A SYNOPSIS REPORT ON A STUDY OF PRICE INTEGRATION IN THE INDIAN STOCK MARKET: BSE SENSEX AD S&P CNX NIFTY SUBMITTED

TO BANGALORE UNIVERSITY

IN THE PARTIAL FULFILLMENT FOR THE AWARD OF MASTER DEGREE OF BUSINESS ADMINISTRATION

SUBMITTED BY ARJUN AGARWAL REG NO: 11SLCMA015

UNDER THE GUIDANCE OF SH.SHIV SHANKAR ACHARYA

THE OXFORD COLLEGE OF BUSINESS MANAGEMENT HSR Layout, Sector-4, Bangalore-560102 Batch: 2011-2013

TITLE OF THE PROJECT

A Study on Price Integration in the Indian Stock Market: BSE Sensex and S&P CNX Nifty.

INTRODUCTION OF THE STUDY

Integration is processes by which markets become open and unified so that, participants in one market have an unimpeded access to other markets. The financial market's integration in general implies that in the absence of administrative and informational barriers, risk adjusted returns on assets of the same tenor in each segment of the market should be comparable to one another. The empirical investigations of market integration between two markets could be examined through various statistical and econometrics techniques. Correlation analysis is a suitable technique, which has been widely and extensively used in past for examining market integration.

The prices of various assets in these markets were the principle instrument and barometer. If the estimated correlation coefficient is close to plus or minus one, then the prices in the markets was considered as the supporting evidence for market integration. However, correlation analysis has its own limitations. It suffers from the important limitation of possible serial correlation, thus provides spurious or not meaningful results. In order to analyze the co movements of international stock prices and thereby stock market integration, most of the studies applied co integration techniques. The study applies the Engel-Engel-Granger co integration technique, which is a popular and suitable technique for two variables.

STATEMENT OF THE PROBLEM

There are various studies, which have analyzed the co-moments and co integration between various stock exchanges of different countries. We are not sure whether the fluctuations of one index will affect the other and whether they are co integrated or not. This study examines the price integration between two stock price indices BSE sensex and S&P CNX Nifty in India.

OBJ ECTIVE OF THE STUDY

To examine the price integration between the two major stock markets in India.

To determine the relationship between the stock indices. To evolve sufficient evidence to prove the relationship between price of both market. To analyse co-integration of the reasons for co-integration of the stock prices.

SCOPE OF THE STUDY

. The Indian financial system has undergone a sea change over the years especially after nineties. Until the early nineties, it was characterized by regulated and administered regime. The interest rates were administered, various markets participants including banks, financial institutions and corporate were restricted in terms of the nature and volume of transactions they could undertake in various financial markets including the money, for-ex and capital markets. The administrative limits were also imposed on the transactions between residents and non-residents. However, a drastic change occurred since mid-1991, when RBI has taken several steps to develop various segments of the financial markets, strengthen their integration and enhance their efficiency, covering various markets including stock market Financial system has become market oriented rather than strictly controlled. Methodology

RESEARCH DESIGN.
Secondary data refers to those data has already been collected and analyzed by someone else. In other words secondary data is the information that already exists some where having been collected for another purpose. In this study secondary data was collected from various sources like:

References for Websites. Monthly review reports. Stock exchange. Magazines and Journals.

Hypothesis of the study

Hypothesis 1

H0: There is no significant relation between BSE Sensex and S&P CNX Nifty. H1: There is significant relation between BSE Sensex and S&P CNX Nifty.

Study Type:
The study type is analytical, quantitative and historical. Analytical because facts and existing information is used for the analysis, Quantitative as relationship is examined by expressing variables in measurable terms Historical as the historical information is used for analysis and interpretation.

Study population:
Population is the closing of national stock exchange & Bombay stock exchange.

Sample:
Sample chosen is daily and monthly closing values of BSE Sensex, S&P CNX Nifty.

Sampling technique:
Deliberate sampling is used because only particular units are selected from the sampling frame. Such a selection is undertaken as these units represent the population in a better way and reflect better relationship with the other variable.

Data gathering procedures and instruments:

Data: Historical values of monthly closing and daily closing of BSE Sensex and S&P CNX nifty.

Data Source:
Historical share prices of the NSE sample are taken from www.nseindia.com, www.bseindia.com, www.nseindia.com, www.sebi.co.in, www.moneycontrol.com and BSE from www.financeyahoo.com.Statistical Models, Dickey Fuller test to test the stationary of the series. Angel-grangers co-integration approach to test for co integration between the series.

CHAPTER 2: RESEARCH DESIGN

This chapter deals with the plan of the study, tools and techniques used in data collection, objectives of the study, limitations of the study, research problem, review, methodology and sources of data.

CHAPTER 3: PROFILE OF THE INDUSTRY/COMPANY

This chapter deals with the profile of the Indian financial market which includes money market, capital market, forex market, credit market etc.

CHAPTER 4 : ANALYSIS AND INTERPRETATION OF THE DATA

This chapter provides an analysis of data with required interpretation.

CHAPTER 5: SUMMARY OF FINDINGS, SUGGESTIONS AND CONCLUSIONS

This chapter includes an overview to the study, summarizes the findings under each objective. It provides conclusion and acceptable recommendations based on the findings. BIBLIOGRAPHY: This chapter includes the list of various books, articles, websites that are referred and used in the research study. ANNEXURE: This chapter includes the copy of questionnaire used (if any), financial statement of the company, calculations supporting interpretation etc.