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A STUDY ON EFFECT OF FIIS INVESTMENTS ON INDIAN STOCK MARKETS: WITH REFERENCE TO BSE

PROJECT REPORT

Submitted by

GUNALAN.C
Register No: 098001312013
In partial fulfillment for the award of the degree of

MASTER OF BUSINESS ADMINISTRATION in

DEPARTMENT OF MANAGEMENT STUDIES SHREE VENKATESHWARA HI TECH ENGINEERING COLLEGE, GOBI 638 455 JUNE-2011

SHREE VENKATESHWARA HI TECH ENGINEERING COLLEGE, GOBI 638 455 Department Of Management Studies
PROJECT WORK JUNE 2011 This is to certify that the project entitled

A STUDY ON EFFECT OF FIIS INVESTMENTS ON INDIAN STOCK MARKETS: WITH REFERENCE TO BSE
is the bonafied record of project work done by

GUNALAN.C
Register No: 098001312013

of Master of Business Administration during the year 2011-2012

----------------------

-----------------------------------

Project Guide

Head of the Department

Submitted for the Project Vice-Voce examination held on ________________

----------------------Internal Examiner

--------------------External Examiner

DECLARATION

I affirm that the project work titled A STUDY ON

EFFECT OF FIIS

INVESTMENTS ON INDIAN STOCK MARKETS: WITH REFERENCE TO BSE. being submitted in partial fulfillment for the award of MASTER OF BUSINESS ADMINISTRATION is the original work carried out by me. It has not formed the part of any project work submitted for the award of any degree or diploma, either in this or any other University.

Signature of the candidate GUNALAN.C Register No: 098001312013

I certify that the declaration made above by the candidate is true.

Signature of the Guide, Mr.R.SRITHAR, M.B.A., M.Phill Assistant Professor

ACKNOWLEGEMENT

I take this opportunity to acknowledge my indebtedness to all those who helped to complete this project work successfully. I express my sincere and special thanks to Thiru.P.VENKATACHALAM, Chairman and Thiru.K.C.KARUPANAN, Secretary, Shree Venkateshwara Hi-Tech Engineering College, and Dr. P.THANGAVEL,ME., MBA., PhD., Principal, for giving me an opportunity to use the facilities in the college premises to complete the project. I wish to express my sincere gratitude to our beloved Head of Department Ms.

S. SATHYASUNDARI, M.B.A., M.Phil., Ph.D., Department of Management studies for her extraordinary guidance, which helped me to complete this project work successfully. With great pleasure M.B.A., I express M.Phil, my profound sense of gratitude Department to of

Thiru.R.SRITHAR,

(Assistant

Professor)Faculty

Management Studies for his guidance, sincere co-operation and valuable suggestions during all the stages of my project work. I record my gratitude Mr.J.MAHESHKUMAR, M.Com., M.Phil., Relationship Manager of share khan pvt ltd, erode., for giving me the permission to carry out my study. I express my sincere thanks to my beloved parents and all other members in my family and all my friends for their timely help and co-operation in enabling me to complete my project. I thank the almighty whose blessings are always been a strength and help me in the fulfillment of my project work.

TABLE OF CONTENTS CHAPTER NO. DESCRIPTION PAGE NO.

Abstract List of Tables List of Figures Introduction

vi vii viii

1.1 About The Study

1

1 5 11

1.2 About The Industry 1.3 About The Company

Main Theme of the Project 2.1 Objectives of the study

22 23 24 25

2.2 Scope of the study 2.3 Limitations of the study 2.4 Methodology

Analysis and Interpretation Findings, Recommendations & Conclusion 4.1 Findings

27

58 60 61

4.2 Recommendations 4.3 Conclusion Bibliography

ABSTRACT

The present study of the research entitled A STUDY ON EFFECT OF FIIS INVESTMENTS ON INDIAN STOCK MARKES: WITH REFERENCE TO BSE. The study which was based on the Secondary data from records and profile of the organization. The present study has been organized into four chapters. The First chapter that deals with introduction about the study, profile of the industry and company. Second chapter that deals with objectives, limitations and scope of the study. The main objective of the study is to know the effect of FII flow in the Bombay stock exchange index. The researcher used exploratory research design in the financial statement. The primary data and secondary data collected through annual reports. Third chapter that deals with the Analysis and Interpretation. The tool used in this study is Spearmans Rank Correlation, Regression Analysis, Simple Moving average. Only tables and charts are used for understanding the financial volume of FII. The fourth chapter deals with suggestions for the improvement of the companys investors. Findings show that the profitability, assets and liabilities position is good. The conclusion is given; it reveals that the FII are having more impact on the share price movement of selected five (service, banking, Energy, Pharma, Real Estate Infrastructure) sectors.

LIST OF TABLES TABLE NO. 3.1 TITLE Showing Correlation for bank sector and FII PAGE NO 28

7 Showing Correlation for service sector and FII Showing Correlation for energy sector and FII Showing Correlation for pharma sector and FII Showing Correlation for real estate infrastructure sector and FII Showing Regression for service sector and FII Showing Regression for service sector and FII Showing Regression for energy sector and FII Showing Regression for pharma sector and FII Showing Regression for real estate infrastructure sector and FII Showing Simple moving average for FII (March 2006) Showing Simple moving average for FII (March 2007) Showing Simple moving average for FII (March 2008) Showing Simple moving average for FII (March 2009) Showing Simple moving average for FII (March 2010) LIST OF FIGURES FIGURE NO. 3.1 3.2 3.3 3.4 TITLE Showing Simple moving average for FII (March 2006) Showing Simple moving average for FII (March 2007) Showing Simple moving average for FII (March 2008) Showing Simple moving average for FII (March 2009) PAGE NO 49 51 53 55

3.2 3.3 3.4 3.5 3.6 3.7 3.8 3.9 3.10 3.11 3.12 3.13 3.14 3.15

29 30 31 32 33 36 39 42 45 48 50 52 54 56

3.5

Showing Simple moving average for FII (March 2010)

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CHAPTER 1 INTRODUCTION 1.1 ABOUT THE STUDY An investor or investment fund that is registered in a country outside of the one in which it is currently investing. 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. Entities covered by the term FII include Overseas pension funds, mutual funds, investment trust, asset management company, nominee company, bank, institutional portfolio manager, university funds, endowments, foundations, charitable trusts, charitable societies, a trustee or power of attorney holder incorporated or established outside India proposing to make

proprietary investments or investments on behalf of a broad-based fund FIIs can invest their own funds as well as invest on behalf of their overseas clients registered as such with SEBI. These client accounts that the FII manages are known as sub-accounts. A domestic portfolio manager can also register itself as an FII to manage the funds of sub-accounts. A few large FIIs (less than 3% of all registered ones), issue derivative instrument is called participatory notes that are registered and traded overseas, backed by the FIIs holdings of Indian securities. This arrangement has raised some concerns in regulatory circles since it makes it difficult to trace the ultimate beneficiary in the funds and may be used to bring in unclean funds (funds generated out of illegal activities) into the Indian markets. As of mid-July 2006, there were 932 FIIs registered with SEBI, of which 115 were registered in the first half of 2006 itself. US-based funds accounted for 39% of all registered FIIs, followed by UK-based ones (16%), Luxembourg (7%) and Singapore (5%). In terms of net cumulative investment, US based funds accounted for 29% at the end of October 2005 followed by UK (17%).

Though initially restricted to investing only in listed company stocks, FIIs are now allowed to invest in equity, bonds and derivative instruments in India subject to limits of foreign ownership for various sectors as well as ceilings on total investment per FII. Regular FIIs follow what has come to be known as the 70:30 rule, i.e. they must invest no less than 70% of their funds in equity-related instruments and may invest the remainder in debtrelated instruments. There are also some FIIs that are registered as 100 per cent debt-fund FIIs that are permitted to invest exclusively in debt instruments. HISTORY FII inflows into the Indian economy were not one of the leading varieties of capital flows until 2003-04. In the aftermath of the 1997 East Asian crisis, such flows had actually become net outflows in 1998-99. While there was a modest recovery in 1999-2000, languishing FII flows steadily declined to US$377 million in 2002-03. However, the years 2003-04 and 2004-05, have been remarkably robust years for such flows. During 2003-04 and 2004-05, their share shot up to

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79.4 per cent and 68.2 per cent, respectively, indicating the significant contribution being made by FII investment to the capital account in recent years. Ever since the opening of the Indian equity markets to foreigners, FII investments have steadily grown from about Rs. 2,600 crores in 1993 to over Rs.48,000 crores in 2005. At the end of June 2006, the cumulative FII flows to India accounted for a little over 9% of the Bombay Stock Exchange market capitalization. One of the events that has gone into the history book of the Indian Economy during the calendar year 2004 is the newer peaks of the stock markets. The year, before closing, achieved an all time high of both Sensex and Nifty around 6602 and 2080 respectively. While a lot of reasons could be cited as reasons for this stock markets rally, the role of Foreign Institutional Investors (FIIs) can not be overlooked. In fact, the FIIs have been playing a key role in the Indian financial markets since their entry into this country in the early 1990s.

Their importance has been growing over time as their net investment is on the rise over time. The calendar year that just concluded has received an historic net inflow from FIIs to the tune of US $ 9.187 billion which is around 28 per cent of the total inflows the country has received till December 31, 2004. They facilitate the flow of capital to firms and countries that offer the best investment opportunities breaking the geographical boundaries. They also bring with them the much wanted breadth and depth into the capital markets of the emerging economies. Indian Scenario FIIs were first allowed to make portfolio investment in India on September 14, 1992, initially with lots of restrictions. The regulations on them are liberalized over time and at minimal now. The FIIs which made a modest beginning in 1993-94 at US $ 1638 million stood at US$ 25754 million as of 2003-04. This increase in investment by FIIs is also accompanied by an increase in the number of registered FIIs and sub accounts. The total number of registered FIIs is 637 as at the end of December 2004. These FIIs are from many countries with USA accounting for the largest share at 42 per cent, followed by UK and Luxemburg at 19 and 7 per cent respectively.

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OPPORTUNITIES FOR FOREIGN INVESTORS IN INDIAN STOCK MARKETS Direct Investment Foreign companies are now permitted to have a majority stake in their Indian affiliates except in a few restricted industries. In certain specific industries, foreigners can even have holding up to 100 per cent. Investment through Stock Exchanges Foreign Institutional Investors (FII) upon registration with the Securities and Exchange Board of India (SEBI) and the Reserve Bank of India (RBI) are allowed to operate in Indian stock exchanges subject to the guidelines issued for the purpose by SEBI. Important requirements under the guidelines
1.

Portfolio investment in primary or secondary markets will be subject to a ceiling of 30 percent of issued share capital for the total holding of all registered FIIs. In any one company an FII holding is subject to a ceiling of 10 percent of the total issued capital.

2.

However, in applying the ceiling of 30 percent, the following are excluded; Foreign investment under a financial collaboration which is permitted up to 51 percent

in all priority areas.

Investment by FIIs through offshore single/regional funds, GDRs and euro convertibles.
3. 4.

Disinvestments are allowed through allowed through a broker of a Stock Exchange. A registered FII is required to buy or sell only for delivery. It is not allowed to offset a deal. It is also not allowed to sell short.

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1.2 ABOUT THE INDUSTRY In India, the stock market reforms were aimed at creating an active, efficient and competitive securities market subject to effective regulation by SEBI which would ensure investor protection. There is almost unanimity among the academics that liberalization encourages the formation of equity markets where they did not exist previously and helps in their deepening where they predated the reforms. The inexplicable bias against the liberalization of the stock market is reflected in the multi-pronged benefits that it can offer towards the economy of a country. The stock market provides an additional channel (along with banks and financial institutions) for mobilizing and allocating resources efficiently than that of banks which are often plagued with asymmetric information that leads to adverse selection and moral hazards problems. It ensures improvements in the productivity of investments through market allocation of capital and also increases managerial disciplines through market for corporate control. the Indian stock markets, like many other markets of developing countries, also experienced stupendous growth and development in the post-liberalization period. The process of reforms has led to pace of growth of Indian stock market almost unparalleled in the history of any country. But this growth and development in the Indian stock market is marred by excessive price fluctuation that has plagued the Indian market more fiercely than many of its counter parts in the post-liberalization period. The present study to focus on the stock market behavior on the FIIs trend. PRIMARY MARKET

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The primary market in which the public issue of securities is made through prospectus is a retail market and is reached through direct mailing. In the primary market, new issue of equity and debt are arranged in the form of a new floatation, either publicly or privately or in the form of a rights offer, to existing share holders. SECONDARY MARKET By secondary market, we mean trading of the already issued securities through the mechanism of the stock exchanges and there after its cleaning and exchanges and there after its cleaning and settlement of trades. The securities thus can be divided into two parts viz., trading and clearing and settlements. We shall be discussing both these aspects of secondary market. In India, there are 24 recognized stock exchanges and 9687 registered brokers. BOMBAY ON LINE TRADING (BOLT) SYSTEM Bombay stock exchange (BSE) was the first to introduce on line computerized trading of scrip to replace manual trading practices. In BSE most of the equity shares have transformed from trading in the ring to the BOLT system. From July 1st 1995 the BOLT system has become users active and now allows other stock exchanges for instant online trading. The BOLT system provides systematic trading in a growing volume of business. The BOLT systems provides information on the best buy and sell rates for each scrip, pending and executed orders, negotiated and crossed deals, market position of all the scrip of a broker, domestic shares indices and market and economy-related news. INDICES Sensex The premier Stock Exchange that pioneered the stock broking activity in India, 128 years of experience seems to be a proud milestone. A lot has changed since 1875 when 318 persons became members of what today is called The Stock Exchange, Mumbai by paying a princely amount of Re1. Since then, the countrys capital markets have 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

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scale to measure the ups and downs in the Indian stock market. The Stock exchange, Mumbai (BSE) in 1986 came out with a stock index that subsequently became the barometer of the Indian stock market.

SENSEX is not only scientifically designed but also based on globally accepted construction and review methodology. First compiled in 1986, SENSEX is a basket of 30 constituent stocks representing a sample of large, liquid and representative companies. The base year of SENSEX is 1978-79 and the base value is 100. The index is widely reported in both domestic and international markets through print as well as electronic media. The index was initially calculated based on the Full Market Capitalization methodology but was shifted to the free-float methodology with effect from September 1, 2003. The Free-float Market Capitalization methodology of index construction is regarded as an industry best practice globally. All major index providers like MSCI, FTSE, STOXX, S&P and Dow Jones use the Freefloat methodology. Due to is wide acceptance amongst the Indian investors; SENSEX is regarded to be the pulse of the Indian stock market. As the oldest index in the country, it provides the time series data over a fairly long period of time (From 1979 onwards. Small wonder, the SENSEX has over the years years become one of the prominent brand in the country. 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. The SENSEX captured all these events in the most judicial manner one can identify the booms and busts of the Indian stock market through SENSEX. SENSEX Calculation Methodology SENSEX is calculated using the: free-float Market capitalization

methodology. As per this methodology, the level of index at any point of time reflects the Freefloat market value of 30 component stocks relative to a base period. The market capitalization of a company is determined by multiplying the price of its stock by the number of shares issued by the company. This market capitalization further multiplied by the free-float factor to determine the free-float market capitalization.

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The base period of SENSEX is 1978-79 and the base value is 100 index points. This is often indicted by the notation 1978-79=100. The calculation of SENSEX involves dividing the Free-float market capitalization of 30 companies in the Index by a number called the Index Divisor. The Divisor is the only link to the original base period value of the SENSEX. It keeps the Index comparable over time and is the adjustment point for all Index adjustments arising out of corporate actions, replacement of scrip etc. During market hours, prices of the index scrips, at which latest trades are executed, are used by the trading system to calculate SENSEX every 15 seconds and disseminated in retime.

Maintenance of SENSEX One of the important aspects of maintaining continuity with the past is to update the base year average. The base year value adjustment ensures that replacement of stocks in Index, additional issue of capital and other corporate announcements like rights issue etc. do not destroy the historical value of the index. The beauty of maintenance lies in the fact that adjustments for corporate action in the Index should not per se affect the index values. The Index Cell of the exchange does the day-to-day maintenance of the index within the broad index policy framework set by the Index Committee. The Index Cell ensures that SENSEX and all the other BSE indices maintain their benchmark properties by striking a delicate balance between frequent replacements in index and maintaining its historical continuity. The Index Committee of the Exchange comprises of experts on capital markets from all major market segments. They include Academicians, Fund-managers from leading Mutual Funds-Journalists Market Participants, Independent Governing Board members, and Exchange administration. Adjustment for Bonus, Rights and Newly issued Capital The arithmetic calculation involved in calculating SENSEX is simple, but problem arises when one of the component stocks pays a bonus or issues rights shares. If no adjustments were made, a discontinuity would arise between the current value of the index and its previous value despite the non-occurrence of any economic activity of substance. At the Index Cell of the Exchange, the base values is adjusted, which is used to alter market capitalization of the component stocks to arrive at the SENSEX value.

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The Index Cell of the Exchange keeps a close watch on the events that might affect the index on a regular basis and carries out daily maintenance of all the 14 Indices. Adjustments for Rights Issues When a company, included in the compilation of the index, issues right shares, the freefloat market capitalization of that company is increased by the number of additional shares issued based on the theoretical (ex-right) price. An offsetting or proportionate adjustment is then made to the Base Market Capitalization (see Base Market Capitalization Adjustment below).

Adjustments for Bonus Issue When a company, included in the compilation of the index, issues bonus shares, the market capitalization of that company does not undergo any change. Therefore, there is no change in the Base Market capitalization, only the number of shares in the formula is updated. Other Issues: Base Market Capitalization Adjustment is required when new shares are issued by way of conversion of debentures, mergers, spin-offs etc. or when equity is reduced by way of buy-back of shares, corporate restructuring etc. Quantitative Criteria 1. Final Rank The scrip should figure in the top 100 companies listed by Final Rank. The final rank is arrived at by assigning 75% weight age to the rank on the basis of six-month average full market capitalization and 25% weight age to the liquidity rank based on six-month average daily turnover & six-month average in pact cost. 2. Trading Frequency The scrip should have been traded on each and every trading day for the last six months. Exceptions can be made for extreme reasons like scrip suspension etc. 3. Market Capitalization Weight age:

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The weight of each scrip in SENSEX based on six-month average Free-Float market capitalization should be at least 0.5% of the Index. 4. Industry Representation Scrip selection would take into account a balanced representation of the listed companies in the universe of BSE. The index companies should be leaders in their industry group. 5. Listed History The scrip should have a listing history of at least 3 months on BSE. However, the Committee may remix the criteria under exceptional circumstances. BSE Sector Series (90/FF) Indices

BSE Auto Index BSE BANKEX BSE Capital Goods Index BSE Consumer Durables Index BSE FMCG Index BSE Healthcare Index BSE IT Index BSE Metal Index BSE Oil & Gas Index BSE Mid Cap Index

Selection of the Base Year and Base Index Value The base date has been fixed after a detailed analysis of the relative volatility of BSE-200, the index closest to BSE-500, over the last 8 years. The coefficient of variation of BSE-200 for 1998-99 is one of the lowest in this period. Hence, 1998-99 is chosen as the base year, and within this, the date February 1, 1999 is selected as the base date for its proximity to the current period. The base value was fixed at 1000 points in order to keep the index comparable with other similar indices.All BSE Sectoral Indices are in a way sub-set of BSE-500 index and 90% coverage in each sector is given from the universe of BSE-500 index constituents.

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1.3ABOUT THE COMPANY Share khan, one of India's leading brokerage houses, is the retail arm of SSKI Investor Services Pvt. Ltd., a company in the securities and equities segment decided to harness the power of the Internet and offer services to its customers through an online stock trading portal. With over 510 share shops in 170 cities, and India's premier online trading portal www.sharekhan.com. It deployed solutions from BEA that could support a large and growing user base in efficient, secure, reliable and fast trading services and provide a platform to run trading and risk management applications. The services provided by Sharekhan are

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The company offers its services through a combination of online and offline channels. The online model comprises a portal, chat facilities, and 'speed trade' terminals. And the offline model uses a combination of an IVR infrastructure and a team of customer agents to receive orders over the telephone. The company claims to have around 150,000 current registered users nationwide. The 'speed trade' channel offers the benefit of a terminal at the user end, which is connected to the company's systems through a TCP/IP link. It can work on dial-up, cable connections, and GPRS links using 128-bit SSL encryption technology certified by VeriSign. Unlike a Web trade request, which travels with the help of HTTP or HTTPS, a speed trade transaction is a direct transfer of information with the trading system, is live, and on real-time. The heart of the business At the heart of the company's business is the trading platform and the risk management system and customers of the related products and financial services are the retail end-users. In such a scenario the company runs every individual profile through a risk management system before fulfillment. Therefore IT is at the heart of the business. new platform The company believes in deploying the best technology available. So evaluated solutions from BEA and IBM, since they were the only solution providers in this space at that time. The decision was based on a number of parameters like security, reliability, scalability, the ability to integrate with legacy applications, interoperability with other environments, and ease-of-use. BEA kicks in Share khan deployed BEA's Web Logic platform and currently uses versions 5.1 and 7.0. The platforms run on 12 Sun Solaris servers. BEA's Web Logic is the foundation of Share khans online trading application. BEA's middleware platform has the business logic to

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interface with the various technology aspects, and provides encrypted transactions. It aims to support more than 150,000 hits everyday between a five hour period of 9.30 AM and 5.30 PM. ORGANIZATION CHART

PRODUCT AND SERVICES OFFERD BY SHAREKHAN

1. 2. 3. 4. 5. 6.

Equity Trading Platform (Online/Offline). Commodities Trading Platform (Online/Offline). Portfolio Management Service. Mutual Fund Advisory and Distribution. Insurance Distribution. Forex A Share khan outlet offers the following services:

Online BSE and NSE executions (through BOLT & NEAT terminals) Free access to investment advice from Share khan's Research team Share khan Value Line (a monthly publication with reviews of recommendations, stocks to watch out for etc) Daily research reports and market review (High Noon & Eagle Eye) Pre-market Report (Morning Cuppa) Daily trading calls based on Technical Analysis Cool trading products (Daring Derivatives and Market Strategy) Personalized Advice Live Market Information Depository Services: Demat & Remat Transactions Derivatives Trading (Futures and Options) Commodities Trading IPOs & Mutual Funds Distribution Internet-based Online Trading: Speed Trade.

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WHAT IS SHARE? Share or Equity represents part of an ownership of a business. So as a shareholder you own a piece of the action that happens in that business. Why would you want a piece of the action? For the rewards of course. As a shareholder you have a right over the profits generated by your business. Your company might pay out the profits generated every year as dividends or it may retain the profits to further grow them. There is another way you as a shareholder can make money. If your company does well, then its shares listed on the stock market become more valuable and the stock price appreciates. On the other hand, the company might perform badly. Then not only do you not get dividends but the stock price also declines. Hence investing in shares is a risky proposition.

When you invest in shares, you can expect certain returns based on the fundamentals of a business. However you have no control over it. What you have control over is managing risks associated with it.

WHY INVEST IN SHARAES? We know now that investing in shares is akin to owning part of a business. A profitable business keeps ploughing back profits to earn more profits or should we say "compounding profits".

Hence unlike investing in assets like gold and real estate, which are not productive, or in bonds or debentures, which have fixed returns, investing in shares, which represent ownership in productive assets (business), hold very high upside potential. The power of compounding is what makes investing in stocks very attractive. In very simple terms it means that the returns on the principal earn returns too. In other words, Rs100 that earns mere returns of 15% per annum becomes Rs250 in ten years whereas Rs100 compounding at 15% per annum turns out to be Rs405 in ten years!

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As you stretch the time horizon, your money appreciates further. Compounding at 15% per annum Rs100 becomes Rs405 in ten years, Rs810 in 15 years and Rs1,640 in 20 years. Hence the longer the duration of investment, the better are the returns.

For instance, if you had invested Rs1, 000 in HLL in March 1990, it would have been worth Rs40,000 in March 2001, i.e. it would have increased 40 times in 11 years. need not deter one. After all, the rewards outweigh the risks. INVESTMENT AND RISK Investing in stocks is risky since there are many uncertainties associated with the ability of a business to generate profits. Hence there is no control on the returns but an investor has control over managing her/his risks. Of course investing is risky. Higher returns always come with higher risks. However the risks of investing

Portfolio diversification is a straightforward way to reduce exposure to business specific risks. It simply means that one should not keep all his eggs in one basket. Invest in a diversified set of stocks spanning different businesses. Equity risk does not add up as you spread the capital over a larger number of stocks.

Another way to handle risks associated with buying too high or too low at a given point in time is to spread ones investments across time. Never invest lump sum in the stock market. Spread your investments over a period of time. This is normally referred to as steady investment plans or rupee cost averaging. DEALING WITH SHARES ACCOUNT OPENING With a Share khan online trading account, you can buy and sell shares in an instant! Anytime you like and from anywhere you like! You can select an Online Trading Account that suits your needs-an Invest Tiger Account for investors, a Trade Tiger Account for active day traders and the First Step programme specially designed for beginners in the stock market. Benefit from Online Trading in Equities

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Freedom from Paperwork Instant credit and money transfer Trade from any net enabled PC After hour orders Online orders on the phone Timely advice and research reports Real-time Portfolio tracking Information and Price alerts

DEMAT ACCOUNT

Dematerialization and trading in the demat mode is the safer and faster alternative to the physical existence of securities. Demat as a parallel solution offers freedom from delays, thefts, forgeries, settlement risks and paper work. This system works through depository participants (DPs) who offer demat services and the securities are held in the electronic form for the investor directly by the Depository.

Sharekhan Depository Services offers dematerialization services to individual and corporate investors. We have a team of professionals and the latest technological expertise dedicated exclusively to our demat department, apart from a national network of franchisee, making our services quick, convenient and efficient.At Sharekhan, our commitment is to provide a complete demat solution which is simple, safe and secure. HOW TO BUY A SHARE? Unlike buying clothes from your favorite showroom where you just walk in, buy the stuff you like and pay for it, buying shares is a little different. Shares are traded on stock exchanges and you can buy them only from people recognized/authorized by the stock exchanges to buy or sell shares. These people are popularly known as stock brokers.

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In order to buy your first share you need to become a client of a stock broker. Since it is a very sensitive relationship, we suggest that you spend time to choose a good broker. Check our articles how to choose a Broker to understand the process better.

Once you are a client of a broker, then it is as easy as shopping. Call up your broker, check the quotes of the stock you wish to buy and place an order. These days it is a lot easier to trade online. You could check the demo on our trading site to get a feel of how easy it is.

HOW TO SELL A SHARE? He same way you buy one, you just holler sell this time around. You call your broker and tell him or her to sell your shares (or you enter your sale with an online broker). You'll get the market price of the stock for that day.

But you shouldn't get into the habit of selling stocks frequently. You'll have to pay a brokerage on each sale, just as you do when you buy a stock. And that could eat up any profits you might make if the stock price goes up.

INVESTING AND SPECULATION Here is the doyen of investing, Benjamin Graham expounding on the distinction between these two activities. An investment operation is one which, on thorough analysis, promises safety of principal and a satisfactory return. Operations not meeting these requirements are speculative that is a very brief reference to speculation. We could amplify it a bit by saying that in speculative operations a successful result cannot be predicated on the processes of security analysis. Speculative operations are all concerned with changes in price. In some cases the emphasis is on price changes alone, and in other cases the emphasis is on changes in value, which are expected to give rise to changes in price. I think that is a rather important classification of speculative operations.

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FEATURES OF CLASSIC ACCOUNT

Online trading account for investing in Equities and Derivatives via sharekhan.com Integration of: Online trading + Bank + Demat account Instant cash transfer facility against purchase & sale of shares Make IPO bookings You get Instant order and trade confirmations by e-mail Streaming Quotes Personalized Market Scan with your own customized stock ticker! Single screen interface for cash and derivatives Your very own Portfolio Tracker

DIAL-N-TRADE Free with your Sharekhan Classic Account, the Dial-n-Trade service enables you to place orders for buying and selling shares through your telephone.

PORTFOLIO MANAGEMENT SERVICES (PMS)

There are two type of portfolio management services offered by sharekhan head office. One is pro prime and other one is protect.

PMS PRO PRIME Ideal for investors looking at steady and superior returns with low to medium risk appetite. This portfolio consists of a blend of quality blue-chip and growth stocks ensuring a balanced portfolio with relatively medium risk profile. The portfolio will mostly have large

Product Approach Investments are based on 3 tenets:

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i] Consistent, steady and sustainable returns ii] Margin of Safety iii]Low Volatility Product Characteristics >Bottom up stock selection >In-depth, independent fundamental research >High quality companies with relatively large capitalization. >Disciplined valuation approach applying multiple valuation measures >Medium to long term vision, resulting in low portfolio turnover Product details >Minimum Investment: Rs. 10 lakhs >Lock in period: 6 Months >Reporting: Online access to portfolio holdings, quarterly reporting of portfolio

holdings/transactions >Charges: 2.5% per annum AMC charged every quarter, 0.5% brokerage 20% profit after 15% hurdle is crossed-chargeable at the end of the fiscal year. >Profit withdrawal in multiples of 25000 after lock in period. sharing

PMS PROTECH Protect uses the knowledge of technical analysis and the power of derivatives market to identify trading opportunities in the market. The Protect line of products are designed around various risk/reward/volatility profiles for different kinds of investment needs..

Protech is based on:

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> Long Short strategies > Focus on absolute returns > Timing the market Product Approach

>Superior performance can be achieved through sheer market timing, by picking before the infection points in their trading cycles

Stocks/Nifty

>Linear returns are possible from having sell market positions in downtrends and by using the options market to change the portfolio beta >Money management rules will be in place.

Product Characteristics >Using swing based index -trading systems, stop and reverse, trend following and momentum trading techniques. >Nifty based products for low impact cost and low product vitality. >Both long and short strategies to earn returns even in falling markets. >The use of options to enhance the risk reward profile of the product and therefore offer a higher Beta. Product Details > Minimum Investment: Rs 5 lakhs > Lock in: 6 months > AMC fees: 0% >Reporting: Monthly reporting of transactions, brokerage 0.05% for derivatives, 20% profit sharing on booked profits on quarterly basis. >Profit withdrawal in multiples of 25000 after lock in period

28

CHAPTER 2

MAIN THEME OF THE PROJECT

2.1 OBJECTIVES OF THE STUDY The present study had been conducted with the following objectives:
1. 2. 3. 4.

To study the effect of FII flow in the Bombay stock exchange index. To analyze the trend of Bombay stock exchange sector wise sensex on FII flow. To give suggestion to the investors to improve the investment portfolio. To analyze the impact of FIIs equity investment on specific industrial sector (Service, Energy, Pharama, Banking & Real Estate) indices.

29

2.2 SCOPE OF THE STUDY India moved from a controlled economy into current account convertibility and a market determined exchange rate. There have been excessive capital during 1993-94 followed by volatility of inflows in 1995-96, 1997, 2000 and 2001. Since the world is globalize, institutional investors enter markets in different countries where they are able to find gains and participate actively and also influence other markets because of the volume of unds which they can invest. The active participation of foreign financial institutions in countries in which their influence has been observed in recent years are Mexico, korea, latin, America, Thailand and India.
a.

The consequences of the large inflows of capital from the developed to the developing countries. The interest rate differential between the developed and the developing countries as funds flow to out of the developed countries due to the rate of interest in their own country and the time of gaining high rates of interest in developing countries. The importance of the study is thus derived from the global integration of financial markets and financial institutions in the international investment process.

b.

It will be useful to review the participation of the FIIs in India and its implications for the future. It would provide a base for making policies and controls to protect the capital market from negative effects. It would also draw attention to the positive effects of linking of financial institutions and financial in different countries.

30

2.3 LIMITATIONS OF THE STUDY

1.

There are so many factors are influencing the stock market of which FII flow is a factor. So the present study is analyzing the flow of FII only. The remaining determinants are considered as constant.

2.

The secondary data taken from BSE website and Sharekhan Ltd, Erode. The data relating to the FII net flow are in the form of rounded figures. So the results may vary from the actual performance.

3.

The study has analyzed the correlation between flow of FII and the BSE sector wise sensex. But there is no conformity that the FII have invested their money in the particular sector.

2.4 METHODOLOGY

31

2.4.1 INTRODUCTION Research is defined as a systematized effort to gain knowledge. Research comprises defining and redefining problems, formulating hypothesis or suggest solutions, collecting, organizing and evaluating data, making deductions and reaching conclusions and at last carefully testing the conclusions to determine whether they fit the formulating hypothesis. It refers to the systematic method consisting of enunciating the problem, formulating a hypothesis, collecting the fact the data, analyzing the facts the reaching certain conclusion and either in the form of solution towards the concerned problem or in certain generalization for some theoretical formulation. A Research designs purely simply the framework or plan for a study that guides the collection and analysis of the data .It provides scientific framework for conducting some research investigation. In this research descriptive research study has been followed where in, its typically concerned with determining frequency with which something occurs 2.4.2 Research Design A research design is the arrangement of conditions for collection kind analysis of data in a manner that aims to combine relevance to the research purpose with economy in procedure. 2.4.3 Data collection The analysis of financial condition and performance of the enterprise necessitates accurate and reliable data. Therefore the data for present day is collected with the help of secondary data. 2.4.4 Method of Sampling Since for the purpose of this analysis are taken and from the five sectors. Therefore the sampling used is judgmental sampling. In this method, items for the sample are selected on certain predetermined criteria. The fixation of criteria and the choice of sampling may bring in personal element and introduce bias. This method is usually applied in small enquiries and researches by individuals when they are familiar with all the items of the population. It is difficult to estimate the sampling error and the reliability of the result depends on the investigator and the impartiality in the choice of the item.

32

2.4.5 TOOLS USED FOR ANAYSIS DATA 1. Spearmans Rank Correlation: The coefficient of rank correlation is based on the various values of the variates and is denoted by R. It is applied in the problems in which data cannot be measured quantitatively but qualitative assessment is possible such as beauty, honesty etc. In this case the best individual is given rank number 1,next rank 2 and so on. The coefficient of rank correlation is given by the formula 6D2 R = 1n (n2-1)

2.

Regression Analysis In linear regression the relationship between the two variables x and y is linear. In order to

estimate best average values of the two variables, two regression equations are required and they are used separately. P2 (x,y) = bxy byx
3.

Simple Moving Average

In technical analysis the moving is one of the key trend lines that are plotted on a chart reflecting the closing prices over weeks. When the moving average value a securitys price over a period of time. When calculating a moving average, a mathematical analysis of the securitys average value over a predetermined time period is made. As the securities price changes, its average price moves up or down. We can interpret a moving average by comparing the relationship between the moving average of the securitys price with the securitys price itself.

CHAPTER 3

33

ANALYSIS AND INTERPRETATION ANALYSIS Analysis is the process of placing the data in an ordered form, combining them with the existing information and extracting the meaning from them. In other words, analysis is an answer to the question what message is conveyed by each group of data . Which are otherwise raw facts and are unable to give a meaningful information. The raw data become information only when they are analyzed and put in a meaningful form. INTERPRETATION Interpretation is the process of relating various bits of information to other existing information. Interpretation attempts to answer, What relationship exists between the findings to the research objectives and hypothesis framed for the study in the beginning .

SPEARMANS RANK CORRELATION

34

X Bank sector share price movements Y Foreign Institutional Investor Table No. 3.1 Showing correlation for bank sector and FII Year 2006 - 2007 2007 2008 2008 2009 2009 2010 2010 - 2011 X 5954.34 9122.19 5933.12 9030.47 12379.22 Y -88.412 -1530.323 -3449.872 1596.074 2935.17 Rank in X = Xi 4 2 5 3 1 Rank in Y = Yi 3 4 5 2 1 D = Xi -Yi 1 -2 0 1 0 D2 1 4 0 1 0 D2 = 6 Source: Secondary Data 6D2 R = 1n (n2-1) 66 =15(52-1) = 0.7 Result From the above calculated value it shows that there is a Positive correlation between Bank sector share price movement and Foreign Institutional Investor.

X Service sector share price movements Y Foreign Institutional Investor Year 2006 - 2007 X 1963.35 Y -88.412 Rank in X = Xi 5 Rank in Y = Yi 3 D = Xi -Yi 2 D2 4

35

2007 2008 2008 2009 2009 2010 2010 - 2011

2081.56 2110.08 2584.41 3390.80

-1530.323 -3449.872 1596.074 2935.17

4 3 2 1

4 5 2 1

0 -2 0 0

0 4 0 0 D2 = 8

Table No 3.2 Showing correlation for service sector and FII

Source: Secondary Data 6D2 R = 1n (n2-1) 68 =15(52-1) = 0.6 Result From the above calculated value it shows that there is a Positive correlation between Service sector share price movement and Foreign Institutional Investor.

X Energy sector share price movements Y Foreign Institutional Investor Table No. 3.3 Showing correlation for energy sector and FII Source: Secondary Data Year 2006 - 2007 2007 2008 2008 2009 2009 2010 2010 - 2011 X 4526.69 4443.13 3162.01 4284.33 5882.23 Y -88.412 -1530.323 -3449.872 1596.074 2935.17 Rank in X = Xi 2 3 5 4 1 Rank in Y = Yi 3 4 5 2 1 D = Xi -Yi -1 -1 0 1 0 D2 1 1 0 1 0

36

D2 =3 6D2 R = 1n (n2-1) 63 =15(52-1) = 0.85 Result From the above calculated value it shows that there is a Positive correlation between energy sector share price movement and Foreign Institutional Investor.

X Pharma sector share price movements Y Foreign Institutional Investor Table No. 3.4 Showing correlation for pharma sector and FII

Year 2006 - 2007 2007 2008 2008 2009 2009 2010 2010 - 2011

X 5852.70 9790.33 8047.78 9796.275 10192.21

Y -88.412 -1530.323 -3449.872 1596.074 2935.17

Rank in X = Xi 5 3 4 2 1

Rank in Y = Yi 3 4 5 2 1

D = Xi -Yi 2 -1 -1 0 0

D2 4 1 1 0 0 D2 = 6

Source: Secondary Data

6D2 R = 1n (n2-1)

37

66 =15(52-1) = 0.7 Result From the above calculated value it shows that there is a Positive correlation between pharma sector share price movement and Foreign Institutional Investor.

X Real Estate Infrastructure sector share price movements Y Foreign Institutional Investor Table. No 3.5 correlation for real estate infrastructure sector and FII Year 2006 - 2007 2007 2008 2008 2009 2009 2010 2010 - 2011 X 5132.79 5065.27 3310.7 6123.21 9736.01 Y -88.412 -1530.323 -3449.872 1596.074 2935.17 Rank in X = Xi 3 4 5 2 1 Rank in Y = Yi 3 4 5 2 1 D = Xi -Yi 0 0 0 0 0 D2 0 0 0 0 0 D2 = 0

Source: Secondary Data

6D2 R = 1n (n2-1) 60 =15(52-1) =1 Result

38

From the above calculated value it shows that there is a Positive correlation between real estate infrastructures sector share price movement and Foreign Institutional Investor.

LINEAR REGRESSION X Banking sector share price movements Y Foreign Institutional Investor Table No 3.6Showing regression for bank sector and FII Year 2006 2007 2007 2008 2008 2009 2009 2010 2010 2011 X=41919.64 Y=537.363 Source: Secondary Data X2=282987257.8 Y2=3088137.67 XY=17518091.85 12379.22 2935.17 53245027.8 8615222.92 36335115.17 9030.47 1596.074 81549388.42 2547452.21 14413298.37 5933.12 -3449.872 29518792.93 -11901616.82 -18743557.69 9122.19 -1530.323 83219823.8 -2341879.30 -13960328.9 X 5954.34 Y -88.412 X2 35454164.84 Y2 -7816.68 XY -526435.10

( xi ) ( yi ) xi yi

n byx =

39

( xi )2 xi2 n

(41919.64) ( 537.363 ) 17518091.85 5 = (41919.64)2 282987257.8 5

17518091.85

(-4505212.702)

= 282987257.8-351451243.5

22023304.55 = -68493985.7

= -0.32

( xi ) ( yi ) xi yi

40

bxy = ( yi )2 yi2 n

(41919.64) ( 537.363 ) 17518091.85 5 = (-537.363)2 282987257.8 5 17518091.85

(-4505212.702)

= 282987257.8 -(-57751.79)

22023304.55 = 283045009.6 =0.0 7

P2 (x,y) = bxy byx =0.0 7x (-0.32) P2 (x,y) = -0.0224 Interpretation Regression shows the relationship between the average values of two variables. In this analysis shows there is no relationship between bank sector and FII investment.

41

X Service sector share price movements Y Foreign Institutional Investor Year 2006 2007 2007 2008 2008 2009 2009 2010 2010 2011 X=12130.2 Y=X2=30816772.53 Y2=537.363 3088137.67 Table No 3.7 regression for service sector and FII Source: Secondary Data (xi) (yi) xi yi

X 1963.35

Y -88.412

X2 3854743.22

Y2 -7816.68

XY -173552.75

2081.56

-1530.323

4332892.03

-2341879.30

-3185452.89

2110.08

-3449.872

4452437.60

-11901616.82

-7279501.69

2584.41

1596.074

6679175.04

2547452.21

4124899.26

3390.80

2935.17

11497524.64

8615222.92

9952574.43

XY=17997969.74

n byx = (xi) 2 xi2 n

42

(12130.2 ) ( 537.363 ) 1799796.74 5 = (12130.2 )2 30816772.53 5

1799796.74 ( 1303664.13 ) = 30816772.53 29428350.41

19301633.87 = 1388422.12

= 13.90

( xi ) ( yi ) xi yi n bxy = ( yi )2 yi2

43

n (12130.2 ) ( 537.363 ) 1799796.74 5 = ( 537.363)2 30816772.53 5

1799796.74 ( 6518 320.66) = 30816772.53 ( 57751.79)

24516290.4

= 3145889.46 = 7.79 P2 (x,y) = bxy byx = 13.90 ( 7.79) P2 (x,y) = = 108.28

Interpretation Regression shows the relationship between the average values of two variables. In this analysis shows there is no relationship between service sector and FII investment.

X Energy sector share price movements

44

Year 2006 2007 2007 2008 2008 2009 2009 2010 2010 2011

X 4526.69

Y -88.412

X2 20490.92

Y2 -7816.68

XY -400213.71

4443.13

-1530.323

19741404.2

-2341879.30

-6799410.70

3162.01

-3449.872

9998307.24

-11901616.82

-10908523.44

4284.33

1596.074

18355483.55

2547452.21

6838090.58

5882.23

2935.17

34600.629

8615222.92

17265345.03

X=22298.39 Y=537.363 Y Foreign Institutional Investor

X2=82716315.68

Y2=3088137.67

XY=5995287.76

Table. No 3.8 regression for energy sector and FII Source: Secondary Data

( xi ) ( yi ) xi yi

n byx = ( xi )2 xi2 n

45

(22298.39) ( 537.363 ) 5995287.76 5 = (22298.39 )2 82716315.68 5

5995287.76 ( 2396465.94 ) = 82716315.68 99443639.32

8391753.7 = 16727323.64

= 0.501 ( xi ) ( yi ) xi yi n bxy = ( yi )2 yi2 n

(22298.39) ( 537.363 )

46

5995287.76 5 = (-537.363 )2 3088137.67 5

831752.7 = 30816772.53 ( 57751.79)

8391752.7 = -3145889.46

= -2.66 P2 (x,y) = bxy byx = -0.501

2.66

P2 (x,y) = 1.33 Interpretation Regression shows the relationship between the average values of two variables. In this analysis shows there is some relationship between Energy sector and FII investment.

X Pharma sector share price movements Y Foreign Institutional Investor Table No 3.9 regression for pharma sector and FII Year X Y X2 Y2 XY

47

2006 2007 2007 2008 2008 2009 2009 2010 2010 2011

5852.70

-88.412

34254097.29

-7816.68

-517448.91

9790.35

-1530.323

95850953.12

-2341879.30

-14982368.41

8047.78

-3449.872

64766762.93

-11901616.82

-27763794.79

9796.27

1596.074

95966905.91

2547452.21

15635571.84

10192.21

2935.17

103881144.7

8615222.92

29915869.03

X=43679.31 Y=537.363 Source: Secondary Data

X2=394719864

Y2=3088137.67

XY=2287828.76

( xi ) ( yi ) xi yi

n byx = ( xi )2 xi2 n

(43679.31) ( 537.363 ) 2287828.76

48

5 = (43679.31 )2 3947198.64 5

2287828.76

(-4694329.012)

= 3947198.64 76315284.88

6982157.772 = -72368086.24

= -0.09

( xi ) ( yi ) xi yi

n bxy = ( yi )2 yi2 n

(43679.31) ( 537.363 ) 2287828.76 5

49

= (-537.363 )2 3088137.67 5 3757979.77 = -3030385.87 = -1.24

P2 (x,y) = bxy byx = -0.09 x (-1.24) P2 (x,y) = 0.1116

Interpretation Regression shows the relationship between the average values of two variables. In this analysis shows there is some relationship between Pharma sector and FII investment.

X Real Estate Infrastructure sector share price movements Y Foreign Institutional Investor Table. No 3.10 regression for real estate infrastructure sector and FII Year 2006 2007 X 5132.79 Y -88.412 X2 26345533.18 Y2 -7816.68 XY -453800.22

50

2007 2008 2008 2009 2009 2010 2010 2011

5065.27 3310.7 6123.21 9736.01 X=29367.98

-1530.323 -3449.872 1596.074 2935.17 Y=537.363

25656960.17 10960734.49 37493700.7 94789890.72 X2=195246819.3

-2341879.30 -11901616.82 2547452.21 8615222.92 Y2=3088137.67

-7751701.79 -11421484.61 9773071.78 28576844.47 XY=25698929.63

Source: Secondary Data

( xi ) ( yi ) xi yi

n byx = ( xi )2 xi2 n

(29367.98) ( 537.363 ) 25698929.63 5 = (29367.98 )2 195246819.3

51

25698929.63

29475.45 1

= 95246819.3 172495649.9

25669454.18 = 22751169.4 = 1.128

( xi ) ( yi ) xi yi n bxy = ( yi )2 yi2 n

(29367.98) ( 537.363 ) 25698929.63 5 = (-537.363 )2 -3088137.67 5 25669454

52

= 3030385.87

= 8.47

P2 (x,y) = bxy byx = 1.128 x (8.47) P2 (x,y) = 9.55

Interpretation Regression shows the relationship between the average value of two variables. In this analysis shows there is some relationship between Real Estate Infrastructure sector and FII investment.

Simple Moving Average Table No. 3.11 Simple moving average for FII (March 2006)

DAYS NET VALUE 1 96.41 2 109.74 3 -756.59 4 -656.69 5 -808.16 6 -945.84 7 92.78 8 -440.77 9 -299.85

TOTAL NET VALUE FIVE DAYS

5 DAY MOVING AVERAGE

-2015.29 -3057.54 -3074.5 -2758.68 -2401.84

-403.058 -611.508 -614.9 -551.736 -480.368

53

10 11 12 13 14 15 16 17

20.38 -122.61 -496.66 529.66 -246.08 2635.77 -99.27 12.27

-1573.3 -750.07 -1339.51 -369.08 -315.31 2300.08 2323.42 2832.35

-314.66 -150.014 -267.902 -73.816 -63.062 460.016 464.684 566.47

Interpretation In the year of 2006 April the foreign institutional investors Simple Moving Average is starting from 5th day. It will be increased till the day of 7. And after that it decrease. In finally the 17th day the moving average is 566.47.

Figure. No 3.1 Showing simple moving average for FII (March 2006)

54

Table No 3.12 Showing simple moving average for FII (March 2007)

DAYS NET VALUE 1 -483.14 2 -612.7 3 -731.64 4 -489.57 5 28.03 6 60.18 7 412.37 8 130.53 9 -24.61 10 -541.37 11 -64.95 12 -202.47 13 -5 14 147.25 15 187.87 16 712.7 17 126.94 18 58.07 19 289.52 20 -172.31 Interpretation

TOTAL NET VALUE FIVE DAYS

5 DAY MOVING AVERAGE

-2289.02 -1745.7 -720.63 141.54 606.5 37.1 -88.03 -702.87 -838.4 -666.54 62.7 840.35 1169.76 1232.83 1375.1 1014.92

-457.804 -349.14 -144.126 28.308 121.3 7.42 -17.606 -140.574 -167.68 -133.308 12.54 168.07 233.952 246.566 275.02 202.984

In the year of 2007 March the foreign institutional investors Simply Moving Average is starting from 5th day. It will be decreased till the day of 10. And after that it increase. In finally the 20th day the moving average is 202.984.

55

Figure No 3.2 Showing simple moving average for FII (March 2007)

Table No 3.13 Showing simple moving average for FII (March 2008)

DAYS NET VALUE 1 -711.31 2 -512.33 3 -285.03 4 513.04 5 -1248.04

TOTAL NET VALUE FIVE DAYS

5 DAY MOVING AVERAGE

-2243.67

-448.734

56

6 7 8 9 10 11 12 13 14 15 16 17 18

-539.24 127.94 -108.5 -358 -658.22 -1011.05 30.54 376.13 1246.12 393.91 247.98 -401.95 -865.79

-2071.6 -1431.33 -1254.8 -2125.84 -1536.02 -2007.83 -2105.23 -1620.6 -16.48 1035.65 2294.68 1862.19 620.27

-414.32 -286.266 -250.96 -425.168 -307.204 -401.566 -421.046 -324.12 -3.296 207.13 458.936 372.438 124.054

Interpretation In the year of 2008 March the foreign institutional investors Simply Moving Average is starting from 5th day. It will be increased the day of 13. And after that it decrease as well as increase. In finally the 18th day the moving average is 124.054.

Figure No 3.3 Showing simple moving average for FII (March 2008)

57

Table no 3.14 Showing simple moving average for FII (March 2009)

DAYS NET VALUE 1 -580.43 2 -741.33 3 -494.22 4 -590.92 5 -274.68 6 -84.94 7 -186.86 8 299.23 9 -102.34 10 415.12 11 222.14 12 23 13 -149.18 14 376.23 15 501.76 16 348.65 17 1290.74 18 80.43 19 -452.32 20 -583.65

TOTAL NET VALUE FIVE DAYS

5 DAY MOVING AVERAGE

-2681.58 -2186.09 -1631.62 -838.17 -349.59 340.21 647.29 857.15 408.74 887.31 973.95 1100.46 2368.2 2597.81 1769.26 683.85

-536.316 -437.218 -326.324 -167.634 -69.918 68.042 129.458 171.43 81.748 177.462 194.79 220.092 473.64 519.562 353.852 136.77

Interpretation In the year of 2009 March the foreign institutional investors Total Net Value is starting from 5th day. It will be increased till the day of 12. And after that also it increase. In finally the 20 th day the moving average is 136.77.

58

Figure. No 3.4 Showing simple moving average for FII (March 2009)

Table. No 3.15 Showing simple moving average for FII (March 2010)

DAYS NET VALUE 1 1335.52 2 959.17 3 633.87 4 913.34 5 1132.01 6 2173.09 7 364.36 8 304.87 9 371.68 10 659.7

TOTAL NET VALUE FIVE DAYS

5 DAY MOVING AVERAGE

4973.91 5811.48 5216.67 4887.67 4346.01 3873.7

994.782 1162.296 1043.334 977.534 869.202 774.74

59

11 12 13 14 15

377.84 815.14 484.67 284.25 202.78

2078.45 2529.23 2709.03 2621.6 2164.68

415.69 505.846 541.806 524.32 432.936

Interpretation In the year of 2010 march the foreign institutional investors simple moving average is starting from 5th day. It will be decreased till the day of 7. And after that it decrease. In finally the 15h day the moving average is 432.936.

Figure. No 3.5 Showing simple moving average for FII (March 2010)

60

CHAPTER 4 FINDINGS, RECOMMENDATIONS, & CONCLUSION

1.

FINDINGS

It is found from the analysis shows that there is a Positive correlation between Bank sector share price movement and Foreign Institutional Investor.

It is found from the analysis shows that there is a Positive correlation between Service sector share price movement and Foreign Institutional Investor.

It is found from the analysis shows that there is a Positive correlation between energy sector share price movement and Foreign Institutional Investor.

It is found from the analysis shows that there is a Positive correlation between pharma sector share price movement and Foreign Institutional Investor.

It is found from the analysis shows that there is a Positive correlation between real estate infrastructures sector share price movement and Foreign Institutional Investor.

Regression shows the relationship between the average value of two variables. In this analysis shows there is no relationship between bank sector and FII.

Regression shows the relationship between the average value of two variables. In this analysis shows there is no relationship between service sector and FII.

Regression shows the relationship between the average value of two variables. In this analysis shows there is no relationship between Energy sector and FII.

Regression shows the relationship between the average value of two variables. In this analysis shows there is no relationship between Pharma sector and FII.

61

Regression shows the relationship between the average value of two variables. In this analysis shows there is no relationship between Real Estate Infrastructure sector and FII.

In the year of 2006 April the foreign institutional investors simple moving average is starting from 5th day. It will be increased till the day of 7. And after that it will be decrease. In finally the 17th day the moving average is 354.606.

In the year of 2007 march the foreign institutional investors simple moving average is starting from 5th day. It will be decreased till the day of 10. And after that it will be increase. In finally the 20th day the moving average is 202.984.

In the year of 2008 march the foreign institutional investors simple moving average is starting from 5th day. It will be increased till the day of 8. And after that it will be increase as well as decrease. In finally the 18th day the moving average is 124.054.

In the year of 2009 march the foreign institutional investors simple moving average is starting from 5th day. It will be increased till the day of 12. And after that also it will be increase. In finally the 20th day the moving average is 136.77.

In the year of 2010 march the foreign institutional investors simple moving average is starting from 5th day. It will be decreased till the day of 11. And after that it will be decrease. In finally the 15th day the moving average is 432.936.

62

4.2 RECOMMENDATIONS
1.

It is found that there is an impact of flow of FII on the Bank sector. Because, the Foreign Institutional Investors prefer to invest their money into Bank sector i.e., top thirty companies in the stock exchange. It suggested that the investors have to be aware on making investment the thirty companies. It enables the investors to reduce the risk.

2.

It is concluded that there is an impact of flow of FII on the Service sector. Because, any individual prefer to invest their money into Service sector constituents i.e. It enables the investors to reduce the risk and earn more return.

3.

It is clear that there is a relationship between flow of FII and Pharma sector wise. Because, the FII prefer to invest their money into Pharma sector wise. It is suggested the investors, there is a positive relationship between FII net flow and Pharma sector wise.

4.

It is found that there is a relationship flow of FII and Real Estate Infrastructure. Because, the FII prefer to invest their money into Real Estate Infrastructure sector wise. It is suggest to all investor to invest their money in Real Estate Infrastructure sector wise.

63

4.3 CONCLUSION In Indian stock market the foreign institutional investors playing a vital role. They have power to change the market movements. Because their investment portion is very high. But in small investors fund is very low comparing to the foreign institutional investors. In this study said that the foreign institutional investors are having more impact on the share price movement of selected five(Service, PSE, Energy, Pharma, Real Estate Infrastructure) sectors. The primary objective of the secondary market is to provide liquidity to the stocks and investors. But unfortunately when a large number of listed shares in the stock exchange becomes illiquid, it seems the purpose of the secondary market has been defeated. In India a small number of stocks account for a large proportion of trading volume, which is not a satisfactory sign. Lack of liquidity in a large volume of shares in the markets would definitely limit investment options for institutional and individual investors. The FII impact is very high in all five (Bank, Service, Energy, Pharma, Real Estate Infrastructure) selected sectors.

64

BIBLIOGRAPHY REFERENCES BOOKS

Avadhani V.A., Investment Management, Himalaya Publishing House, New Delhi, 2nd Edition, 1999. Bhalla V.K., Investment Management, Security Analysis and Portfolio

Management, S.Chand & Co Ltd, New Delhi, 2nd Edition, 1997.

Gupta.S.P., Statistical Methods, Sultan Chand & Co, 2nd Edition, 1998. Kothari.C.R., Research Methods and Techniques, Wishwa Prakashan Publishing, New Delhi, 1990. Prasanna Chandra, Financial Management-Theory and Practice, Tata Mc Graw Hill, International Edition, 5th edition, 2000.

WEBSITES

1. 2. 3. 4. 5. 6.

www.sharekhan.com www.nseindia.com www.investopedia.com www.equitymaster.com www.moneycontrol.com www.stockmaster.com