CERTIFICATE

This is to certify that the project entitled WORKING OF STOCK MARKET IN INDIA submitted to partial fulfillment of the requirements for the award of the degree of Master of Business Administration of VIMT (Rohtak), is a record of research work carried out by SUNIT GARG under my supervision and guidance.

Mr. NITIN GOYAL Lecturer, VAISH INSTITUTE OF MANAGEMENT & TECHNOLOGY, MDU, (Rohtak)

DECLARATION I, SUNIT GARG student of M.B.A. in VIMT, Rohtak here by declare that the Project Report entitled Working of Stock Market-In India is an original work and the same has not been submitted to any other Institute for award of any degree.

Project In charge

Signature of candidate

ACKNOWLEDGEMENT Heart full thanks to the following people. I express my sincere and deep sense of gratitude to my esteemed guide Mr. NITIN GOYAL lectuere in M.B.A Deptt., VAISH INSTITUTE OF MANAGEMENT & TECHNOLOGY, ROHTAK for his continued support and supervision. I am highly obliged to him for providing me the opportunity to work under his guidance. It was his scholarly suggestions, immense interest and moral support that helped in competing the work confidently and successfully. I would also place on record my gratitude to all teachers of VAISH INSTITUTE OF MANAGEMENT & TECHNOLOGY, ROHTAK for their constant encouragement.

(SUNIT GARG)

PREFACE We cannot achieve any thing on the basis of theoretical knowledge only as provided by books, in order achieve positive and successful results the classroom learnings are not sufficient the practical knowledge is also necessary with theoretical knowledge. To develop healthy skills in management theoretical knowledge must be supplemented with the real practical environment. In production labors play his part one side and management plays his part on the other side. In management the practical training gives us a great opportunity to stand in this competitive world. The main advantage of Project Training is to make the familiar to a student of any particular organization environment, norms, culture, along with formal teaching. It is very different kind of experience for any student. I select Stock Market to analyze for my Project Training Purpose which is an integral part of two years Master Degree in Management in M. D. University, Rohtak. This training is undergone after the completion of the third semester of the course. After analyzing stock market, I had the opportunity of getting practical with business world which enhanced my practical knowledge

CONTENTS Sr. No. Title Declaration Acknowledgement Preface -----------------------------------------------------------------------------------------1. Introduction 2. About Stock Exchange Brief History of Stock Exchanges in India The Stock Exchanges Function of Stock Exchange Most Commonly used Stock Exchanges Bombay Stock Exchange(BSE) National Stock Exchange(NSE) Invest Analysis Fundamental Analysis Technical Analysis 3. 4. 5. Objective of study Scope of the Study Research Methodology Meaning of research Research Design Sampling Technique Data Source Research Instrument 6. 7. 8. 9. Limitations Suggestions and Conclusions Annexure Bibliography

Stock Market Profile

ABOUT STOCK EXCHANGE Stock Exchange is an institution evolved in industrially developed capitalist economics with free market mechanism. In typical free market, the individual investor would ideally choose to make money available to those new or existing enterprises which offer the best prospect of immediate and continuing profit. And since he is entitled to withdraw money from a less profitable enterprise by selling his shares, as long as he can find a buyer and to reinvest it, he will be continually looking for new and more profitable outlets for his money. Therefore, in theory, stock exchange was termed as institution allocator of resources par excellence. The stock exchange an institution broadly fulfilling the following objectives: Making funds available to entrepreneurs for business activity ; Ensuring maximum return on the investment made by the investors; Providing platform for saving, investment and reinvestment activity.

In India, however, the institution of stock exchange evolved and developed as an organization offering place for speculative activity, which had little to do with industrial financing and investment activity. After 1865, a number of financial failures and problems in speculative activity led brokers to form an association in 1875. It was only the disaster that followed the boom, which brought the brokers together in July, 1875 to form an association that is today called the Stock Exchange, Bombay. Stock exchange remain absolutely on the borders of industrial financing and investment activity in pre-independence economy, the primary reason being the general distrust by the public of private business. With the absence of any meaningful role in industrial financing and investment activity, the functioning, organization and management of the institution of stock exchange tended to develop as that of an organization primarily concerned with speculative activity. The organization and management of major stock exchanges formed during this period did not prove to be positive to the developments and desirable changes later, more particularly during the period of 1980s.

The recent reforms in stock markets were triggered by issues of surveillance and any developments that will have a bearing on the quality and effectiveness of the surveillance and implications on the quality of growth. This is an important aspect that should be seriously addressed to the stock markets and the regulators. While government and regulatory authorities will have a greater role to play in promoting competition, the stock exchanges at their individual level have to take keen interest and initiate measures that would promote greater inter-exchange cooperation helping each other on overcoming shortfalls and setbacks. A fair degree of cooperation is required with in the stock exchanges in the country to avoid imprudent practices and inducements that will be harmful to the health of the markets,

The term Stock Market' is a concept for the mechanism that enables the trading of company stocks (collective shares), other securities and derivatives. The stock market is one of the most important sources for companies to raise money. This allows businesses to go public, or raise additional capital for expansion. The liquidity that an exchange provides affords investors the ability to quickly and easily sell securities. This is an attractive feature of investing in stocks, compared to other less liquid investments such as real estate. History has shown that the price of shares and other assets is an important part of the dynamics of economic activity, and can influence or be an indicator of social mood. Rising share prices, for instance, tend to be associated with increased business investment and vice versa. Share prices also affect the wealth of households and their consumption. Therefore, central banks tend to keep an eye on the control and behavior of the stock market and, in general, on the smooth operation of financial system functions. . Exchanges also act as the clearinghouse for each transaction, meaning that they collect and deliver the shares, and guarantee payment to the seller of a security. This eliminates the risk to an individual buyer or seller that the counterparty could default on the transaction.

The smooth functioning of all these activities facilitates economic growth in that lower costs and enterprise risks promote the production of goods and services as well as employment. In this way the financial system contributes to increased prosperity. Despite its expansion a very small percentage of households savings is channelised into the securities market. What worries further is the intention revealed that the majority of existing shareholders are unlikely to invest in the securties market in the coming years. It indicates lack of condidence by the existing investors in the securties market. The recent crises on the equity market has highlighted the deficiencies of governance with broker-run exchanges. While there is a broad agreement that the governance structures of the broker-run exchanges need to be transformed.

HISTORY OF STOCK EXCHANGES IN INDIA The origin of stock exchanges in India can be traced back to the later half of 19 th century. After the American Civil War (1860-61) due to the share mania of the public, the number of brokers dealing on shares increased. The brokers organised an informal association in Mumbai named The Native Stock And Share Brokers Association in 1875. Increased activity in trade and commerce during the First World War and Second World War resulted in an increase in stock trading. Stock exchanges were established in different centres like Chennai, Delhi, Nagpur, Kanpur, Hyderabad and Banglore. The growth of stock exchanges suffered a set back after the end of World War. Worldwide depression affected them. Most of the stock exchanges in the early stages had a speculative nature of working without technical stregth. Securties and Contract Regulation Act, 1956 gave powers to the central government to regulate the stock exchanges. The stock exchanges in Mumbai, Calcutta, Chennai, Ahmedabad, Delhi, Hyderabad and Indore were recognised by the SCR Act. Till recent past, floor trading took places in all stock exchanges. In the flooe trading system, the trade takes place through open outcry system during the official trading hours. Trading posts are assigned for different securties were buy and sell activities of securties took place. This system needs a face to face contact among the traders and restict the trading volume. The speed of new information reflected on the prices was rather slow. The deals were also not transparent and the system favoured the brokers rather than the investors. The setting up of NSE and OTCEI with the screen based trading facility resulted in more and more stock exchanges turning towards the computer based trading. Bombay stock exchange introduced the screen based trading system in 1995. Madras stock exchange introdued Automated Network Trading System(MANTRA) on Oct 7th 1996. Apart from Bombay stock exchange, Vadodara, Delhi, Pune, Banglore, Calcutta abd Ahmedabad stock exchanges have introduced screen based trading. Other exchanges are also planning to shift to the scren based trading.

One of the oldest stock markets in Asia, the Indian Stock Markets have a 200 years old history. 18th Century East India Company was the dominant institution and by end of the century, busuness in its loan securities gained full momentum 1830's Business on corporate stocks and shares in Bank and Cotton presses started in Bombay. Trading list by the end of 1839 got broader 1840's Recognition from banks and merchants to about half a dozen brokers 1850's Rapid development of commercial enterprise saw brokerage business attracting more people into the business 1860's The number of brokers increased to 60 1860-61 The American Civil War broke out which caused a stoppage of cotton supply from United States of America; marking the beginning of the "Share Mania" in India 1862-63 The number of brokers increased to about 200 to 250 1865 A disastrous slump began at the end of the American Civil War (as an example, Bank of Bombay Share which had touched Rs. 2850 could only be sold at Rs. 87) Pre-Independance Scenario - Establishment of Different Stock Exchanges 1874 1875 1880's 1894 1880 - 90's 1908 1920 1923 1934 1936 1937 With the rapidly developing share trading business, brokers used to gather at a street (now well known as "Dalal Street") for the purpose of transacting business. "The Native Share and Stock Brokers' Association" (also known as "The Bombay Stock Exchange") was established in Bombay Development of cotton mills industry and set up of many others Establishment of "The Ahmedabad Share and Stock Brokers' Association" Sharp increase in share prices of jute industries in 1870's was followed by a boom in tea stocks and coal "The Calcutta Stock Exchange Association" was formed Madras witnessed boom and business at "The Madras Stock Exchange" was transacted with 100 brokers. When recession followed, number of brokers came down to 3 and the Exchange was closed down Establishment of the Lahore Stock Exchange Merger of the Lahoe Stock Exchange with the Punjab Stock Exchange Re-organisation and set up of the Madras Stock Exchange Limited (Pvt.) Limited led by improvement in stock market activities in South India with establishment of new textile mills and plantation companies Uttar Pradesh Stock Exchange Limited and Nagpur Stock Exchange Limited was established Establishment of "The Hyderabad Stock Exchange Limited" "Delhi Stock and Share Brokers' Association Limited" and "The Delhi Stocks and Shares Exchange Limited" were established and later on merged into "The Delhi

1940 1944 1947

Stock Exchange Association Limited" Post Independance Scenario The depression witnessed after the Independance led to closure of a lot of exchanges in the country. Lahore Estock Exchange was closed down after the partition of India, and later on merged with the Delhi Stock Exchange. Bnagalore Stock Exchange Limited was registered in 1957 and got recognition only by 1963. Most of the other Exchanges were in a miserable state till 1957 when they applied for recognition under Securities Contracts (Regulations) Act, 1956. The Exchanges that were recognized under the Act were: 1. 2. 3. 4. 5. 6. 7. 8. Bombay Calcutta Madras Ahmedabad Delhi Hyderabad Bangalore Indore

Many more stock exchanges were established during 1980's, namely: 1. Cochin Stock Exchange (1980) 2. Uttar Pradesh Stock Exchange Association Limited (at Kanpur, 1982) 3. Pune Stock Exchange Limited (1982) 4. Ludhiana Stock Exchange Association Limited (1983) 5. Gauhati Stock Exchange Limited (1984) 6. Kanara Stock Exchange Limited (at Mangalore, 1985) 7. Magadh Stock Exchange Association (at Patna, 1986) 8. Jaipur Stock Exchange Limited (1989) 9. Bhubaneswar Stock Exchange Association Limited (1989) 10. Saurashtra Kutch Stock Exchange Limited (at Rajkot, 1989) 11. Vadodara Stock Exchange Limited (at Baroda, 1990) 12. Coimbatore Stock Exchange 13. Meerut Stock Exchange

At present, there are twenty one recognized stock exchanges in India which does not include the Over The Counter Exchange of India Limited (OTCEI) and the National Stock Exchange of India Limited (NSEIL).

Government policies during 1980's also played a vital role in the development of the Indian Stock Markets. There was a sharp increase in number of Exchanges, listed companies as well as their capital, which is visible from the following table: S. No. 1 2 3 4 5 6 7 8 As on 31st December No. of Stock Exchanges No. of Listed Cos. No. of Stock Issues of Listed Cos. Capital of Listed Cos. (Cr. Rs.) Market value of Capital of Listed Cos. (Cr. Rs.) Capital per Listed Cos. (4/2) (Lakh Rs.) Market Value of Capital per Listed Cos. (Lakh Rs.) (5/2) Appreciated value of Capital per Listed Cos. (Lak Rs.) 1946 1961 1971 1975 1980 1985 7 7 8 8 9 14 4344 6174 9723 1991 20 6229 8967 32041 1995 22 8593 11784 59583

1125 1203 1599 1552 2265 1506 2111 2838 3230 3697 270 753 1812 2614 3973

971 1292 2675 3273 6750 25302 110279 478121 24 86 358 63 107 170 113 167 148 168 211 126 175 298 170 224 582 260 514 1770 344 693 5564 803

THE STOCK EXCHANGES

The names of the stock exchanges are given below: Ahmedabad Stock Exchange Banglore Stock Exchange Bhubaneswar Stock Exchange Bombay Stock Exchange Calcutta Stock Exchange Cochin Stock Exchange Coimbatore Stock Exchange Delhi Stock Exchange Guwahati Stock Exchange Hyderabad Stock Exchange Indore Stock Exchange Jaipur Stock Exchange Kanpur Stock Exchange Ludhiana Stock Exchange Madras Stock Exchange Magadh Stock Exchange Mangalore Stock Exchange Pune Stock Exchange Saurashtra Stock Exchange NSE OTCEI Inter Connected Stock Exchange

Stock exchanges normally function between 10:00 a.m. and 3:30 p.m. on the working days.

FUNCTIONS OF STOCK EXCHANGE The functions of Stock Exchanges are as followed: Maintains Active Trading: Shares are traded on the stock exchanges, enabling the

investors to buy and sell securties. The prices may vary from transaction to transaction. A continuous trading increses the liquidity or marketability of the shares traded on the stock exchanges. Aids In Financing The Industry: A continuous market for shares provides a faourable climate for raising capital. The negotiability and transferability pf the securties helps the companies to raise long-term funds. Fixation Of Prices: Price is determined by the transactions that flow from investors demand and suppliers preferences. Usually the traded prices are made known to the public. This helps the investors to make better decisions. Ensures Safe And Fair Dealings: The rules, regulations and by-laws of the stock exchanges provide a measure of safety to thr invesors. Transactions are conducted under competitive conditions enabling the investors to get a fair deal. Performance Inducer: The prices of stocks reflect the performance of the traded companies. This makes the corporate more concerned with its public image and tries to maintain good performance. Dissemination Of Information: Stock exchanges provide information through their various publications. They publish the share prices traded on daily basis along with the volume traded. Handouts, Handbooks and Pamphlets provide information regarding the functioning of the stock exchanges. Self Regulating Organisation: The stock exchanges monitor the integrity of the members, brokers, listed companies and clients. Continuous internal audit safeguards the investors against unfair trade practices. It settles the disputes between member brokers, investors and brokers.

Trading Pattern of the Indian Stock Market Indian Stock Exchanges allow trading of securities of only those public limited companies that are listed on the Exchange(s). They are divided into two categories:

Types of Transactions The flowchart below describes the types of transactions that can be carried out on the Indian stock exchanges:

Indian stock exchange allows a member broker to perform following activities: 1. 2. 3. 4. Act as an agent, Buy and sell securities for his clients and charge commission for the same, Act as a trader or dealer as a principal, Buy and sell securities on his own account and risk.

MOST COMMONLY USED STOCK EXCHANGES-IN INDIA THE BONBAY STOCK EXCHANGE (BSE)

(Established in 1875, the Bombay Stock Exchange is Asia's first stock exchange) The Indian stock market is one of the oldest markets in Asia. Its history dates back to nearly two centuries. The earlier records of security dealings in India are meager and obscure. The East India Company was the dominant institution in those days and business in its loans securities was transacted towards the close of the eighteen century. By the 1830s business in corporate stocks and shares in bank and cotton presses took place in Bombay. Through the trading list was broader in 1839, there were only a half a dozen brokers recognized by the banks and merchants. In 1860-61, the American Civil War broke out and Cotton supply from the United States of America and Europe was stopped. This resulted in the Share Mania for cotton trading in India. The number of brokers increased to between 200 and 250. However, at the end of the American Civil War, 1865 a disastrous slump began- for example, a bank of Bombay share that had touched Rs. 2850 could only be sold at Rs. 87. At the same time, brokers found a place in Dalal Street, Bombay where they could conveniently assemble and transact business. In 1887, they formally established the Native Share and Stock Brokers Association. In 1895 the association acquired premises in the same street; it was inaugurated in 1899 as the Bombay Stock Exchange.

The Bombay Stock Exchange is governed by a board, chaired by a non-executive chairman. The executive director is in charge of the administration of the exchange and is supported by elected directors, Securities Exchange Board of India (SEBI) nominees, and public representatives.

THE NATIONAL STOCK EXCHANGE(NSE)

The National Stock Exchange of India Limited was set up to provide access to investors from across the country on an equal footing. NSE was promoted by leading financial institutions at the behest of the Government of India and was incorporated in November 1992 as a tax-paying company, unlike other stock exchanges in the country. On its recognition as a stock exchange under the Securities Contracts (Regulation) Act, 1956 in April 1993, NSE commenced operations in the wholesale debt market (WDM) segment in June 1994. The capital market (equities) segment commenced operations in November 1994, and operations in the derivatives segment commenced in June 2000. The organizational structure of NSE is through the link between National Securities Clearing Corporation Ltd. (NSCCL), India Index Services and Products Ltd. (IISL), National Securities Depositary Limited (NSDL), DotEx International Limited (DotEx) and MSEIT Ltd.

Trading at NSE 1. 2. 3. 4. 5. 6. 7. Fully automated screen-based trading mechanism Strictly follows the principle of an order-driven market Trading members are linked through a communication network This network allows them to execute trade from their offices The prices at which the buyer and seller are willing to transact will appear on the screen When the prices match the transaction will be completed A confirmation slip will be printed at the office of the trading member

Advantages of trading at NSE 1. 2. 3. 4. Integrated network for trading in stock market of India Fully automated screen based system that provides higher degree of transparency Investors can transact from any part of the country at uniform prices Greater functional efficiency supported by totally computerized network

Clearing House NSCCL

Index Services IISL NSE

Technical Support NSEIT/DotEx

Depository NSDL

Over The Counter Exchange of India (OTCEI) Traditionally, trading in Stock Exchanges in India followed a conventional style where people used to gather at the Exchange and bids and offers were made by open outcry. This age-old trading mechanism in the Indian stock markets used to create many functional inefficiencies. Lack of liquidity and transparency, long settlement periods and benami transactions are a few examples that adversely affected investors. In order to overcome these inefficiencies, OTCEI was incorporated in 1990 under the Companies Act 1956. OTCEI is the first screen based nationwide stock exchange in India created by Unit Trust of India, Industrial Credit and Investment Corporation of India, Industrial Development Bank of India, SBI Capital Markets, Industrial Finance Corporation of India, General Insurance Corporation and its subsidiaries and CanBank Financial Services.

Advantages of OTCEI 1. Greater liquidity and lesser risk of intermediary charges due to widely spread trading mechanism across India 2. The screen-based scripless trading ensures transparency and accuracy of prices 3. Faster settlement and transfer process as compared to other exchanges 4. Shorter allotment procedure (in case of a new issue) than other exchanges

INVESTMENT ANALYSIS This study told that when an investor decides to invest in stock market and when he decides to leave i.e. the decisions regarding buying and selling are based on some analysis. What are that factors, on the basis of which he decides to, make investment in stock market? Investors take several precautions before investing. They analyze various factors in terms of fundamental analysis as well as technical analysis. After analyzing all the factors they decided whether it is the right time to invest in market or whether it is the right time to invest in any particular company. All of their decisions are based on their analysis.

FUMDAMENTAL ANALYSIS The Intrinsic value of an equity share depends on multitude factors. The fundamental school of thought appraised the intrinsic value of shares through: 1. Economic Analysis 2. Industry Analysis 3. Company Analysis Economic Analysis The level of economic activity has an impact on investment in many ways. If the economy grows rapidly, the industry can also be show rapid growth and vice versa. When the level of economic activity is low, stock prices are low, and when the level of economic activity is high, stock prices are high reflecting the prosperous outlook for sales and profits of the firms. The analysis of macro economic environment is essential to understand the behavior of the stock prices. The commonly analyzed macro factors are as follows:

1. Gross Domestic Product (GDP) 2. Savings and Investments 3. Inflation 4. Interest Rates 5. Budget 6. The Tax Structure 7. The Balance of Payment (BOP) 8. Monsoon and Agriculture 9. Infrastructure Facilities 10. Demographic Factors 11. Economic Forecasting 12. Economic Indicators 13. Diffusion Index Industry Analysis An Industry is a group of firms that have similar technological structure of production and produce similar products. For the convenience of investors, the broad classification of the industry is given in financial dailies and magazines. Companies are distinctly classified to give a clear picture about their manufacturing process and products. Factors that are considered under Industry Analysis are: 1. Industry Life Cycle Analysis 2. Growth of the Industry 3. Cost structure and profitability 4. Nature of the product 5. Nature of the competition 6. Government policy 7. Labour 8. Research and Development 9. Pollution standards 10. SWOT Analysis

 Company Analysis In the company analysis the investor assimilates the several bits of information related to the company and evaluates the present and future values of the stock. The risk and return associated with the purchase of the stock is analyzed to take better investment decisions. The valuation process depends upon the investors ability to elicit information from the relationship and inter- relationship among the company related variables. The present and future values are affected a number of factors and they are as follows:

1. The competitive edge of the company 2. Earnings of the company 3. Capital Structure of the company 4. Management of the company 5. Operating efficiency of the company 6. Financial Performance of the company 7. Historical price of stock 8. P/E ratio 9. Economic condition 10. Stock market condition

 TECHNICAL ANALYSIS The share price movement is analyzed broadly with two approaches. One is Fundamental Approach and other is Technical Approach. Technical Analysis is a process of identifying trend reversals at an earlier stage to formulate the buying and selling strategy. With the help of several indicators they analyze the relationship between price - volume and supply demand for the overall market and the individual stock. Volume is favorable on the upswing i.e. the number of shares traded is greater than before and on the downside the number of shares traded dwindles. If it is the other way round, trend reversals can be expected. Generally used technical tools are: 1. Dow Theory 2. Volume of Trading 3. Short Selling 4. Odd Lot Trading 5. Bars and Line Charts 6. Moving Averages 7. Oscillators

The behavior of the stock market

From experience we know that investors may 'temporarily' move financial prices away from their long term aggregate price 'trends'. (Positive or up trends are referred to as bull markets; negative or down trends are referred to as bear markets.) Over-reactions may occurso that excessive optimism (euphoria) may drive prices unduly high or excessive pessimism may drive prices unduly low. Economists continue to debate whether financial markets are 'generally' efficient. According to one interpretation of the efficient-market hypothesis (EMH), only changes in fundamental factors, such as the outlook for margins, profits or dividends, ought to affect share prices beyond the short term, where random 'noise' in the system may prevail. (But this largely theoretic academic viewpointknown as 'hard' EMHalso predicts that little or no trading should take place, contrary to fact, since prices are already at or near equilibrium, having priced in all public knowledge.) The 'hard' efficient-market hypothesis is sorely tested by such events as the stock market crash in 1987, when the Dow Jones index plummeted 22.6 percentthe largest-ever one-day fall in the United States.[10] This event demonstrated that share prices can fall dramatically even though, to this day, it is impossible to fix a generally agreed upon definite cause: a thorough search failed to detect any 'reasonable' development that might have accounted for the crash. (But note that such events are predicted to occur strictly by chance, although very rarely.) It seems also to be the case more generally that many price movements (beyond that which are predicted to occur 'randomly') are not occasioned by new information; a study of the fifty largest one-day share price movements in the United States in the post-war period seems to confirm this.[10] However, a 'soft' EMH has emerged which does not require that prices remain at or near equilibrium, but only that market participants not be able to systematically profit from any momentary market 'inefficiencies'. Moreover, while EMH predicts that all price movement (in the absence of change in fundamental information) is random (i.e., non-trending), many studies have shown a marked tendency for the stock market to trend over time periods of weeks or longer. Various explanations for such large and apparently non-random price movements have been promulgated. For instance, some research has shown that changes in estimated risk, and the use of certain strategies, such as stop-loss limits and Value at Risk limits, theoretically could cause financial markets to overreact. But the best explanation seems to be that the distribution of stock market prices is non-Gaussian (in which case EMH, in any of its current forms, would not be strictly applicable).[11][12] Other research has shown that psychological factors may result in exaggerated (statistically anomalous) stock price movements (contrary to EMH which assumes such behaviors 'cancel out'). Psychological research has demonstrated that people are predisposed to 'seeing' patterns, and often will perceive a pattern in what is, in fact, just noise. (Something like seeing familiar shapes in clouds or ink blots.) In the present context this means that a succession of good news items about a company may lead investors to overreact positively (unjustifiably driving the price up). A period of

good returns also boosts the investor's self-confidence, reducing his (psychological) risk threshold.
[13]

Another phenomenonalso from psychologythat works against an objective assessment is group thinking. As social animals, it is not easy to stick to an opinion that differs markedly from that of a majority of the group. An example with which one may be familiar is the reluctance to enter a restaurant that is empty; people generally prefer to have their opinion validated by those of others in the group. In one paper the authors draw an analogy with gambling.[14] In normal times the market behaves like a game of roulette; the probabilities are known and largely independent of the investment decisions of the different players. In times of market stress, however, the game becomes more like poker (herding behavior takes over). The players now must give heavy weight to the psychology of other investors and how they are likely to react psychologically. The stock market, as with any other business, is quite unforgiving of amateurs. Inexperienced investors rarely get the assistance and support they need. In the period running up to the 1987 crash, less than 1 percent of the analyst's recommendations had been to sell (and even during the 20002002 bear market, the average did not rise above 5 %%). In the run up to 2000, the media amplified the general euphoria, with reports of rapidly rising share prices and the notion that large sums of money could be quickly earned in the so-called new economy stock market. (And later amplified the gloom which descended during the 20002002 bear market, so that by summer of 2002, predictions of a DOW average below 5000 were quite common.)

Irrational behavior Sometimes the market seems to react irrationally to economic or financial news, even if that news is likely to have no real effect on the fundamental value of securities itself. But this may be more apparent than real, since often such news has been anticipated, and a counterreaction may occur if the news is better (or worse) than expected. Therefore, the stock market may be swayed in either direction by press releases, rumors, euphoria and mass panic; but generally only briefly, as more experienced investors (especially the hedge funds) quickly rally to take advantage of even the slightest, momentary hysteria. Over the short-term, stocks and other securities can be battered or buoyed by any number of fast market-changing events, making the stock market behavior difficult to predict. Emotions can drive prices up and down, people are generally not as rational as they think, and the reasons for buying and selling are generally obscure. Behaviorists argue that investors often behave 'irrationally' when making investment decisions thereby incorrectly pricing securities, which causes market inefficiencies, which, in turn, are opportunities to make money.[15] However, the whole notion of EMH is that these non-rational reactions to information cancel out, leaving the prices of stocks rationally determined.

The Dow Jones Industrial Average biggest gain in one day was 936.42 points or 11 percent, this occurred on October 13, 2008.[16] Crashes

Robert Shiller's plot of the S&P Composite Real Price Index, Earnings, Dividends, and Interest Rates, from Irrational Exuberance, 2d ed.[17] In the preface to this edition, Shiller warns, "The stock market has not come down to historical levels: the price-earnings ratio as I define it in this book is still, at this writing [2005], in the mid-20s, far higher than the historical average... People still place too much confidence in the markets and have too strong a belief that paying attention to the gyrations in their investments will someday make them rich, and so they do not make conservative preparations for possible bad outcomes."

Price-Earnings ratios as a predictor of twenty-year returns based upon the plot by Robert Shiller (Figure 10.1,[17] source). The horizontal axis shows the real price-earnings ratio of the S&P Composite Stock Price Index as computed in Irrational Exuberance (inflation adjusted price divided by the prior ten-year mean of inflation-adjusted earnings). The vertical axis shows the

geometric average real annual return on investing in the S&P Composite Stock Price Index, reinvesting dividends, and selling twenty years later. Data from different twenty year periods is color-coded as shown in the key. See also ten-year returns. Shiller states that this plot "confirms that long-term investorsinvestors who commit their money to an investment for ten full years did do well when prices were low relative to earnings at the beginning of the ten years. Long-term investors would be well advised, individually, to lower their exposure to the stock market when it is high, as it has been recently, and get into the market when it is low."[17] Main article: Stock market crash A stock market crash is often defined as a sharp dip in share prices of equities listed on the stock exchanges. In parallel with various economic factors, a reason for stock market crashes is also due to panic and investing public's loss of confidence. Often, stock market crashes end speculative economic bubbles. There have been famous stock market crashes that have ended in the loss of billions of dollars and wealth destruction on a massive scale. An increasing number of people are involved in the stock market, especially since the social security and retirement plans are being increasingly privatized and linked to stocks and bonds and other elements of the market. There have been a number of famous stock market crashes like the Wall Street Crash of 1929, the stock market crash of 19734, the Black Monday of 1987, the Dot-com bubble of 2000, and the Stock Market Crash of 2008. One of the most famous stock market crashes started October 24, 1929 on Black Thursday. The Dow Jones Industrial lost 50 % during this stock market crash. It was the beginning of the Great Depression. Another famous crash took place on October 19, 1987 Black Monday. The crash began in Hong Kong and quickly spread around the world. By the end of October, stock markets in Hong Kong had fallen 45.5 %%, Australia 41.8 %%, Spain 31 %%, the United Kingdom 26.4 %%, the United States 22.68 %%, and Canada 22.5 %%. Black Monday itself was the largest one-day percentage decline in stock market history the Dow Jones fell by 22.6 %% in a day. The names Black Monday and Black Tuesday are also used for October 2829, 1929, which followed Terrible Thursdaythe starting day of the stock market crash in 1929. The crash in 1987 raised some puzzles-main news and events did not predict the catastrophe and visible reasons for the collapse were not identified. This event raised questions about many important assumptions of modern economics, namely, the theory of rational human conduct, the theory of market equilibrium and the hypothesis of market efficiency. For some time after the crash, trading in stock exchanges worldwide was halted, since the exchange computers did not perform well owing to enormous quantity of trades being received at one time. This halt in trading allowed the Federal Reserve system and central banks of other countries to take measures to control the spreading of worldwide financial crisis. In the United States the SEC introduced several new measures of control into the stock market in an attempt to prevent a re-occurrence of the events of Black Monday. Computer systems were upgraded in the stock exchanges to handle larger trading volumes in a more accurate and controlled manner. The SEC modified the margin requirements in an attempt to

lower the volatility of common stocks, stock options and the futures market. The New York Stock Exchange and the Chicago Mercantile Exchange introduced the concept of a circuit breaker. The circuit breaker halts trading if the Dow declines a prescribed number of points for a prescribed amount of time.

Objectives of Study If one person has to do anything he has specific objective behind his working i.e. there is always an objective behind any action or event and without that you can not know for what you are striving. The objective of my study is related with analysis of stock market in India covers the following areas: 1. The objective of the study is to know investors investment decisions in stock market. 2. To understand the perceptions of investors towards Indian Stock Market. 3. To know about fundamental factors like economic factors, industry analysis, company analysis which affects investment decisions. 4. To know about technical factors like chats, trend lines, P/E ratio, moving average, oscillators etc. which affects investment decisions. 5. To identify the problems in the working of stock exchanges. 6. To evaluate various legal aspects pertaining to stock markets in India. 7. Identifying small investors problems with the brokers.

Scope of the Study Along with the objective the scope of study is also plays an important role in analysis the project it makes the study more meaningful and relevant. Seems my study is related with analyzing the Indian stock market, therefore my scope of study is limited to Indian stock market only. In Stock Market different types of markets are available like INDIAN STOCK MARKET, DOW JONES, NASDAQ and others, I have selected Indian Stock Market.

Research Methodology A research design in simply a plan or framework for a study that is used as a guide in collecting & analyzing the data. It helps the researcher to conduct the study by ensuring that economical procedures are employed & probing is relevant to the problem. Research methodology is a way to systematically solve the research problem. It may be understood as a science of studying how research is done scientifically. Every researcher has to design methodology for his problem. To understand the system better and to make practical suggestions for improvement, it is imperative to think in an innovative manner and within the constraints imposed by the system. To affect this plan and to get deeper into the system, the following methodology was adopted.

Research Design: -

A research design is an arrangement of conditions for collection and

analysis of data in a manner that aims to combine relevance to the research purpose with economy in procedure. The Descriptive or Diagnostic Research Design is used here it is that research which has not been done earlier in-fact it is based on the new generalizations of the facts. It includes the finding of new enquires. The research design implemented in this research is Descriptive and

Diagnostic. The descriptive research studies are those studies which are concerned with describing the characteristics of a particular individual, or of a group, whereas diagnostic research studies determine the frequency with which something occur or its association with something else.

Sampling Technique: -

Every research is based on some facts and findings and these

are found or calculated through sample, so sample selection and technique used plays very vital role in any research methodology. It is of two types:

a) Non-Probabilistic Sampling: - It is that type of sampling which is according to the convenience of researcher therefore it is called convenience research also. b) Probabilistic Sampling: - Probabilistic sampling is characterized by the fact that each element of the population is known & non-zero chance of being included in the sample. The non probabilistic sampling technique is used here because the findings are based on: 1. Selected Brokers Interviews 2. Selected Investors Interviews

Data Source: -

This project requires data that have already

been collected by someone else or newer one. Here the newer data has been analyzed there for primary data source is used. Research Instrument: - Research instrument is used for This relates to the tools used for collection of data and other

collecting the data.

information required for the purpose of the project. Research Instrument used in the project is questionnaire. Sample Size: For the purpose of analysis the project has

been taken with 10 brokers and with 50 Investors as samples.

 unit.

Sampling Unit: - It covers Brokers and Investors as measuring

Sampling Area: - Rohtak City

Research Methodology at a Glance

Research Problem: - An Analysis of Stock Market- In India Research Design: Descriptive or Diagnostic

Data Collection:Data Type: Data Collection Tools: Sampling:Sampling Unit: Sampling Area: Sample Size: Research Approach: Brokers/ Investors Rohtak City 10Brokers/ 50 Investors Survey Primary Questionnaire

LIMITATIONS OF STUDY

Working on An analysis of stock market-In India itself is a great experience and regarding my project I faced certain limitations during my survey for the project are as follows:

On-site observation and direct interviews was a tedious job and took a lot of time. The sample size was small. The results may not be very accurate, as I did not interact with each and every employee. I could not get exact information, as I was not given the opportunity to have more exposure of different parts of India as I was only taking care of Rohtak City. While conducting the project, I faced time constraint problem. Some times the brokers/investors not respond proper cooperation with my questionnaire, they take it as formality. The cost occurred during survey was also a problem.

SUGGESTIONS AND CONLUSIONS There are some suggestions which may be helpful for brokers and Investors regarding analyzing stock market which increased confidence among investors regarding stock market. These are: 1. A uniform organizational structure among all the stock exchanges having democratic representation of different interest groups would be proposed. It would facilitate in dealing with crises situation promptly, firmly and impartially. 2. Steps to be taken towards improvement of operational efficiency includes enhancement of trading hours, strict vigilance on the price manipulation, advancement of computerized trading and development of communication system in the remote areas of the country.

3. Prudent use of available mechanism like imposition of margin money, volume restrictions, and circuit breakers to control the temporal disequilibrium of the market. 4. To increase investors confidence in stock market must be regained in order to encourage capital mobilization through primary market issues.

5. The investor forum as well other authorities should have power to dispose off the cases summarily and to award compensation to the investors. 6. The detail information regarding investments which investors wants may include the form of organization, management, capital adequacy, liabilities, defaults and penal actions taken by the regulator and self regulatory organizations against the broker in the past and other relevant information, must provides them.

7. The stock market is integrated with banking sector so that the effective and efficient payment, settlement and clearing systems are developed. 8. Further expansion of banking activities in conjunction with further efforts to liberalize the banking system.

9. The culprit needs to be punished in an exemplary manner so that it becomes a lesson for others. The investors should have means to recover their loss caused by the culprit.

ANALYSIS OF DATA COLLECTED FROM BROKERS

1. Views On Stock Exchanges Management Design Mechanism Option A: Demutualisation Option B: Establishment of statutory committee in each stock exchange

Option C: Complete removal of brokers from the governing body Option D: Staff selection should be through public service commission

10%

10%

Option A Option B 50% Option C Option D

30%

2. Views On Dominance of brokers in governing body of Indian stock exchanges Option A: Option B: Option C: Option D: No firewall between brokers and management of stock exchanges Staffing and Management structure of stock exchanges below the board level Brokers dominance in governing body Laxity of implementation in disciplnary action of members

20%

30%

Option A Option B Option C

40%

10%

Option D

3. Views On Organizational structural changes for bringing efficiency in stock exchanges Option A: Option B: Option C: National Clearing System National Depositary System National Trade Comparison and Reporting System

30% Option A Option B 60% 10% Option C

4. Do we need operational change in indian stock exchanges for the purpose of safeguard small investors? Option A: Option B: Option C: Compulsory participation of Market maker in the trading are related to ex-company shares which

Control on violent price swings between trading and settlement Special 48 hours window between delivery of securties and payment

30% Option A 50% Option B Option C

20%

5. Views on smooth functioning matter in stock exchanges Option A: Option B: Option C: Through government elected members Through eminent economic journalist representation in the governing board Through stock exchanges brokers representation on a rotation basis

30%

Option A Option B Option C

60%

10%

6. Views on stock market scam by brokers Option A: Option B: Option C: Option D: Recovering the money Reforming the system Strict vigilence on banking operations Stern action against the brokers

30%

20%

Option A Option B 10% Option C Option D

40%

7. Views on Protection of small investors from the price rigging Option A: Option B: Option C: Option D: Concentration ratio system Circuit breaker system Daily and weekly transaction price limit Margin system

20% 40% 10% 30%

Option A Option B Option C Option D

ANALYSIS OF DATA COLLECTED FROM CLIENTS/INVESTORS

1. Views regarding general investment period Option A: Option B: Option C: Long Term Medium Term Short Term

25 20 15 10 5 0 Option A 10

22 18

Option B

Option C

2. Views on stock investment experience with Primary Market Option A: Option B: Option C: Option D: Very Satisfactory and Rewarding Reasonably Unsatisfactory Unsatisfactory Very Unsatisfactory

40 35 30 25 20 15 10 5 0 Option A 3

38

7 2 Option B Option C Option D

3. Views on satisfaction level with brokers Option A: Option B: Option C: Option D: Very satisfied Somewhat satisfied Somewhat dissatisfied Very dissatisfied

40 35 30 25 20 15 10 5 0 Option A 5

36

6 3

Option B

Option C

Option D

4. Views on deficiencies in brokers services Option A: Option B: Option C: Option D: Bad execution High cost Accounting Snaufs Any other

25 20 15 10 5 0 Option A 10

22

14

Option B

Option C

Option D

5. Clients opinion regarding what should be ideal brokerage? Option A: Option B: Option C: Option D: 0.25% 0.35% 0.50% 0.65%

25 20

22

16 15 10 5 0 Option A Option B Option C Option D

8 4

6. Reason behind dealing with sub-brokers Option A: Option b: Option C: Option D: Sub-broker provide services at your doorstep You dont know about any stock Not the stock exchange members Any other reason

30 25 20 15 10 6 5 0 Option A Option B Option C Option D 2 24 18

7. Views on confident level of investors on the fair dealing with their brokers Option A: Option B: Option C: Option D: Very confident Somewhat confident Somewhat doubtful Very doubtful

30 25 20 15 10 5 0 Option A Option B Option C Option D 12 8 5 25

8. Which one of your most favourite Stock Exchange? Option A: Option B: Option C: NSE BSE Any other

40 35 30 25 20 15 10 5 0

36

10 4

Option A

Option B

Option C

9. On what Basis you invests in stock market? Option A: Option B: Option C: On Fundamental Analysis On Technical Analysis Both

25 20 15 10 5 0 Option A Option B 15 13

22

Option C

QUESTIONNAIRE FOR BROKERS 1. Views On Stock Exchanges Management Design Mechanism Option A: Demutualisation Option B: Establishment of statutory committee in each stock exchange

Option C: Complete removal of brokers from the governing body Option D: Staff selection should be through public service commission

2. Views On Dominance of brokers in governing body of Indian stock exchanges Option A: Option B: Option C: Option D: No firewall between brokers and management of stock exchanges Staffing and Management structure of stock exchanges below the board level Brokers dominance in governing body Laxity of implementation in disciplnary action of members

3. Views On Organizational structural changes for bringing efficiency in stock exchanges Option A: Option B: Option C: National Clearing System National Depositary System National Trade Comparison and Reporting System

4. Do we need operational change in indian stock exchanges for the purpose of safeguard small investors? Option A: Option B: Option C: Compulsory participation of Market maker in the trading are related to ex-company shares which

Control on violent price swings between trading and settlement Special 48 hours window between delivery of securties and payment

5. Views on smooth functioning matter in stock exchanges Option A: Through government elected members

Option B: Option C:

Through eminent economic journalist representation in the governing board Through stock exchanges brokers representation on a rotation basis

6. Views on stock market scam by brokers Option A: Option B: Option C: Option D: Recovering the money Reforming the system Strict vigilence on banking operations Stern action against the brokers

7. Views on Protection of small investors from the price rigging Option A: Option B: Option C: Option D: Concentration ratio system Circuit breaker system Daily and weekly transaction price limi Margin system

QUESTIONNAIRE FOR CLIENTS/ INVESTORS

1. Views regarding general investment period

Option A: Option B: Option C: Long Term Medium Term Short Term

2. Views on stock investment experience with Primary Market

Option A: Option B: Option C: Option D: Very Satisfactory and Rewarding Reasonably Unsatisfactory Unsatisfactory Very Unsatisfactory

3. Views on satisfaction level with brokers

Option A: Option B: Option C: Option D: Very satisfied Somewhat satisfied Somewhat dissatisfied Very dissatisfied

4. Views on deficiencies in brokers services

Option A: Option B: Option C: Option D: Bad execution High cost Accounting Snaufs Any other

5. Clients opinion regarding what should be ideal brokerage?

Option A: Option B: Option C: Option D: 0.25% 0.35% 0.50% 0.65%

6. Reason behind dealing with sub-brokers

Option A: Option b: Option C: Option D: Sub-broker provide services at your doorstep You dont know about any stock Not the stock exchange members Any other reason

7. Views on confident level of investors on the fair dealing with their brokers
Option A: Option B: Option C: Option D: Very confident Somewhat confident Somewhat doubtful Very doubtful

8. Which one of your most favourite Stock Exchange?

Option A: Option B: Option C: NSE BSE Any other

9. On what Basis you invests in stock market?

Option A: Option B: Option C: On Fundamental Analysis On Technical Analysis Both

BIBLIOGRAPHY 1. Avadhani V A (1992), Investment and Securities Market in India: Investment Management, Himalaya Publishing, Bombay. 2. Bhole L M (1982), Financial Markets and Institutions: Growth Structure and Innovations, Tat MacGraw Hill, New Delhi 1st edition. 3. Achils, Steven B. Technical Analysis from A to Z, McGraw-Hill, 2000. 4. Engerman, M. Using Fundamental and Economic Factors to Explain Stock Returns, Barra Newsletter, Fall 2005. 5. Greig, A.C. Fundamental Analysis and Subsequent Stock Returns, Journal of Accounting and Economics, 15, 2004, pp.413-442. 6. M. Ranganatham and R. Madhumathi. Investment Analysis and Portfolio Management, Pearson Education, 2005, pp. 206-410. 7. Punithavathy Pandian. Security Analysis and Portfolio Management, Vikas Publishing House Pvt. Ltd., 2001, pp. 215-278. 8. Khan Javaid (2005), Operating of stock exchange in India, Vista International Publishing House, Delhi.