overall limit, the Reserve Bank
cautions all designated bank branches so as not to purchase any more equity shares of
the respective company on behalf of FIIs/NRIs/PIOs without prior approval of the
Reserve Bank. The link offices are then required to intimate the Reserve Bank about
the total number and value of equity shares/convertible debentures of the company
they propose to buy on behalf of FIIs/NRIs/PIOs. On receipt of such proposals, the
Reserve Bank gives clearances on a first-come-first served basis till such investments
in companies reach 10 / 24 / 30 / 40/ 49 per cent limit or the sectoral caps/statutory
ceilings as applicable. On reaching the aggregate ceiling limit, the Reserve Bank
advises all designated bank branches to stop purchases on behalf of their

32
FIIs/NRIs/PIOs clients. The Reserve Bank also informs the general public about the
`caution’ and the `stop purchase’ in these companies through a press release.

P-NOTES (PARTICIPATORY NOTES)

These are instruments issued by registered foreign institutional investors to overseas
investors, who wish to invest in the Indian stock markets without registering
themselves with the market regulator, the Securities and Exchange Board of India.

Financial instruments used by hedge funds that are not registered with Sebi to invest
in Indian securities. Indian-based brokerages to buy India-based securities / stocks and
then issues participatory notes to foreign investors. Any dividends or capital gains
collected from the underlying securities go back to the investors.

WHY P-NOTES?

Since international access to the Indian capital market is limited to FIIs. The market
has found a way to circumvent this by creating the device called participatory notes,
which are said to account for half the $80 billion that stands to the credit of FIIs.
Investing through P-Notes is very simple and hence very popular.

A Securities and Exchange Board of India proposal to tighten the rules for purchase of
shares and bonds in Indian companies through the participatory note route took the
breath away of the Indian stock market and it suffered its biggest fall in history

LIST OF COMPANIES
Companies where NRI investment has reached 8% and further purchases are
allowed only with prior approval RBI
1. Astra IDL Ltd.

33
2. M/s. Codura Exports Ltd.
3. IDL Industries Ltd.
4. Nexus Software Ltd.
5. Dalmia Cement (Bharat) Ltd.

Companies where NRI investment has already reached 10% and no further
purchases can be allowed
1. DSQ Biotech Ltd
2. Global Trust Bank Ltd.
3. Madras Aluminium Co. Ltd
4. SPL Ltd
5. Seirra Optima Ltd
Companies in which FII Investment is allowed upto 30% of their paid up capital
1. Aptech Ltd
2. Asian Paints (India) Ltd
3. Capital Trust Ltd
4. Container Corporation of India
5. Ferro Alloys Corporation Ltd
6. Garware Polyester Ltd

Companies in which FII Investment is allowed upto 40% of their paid up capital
1. Balaji Telefilms Ltd.
2. M/s. Burr Brown (India) Ltd.
3. M/s. Elbee Services Ltd.
4. Hero Honda Motors Ltd.
5. Jyoti Structures Ltd

Companies in which FII Investment is allowed upto 49% of their paid up capital
1. Blue Dart Express Ltd
2. CRISIL
3. HDFC Bank Ltd
4. Hindustan Lever Ltd
5. Himachal Futuristic Communications Ltd

34
6. Infosys Technologies Ltd.
7. NIIT Ltd.
8. Dr. Reddy's Laboratories
9. Reliance Petroleum Ltd.

Companies in which NRI/FII Investment is allowed upto 49% of their paid up

capital
1. ICICI Bank Ltd.

Companies in which FII Investment is allowed upto sectoral cap/statutory ceiling

of their paid up capital
1. GTL Ltd. - (74%)
2. Housing Development Finance Corporation Ltd. - (74%)
3. Infosys Technologies Ltd. - (100%)
4. Pentamedia Graphics Ltd. - (100%)
5. Pentasoft Technologies Ltd. - (100%)

Companies where 22% FII investment limit has been reached and further
purchases are allowed with prior approval of RBI
1. ACC Ltd.
2. Digital GlobalSoft Ltd.

Public Sector banks including SBI in which 20% limit has been reached.
1. State Bank of India
Companies falling under 24%
None

Companies in which the Ban limit in respect of maximum permissible foreign

holding including GDR/ADR/FDI/NRI/PIO/FII Investment as stipulated by
Government has been reached
1. ICICI Ltd.

35
Companies in which the Caution limit (47%) in respect of maximum permissible
foreign holding including GDR/ADR/FDI/NRI/PIO/FII Investments as stipulated
by Government has reached
None

Mumbai: in a bid to boost investor’s confidence, the reserve bank hiked investment
limit in companies for foreign institutional investors to the level of foreign direct
investment set in various sectors. Now, FII investment in companies will be governed
by investment ceiling for FDI for specific sectors, RBI said in a statement. the
shareholders and board approval would be necessary for such proposals, the statement
added. at present the investment ceiling in companies for FII is 49 per cent. Now the
ceiling has been hiked to 74 per cent and beyond on par with the ceiling for FDI in
various sectors. For instance, in case of pharmaceutical, it will be 74 per cent for FII
as in the case of FDI. This measure comes a day after finance minister yashwant sinha
assured FII in a tele-conference that the government would come out with a slew of
investment friendly measures to boost investor’s confidence. At present, FII could
automatically buy up to 24 per cent in companies which can be increased to 49 per
cent with shareholder approval. FDI limit is generally higher for various sectors and
FII investment limit is now on par with FDI. in the case of petroleum refining and
exploration, airports, trading, roads, highways, ports, hotels and tourism, film industry
and mass rapid transport system, the FDI investment limit was 100 per cent. in these
sectors, investment by FII will be allowed up to 100 per cent. The statement said
today’s decision was taken in consultation with the centre. While the investment limit
for civil aviation is 40 per cent, for private sector banking, telecommunication and
broadcasting it would be 49 per cent. In case of defense and strategic industries and
insurance, it would be 26 per cent.

36
4. POLITICAL INFLUENCE
The presence of political risk is a worldwide phenomenon that has affected
most national stock markets in the twentieth century. Within this context, it is often
said that returns of the stock markets are affected by the Parliamentary happenings. I
found that stock index returns are significantly lower and volatility is higher when
Parliament is in-session as compared to Parliament in-recess. Put another way, using
an “out-of-session” investment strategy by investing in BSE Sensex over the last 14
years would have led to growth in portfolio value by over nine times compared to an
“in-session” investment strategy. The study concludes by discussing the influence of
coalition governments, coalition politics, and gradual weakening of parliament among
important factors driving these results
Since the early 1990's, when the Indian economy was liberalized, India has emerged
as the world leader in information technology and business outsourcing, with an
average growth of about 6 percent a year. Growing foreign investment and easy credit
have fueled a consumer revolution in urban areas. With their Starbucks-style coffee
bars, Blackberry-wielding young professionals, and shopping malls selling luxury
brand names, large parts of Indian cities strive to resemble Manhattan.

For decades now, India's underprivileged has used elections to register their protests
against joblessness, inequality and corruption. In the 2004 general elections, they
voted out a central government that claimed that India was "shining," bewildering not
only most foreign journalists but also those in India who had predicted an easy victory
for the ruling coalition.

Among the politicians whom voters rejected was Chandrababu Naidu, the
technocratic chief minister of one of India's poorest states, whose forward-sounding
policies, like providing Internet access to villages, prompted Time magazine to
declare him "South Asian of The Year" and a "beacon of hope."

37
But the anti-India insurgency in Kashmir, which has claimed some 80,000 lives in the
last decade and a half, and the strength of violent communist militants across India,
hint that regular elections may not be enough to contain the frustration and rage of
millions of have-nots, or to shield them from the temptations of religious and
ideological extremism.

Most privatization programs begin with a period of partial privatization in which only
non-controlling shares of firms are sold on the stock market. Since management
control is not transferred to private owners it is widely contended that partial
privatization has little impact. This perspective ignores the role that the stock market
can play in monitoring and rewarding managerial performance even when the
government remains the controlling owner. Using data on Indian state-owned
enterprises we find that partial privatization has a positive impact on profitability,
productivity, and investment.

This paper investigates the influence of incumbent firms on the decision to allow
foreign direct investment into an industry. Based on data from India’s economic
reforms, the results suggest that firms in concentrated industries are more successful
at preventing foreign entry that state-owned firms are more successful at stopping
foreign entry than similarly placed private firms, and that profitable state-owned firms
are more successful at stopping foreign entry than unprofitable state-owned firms.
These findings continue to hold after controlling for industry characteristics such as
the presence of natural monopolies and the size of the workforce. The pattern of
foreign entry liberalization supports the private interest view of policy
implementation.
Using panel data on industries in emerging markets, we investigate the effect of stock
market liberalization on industry growth. Consistent with the view that liberalization
reduces financing constraints, we find that industries that are more externally
dependent and face better growth opportunities grow faster following liberalization.
However, this increase in industry growth appears to come from an expansion in the
size of existing firms rather than through new firm entry, which is puzzling since new
firms are typically more financially constrained. To reconcile these conflicting results
we examine whether barriers to entry arising out of institutional and regulatory
frictions affect the impact of liberalization on new firms. We find that liberalization

38
leads to new firm growth at the industry level in countries that allocate capital more
efficiently, and in industries that privatize government-owned firms. From a policy
perspective these results suggest that stock market liberalization will have a larger and
more uniformly distributed growth impact if it is accompanied by complementary
reforms that enhance competition.

We investigate the influence of financial and political factors on the decision to

privatize government-owned firms using firm-level data from India. Based on data
from all elections held since the start of the privatization process, we find that the
government is reluctant to privatize firms located in regions where the governing
party faces more political competition from opposition parties. This result is robust to
political ideology; industry and time effects; and state-level differences in income,
literacy, and growth opportunities. As an indication that political patronage is
important, no government-owned firm located in the home state of the politician in
charge of that firm is ever privatized. Using political variables as an instrument for the
endogenous privatization decision, we find that privatization has a positive and
significant impact on firm performance.

We examine whether bilateral political relations can explain investment and trade
flows between the United States and other countries. We treat political relations as
endogenous using instrumental variable analysis and investigate whether an
exogenous shock to political relations, the 2003 war in Iraq, leads to a shift in
economic flows. The results suggest that deterioration in bilateral relations is followed
by a significant decrease in economic flows between the United States and that
country. These results are robust to country fixed effects, income, industry growth,
financial market development, and risk.

39
CHAPTER III

40
 COMPANY PROFILE
Introduction to India bulls

India bulls are India’s leading Financial and Real Estate Company with a
wide presence throughout India. They ensure convenience and reliability in all their
products and services. India bulls have over 640 branches all over India. The
customers of India bulls are more than 4,50,000 which covers from a wide range of
financial services and products from securities, derivatives trading, depositary
services, research & advisory services, consumer secured & unsecured credit, loan
against shares and mortgage & housing finance. The company employs around 4000
Relationship managers who help the clients to satisfy their customized financial goals.
India bulls entered the Real Estate business in the year 2005 with its group of
companies. Large scale projects worth several hundred million dollars are evaluated
by them.

India bulls Financial Services Ltd is listed on the National Stock Exchange (NSE),
Bombay Stock Exchange (BSE) and Luxembourg Stock Exchange. The market
capitalization of India bulls is around USD 2500 million (29thDecember, 2006).
Consolidated net worth of the group is around USD 700 million. India bulls and its
group companies have attracted USD 500 million of equity capital in Foreign Direct
Investment (FDI) since March 2000. Some of the large shareholders of India bulls are
the largest financial institutions of the world such as Fidelity Funds, Goldman Sachs,
Merrill Lynch, Morgan Stanley and Farallon Capital.

41
India bulls Group is one of the top business houses in the country with business
interests in Real Estate, Infrastructure, Financial Services, Retail, Multiplex and
Power sectors. India bulls Group companies are listed in Indian and overseas financial
markets. The Net worth of the Group exceeds USD 3 billion. India bulls has been
conferred the status of a “Business Super brand” by The Brand Council, Super brands
India.

India bulls Financial Services is an integrated financial services powerhouse

providing Consumer Finance, Housing Finance, Commercial Loans, Life Insurance,
Asset Management and Advisory services. India bulls Financial Services Ltd is
amongst 68 companies constituting MSCI - Morgan Stanley India Index. India bulls
Financial is also part of CLSA’s model portfolio of 30 Best Companies in Asia. India
bulls Financial Services signed a joint venture agreement with Sogecap, the insurance
arm of Societé Generale (SocGen) for its upcoming life insurance venture. India bulls
Financial Services in partnership with MMTC Limited, the largest commodity trading
company in India, has set up India’s 4th Multi-Commodities Exchange.

India bulls Real Estate Limited is India’s third largest property company with
development projects spread across residential projects, commercial offices, hotels,
malls, and Special Economic Zones (SEZs) infrastructure development. India bulls
Real Estate partnered with Farallon Capital Management LLC of USA to bring the
first FDI into real estate. India bulls Real Estate is transforming 14 million sqft in 16
cities into premium quality, high-end commercial, residential and retail spaces. India
bulls Real Estate has diversified significantly in the following business verticals
within the real estate space: Real Estate Development, Project Advisory &
Facilities Management: Residential, Commercial (Office and Malls) and SEZ
Development.

India bulls Securities Limited is India’s leading capital markets company with All-
India Presence and an extensive client base. India bulls Securities possesses state of
the art trading platform, best broking practices and is the pioneer in trading product
innovations. Power India bulls, in-house trading platform, is one of the fastest and

42
most efficient trading platforms in the country.. India bulls Securities Limited is the
first brokerage house to be assigned the highest rating BQ – 1 by CRISIL.

Growth of India bulls

Year 2000-01:
One of India’s first trading platforms was set up by India bulls Financial Services Ltd.
with the development of an in-house team.

Year 2001-03:
The service offered by India bulls was increased to include Equity, F&O, Wholesale
Debt, Mutual fund, IPO Financing/Distribution and Equity Research.
Year 2003-04:
In this particular year India bulls ventured into Distribution and Commodities Trading
business.

Year 2004-05:
 This was one of the most important years in the history of India bulls. In this
year:
 India bulls came out with its initial public offer (IPO) in September 2004.
 India bulls started its Consumer Finance business.
 India bulls entered the Indian Real Estate market and became the first
company to bring FDI in Indian Real Estate.
 India bulls won bids for landmark properties in Mumbai.

Year 2005-06:
In this year the company acquired over 115 acres of land in Sonepat for residential
home site development. The world renowned investment banks like Merrill Lynch

43
and Goldman Sachs increased their shareholding in India bulls. It also became a
market leader in securities brokerage industry, with around 31% share in Online
Trading. The world’s largest hedge fund, Farallon Capital and its affiliates committed
Rs. 2000 million for India bulls subsidiaries Viz. India bulls Credit Services Ltd. and
India bulls Housing Finance Ltd. In the same year, the Steel Tycoon Mr. L N Mittal
promoted LNM India Internet venture Ltd. acquired 8.2% stake in India bulls Credit
Services Ltd.

Year 2006-07:

In this year, India bulls Financial Services Ltd. was included in the prestigious
Morgan Stanley Capital International Index (MSCI). India bulls Financial Services
Ltd. was benefited with the Farallon Capital agreeing to invest Rs. 6,440 million in it.
The company also received an “in principle approval” from Government of India for
development of multi product SEZ in the state of Maharashtra. India bulls Financial
Services Ltd acquired 100% of the equity share capital of Noble Realtors Pvt. Ltd.
Noble Realtors is a Company engaged in the business of construction and
development of real estate projects. India bulls Real Estate Business was demerged to
become a separate entity called India bulls Real Estate Ltd. The Board of India bulls
Financial

44
The Board of Directors

 Sameer Gehlaut Chairman and CEO

 Gagan Banga Executive Director

 Rajiv Rattan CEO

 Shamsher Singh Director

 Aishwarya Katoch Director

 Karan Singh Director

 Prem Prakash Mirdha Director

 Saurabh K Mittal Director

 Amit Jain Company Secretary

45
46
 Senior Vice President

Regional Manager

Branch Manager
Senior Sales Manager

Support System Sales Function

RM/SRM
Back Office Local
Executive Compliance
Officer

ARM

Dealer

Organization Structure- Board of Directors:

47
 Trading Products of Indiabulls Securities

Indiabulls Securities
Trading Products

Cash Account Intraday Account Margin Trading

48
Indiabulls Securities provide three products for trading. They are
 Cash Account
 Intraday Account
 Margin Trading (Mantra)

Cash Account: It provides the client to buy 4 times of cash balance in his trading
account.
Intraday Product: It provides the client to buy 8 times of his cash balance in the
trading account.
Mantra Account: Also called as margin trading, is a special account to buy on
leverage for a longer duration

49
The subsidiaries of India bulls Financial Services Ltd. include:
 India bulls Capital Services Ltd.

 India bulls Commodities Pvt. Ltd.

 India bulls Credit Services Ltd.

 India bulls Finance Co. Pvt. Ltd

 India bulls Housing Finance Ltd.

 India bulls Insurance Advisors Pvt. Ltd.

 India bulls Resources Ltd.

 India bulls Securities Ltd

India bulls Financial Services Ltd:

India bulls Financial Services Ltd. was incorporated in the year 2005.The Auditors of
India bulls Financial Services Ltd. are Deloitte, Haskins & Sells. The main activity of
this company is in relation to securities and stock brokerage. It was also responsible
for setting up one of India’s first trading platforms. 

India bulls Financial Services is one of India’s leading and fastest growing private
sector financial services companies. India bulls Financial Services is an integrated
financial services powerhouse providing Consumer Finance, Housing Finance,
Commercial Loans, Life Insurance, Asset Management and Advisory services. The
company is focused on providing multiple financial services through an extensive
network of consumer touch-points covering Tier 1, Tier 2 & Tier 3 cities. India bulls
serves more than 500,000 customers across different financial products through its
branch network, call centers & the internet. It also ranks among the top private sector
financial services and banking groups in terms of net worth.

50
India bulls Securities Limited:

India bulls Securities Limited is India’s leading capital markets company with All-
India Presence and an extensive client base. India bulls Securities is the first and only
brokerage house in India to be assigned the highest rating BQ – 1 by CRISIL. India
bulls Securities Ltd is listed on NSE, BSE & Luxembourg stock exchange

India bulls Real Estate Limited:

India bulls Real Estate Limited with projects covering a total land area in excess of
10,000 acres is one of the largest listed real estate companies in India and a leading
national player across multiple realty and infrastructure sectors. IBREL projects
include High-end Office and Commercial Spaces, Premium Residential
Developments, Integrated Townships, Luxury Resorts and Special Economic Zones.
IBREL is partners with internationally renowned consultants and construction
companies for its developments at various stages of execution.

Store One Retail India Ltd:

Retailing in India is gradually inching its way to becoming the next booming industry.
The whole concept of shopping has changed in terms of consumer buying behavior
and leading to a revolution in shopping. Modern retail has entered India in the form of
sprawling shopping centers, multi-storied lifestyle malls and huge complexes offer
shopping, entertainment and food all under one large roof.

A retail business works on a network environment as the stores connect to one another
as well as to supplier sites. This is because in the retail business quick response is the
key to success. Retail is buzzing with lot of excitement and euphoria. The market is
growing and government policies are becoming more favorable and emerging
technologies are facilitating operations.

The next few years will be amongst the most remarkable in the evolution of modern
retail in India and Store One Retail India Ltd. is amongst those that have aspired to
emerge into this booming industry.

51
Store One Retail India Ltd. is the retail arm of India bulls Group, a business
conglomerate catering to the entire Indian consumption space.

Store One Retail operates on multiple retail formats in both value and lifestyle
segment of the Indian consumer market.

The company has forayed in  multiple formats which include Store One (in the
process of being re-branded) - a chain of lifestyle stores, “happy store” - a hyper
format retail chain offering great value for money on daily needs, apparels, home and
appliances. The company already has operational stores at Pune, Nagpur & Faridabad
(NCR) .The Company plans to stretch its footprint across the nation with the addition
of more such stores.

 INDIABULLS POWER BUSINESS:

India bulls Power Limited was established in 2007 to capitalize on emerging

opportunities in the Indian power sector. It develops and intends to operate and
maintain power projects in India. India bulls are currently developing Five Thermal
Power Projects with an aggregate capacity of approximately 6600 MW. These
projects include, Amravati Phase-I (1320 MW), Amravati Phase-II (1320 MW), Nasik
(1335 MW) in Maharashtra, Bhaiyathan Thermal Power Project (1320 MW) &
Chhattisgarh Power Project (1320 MW) in the State of Chhattisgarh. In addition to the
above Indiabulls is also developing four medium size Hydro Power Projects in
Arunachal Pradesh aggregating to 167 MW. India bulls has also entered into MoUs
with the Govt. of Madhya Pradesh and Jharkhand for setting up of 2640 MW & 1320
MW Thermal Power Projects in each of these States respectively.

India bulls power trading ltd:

Indian Power Trading sector has come a long way since trading was recognized as a
distinct activity in the Indian Electricity Act 2003. By the end of FY 2008-09 the
traded volume has increased manifold since 2003. The market has matured in terms of
volume traded, number of trading entities and sophistication of the trading
instruments. India saw its first online exchange for trading of electricity in 2008 thus
further improving the price discovery mechanism. The country today has two
operational Power Exchanges which are operating on Day Ahead contracts. The
electricity futures have also been introduced on an Indian Commodity Exchange.

52
These developments in the market open up a new dimension in the Indian energy
sector for optimization of Demand and Supply by way of trading. Trading of electric
power would help the entities with surplus or deficit power situations to ensure
optimal utilization of their resources & create an inter-regional & intra-regional
balance in respect of power.

India bulls group companies India bulls Power Trading Limited and India bulls Power
Generation Limited have been awarded with Category “A” Interstate Power Trading
License by the Hon’ble Central Electricity Regulatory Commission (Vide License No.
32/Trading/CERC dated 12.09.2008 and Vide License No. 33/Trading/CERC dated
12.09.2008). India bulls has also been granted a category ‘F’ trading license for
intrastate trading in Maharashtra by Hon’ble MERC (Vide License No. 2 of 2008
dated 21st August 2008).

  Mutual Fund

  Assets Under management as on 28th Feb 2010

Asset under management of mutual fund industry for the month of February
2010 augmented by meager 1.08% to Rs. 7, 66,869 crores compared to Rs. 7, 58,712
crores in the prior month. The industry has seen growth for the second consecutive
month led by the strong sentiments of the investors in the market & investments by
banks & corporate. The total assets of income funds stood at Rs. 4, 76,384 crores (up
by 1.21%) while liquid funds went up to Rs. 73,030 crores (up by 2.14%). Mutual
Funds were net sellers of Rs 697.40 crore in the equity market and net buyer of Rs
11,973.60 crore in debt market. The MF industry recorded the net inflow of Rs. 6,365
crores in February 2010 against net inflow of Rs 97,242 crore in January 2010

53
INDUSTRY PROFILE

STOCK MARKET:

Indian stock market has shown dramatic changes last 4 to 5 years. As of 2004 march-
end, Indian stock exchanges had over 9400 companies listed. Of course, the number
of companies whose shares are actively traded is smaller, around 800 at the NSE and
2600 at the BSE. Each company may have multiple securities listed on an exchange.
Thus, BSE has over 7200 listed securities, of which over 2600 are traded. The market
capitalization of all listed stocks now exceeds Rs. 13 Lakh crore. Total turnover-or the
value of all sales and purchases – on the BSE and the NSE now exceeds Rs. 50 lakh
crore.

As large number of indices are also available to fund managers. The two leading
market indices are NSE 50-shares (S&P CNX Nifty) index and BSE 30-share
(SENSEX) index. There are index funds that invest in the securities that form part of
one or the other index. Besides, in the derivatives market, the fund managers can buy
or sell futures contracts or options contracts on these indices. Both BSE and NSE also
have other sect oral indices that track the stocks of companies in specific industry
groups-FMCG, IT, Finance, Petrochemical and Pharmaceutical while the SENSEX
and Nifty indices track large capitalization stocks, BSE and NSE also have Mid cap
indices tracking mid-size company shares. The number of industries or sectors
represented in various indices or in the listed category exceeds50. BSE has 140 scrips
in its specified group A list, which are basically large-capitalization stocks. B 1 Group
includes over 1100 stocks, many of which are mid-cap companies. The rest of the B2
Group includes over 4500 shares, largely low-capitalization.

54
SECURITIES AND EXCHANGE BOARD OF INDIA(SEBI):

SEBI is the regulator for the Securities Market in India. It was formed officially by
the Government of India in 1992 with SEBI Act 1992 being passed by the Indian
Parliament. Chaired by C B Bhave, SEBI is headquartered in the popular business
district of Bandra-Kurla complex in Mumbai, and has Northern, Eastern, Southern
and Western regional offices in New Delhi, Kolkata, Chennai and Ahmedabad.

Preamble:

The Preamble of the Securities and Exchange Board of India describes the basic
functions of the Securities and Exchange Board of India as

“…..to protect the interests of investors in securities and to promote the development
of, and to regulate the securities market and for matters connected therewith or
incidental thereto” .

Functions and responsibilities:

SEBI has to be responsive to the needs of three groups, which constitute the market:

 the issuers of securities

 the investors

 The market intermediaries.

55
National Stock Exchange (NSE):

The NSE was incorporated in NOVEMBER 1994 with an equity capital of Rs.25
Crores. The International Securities Consultancy (ISC) of Hong Kong has helped in
setting up NSE. ISC has prepared the detailed business plans and installation of
hardware and software systems. The promotions for NSE were financial institutions,
insurance companies, banks and SEBI capital market ltd, Infrastructure leasing and
financial services ltd. and stock holding corporation ltd.

NSE is a national market for shares, PSU bonds, debentures and government
securities since infrastructure and trading facilities are provided. The genesis of the
NSE lies in the recommendations of the Pherwani Committee (1991).It has been setup
to strengthen the move towards professionalisation of the capital market as well as
provide nation wide securities trading facilities to investors.

NSE-Nifty:

The NSE on April22, 1996 launched a new equity index. The NSE-50 the new index
which replaces the existing NSE-100, is expected to serve as an appropriate index for
the new segment of futures and options.

“Nifty” means National Index for Fifty Stocks.

The NSE-50 comprises 50 companies that represent 20 broad industry groups with an
aggregate market capitalization of around Rs. 1, 70,000 crores. All the companies
included in the Index have a market capitalization in excess of Rs. 500 crores. Each
and should have traded for 85% of trading days at an impact cost of less than 1.5%.

The base period for the index is the close of price on NOV 3, 1995 which makes one
year of completion of operation of NSE’s, capital market segment. The base value of
the index has been set at 1000.

56
Markets

Currently, NSE has the following major segments of the capital market:
 Equity
 Futures and Options
 Retail Debt Market
 Wholesale Debt Market
 Currency futures

NSE became the first stock exchange to get approval for Interest rate futures as
recommended by SEBI-RBI committee, on 31 August,2009, a futures contract based
on 7% 10 Year GOI bond (NOTIONAL) was launched with quarterly maturities

NSE-Midcap Index:

The NSE madcap index or the Junior Nifty comprises 50 stocks that represents 21
board Industry groups and will provide proper representation of the madcap. All
stocks in the index should have market capitalization of greater than Rs.200 crores
and should have traded 85% of the trading days an impact cost of less 2.5%.

The base period for the index is Nov 4, 1996 which signifies 2 years for completion
of operations of the capital market segment of the operations. The base value of the
index has been set at 1000.

Average daily turnover of the present scenario 258212(laces) and number of average
daily trades 2160(laces).

57
Bombay Stock Exchange (BSE):

This stock exchange, Mumbai, popularly known as “BSE” was established In 1875 as
“The native share and stock brokers association”, as a voluntary non-profit making
association .It has evolved over the years into its present status as the premier stock
exchange in the country. It may be noted that the stock exchange is the oldest one in
Asia, even older than the Tokyo Stock Exchange, this was founded in 1878.

The Bombay Stock Exchange Limited (formerly, The Stock Exchange, Mumbai;
popularly called Bombay Stock Exchange, or BSE) is the oldest stock exchange in
Asia and has the greatest number of listed companies in the world; with 4700 listed as
of August 2007.It is located at Dalal Street, Mumbai, India. On 31 December 2007,
the equity market capitalization of the companies listed on the BSE was US$ 1.79
trillion, making it the largest stock exchange in South Asia and the 12th largest in the
world.

A governing board comprising of 9 elected directors, 2 SEBI nominees, 7 public

representatives and an executive director is the apex body, which decides the policies
and regulates the affairs of the exchange.

The ban on all the deferral products like BLESS AND ALBM in the Indian capital
markets by SEBI with effect from July 2, 2001, abolition of account period
settlements, introduction of compulsory rolling settlements in all scripts traded on the
exchanges with effect from Dec 31, 2001, etc., have adversely impacted the liquidity
and consequently there is a considerable decline in the daily turnover at the exchange.
The average daily turnover of the exchange in the present scenario is 110363(laces)
and the no of average daily trades is 1057(laces)

58
BSE Indices:

In order to enable the market participants, analysts etc., to track the various ups and
downs in Indian stock market, the exchange had introduced in 1986 an equity stock
index called BSE-SENSEX that subsequently became the barometer of the moments
of the share prices in the Indian stock market. It is a “market capitalization –
weighted” index of 30 component stocks representing a sample of large, well
established and leading companies. The base year of sensex is 1978-79.

The Sensex is widely reported in both domestic and international markets through
print as well as electronic media. Sensex is calculated using a market capitalization
weighted method. As per this methodology, the level of index reflects the total market
value of all 30-component stocks from different industries related to particular base
period. The total value of a company is determined by multiplying the price of its
stock by the number of shares outstanding.

Statisticians call an index of a set of combined variables (such as price number of

shares) Composite index. An Indexed number is used to represent the results of this
calculation in order to make the value easier to work with and track over a time. IT is
much easier to graph a chart base on indexed values then one based on actual values
world over majority of the well known indices are constructed using “Market
capitalization weighted method”. The divisor is only link to original base period value
of the sensex.

New base year average = old base year average

*(new market value/old market value)

Membership CRITARIA:

 Membership for the new segment in both the exchanges is not automatic and
has to be separately applied for.
 Membership is currently open on both the exchanges.
 All members will also have to be separately registered with SEBI before they
can be accepted.

59
Membership Criteria

NSE

Clearing Member (CM)

 Net worth - 300lakh

 Interest-Free Security Deposits - Rs. 25lakh
 Collateral Security Deposit - Rs. 25lakh

In addition for every TM he wishes to clear for the CM has to deposit Rs. 10lakh.

Trading Member (TM)

 Net worth - Rs. 100 lakh

 Interest-Free Security Deposit - Rs. 8 lakh
 Annual Subscription Fees - Rs. 1 lakh

BSE

Clearing Member (CM)

 Networth - 300 lacs

 Interest-Free Security Deposits - Rs. 25 lakh
 Collateral Security Deposit - Rs. 25 lakh
 Non-refundable Deposit - Rs. 5 lakh
 Annual Subscription Fees - Rs. 50 thousand

In addition for every TM he wishes to clear for the CM has to deposit Rs. 10 lakh
with the following break-up.

 Cash - Rs. 2.5 lakh

 Cash Equivalents - Rs. 25 lakh
 Collateral Security Deposit - Rs. 5 lakh

60
Trading Member (TM)

 Net worth - Rs. 50 lakh

 Non-refundable Deposit - Rs. 3 lakh
 Annual Subscription Fees - Rs. 25 thousand

The Non-refundable fees paid by the members are exclusive and will be a total of
Rs.8 lakhs if the member has both Clearing and Trading rights.

Rules and Laws:

 Both the BSE and the NSE have been give in-principle approval on their rule and
laws by SEBI.
 According to the SEBI chairman, the Gazette notification of the Bye-Laws after
the final approval is expected to be completed by May 2000.
 Trading is expected to start by mid-June 2000.

Historical Data for BANK NIFTY

For the period 24-1-2012 to 31-1-2012

Date Open High Low Close

24-Jan-2012 9369.10 9630.55 8960.20 9133.85
25-Jan-2012 9170.35 9827.30 9170.35 9752.25
28-Jan-2012 9748.35 9937.90 9313.60 9901.90
29-Jan-2012 9933.20 10113.35 9420.75 9569.60
30-Jan-2012 9635.35 9635.35 9309.80 9404.15
31-Jan-2012 9442.20 9505.35 9147.25 9226.25

61
INTERPRETATION: - Due to the expectations that “there will be cut in the
lending rates” led to increase in the prices of all Banks in India. But New Monetary
policy did not changed the lending rates. Even though there is no hike in the lending
rates investors disappointed and it led to fall in the prices Of the Banks. From the
above example it is clear that “EXPECTATIONS DRIVES THE MARKET”

Date Open High Low Close

07-Mar-2012 4149.25 4177.70 4149.25 4164.55
08-Mar-2012 4164.85 4175.45 4099.55 4106.95
09-Mar-2012 4107.15 4132.80 4080.90 4096.20
12-Mar-2012 4096.65 4126.90 4023.15 4040.00
13-Mar-2012 4046.00 4065.45 3918.20 3938.95
14-Mar-2012 3939.10 3958.90 3856.70 3942.00
15-Mar-2012 3948.05 3958.00 3873.85 3893.90
16-Mar-2012 3893.40 3893.40 3674.85 3745.30
19-Mar-2012 3745.40 3818.75 3718.15 3811.20
20-Mar-2012 3811.65 3842.05 3711.05 3726.75
21-Mar-2012 3726.50 3726.65 3554.50 3576.50
22-Mar-2012 3577.15 3679.15 3576.65 3655.65
23-Mar-2012 3661.55 3714.15 3568.55 3626.85
26-Mar-2012 3627.25 3779.50 3626.80 3761.65
28-Mar-2012 3761.85 3795.70 3684.25 3718.00
29-Mar-2012 3717.45 3781.45 3713.90 3734.60
07-Mar-2012 3735.25 3775.85 3717.15 3770.55
08-Mar-2012 3768.40 3768.40 3623.00 3641.10
09-Mar-2012 3644.90 3711.05 3630.55 3643.60
12-Mar-2012 3639.35 3683.60 3573.85 3608.55

62
INTEPRETATION: - Typically, higher inflation leads to lower equity values;
from the above example it is proved that when the inflation was high in the market
stock prices had gone low. When it reached the minimum level which is set by the
RBI, prices of the stocks dramatically went up.

Historical Data for S&P CNX NIFTY

For the period 1-3-2011 to 30-4-2011

Date Open High Low Close

01-Mar-2012 3745.40 3818.75 3718.15 3811.20
02-Mar-2012 3811.65 3842.05 3711.05 3726.75
05-Mar-2012 3726.50 3726.65 3554.50 3576.50
06-Mar-2012 3577.15 3679.15 3576.65 3655.65
07-Mar-2012 3661.55 3714.15 3568.55 3626.85
08-Mar-2012 3627.25 3779.50 3626.80 3761.65
09-Mar-2012 3761.85 3795.70 3684.25 3718.00
12-Mar-2012 3717.45 3781.45 3713.90 3734.60
13-Mar-2012 3735.25 3775.85 3717.15 3770.55
14-Mar-2012 3768.40 3768.40 3623.00 3641.10
15-Mar-2012 3644.90 3711.05 3630.55 3643.60
16-Mar-2012 3639.35 3683.60 3573.85 3608.55
19-Mar-2012 3611.30 3683.35 3602.85 3678.90
20-Mar-2012 3680.35 3725.00 3676.65 3697.60
21-Mar-2012 3697.70 3771.20 3680.60 3764.55
22-Mar-2012 3764.50 3881.00 3764.50 3875.90
23-Mar-2012 3876.75 3901.75 3850.80 3861.05
26-Mar-2012 3863.45 3885.45 3768.25 3819.95

63
28-Mar-2012 3818.75 3830.30 3752.95 3761.10
29-Mar-2012 3759.15 3805.85 3750.35 3798.10
30-Mar-2012 3788.85 3832.20 3785.30 3821.55
02-Apr-2012 3820.00 3820.00 3617.00 3633.60
03-Apr-2012 3633.85 3703.05 3632.20 3690.65
04-Apr-2012 3689.75 3751.40 3689.75 3733.25
05-Apr-2012 3735.20 3771.45 3709.15 3752.00
09-Apr-2012 3752.90 3850.90 3747.25 3843.50
10-Apr-2012 3844.15 3858.35 3819.30 3848.15
11-Apr-2012 3848.35 3876.35 3844.75 3862.65
12-Apr-2012 3861.85 3861.85 3811.25 3829.85
13-Apr-2012 3830.35 3924.55 3828.45 3917.35
16-Apr-2012 3920.50 4016.80 3920.50 4013.35
17-Apr-2012 4014.40 4030.00 3976.25 3984.95
18-Apr-2012 3989.60 4039.25 3981.75 4011.60
19-Apr2012 3998.50 4011.00 3933.35 3997.65
20-Apr-2012 4000.25 4090.05 3995.50 4083.55
23-Apr-2012 4083.55 4122.35 4075.20 4085.10
24-Apr-2012 4085.10 4162.15 4057.70 4141.80
25-Apr-2012 4134.25 4173.30 4114.35 4167.30
26-Apr-2012 4170.05 4217.90 4143.25 4177.85
27-Apr-2012 4182.00 4182.00 4074.30 4083.50
30-Apr-2012 4081.60 4096.90 4028.90 4087.90

64
 NIFTY

4300
4200
4100
CLOSING PRICE

4000
3900
3800 Series1
3700
3600
3500
3400
3300
1 3 5 7 9 11 13 15 17 19 21 23 25
DATE

INTERPRETATION:- As the inflation in the India came to minimum level

investors in India and FIIs felt economic conditions in the country were good so all
stock prices and indices have gone up.

65
3. FOREIGN INSTITUTIONAL INVESTMENTS

Historical Data for S&P CNX NIFTY

For the period 1-1-2011 to 31-1-2011  
Date Open High Low Close

1-Jan-12 6136.75 6165.35 6109.85 6144.35

2-Jan-12 6144.7 6197 6060.85 6179.4
3-Jan-12 6184.25 6230.15 6126.4 6178.55
4-Jan-12 6179.1 6300.05 6179.1 6274.3
7-Jan-12 6271 6289.8 6193.35 6279.1
8-Jan-12 6282.45 6357.1 6221.6 6287.85
9-Jan-12 6287.55 6338.3 6231.25 6272
10-Jan-12 6278.1 6347 6142.9 6156.95
11-Jan-12 6166.65 6224.2 6112.55 6200.1
14-Jan-12 6208.8 6244.15 6172 6206.8
15-Jan-12 6226.35 6260.45 6053.3 6074.25
16-Jan-12 6065 6065 5825.75 5935.75
17-Jan-12 5937.95 6013.15 5880.3 5913.2
18-Jan-12 5907.75 5908.75 5677 5705.3
21-Jan-12 5705 5705 4977.1 5208.8
22-Jan-12 5203.35 5203.35 4448.5 4899.3
23-Jan-12 4903.05 5328.05 4891.6 5203.4
24-Jan-12 5208 5357.2 4995.8 5033.45
25-Jan-12 5035.05 5399.25 5035.05 5383.35
28-Jan-12 5380.95 5380.95 5071 5274.1
29-Jan-12 5279.55 5391.6 5225.25 5280.8
30-Jan-12 5283.75 5314.3 5142.25 5167.6
31-Jan-12 5172.25 5251.65 5071.15 5137.45

INTERPRETATION:- FIIs plays the big role in the stock market. As they
pull out the very huge amount in India because of the subprime crisis and other
reasons, our indices had lost ever highest intraday. In the middle of the January in
week nifty lost 1175 points.

66
Interpretation: The above table indicating that Global linkages for Indian
stocks have been on the rise since 2002-03, when foreign institutional investments
began to gain traction.

67
 1. Political influence

Ambuja Cements Ltd.

Date Open High Low Close Traded Value No. Of Trades Traded Qty 
(Rs. Lakhs)
13-12-2011 151.00 151.75 145.25 147.15 402.35 1651 272893 
14-12-2011 147.50 152.00 144.55 149.45 762.21 2701 513615 
17-12-2011 149.50 151.75 145.05 145.40 306.87 1568 206485 
18-12-2011 145.60 147.40 144.25 144.60 192.85 1058 132641 
19-12-2011 146.30 147.25 144.25 144.65 180.98 804 124563 
20-12-2011 145.00 148.40 144.00 144.30 468.43 836 324751 
24-12-2011 146.95 147.70 144.10 144.60 208.35 802 143578 
26-12-2011 146.00 147.95 144.30 145.75 195.08 880 134375 
27-12-2011 146.85 147.25 144.70 145.20 176.33 1054 120948 
28-12-2011 145.00 150.00 145.00 149.20 451.28 1214 307337 

Gujarat Lease Financing Ltd.

Date Open High Low Close Traded Value No. Of Trades Traded Qty 
(Rs. Lakhs)
14-12-2011 12.42 12.42 12.42 12.42 4.04 69 32557 
17-12-2011 13.04 13.04 13.04 13.04 11.57 159 88712 
18-12-2011 13.69 13.69 12.39 13.69 57.30 732 432346 
19-12-2011 14.37 14.37 14.37 14.37 10.26 91 71373 
20-12-2011 15.08 15.08 15.08 15.08 6.42 83 42547 
24-12-2011 15.83 15.83 15.83 15.83 6.35 75 40091 
26-12-2011 16.62 16.62 16.62 16.62 3.60 61 21666 
27-12-2011 17.45 17.45 17.45 17.45 3.76 45 21575 
28-12-2011 18.32 18.32 16.58 18.32 190.76 835 1044252 
31-12-2011 19.23 19.23 18.90 19.22 120.77 725 628084 
01-01-2011 20.15 20.15 18.30 20.15 108.51 668 541779 

INTERPRETATION:- No change in the Government, new government

strong support, election of good leader led to safe feeling among investors for
investment , so prices of the firms situated in Gujarat have increased, Political
Stability and Industrial Growth move together.

68
5. COMPANY ANNOUNCEMENTS

Stock price reactions to some recent news headlines for the Infosys
company

Stock Price Volatility

Price Price
Headline +/-
Before After
Infosys Q3 results on Jan 11   28-Dec-2011 IRIS 1780 1795.75 +
Alliance Bank to run on Finacle Solution of Infosys   10-
1731 1748.45 +
Dec-2011 IRIS
Infosys makes USD 80 mn pitch for Aviva`s BPO units    08-
1731 1748.45 +
Dec-2011 IRIS NEWS DIGEST
Infosys to invest Rs 8 bn by March`08   30-Nov-2011 IRIS 1580 1604.05 +
Infosys Technologies appears on FinTech 100 list   29-Nov-
1595 1569.6 -
2011 IRIS NEWS DIGEST
Infosys gets 2011 BSC Hall of Fame award for executing
1580 1569.55 -
strategy   28-Nov-2011 IRIS
Infosys Technologies delivers two new services to
1595 1575.8 -
Microsoft   27-Nov-2011 IRIS
Infosys eyes 15 overseas deal worth USD 100 mn    31-Oct-
1851.5 1839.1 -
2011 IRIS NEWS DIGEST
Infy launches Finacle Bank-in-a-Box   30-Oct-2011 PRESS
1875 1851.3 -
RELEASE
Infosys rejigs business units   29-Oct-2011 IRIS NEWS
1870 1860.55 -
DIGEST

Stock price reactions to some recent news headlines for the Satyam Company
Stock Price Volatility

Price Price
Headline +/-
Before After
Satyam to erect centre of excellence in Hyderabad   24-Dec-
430 454.55 +
2011 IRIS
Satyam allots shares under ESOP   20-Dec-2011 IRIS 407 427.7 +
Satyam Computer allots equity shares under ESOP   13-Dec-
436.5 421.05 -
2011 IRIS
Satyam Computer allots shares under ESOP   11-Dec-2011
442.7 441.7 -
IRIS
Satyam sets up COE in Japan   11-Dec-2011 IRIS 442.7 441.7 -
Satyam Computer allots shares under ESOP   06-Dec-2011
444.9 436.8 -
IRIS
Satyam & Arvato Systems ink pact    05-Dec-2011 IRIS 445 438.75 -
Satyam Computer allots shares under ESOP   30-Nov-2011
430 439.95 +
IRIS
Satyam Computer allots 54,478 shares under ESOP   28-
429 424.95 -
Nov-2011 IRIS

69
Satyam to sponsor 2011, 2014 FIFA World Cup   26-Nov-
420 426.35 +
2011 IRIS NEWS DIGEST

INTERPRETATION:-Just impressive sales and profit figures don't

impress many investors. They also judge a company by its growth
rate,i.e rate of growth in sales as well as profits. A fast growing
company has good capital appreciation. Good growth is also a
reflection of quality management.

INFOSYS QUARTERLY RESULTS 11TH.

Infosys Technologies Ltd.

Date Open High Low Close

03-01- 1,740.0 1,750.0 1,691.6 1,713.0
2012 0 0 0 0
04-01- 1,711.3 1,730.0 1,680.0 1,694.8
2012 0 0 0 0
07-01- 1,670.0 1,681.0 1,623.0 1,638.1
2012 0 0 0 0
08-01- 1,651.0 1,694.6 1,623.2 1,662.1
2012 0 0 0 5
09-01- 1,679.0 1,699.0 1,648.7 1,655.5
2012 0 0 5 5
10-01- 1,660.9 1,714.0 1,588.0 1,602.2
2012 0 0 0 0
11-01- 1,625.0 1,650.0 1,562.0 1,580.1
2012 0 0 0 0
14-01- 1,590.0 1,599.0 1,524.1 1,530.2
2012 0 0 0 0
15-01- 1,550.0 1,555.0 1,500.0 1,501.8
2012 0 0 0 0
16-01- 1,525.0 1,544.0 1,485.1 1,494.1
2012 0 0 0 5
17-01- 1,500.0 1,526.0 1,487.2 1,490.9
2012 0 0 5 0
18-01- 1,475.0 1,500.0 1,452.0 1,464.3
2012 0 0 0 5
21-01- 1,465.0 1,465.0 1,305.0 1,390.2
2012 0 0 0 0
22-01- 1,355.0 1,425.0 1,212.2 1,377.5
2012 0 0 0 5

INTERPRETATION:- Impressive sales and profit figures don't

impress many investors, the stock market is driven by the
expectations. Whenever a particular company is about to achieve its
target profits, then itself prices of that stock increase, but not after

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announcing the quarterly results. If the results are not up to the
investor expectation then prices would fall.

6. SEBI
a) Historical Data for S&P CNX NIFTY

For the period 12-10-2011 to 22-10-2011

Date Open High Low Close

12-Oct-2011 5525.30 5549.30 5402.60 5428.25
15-Oct-2011 5428.35 5682.65 5419.90 5670.40
16-Oct-2011 5670.65 5708.35 5578.45 5668.05
17-Oct-2011 5658.90 5658.90 5107.30 5559.30
18-Oct-2011 5551.10 5736.80 5269.65 5351.00
19-Oct-2011 5360.35 5390.85 5101.75 5215.30
22-Oct-2011 5202.75 5247.40 5070.90 5184.00

INTERPRETATION: - As the SEBI has announced to ban the P-

Notes market has fallen dramatically.

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b) SEBI Regulation on Stock Prices

IFSL Ltd

Year High Low Close P/E High P/E Low P/E Close Mkt Cap.
Jan 08 3.85 1.65 1.65 0.00 0.00 0.00 13.20
Dec 07 2.81 1.33 2.81 0.00 0.00 0.00 22.48
Nov 07 1.71 1.15 1.39 0.00 0.00 0.00 11.12
Oct 07 1.31 0.82 1.12 0.00 0.00 0.00 8.96
Sep 07 1.52 1.10 1.25 0.00 0.00 0.00 10.00
Year High Low Close P/E High P/E Low P/E Close Mkt Cap.
Aug 07 1.54 0.86 1.34 0.00 0.00 0.00 10.72
Jul 07 0.97 0.78 0.93 0.00 0.00 0.00 7.44
Jun 07 1.00 0.75 0.88 0.00 0.00 0.00 7.04
May 07 1.14 0.80 0.85 0.00 0.00 0.00 6.80
Apr 07 1.31 0.92 1.14 0.00 0.00 0.00 9.12
Year High Low Close P/E High P/E Low P/E Close Mkt Cap.
Mar 07 1.40 0.94 0.95 0.00 0.00 0.00 7.60
Feb 07 2.39 1.34 1.34 0.00 0.00 0.00 10.72
Jan 07 1.84 0.77 1.73 0.00 0.00 0.00 13.84
Dec 06 1.06 0.78 0.80 0.00 0.00 0.00 6.40
Nov 06 1.24 0.89 0.90 0.00 0.00 0.00 7.20
Year High Low Close P/E High P/E Low P/E Close Mkt Cap.
Oct 06 1.50 1.07 1.08 0.00 0.00 0.00 8.64
Sep 06 1.47 1.12 1.26 0.00 0.00 0.00 10.08
Aug 06 2.14 1.25 1.39 0.00 0.00 0.00 11.12
Jul 06 1.70 1.26 1.37 0.00 0.00 0.00 10.96
Jun 06 2.27 1.31 1.58 0.00 0.00 0.00 12.64
Year High Low Close P/E High P/E Low P/E Close Mkt Cap.
May 06 3.21 1.84 2.07 0.00 0.00 0.00 16.56
Apr 06 4.41 1.70 2.96 0.00 0.00 0.00 23.68
Mar 06 3.22 1.34 1.58 0.00 0.00 0.00 12.64
Feb 06 4.69 2.56 2.91 5.77 2.51 3.08 23.28
Jan 06 5.60 3.64 3.64 6.34 3.85 3.85 29.12
Year High Low Close P/E High P/E Low P/E Close Mkt Cap.
Dec 05 6.81 4.23 4.45 7.85 4.25 4.70 35.60
Nov 05 11.64 6.39 6.40 13.58 6.74 6.76 51.20
Oct 05 19.80 4.40 7.60 20.92 3.86 8.03 60.80
Sep 05 38.00 21.20 21.95 45.49 19.08 23.20 175.60
Aug 05 29.95 21.20 27.80 36.81 18.34 29.38 222.40
Year High Low Close P/E High P/E Low P/E Close Mkt Cap.
Jul 05 29.75 20.45 26.10 34.71 20.41 27.58 208.80

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 Jun 05 27.39 21.50 22.55 29.73 21.66 23.83 180.40
May 05 27.50 23.80 25.79 30.41 24.17 27.25 206.32
Apr 05 25.91 22.25 25.90 27.39 23.40 27.37 207.20
Mar 05 22.85 12.94 22.11 24.96 12.45 23.37 176.88
Year High Low Close P/E High P/E Low P/E Close Mkt Cap.
Feb 05 19.58 13.66 14.21 0.00 0.00 0.00 113.68
Jan 05 20.00 15.24 18.73 0.00 0.00 0.00 149.80
Dec 04 17.69 13.40 16.00 0.00 0.00 0.00 127.96
Nov 04 14.55 10.80 13.83 0.00 0.00 0.00 110.60
Oct 04 11.20 6.38 11.15 0.00 0.00 0.00 89.20
Year High Low Close P/E High P/E Low P/E Close Mkt Cap.
Sep 04 6.09 2.01 6.09 0.00 0.00 0.00 48.72
Aug 04 1.80 1.50 1.76 0.00 0.00 0.00 14.04
Dec 03 1.60 1.49 1.52 0.00 0.00 0.00 12.16
Nov 03 1.68 1.60 1.61 0.00 0.00 0.00 12.84
Oct 03 1.68 1.61 1.66 0.00 0.00 0.00 13.28
Year High Low Close P/E High P/E Low P/E Close Mkt Cap.
Sep 03 1.58 1.34 1.58 0.00 0.00 0.00 12.64
Aug 03 1.29 1.08 1.15 0.00 0.00 0.00 9.20
Jul 03 1.09 1.07 1.07 582.69 562.00 562.00 5.62
Jun 03 1.10 1.06 1.06 599.81 554.00 554.00 5.54
May 03 1.06 1.06 1.06 557.00 557.00 557.00 5.57
Year High Low Close P/E High P/E Low P/E Close Mkt Cap.
Apr 03 1.20 1.15 1.20 632.64 604.00 627.00 6.27
Mar 03 1.20 1.00 1.14 630.00 466.67 599.00 5.99
Jan 03 1.03 1.00 1.01 0.00 0.00 0.00 5.30
Dec 02 1.05 0.98 1.02 0.00 0.00 0.00 5.36
Mar 02 1.40 1.01 1.01 0.00 0.00 0.00 5.30
Year High Low Close P/E High P/E Low P/E Close Mkt Cap.
Aug 01 1.25 1.23 1.25 0.00 0.00 0.00 6.56
Oct 96 1.00 1.00 1.00 0.00 0.00 0.00 5.25
Sep 96 1.00 1.00 1.00 0.00 0.00 0.00 5.25

INTERPRETAION: Market rumors and motivated announcements by

companies are used to manipulate the prices of small-cap stocks. The above table
proving that SEBI is taking necessary actions when the manipulation or price riggings
takes place in the market.

7. ANNUAL BUDGET

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 Data for ACC - EQ from 16-3-2012 to 23-3-2012
 

Serie Prev Open High Low Last Close

Date
s Close Price Price Price Price Price
16-Mar-
EQ 731.80 735.70 742.00 715.20 718.05 723.15
2011
19-Mar-
EQ 723.15 730.00 744.50 720.15 736.50 739.35
2011
20-Mar-
EQ 739.35 745.00 761.90 740.00 745.80 749.20
2011
21-Mar-
EQ 749.20 752.00 762.00 737.10 748.00 752.75
2011
22-Mar-
EQ 752.75 755.00 763.50 745.55 752.00 753.70
2011
23-Mar-
EQ 753.70 755.00 781.00 741.20 744.60 746.30
2011

INTERPRETATION:- Cut in the Excise duty to the Cement industry in

the last Budget led to increase the prices of the cement stocks. Investors
felt the industry can create more profits as compared to previous.

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B)
Data for
RANBAXY - EQ from 25-2-2012 to 7-3-2012
Total Traded
Series Date Prev Close Open Price Close Price
Quantity
EQ 25-Feb-2011 410.00 410.00 420.65 936335
EQ 26-Feb-2011 420.65 425.00 421.25 552491
EQ 27-Feb-2011 421.25 422.00 436.05 1969013
EQ 28-Feb-2011 436.05 437.10 444.35 2252916
EQ 29-Feb-2011 444.35 445.00 445.75 2458981
EQ 03-Mar-2011 445.75 439.00 452.45 3804665
EQ 04-Mar-2011 452.45 450.00 450.10 1547607
EQ 05-Mar-2011 450.10 450.00 454.30 1216420

INTERPRETATION: As the Government reduced the Excise on Pharma goods to

14%, excised R&D gives 125% weighted tax weighted Tax Reduction prices of all
Pharma Companies rose. That is represented in the above Table and Graph.

75
SUMMARY AND CONCLUSIONS

FINDINGS

 The government’s interest rates, tax rates, trade policy and budget deficits all
have an impact on prices.

 Both the condition of an individual business and the strength of the industry it
is in will affect the price of its stock.

 Profits earned, volume of sales, and even the time of year will all affect how
much an investor wants to own a stock.

 Events around the world, such as changes in currency values, trade barriers,
wars, natural disasters, and changes in governments, all change how people
think about the value of different investments and about how they should
invest in the future.

 Economic Indicators like the Gross National Product , the inflation rate , the
budget deficit and the unemployment rate point to how the economy is likely
to perform which indirectly affect the stock prices.

 Psychological Factors and expectations driving the market

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CONCLUSIONS

 Investors who are aware of the factors that affect market price are more likely
to make sound investment decisions.

 Market Price of the Shares in the Stock Market are affected by Pre
Announcements and News or Issues.
 Bull or Bear markets are fueled by investors' perceptions of where the
economy and the market are going. If investors feel that they are in a bull
market, they will feel confident investing, adding to the growth of the market.
However, if investors think that the market is falling they will sell stock at
lower prices, continuing the bear market.

SUGGESTIONS

 Study the market thoroughly before you invest

 Do not buy stocks on the basis of tips or recommendations.

 Invest money that you can afford to lose. In other words, do not put your
entire life savings in the markets.

 Do not panic when the market is Bearish

 Avoid putting all your eggs in one basket. Hence, diversify your portfolio.
 Invest for the long-term. If you have an investment horizon of 5-10 years
and are invested in the right sectors, chances are that you will gain.

77
 BIBLIOGRAPHY

Share Price Movements:

www.nseindia.com
www.bseindia.com
www.kotaksec.com
www.myiris.com

For information, Announcements:

www.moneycontrol.com
www.moneypore.com
www.google.com
www.yahoofinance.com
www.answers.com
www.investopedia.com
www.wikipedia.com
www.bullishindian.com
Books:

V.A. AVADHANI, INVESTMENT MANAGEMENT

MAGAZINES AND NEWS PAPERS:

ECONOMIC TIMES
TIMES OF INDIA
BUSINESS LINE
BUSINESS WORLD
BUSINESS WEEK
4PS

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