1. Stock indices and Factors Affecting Share prices
SUBMITTED BY
(N.V.S Raghunath)
Reg NO: 10P35F1271
Under The Guidance and Supervision
Of
Prof. Samanvi Bhograj
BHAVAN - NIFTE SCHOOL OF BUSINESS
NO 60, 60FT ROAD, OFF BELLARY ROAD,
SAHAKAR NAGAR, BANGALORE-560092.
2010-12
1|Page

2. DECLARATION
I hereby declare that this report titled “Stock indices and Factors
Affecting Share prices” is a record of independent work carried out by
me under the guidance and supervision of Prof. Samanvi Bhograj,
Project Guide, BNSB towards the partial fulfillment of
requirements for the M.B.A. degree course of Bharathiar
University at Bhavan – NIFTE School of business.
I further declare that this Project is the result of my own efforts
and that it has not been submitted to any other university or
institute for the award of a degree or diploma or any other similar
title of recognition.
PLACE: Bangalore N.V.S Raghunath
DATE :
2|Page

3. GUIDE’S CERTIFICATE
This is to certify that the Dissertation Project Report entitled “Stock indices
and Factors Affecting Share prices”, done by N.V.S Raghunath (Reg No. -
10P35F1271) is a bona fide work done carried under my guidance during the
academic year 2010-12 in a partial fulfilment of the requirement for the
award of MBA degree by Bharathiar University. To the best of my
knowledge this report has not formed the basis for the award of any other
degree.
Prof. Samanvi Bhograj
(GUIDE)
3|Page

4. ACKNOWLEDGEMENT
Any successful work is always a product of many hands
coming together in co-operation and assistance. This
work is no different. A number of people are responsible
for accomplishment of this work. Their guidance and
suggestions were highly helpful during the course.
I express my deep sense of gratitude to Prof.
Samanvi Bhograj, my project guide, Bhavan – NIFTE
School of Business, Bangalore, for her most valuable
guidance, inspiring supervision, periodical monitoring
and sparing his precious time for this project.
I also express my sincere gratitude to my friends for all
the inspirations and giving me an opportunity to carry
out the project report. Without their help, the project
report would not have been possible.
Thanking you,
N.V.S Raghunath
4|Page

5. CONTENTS
Chapter No. Name of the concept Page No.
Executive summary 6
7
Introduction
Objectives of the study 9
Scope of the study 9
1 Methodology of the study 10
Limitations of the study 11
2 Review of Literature 12
3 Industry Profile 30
4 Data analysis and interpretation 41
5 Findings, Suggestions and Conclusion 63
6 Bibliography 68
5|Page

6. Executive Summary
The stock indices is used to measure a section of the stock market So, these indices were
quoted by the news or financial service firms so they used to get a benchmarks the
financial service firms were nothing but brokerage company . So to make in a proper
order the stock indices had introduced S&P CNX Nifty junior, S&P CNX-500, CNX
Midcap-200. These were the indices we will come over
While coming to the Stock Prices it will be vary according to the factors
influenced so, here the factors influence it may be economic factor, demand and supply,
geographical factor. So to understand the stock price variation here I had taken the 5
companies of automobile sector
To understand the concept of stock indices. Study the major companies those are part of
the Indices. We have to study the volatility of stock prices and indices. And the impact of
Different economic, industry and company specific factors that affect the stock prices
and stock market indices
The analysis and interpretation of various Companies
of Automobile sector were done because we will come to know which company is doing
better
Findings and suggestion .The various factors influence
the stock market prices it may be due to demand and supply; news, eps, fresh issue of
shares, etc… will be the causes of fluctuation of prices
Suggestion is that if the investor wants to invest in a particular company he/she has to
analyze the present scenario of the company there business profile, market share of the
company, balance sheet. Conclusion-is process of constructing an index is tedious but
very useful for a normal investor who works on his own in his investment game. The
process of constructing market leader index in this present project work is given clearly
and any investor can follow this process to easily construct his own index
6|Page

7. CHAPTER 1 - INTRODUCTION
7|Page

8. INTRODUCTION
An index is a number used to represent the changes in asset of values between a base
time period and another time period. A stock index is a number that helps measure the
levels of the market. Returns on the index thus are supposed to represent returns on the
market.
Index means the statistical composite that measures changes in the economy or in
financial markets, often expressed in percentage changes from a base year or from the
previous month. Indexes measure the ups and downs of stock, bond, and some
commodities markets, in terms of market prices and weighting of companies in the index.
An index is a statistical measure of change in an economy or a securities market. In the
case of financial markets, an index is essentially an imaginary portfolio of securities
representing a particular market or a portion of it. Each index has its own calculation
methodology and is usually expressed in terms of a change from a base value. Thus, the
percentage changes is more important that the actually numeric value. For example,
knowing that a stock exchange is at, say, 5,000 don‘t tell you much. However, knowing
that the index has risen 30% over the last year to 5,000 gives a much better
demonstration of performance.
Index values are useful for investors to track changes in market values over long periods
of time. For example, the widely used Standard and Poor's 500 Index is computed by
combining 500 large-cap and U.S. stocks together into one index value. Investors can
track changes in the index's value over time and use it as a benchmark to compare their
own portfolio returns. Technically, you can't actually invest in an index. Rather, you
invest in a security such as an index fund or ETF that attempts to track an index as
closely as possible called stock index. The plural of index can be spelled either indexes or
indices.
8|Page

9. OBJECTIVES OF THE STUDY
The main objective of this project is to understand the composition and performance
National Stock Exchange index NIFTY. And automobile sector
It includes:
1. To understand the concept of stock indices.
2. To study the major companies those are part of the Automobile sector.
3. To study the volatility of stock prices and indices.
4. To study the impact of different economic, industry and company specific factors
that effect the stock prices and stock market indices.
SCOPE OF THE STUDY
5 companies from Automobile sectors have been selected to study the market and to
construct the NIFTY index. The market prices of all 5 companies from 2008-2011 were
taken for study. The market share is taken as base for the selection of index construction
i.e. companies have been selected on the basis of this market share.
9|Page

10. METHODOLOGY
Sources of data:
Data collection is an actively in marketing research. The design of the data collection
method is the spine of research design. The sources of data are classified in to
two types
 The Primary Data.
 The Secondary Data.
PRIMARY DATA:
The primary data are fresh data collected directly from the field and therefore
consist of original information gathered for the specific purpose. It is expensive,
laborious, and time consuming. But it assures a greater degree of accuracy and reliability
as it comes straight from the horse‘s month.
SECONDARY DATA:
The secondary data are the data, which the investigator borrows from other who
have collected it for various other purposes. Therefore it may not entirely be reliable. It is
less expensive and involves less expensive and involves less time and labor than the
collection of primary data.
The Sources of collecting Data:
I. Websites of different online trading firms.
II. Newspaper, magazines, trade journals.
III. Publications of different online trading firms.
IV. Interaction with managers and customers.
10 | P a g e

11. LIMITATIONS
 Information is collected primarily from secondary sources and may not be
accurate.
 Index and stock prices moments are observed here for three years
 Period is from 2008 -2011 to work on any study comprehension
11 | P a g e

12. CHAPTER 2 - REVIEW OF LITERATURE
12 | P a g e

13. The securities market achieves one of the most important functions of channeling idle
resources to productive resources or from less productive resources to more productive
resources. Hence in the broader context the people who save and investors who invest
focus more towards the economy‘s abilities to invest and save respectively. This
enhances savings and investments in the economy, the two pillars for economic growth.
The Indian Capital Market has come a long way in this process and with a strong
regulator it has been able to usher an era of a modern capital market regime. The past
decade in many ways has been remarkable for securities market in India. It has grown
exponentially as measured in terms of amount raised from the market, the number of
listed stocks, market capitalization, trading volumes and turnover on stock exchanges,
and investor population. The market has witnessed fundamental institutional changes
resulting in drastic reduction in transaction costs and significant improvements in
efficiency, transparency and safety.
DEPENDENCE OF SECURITIES MARKET:
Three main sets of entities depend on securities market- the corporate, the government &
households. While the corporate and governments raise resources from the securities
market to meet their obligations, the households invest their savings in securities.
PRIMARY MARKET & SECONDARY MARKET:
The securities market comprises two segments- primary market (new issues, offer for
sale) & secondary market (trading of stocks). There are two major types of issuers who
issue securities. The corporate entities issue mainly debt and equity instruments (shares,
debentures, etc.), while the governments (central and state governments) issue debt
securities (dated Securities, treasury bills). The two major exchanges, namely the NSE
and the BSE provide trading of securities.
13 | P a g e

14. LAWS GOVERNING CAPITAL MARKET:
The four main legislations governing the securities market are:
(a) The SEBI Act, 1992 which establishes SEBI to protect investors and develop and
regulate securities market.
(b) The Companies Act, 1956, which sets out the code of conduct for the corporate
sector in relation to issue, allotment and transfer of securities, and disclosures to be
made in public issues.
(c) The Securities Contracts (Regulation) Act, 1956, read with the Securities Contracts
(Regulation) Rules, 1957 which provide for regulation of transactions in securities
through control over stock exchanges; and
(d) The Depositories Act, 1996 which provides for electronic maintenance and transfers
of ownership of demat securities.
REGULATORS:
SEBI is the primary regulator of the Securities Market and the entities operating therein.
The SEBI Act and the Depositories Act are mostly administered by SEBI. Government
and regulations by SEBI frame the rules under the securities laws. All these are
administered by SEBI. The powers under the Companies Act relating to issue and
transfer of securities and non-payment of dividend are administered by SEBI in case of
listed public companies and public companies proposing
To get their securities listed.
STOCK MARKET:
When investors think of the stock market, they may imagine a specific place - such as a
stock exchange. In fact, the stock market is the abstract idea of stock trading and stock
exchange. All selling of stocks - at stock exchanges and in other ways - affects the
market overall. Following stock market information in the news can help you make the
right decisions about stock market investing.
14 | P a g e

15. Luckily, today you can get stock market data from a wide variety of sources. Knowing
the stock market price of your investments, being able to answer the question what is the
stock market and watching the market's ups and downs can help you become a stronger
investor.
STOCK MARKET DEFINITIONS:
1. A market for the buying and selling of stocks, such as the Bombay Stock
exchange.
2. An institution that facilitates the buying and selling of stocks.
3. Where stocks (shares) are bought and sold. A share is a portion of the total
ownership of a corporation. The more shares you own in a corporation, the more
ownership you have in that corporation.
4. Stocks are bought or sold. The ―market‖ refers to this activity. There are
organized exchanges, such as The Bombay Stock exchange, that buyers and
sellers go through to place the transactions (or trades).
5. Stock exchange: an exchange where professional stockbrokers conduct security
trading.
6. A stock market is a market for the trading of company stock, and derivatives of it;
both of these are securities listed on a stock exchange as well as those only traded
privately.
7. The organized trading of stocks, bonds, or other securities, or the place where such
trading occurs.
8. Where stocks (shares) are bought and sold. A share is a portion of the total
ownership of a corporation. The more shares you own in a corporation, the more
ownership you have in that corporation.
9. The set of institutions that facilitate the exchange of stocks between buyers and
sellers. A stock market can be an actual place, but with the growth of electronic
15 | P a g e

16. transactions a large fraction of stock market transactions are not centrally located in a
particular location.
10. Particulars market where stocks and bonds are traded.
11. Stock market may be a physical place, sometimes known as a stock exchange,
where brokers gather to buy and sell stocks and other securities. The term is also used
more broadly to include electronic trading that takes place over computer and
telephone lines.
12. Is a market for the trading of publicly held company stocks or shares and
associated financial instruments (including stock options, convertibles and stock
index futures). Traditionally such markets were open-outcry where trading occurred
on the floor of exchange.
13. in relation to a securities exchange or a stock exchange, includes, in the case of
the Exchange, a stock market of a securities exchange or of a stock exchange, as the
case may be, that is a subsidiary of the Exchange.
14. Stock exchange: an exchange where security trading is conducted by professional
stockbrokers an organized marketplace where members gather to trade securities.
Members may act either as agents for customers, or as principals for their own...
15. An organized marketplace for securities featured by the centralization of supply
and demand for the transaction of orders by member brokers for institutional and
individual investors.
16 | P a g e

17. STOCK EXCHANGE:
1. A place where stocks, bonds, or other securities are bought and sold.
2. An association of stockbrokers who meet to buy and sell stocks and bonds
according to fixed regulations.
3. A place where stocks, bonds, or other securities are bought and sold.
4. A place where stocks, bonds, or other securities are bought and sold.
5. An association of stockbrokers who meet to buy and sell stocks and bonds
according to fixed regulations.
6. A place where stocks, bonds, or other securities are bought and sold.
An association of stockbrokers who meet to buy and sell stocks and bonds according
to fixed regulations.
NEED OF STOCK MARKET:
The stock market is simply a term for the overall market or industry that is concerned
with buying and selling company stock, both private and publicly traded securities. The
stock market does many things. It helps to set prices of stocks. The more a stock is traded
on the market and the more in demand the stock, the higher is its value. Having a stock
market that is interconnected with stock markets around the world helps traders and
investors to see how specific stocks are doing.
Of course, the stock market is mainly present to create money. Through the market,
investors - both companies and individuals - can buy stocks, which effectively make
them own a small part of a company. If the company prospers, investors are rewarded
with dividends and profits. Companies, by becoming public and offering stocks to the
public, can raise money and improve their profile through business expansions which can
help them make great profit.
17 | P a g e

18. NATIONAL STOCK EXCHANGE OF INDIA LIMITED
The National Stock Exchange of India Limited has genesis in the report of the High
Powered Study Group on Establishment of New Stock Exchanges, which recommended
promotion of a National Stock Exchange by financial institutions (FI‘s) to provide access
to investors from all across the country on an equal footing. Based on the
recommendations, 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 Exchange 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 Derivatives segment commenced in June 2000.
NSE GROUP
National Securities Clearing Corporation Ltd. (NSCCL)
It is a wholly owned subsidiary, which was incorporated in August 1995 and commenced
clearing operations in April 1996. It was formed to build confidence in clearing and
settlement of securities, to promote and maintain the short and consistent settlement
cycles, to provide a counter-party risk guarantee and to operate a tight risk containment
system.
18 | P a g e

19. NSE.IT Ltd.
It is also a wholly owned subsidiary of NSE and is its IT arm. This arm of the NSE is
uniquely positioned to provide products, services and solutions for the securities
industry. NSE.IT primarily focuses on in the area of trading, broker front-end and back-
office, clearing and settlement, web-based, insurance, etc. Along with this, it also
provides consultancy and implementation services in Data Warehousing, Business
Continuity Plans, Site Maintenance and Backups, Stratus Mainframe Facility
Management, Real Time Market Analysis & Financial News.
India Index Services & Products Ltd. (IISL)
It is a joint venture between NSE and CRISIL Ltd. to provide a variety of indices and
index related services and products for the Indian Capital markets. It was set up in May
1998. IISL has a consulting and licensing agreement with the Standard and Poor's (S&P),
world's leading provider of investible equity indices, for co-branding equity indices.
National Securities Depository Ltd. (NSDL)
NSE joined hands with IDBI and UTI to promote dematerialization of securities. This
step was taken to solve problems related to trading in physical securities. It commenced
operations in November 1996.
19 | P a g e

20. NSE Facts
 It uses satellite communication technology to energize participation from around
400 cities in India.
 NSE can handle up to 1 million trades per day.
 It is one of the largest interactive VSAT based stock exchanges in the world.
 The NSE- network is the largest private wide area network in India and the first
extended C- Band VSAT network in the world.
 Presently more than 9000 users are trading on the real time-online NSE
application.
Today, NSE is one of the largest exchanges in the world and still forging ahead. At NSE,
we are constantly working towards creating a more transparent, vibrant and innovative
capital market.
AUTOMOBILE SECTOR
Company Name Industry Last Price Mkt Cap(Cr) Weight
Bajaj Auto Automobiles 1,342.70 42,341.63 1.15
Hero Honda Automobiles 1,731.70 31,739.33 1.02
Mah and Mah Automobiles 644.1 42,997.30 1.17
Maruti Suzuki Automobiles 1,165.00 36,464.78 0.99
Tata Motors Automobiles 980.95 67,070.30 1.85
20 | P a g e

21. DIFFERENCES BETWEEN THE INDICES
The indices are different from each other to a certain extent. Some time the sensex may
move up 100 point but NSE nifty may move up only 40 points. The main factors that
differentiate one index from the other are give below.
1. The number of the component stocks
2. The composition of the stocks
3. The weights
4. Base year
1. The Number Of The Component Stocks: The number of stock in an index
influences the behavior of index. If the number of component stocks is larger, it
would be a representative sample capable of reflecting the market movement. The
sensex has 30 scrips like the Dow Jones Industrial average in (338 stocks) and
Nifty (50 stocks) are also widely used. BSE National Index is considered to be more
representative than sensex because it has 100 stocks. Out of 100 stocks. Out of 100,
22 are quoted on the rest are listed on the BSE and the rest are listed on the BSE and
other exchanges.
2. The Composition of the stocks: The composition of the stocks in the index should
reflect the market movement as well as the macroeconomic changes. The centre for
monitoring Indian Economy maintains an index. It often changes the composition of
the index so as to reflect the market movement in a better manner. Some of the
scrip‘s traded volume may fall down and at the same time some other stock may
attract the market interest. In such a case the scrip that has lost the market interest
should be dropped and other must be added. Only then, the index would become
more representative.
21 | P a g e

22. 3. The weight: The weight assigned to each company‘s scrip also influences the
movement of the index. The indices may be weighted with the price or value. The
Dow Jones industrial Average and Nikkei Stock Average of 225 scrips of Tokyo
stock exchange are weighted with the price. A price weight index is computed by
adding the current prices of the stocks exchange and dividing the sum by the total
number of stocks. The stocks with high price influence the index more than the low
priced stock in the sample. In the value weighted index the total market value of the
share is the weight. In an un weighted index, all stocks carry equal carry equal
weights. The price or market volume of the scrip does not affect the index. The
movement of the price is based on the percentage change in the average price of the
stocks in the particular index.
4. The choice of base year also leads to variations among the index. The base year
differs from each other in the various indices. The base year should be free from any
unnatural fluctuations in the market. If the base year is close to the current year, the
index would be more effective in reflecting the changes in the market movement. At
the same time if it is too close, the investor cannot make historical comparison. The
sensex has the base year as 1978-79 and the next oldest one is the RBI index of
ordinary shares with 1980-81 as base year. The following table gives the summary of
major stock market indices.
Indian stock market Weighting Base No. of stock Base year
Indices
Economic Time Unweighted 72 1984-85
Index of
Ordinary share Market Value 30 1978-79
PricesBSE sensex
100
BSE National Index Market Value 1983-84
22 | P a g e

23. BSE-200 Market Value 200 1989-90
Dollex Market Value 200 1989-90
S&P Nifty (NSE-
50)
S &P CNX Nifty Market Value 50 Nov 1995
Junior
S&P CNX-500 Market Value 50 -
CNX Midcap-200 Market Value 500 1994
International Stock Indices
Nikkei Dow Jone Price weighted 225 1949
Ave
S& P composite Market Value 500 1941-42
1. Industry representation: The Index should be able to capture the macro-industrial
situation through price movement of individual scrips. The company‘s scrip should
reflect the present state of the industry and its future prospects. Companies chosen
should be representative of the industry. Care is taken in selecting scrips across all
the major industries major industries to make the index act as a real barometer to the
economy
2. Market capitalization: The market capitalization of the stock indicates the true
value of the stock, as the outstanding number of share is multiplied by the price. Price
Indicate the demand and growth potential for the stock. The outstanding shares
depend on the equity base. The selected scrip should have a wide equity base too
23 | P a g e

24. 3. Liquidity: The liquidity factor is based on the average number of deal of scrip. The
average number of deal in the two previous years is taken in to account. The market
fancy for the share can be found out by the trading volumes. The Financial Express
Equity Index is weighted by trading volume and not by market capitalization. The
market depth: the market depth factor is the average deal as a percentage of
company‘s shares outstanding. The market depth depends upon the wide equity base.
If the equity base is broad based then number of deals in the market would increase.
For example Reliance Industries has a wide equity base and large number of
outstanding shares.
4. Floating stock depth: The floating stock depth factor is the average of deals as a
percentage of floating stock. Low floating stock is able to command high price. Its
sound finance and internal generation of funds led growth may be the reason for the
low flotation. Trading volumes are directly liked to the public holding in the
company. Wide public holding is a pre-requisite for high trading volume. Reliance
industries are a good example. The free float of company is 45 percent and it has its
positive effect on the trading volume. Revision of sensex scrips :
INTRODUCTION & BRIEF ABOUT THE INDEX CONSTRUCTION:
An index is a number used to represent the changes in asset of values between a base
time period and another time period. A stock index is a number that helps measure the
levels of the market. Returns on the index thus are supposed to represent returns on the
market.
Index means the statistical composite that measures changes in the economy or in
financial markets, often expressed in percentage changes from a base year or from the
previous month. Indexes measure the ups and downs of stock, bond, and some
commodities markets, in terms of market prices and weighting of companies in the index.
24 | P a g e

25. A statistical measure of change in an economy or a securities market. In the case of
financial markets, an index is essentially an imaginary portfolio of securities representing
a particular market or a portion of it. Each index has its own calculation methodology
and is usually expressed in terms of a change from a base value. Thus, the percentage
changes is more important that the actually numeric value. For example, knowing that a
stock exchange is at, say, 5,000 don‘t tell you much. However, knowing that the index
has risen 30% over the last year to 5,000 gives a much better demonstration of
performance.
Index values are useful for investors to track changes in market values over long periods
of time. For example, the widely used Standard and Poor's 500 Index is computed by
combining 500 large-cap U.S. stocks together into one index value. Investors can track
changes in the index's value over time and use it as a benchmark to compare their own
portfolio returns to. Technically, you can't actually invest in an index. Rather, you invest
in a security such as an index fund or ETF that attempts to track an index as closely as
possible o called stock index. See also base period. The plural of index can be spelled
either indexes or indices.
NIFTY & SENSEX:
The word Nifty is a combination of two words namely the ―N‖ from national and ―Nifty‖
from fifty. It is an index of fifty companies listed on the National Stock Exchange in
India. The fifty companies cover twenty two different sectors of the Indian economy. The
Sensex on the other hand refers to the sensitivity Index of the Bombay Stock Exchange.
The Sensex comprises of the traded stock of the thirty most traded and active types. It is
also representative and covers various sectors. The stock of the Nifty companies‘
accounts for approximately sixty percent of the stock traded at the National stock
exchange, the Sensex stock accounts for nearly twenty percent of the capitalization of the
Bombay Stock Exchange.
25 | P a g e

26. SENSEX, short form of the BSE-Sensitive Index, is a "Market Capitalization-Weighted"
index of 30 stocks representing a sample of large, well-established and financially sound
companies. The index is widely used to Measure the performance of the Indian stock
markets.
The NSE S&P CNX Nifty 50 indexes is a well diversified 50 Stock index accounting for
24 sectors of the economy. It is used for a variety of purposes such as benchmarking fund
portfolios, index based derivatives and index funds.
MARKET INDEX:
Market measure that consists of weighted values of the components that make up certain
list of companies. A stock market tracks the performance of certain stocks by weighting
them according to their prices and the number of outstanding shares by a particular
formula.
THE BASIC IDEA IN AN INDEX:
Every stock price moves for two possible reasons: news about the company (e.g. a
product launch, or the closure of a factory, etc.) or news about the country (e.g. nuclear
bombs, or a budget announcement, etc.). The job of an index is to purely capture the
second part, the movements of the stock market as a whole (i.e. news about the country).
This is achieved by averaging. Each stock contains a mixture of these two elements -
stock news and index news. When we take an average of returns on many stocks, the
individual stock news tends to cancel out. On any one day, there would be good stock-
specific news for a few companies and bad stock-specific news for others. In a good
index, these will cancel out, and the only thing left will be news that is common to all
stocks. The news that is common to all stocks is news about India. That is what the index
will capture.
26 | P a g e

27. REASONS FOR THE INDEX KEEP CHANGING FROM TIME TO TIME:
S&P CNX Nifty: Think of a liquid stock as a good thermometer, one which gives
accurate data about the true price of the stock, because it trades actively with a tight
spread. The prices observed for an illiquid stock are like readings from a low quality
thermometer, which reports noisy data about the phenomenon of interest (the true price
of the security). We try to find the fifty best thermometers in the country and average
their values to make the S&P CNX Nifty. As time passes, better thermometers become
available (in the form of large, liquid stocks that are not in the S&P CNX Nifty). We
would like that S&P CNX Nifty always uses the best thermometers possible. So we
remove the weakest thermometer from inside the S&P CNX Nifty and accept the new
stock into it. The world changes, so the index should change. Yet, the change should not
be sudden - for that would disrupt the character of the index. S&P CNX Nifty uses clear
researched and publicly documented rules for index revision. These rules are applied
regularly, to obtain changes to the index set. Index reviews are carried out every quarter
to ensure that each security in the index fulfills all the laid down criteria. IDBI was once
not listed; SBI was once illiquid; Infosys was once an obscure software startup. The
world changes, and one by one, these stocks have come into the S&P CNX Nifty. Each
change in the S&P CNX Nifty is small, so the continuity of the index is maintained. Yet,
at all times, S&P CNX Nifty represents the 50 most important liquid stocks in the S&P
CNX Defty is S&P CNX Nifty, measured in dollars. If the S&P CNX Nifty rises by 2%
it means that the Indian stock market rose by 2%, measured in rupees. If the S&P CNX
Defty rises by 2%, it means that the Indian stock market rose by 2%, measured in dollars.
THE S&P CNX 500:
The S&P CNX 500 is India‘s first broad based benchmark of the Indian capital market.
The S&P CNX 500 represents about 96% of total market capitalization and about 93% of
the total turnover on the NSE. The S&P CNX 500 companies are disaggregated into 72
industries, each of which has an index – The S&P CNX Industry Index. Industry
27 | P a g e

28. weightages in the index dynamically reflect the industry weightages in the market. So for
e.g. if the banking sector has a 5% weightage among the universe of stocks on the NSE,
banking stocks in the index would have an approx. representation of 5% in the index.
The S&P CNX 500 is a market capitalization weighted index. The base date for the index
is the calendar year 1994 with the base index value being 1000. Companies in the index
are selected based on their market capitalization, industry representation, trading interest
and financial performance. The index is calculated and disseminated real-time.
CNX NIFTY JUNIOR:
S&P CNX Nifty is the first rung of the largest, highly liquid stocks in India. CNX Nifty
Junior is an index built out of the next 50 large, liquid stocks in India. It is not as liquid
as the S&P CNX Nifty, which implies that the information in the S&P CNX Nifty Junior
is not as noise-free as that of the S&P CNX Nifty. It may be useful to think of the S&P
CNX Nifty and the CNX Nifty Junior as making up the 100 most liquid stocks in India.
S&P CNX Nifty is the front line blue chips, large and highly liquid stocks. The CNX
Nifty Junior is the second rung of growth stocks, which are not as established as those
are in the S&P CNX Nifty. A stock like Satyam Computers, which recently graduated
into the S&P CNX Nifty, was in the CNX Nifty Junior for a long time prior to this. CNX
Nifty Junior can be viewed as an incubator where young growth stocks are found. As
with the S&P CNX Nifty, stocks in the CNX Nifty Junior are filtered for liquidity, so
they are the most liquid of the stocks excluded from the S&P CNX Nifty. Buying and
selling the entire CNX Nifty Junior as a portfolio is feasible.
The maintenance of the S&P CNX Nifty and the CNX Nifty Junior are synchronized so
that the two indices will always be disjoint sets; i.e. a stock will never appear in both
indices at the same time. Hence it is always meaningful to pool the S&P CNX Nifty and
the CNX Nifty Junior into a composite 100 stock index or portfolio.
28 | P a g e

29. CNX MIDCAP 200:
The medium capitalized segment of the stock market is being increasingly perceived as
an attractive investment segment with high growth potential. The primary objective of
the CNX Madcap 200 Index is to capture the movement and be a benchmark of the
madcap segment of the market. The CNX Madcap 200 Index is a market capitalization
weighted index with its base period of the index being the calendar year 1994 and base
value as 1000. For inclusion in the index, the average market capitalization of a company
must range between Rs.0.75 billion to Rs.7.5 billion. The distribution of industries in the
CNX Madcap 200 Index represents the industry distribution in the Madcap segment of
the market. All companies are evaluated for trading interest and financial performance.
IMPORTANCE OF NSE CLOSING PRICE:
NSE has the best surveillance procedures in India, so the extent of market manipulation
is minimum there. In NSE, the professional staff of the surveillance department has no
positions on the market. This elimination of conflicts of interest generates a more honest
focus upon eliminating market manipulation. On a day-to-day basis millions of shares get
traded on the NSE generating huge order flows. Due to the liquidity and order flow from
numerous market players manipulation of the closing price becomes very hard. NSE is
the most liquid exchange in India. Hence, the prices observed there are the most reliable.
NSE has the highest trading intensity (reducing stale prices) and their bid-ask spreads are
the tightest (reducing bid-ask bounce). This is assisted by the fact that the NSE tick size
is Rs.0.05 for all stocks, which encourages tight bid-ask spreads.
29 | P a g e

30. CHAPTER 3 - INDUSTRY PROFILE
30 | P a g e

31. Introduction to the Capital Market
The capital market is the market for securities, where companies and the
government can raise long term funds. The capital market includes the stock market and
the bond market. Financial regulators ensure that investors are protected against fraud.
The capital markets consist of the primary market, where new issues are distributed to
investors, and the secondary market, where existing securities are traded.
Capital market thus plays a vital role in channelizing the savings of individuals for
Investment in the economic development of the country. As a result the investors are not
constrained by their individual abilities, but by the abilities of the companies, which in
turn enhance the savings and investments in the country, liquidity of capital market is an
important factor affecting growth.
Since projects require long term finance, but on the other hand, the investor may not like
to relinquish control over their savings for a long time. A liquid stock market ensures a
quick exit without incurring heavy losses or costs. Thus development of efficient market
system is necessary for creating conductive climate for investment and economic growth.
Capital Market Segment – Primary and Secondary
Broadly , the comprises of two segments – the new issue market which is
commonly known as primary market and the stock market which is known as secondary
market.
31 | P a g e

32. Primary
A primary offering, such as with a corporate bond, means you are buying
it directly from the issuer, at par value, usually. A secondary market is where you sell or
buy existing issues. i.e.; if you bought a bond last year, now need to get your principal,
you can sell it in the secondary market. You may not get par value. If rates are up since
you bought the bond, then you will likely have to sell it at a discount to be able to get rid
of it. If rates have fallen since you bought it, you could get a premium for it.
Secondary
The market where securities are traded after they are initially offered in the
primary market. Most trading is done in the secondary market. To explain further, it is
trading in previously issued financial instruments. An organized market for used
securities. Bombay Stock Exchange (BSE), National Stock Exchange NSE, bond
markets, over-the-counter markets, residential mortgage loans, governmental guaranteed
loans etc
Secondary Market refers to a market where securities are traded after being
initially offered to the public in the primary market and/or listed on the Stock Exchange.
Majority of the trading is done in the secondary market. Secondary market comprises of
equity markets and the debt markets. For the general investor, the secondary market
provides an efficient platform for trading of his securities.
For the management of the company, Secondary equity markets serve as a monitoring
and control conduit—by facilitating value-enhancing control activities, enabling
implementation of incentive-based management contracts, and aggregating information
(via price discovery) that guides management decisions.
32 | P a g e

33. BRIEF ABOUT THE STOCK EXCHANGES
Stock Exchange is a market like any other centralized market where both buyers
and sellers come and conduct their business of purchase and sale of shares & securities.
In other words, it is a market place for shares and securities where trading takes place in
a controlled and protected environment.
MEANING OF STOCK EXCHANGE
A stock exchange, share market or bourse is a corporation or mutual organization
which provides "trading" facilities for stock brokers and traders, to trade stocks and other
securities. Stock exchanges also provide facilities for the issue and redemption of
securities as well as other financial instruments and capital events including the payment
of income and dividends. The securities traded on a stock exchange include: shares
issued by companies, unit trusts and other pooled investment products and bonds. To be
able to trade a security on a certain stock exchange, it has to be listed there. Usually there
is a central location at least for recordkeeping, but trade is less and less linked to such a
physical place, as modern markets are electronic networks, which gives them advantages
of speed and cost of transactions. Trade on an exchange is by members only. The initial
offering of stocks and bonds to investors is by definition done in the primary market and
subsequent trading is done in the secondary market. A stock exchange is often the most
important component of a stock market. Supply and demand in stock markets is driven
by various factors which, as in all free markets, affect the price of stocks (see stock
valuation).
There is usually no compulsion to issue stock via the stock exchange itself, nor
must stock be subsequently traded on the exchange. Such trading is said to be off
33 | P a g e

34. exchange or over-the-counter. This is the usual way that bonds are traded. Increasingly,
stock exchanges are part of a global market for securities.
Functions of Stock Exchange
Stock exchange is established into the main purpose of providing a market place
for the members to deal in securities under well laid down regulations and to protect the
interest of the investors. The main functions of stock exchange are
 It brings the companies and investors together so that the investors can put risk
capital into companies and thus, companies can use the capital.
 It provides an orderly regulated market for securities.
 It provides continuous, ready and open market for selling and buying securities.
 It promotes savings and investment in the economy by attracting funds from the
Investors.
 It facilitates take overs by means of acquiring majority of shares traded on the stock
market.
 It acts as a clearing house of business information.
 It motivates the managers of well reputed companies, to retain their shares in ‗A‘
group, to improve performance.
 It induces the managers to improve performance for converting non-specified shares
into specified shares in the exchange.
 It enables the investors to evaluate the net worth of their holdings.
 It also allows the companies to float their shares in the market.
34 | P a g e

35. FINANCIAL MARKET REGULATIONS
Regulations are an absolute necessity in the face of the growing importance of capital
markets throughout the world. The development of a market economy is dependent on
the development of the capital market. The regulation of a capital market involves the
regulation of securities; these rules enable the capital market to function more efficiently
and impartially. A well regulated market has the potential to encourage additional
investors to partake, and contribute in, furthering the development of the economy. The
chief capital market regulatory authority is Securities and Exchange Board of India
(SEBI).
SEBI is the regulator for the securities market in India. It is the apex body to develop and
regulate the stock market in India It was formed officially by the Government of India in
1992 with SEBI Act 1992 being passed by the Indian Parliament. SEBI is headquartered
in the popular business district of Bandra-Kurla complex in Mumbai, and has Northern,
Eastern, Southern and Western regional offices in New Delhi, Kolkata, Chennai and
Ahmedabad. In place of Government Control, a statutory and autonomous regulatory
board with defined responsibilities, to cover both development & regulation of the
market, and independent powers has been set up.
The basic objectives of the Board were identified as:
 to protect the interests of investors in securities;
 to promote the development of Securities Market;
 to regulate the securities market and
35 | P a g e

36.  For matters connected therewith or incidental thereto.
Since its inception SEBI has been working targeting the securities and is attending to the
fulfillment of its objectives with commendable zeal and dexterity. The improvements in
the securities markets like capitalization requirements, margining, establishment of
clearing corporations etc. reduced the risk of credit and also reduced the market.
SEBI has introduced the comprehensive regulatory measures, prescribed registration
norms, the eligibility criteria, the code of obligations and the code of conduct for
different intermediaries like, bankers to issue, merchant bankers, brokers and sub-
brokers, registrars, portfolio managers, credit rating agencies, underwriters and others. It
has framed bye-laws, risk identification and risk management systems for Clearing
houses of stock exchanges, surveillance system etc. which has made dealing in securities
both safe and transparent to the end investor.
Another significant event is the approval of trading in stock indices (like S&P CNX
Nifty & Sensex) in 2000. A market Index is a convenient and effective product because
of the following reasons:
 It acts as a barometer for market behavior;
 It is used to benchmark portfolio performance;
 It is used in derivative instruments like index futures and index options;
 It can be used for passive fund management as in case of Index Funds.
36 | P a g e

37. Two broad approaches of SEBI is to integrate the securities market at the national level,
and also to diversify the trading products, so that there is an increase in number of traders
including banks, financial institutions, insurance companies, mutual funds, primary
dealers etc. to transact through the Exchanges. In this context the introduction of
derivatives trading through Indian Stock Exchanges permitted by SEBI in 2000 AD is a
real landmark.
SEBI has enjoyed success as a regulator by pushing systemic reforms aggressively and
successively (e.g. the quick movement towards making the markets electronic and
paperless rolling settlement on T+2 bases). SEBI has been active in setting up the
regulations as required under law.
EVOLUTION AND GROWTH OF INDIAN PRIMARY MARKET
Early Liberalization Phase: 1992-1995 (Fixed Pricing)
The initiation of the process of reform in India also would not have been possible without
changes in the regulatory framework. The New Economic policy (1991) led to a major
change in the regulatory framework of the capital market in India. The Capital Issues
(Control) Act 1947 was repealed and the Office of the Controller of Capital Issues (CCI)
was abolished. The Securities and Exchange Board of India (SEBI), established in 1988
and armed with statutory powers in 1992, came to be established as the regulatory body
with the necessary authority and powers to regulate and reform the capital market. SEBI
came to be recognized as a regulatory body for the capital market after the abolition of
the CCI. The control on pricing of capital issue has been abolished and easy access is
provided to the capital market. Initial Public Issue caught the attention of general public
only after the success of Reliance, when millions of small investors made huge returns
37 | P a g e

38. which were unheard of till then. Dhirubhai Ambani was the first promoter who raised
huge amounts through the public issue route to finance large facilities.
The issue process was smoothened, procedures were simplified and free pricing was
allowed, although with certain restrictions, The Indian market had the concept of par
value of equity shares, and anything above par was considered premium. The only
companies that were allowed to come with premium issues were those, which had a three
year profit-track record for the preceding five years. New companies without this record
could float premium issues if their promoting companies had the same track record and
they had to hold 50% of the post issue capital. Any new company floated by first
generation entrepreneurs could only issue equity at par. There was no restriction about
prices in a premium issue.
The offer was always at a fixed price, whether premium or par. The companies had to
appoint intermediaries like merchant bankers, registrars, bankers etc. Merchant bankers
had the responsibility of fixing the prices, in consultation with the company, carrying out
with due diligence, preparing the prospectus (offer documents) etc. The prospectus had to
be submitted to SEBI for getting scrutiny.
The trend continued in the early nineties as many large projects were launched after the
economy was liberalized. Many of these companies came out with public issues and the
retail participation increased dramatically. But many of the companies which raised
money during this period just disappeared without a trace.
Late Liberalisation Period: 1996-2005 (Book Building)
The late nineties and the first few years of the current decade did not see much activity in
the primary market even though we saw a huge bull run led by technology stocks at the
turn of the decade. The bad experiences of retail investors kept them away from the
market and made it difficult for companies to launch successful issues. The corporate
38 | P a g e

39. sector was recovering from the damage caused by large capacity expansions and new
projects set up in the nineties.
The dormant primary issues market came alive after 2003 mostly because of the
divestment programme of the government. The issue of Maruti Udyog, through which
the government sold part of its stake in the company, rekindled retail investor interest in
the primary market. The issue was made at a very reasonable price and investors made
very good returns immediately.
The year 2004 saw the primary market activity at its historic peak as some large private
companies also came out with issues. Further divestment by the government; including
the largest ever issue by an Indian company from ONGC, attracted more retail investors
into the market. The IPO market continues to buzz in the current year as well. Taking
advantage of the strength in the secondary market, many high profle companies are lining
up to raise money from the market. The year started with the issue from Jet Airways
which attracted a lot of interest from investors. As a result of tougher regulations, the
quality of the issues has gone up substantially.
2006 onwards scenario:
India's IPO market emerged as the eighth largest with $7.23 billion (Rs 30,000 crore) in
net proceeds through 78 public issues, global research and consultancy firm Ernst &
Young said in its Global IPO report. Across the world, the companies raised $246 billion,
up from $167 billion in 2005, through a total of 1,729 IPOs, led by Chinese companies at
the top with net proceeds of $56.6 billion. However, the biggest number of IPOs came
from the United States with 187 offerings, followed by Japan with 185 and China with
175 IPOs. According to the study, India's increasing number of larger deals has been
driven by the growth of Indian corporations and their need for additional capital for
potential acquisitions. In 2007 Indian IPOs continue to surge in numbers. Continued
strength is expected in the real estate and energy sector. "The rapid growth in emerging
market economies has resulted in a migration of capital from the developed economies
into the emerging markets," E&Y said.
39 | P a g e

40. The localization trend in India is evidenced by several billion-dollar IPOs hosted by
Indian exchanges. In 2006, India's largest IPO, Reliance Petroleum raised $1.8 billion,
followed by the oil production and exploration company, Cairn Energy, which raised
$1.3 billion with both companies listing on domestic exchanges.
However, some Indian companies are also listing abroad, especially London, Singapore
and Luxembourg, primarily for higher valuations and visibility, the report noted.
40 | P a g e

41. CHAPTER 4
DATA ANALYSIS & INTERPRETATIONS
41 | P a g e

42. FACTORS INFLUENCING STOCK PRICES & INDICES
The main factors that include the movement of stock indices include:
a. Economic Factors
b. Industry Trends
c. Company Performance
d. Demand & Supply
e. Other Factors
1. ECONOMY ANALYSIS
Economic analysis is the analysis of forces operating the overall economy a country.
Economic analysis is a process whereby strengths and weaknesses of an economy are
analyzed. Economic analysis is important in order to understand exact condition of an
economy.
The Centre for Monitoring Indian Economy (CMIE) has estimated India‘s gross
domestic product (GDP) to expand at 9.2 per cent in 2010-11 as compared to the growth
of 7.4 per cent in 2009-10. Overall growth in industrial output was 10.8 per cent year-on-
year (y-o-y) in October 2010. The growth in the industrial sector is expected to increase
at 9.4 per cent in 2010-11, as compared to 9.2 per cent in 2009-10. According to a survey
by the Confederation of Indian Industry (CII) and ASCON, around 50 segments (out of
127) in the manufacturing sector grew by 39 per cent, entering the 'excellent growth'
category, during April-December 2010-11 compared to 29 sectors (22.9 per cent) in
April-December 2009 which shows a marked improvement. Also, services sector is
projected to expand by 10 per cent as compared to 8.6 per cent last year, led by the trade
and transport segment. As per Use-based classification, the Sectorial growth rates in
October 2010 over October 2009 are 7.7 per cent in Basic goods, 22 per cent in Capital
42 | P a g e

43. goods and 9.5 per cent in Intermediate goods. The Consumer durables and Consumer
non-durables have expanded by 31 per cent and 0.1 per cent respectively in the reported
month.
The industrial output registered a robust growth of 10.8 per cent year-on-year (y-o-y) in
October 2010. Among the three major constituents of the IIP, manufacturing and
electricity recorded higher growth rates of 11.3 per cent and 8.8 per cent in October as
against their corresponding levels of 10.8 per cent and 4 per cent for the corresponding
month in 2009. The third constituent mining index registered 6.5 per cent in October
2010.
The Economic scenario
Foreign injections amounted to US$ 6.4 billion in October 2010, which was almost 25
per cent of the total inflows in the stock market registered so far in 2010 The net foreign
fund investment crossed the US$ 100 billion mark on November 8 2010, since the
liberalization policy was implemented in 1992.Even in 2011 the foreign investment in
the March month it was U.S$3.6 billion As per the data given by SEBI, the total figure
stood at US$100.9 billion, wherein US$ 4.78 billion were infused in November itself.
The humungous increase in investment mirrors the foreign investors‘ faith in the Indian
markets. FIIs have made investments worth US$ 4.11 billion in equities and poured US$
667.71 million into the debt market.
Data sourced from SEBI shows that the number of registered FIIs stood at 1,738 and
number of registered sub-accounts rose to 5,592 as of November 10, 2010.
As on December 17, 2010, India's foreign exchange reserves totalled US$ 294.60 billion,
an increase of US$ 11.13 billion over the same period last year, according to the Reserve
Bank of India's (RBI) Weekly Statistical Supplement.
Moreover, India received foreign direct investment (FDI) equity worth US$ 12.39 billion
during April-October, 2010-11, taking the cumulative amount of FDI inflows during
43 | P a g e

44. April 2000 - October 2010 to US$ 179.45 billion, according to the Department of
Industrial Policy and Promotion (DIPP).
The services sector comprising financial and non-financial services attracted 21 per cent
of the total FDI equity inflow into India, with FDI worth US$ 2,163 million during April-
October 2010,. Metallurgical industries were the third highest sector attracting FDI worth
US$ 920 million.
 Exports from India have increased by 26.8 per cent year-on-year (y-o-y) to touch
US$ 18.9 billion in November 2010, urging the Government to exude confidence
that overall shipments in 2010-11 may touch US$ 215 billion. For the April-
November 2010 period, exports have grown by 26.7 per cent to US$ 140.3
billion, while imports totaled up to US$ 222 billion, expanding 24 per cent.
 India's logistics sector is witnessing increased activity. According to the Indian
Shipping ministry, the country's major ports handled 44.4 million tones of cargo
during September 2010, 4.5 per cent higher as compared to 5.9 per cent growth in
September 2009. Leading consultants Frost&Sullivan, as cited by The Economic
Times, are expecting traffic to boost at Indian ports from 814.1 million tones
(MT) to 1,373.1 MT from 2010 to 2015 at a CAGR of 11 per cent. The study
group has underlined three key trends in the sector, namely, increase in
containerized cargo, increased private sector participation and traffic diversion
toward minor ports. .
 The average assets under management of the mutual fund industry stood at US$
160.44 billion for the month of September 2010, according to the data released by
Association of Mutual Funds in India (AMFI).
 The cumulative production of vehicles in India grew by 32.4 per cent upto
August 2010 as compared to the same period in 2009, Mr B S Meena, Secretary,
Ministry of Heavy Industry, reported. Passenger vehicles, commercial vehicles
and two-wheeler segments had all recorded impressive growth rates of 32 per
cent, 49 per cent and 31 per cent, respectively during the period upto August
2010. . .
44 | P a g e

45.  According to Ernst & Young (E&Y), a global consultancy firm, India is expected
to receive more than US$ 7 billion in private equity (PE) investments in 2010, on
the back of robust economic growth. According to research firm VCCEdge,
mergers and acquisition (M&A) deals worth US$ 54.6 billion have been signed
till December 15, 2010, significantly more than the previous high of US$ 42
billion achieved in 2007.
 The HSBC Market Business Activity Index, which measures business activity
among Indian services companies, based on a survey of 400 firms, rose to 60.1 in
November 2010 from 56.2 in October 2010.
 We had taken the stock prices from the 2008 -2011 the stock prices melt down
very drastically in 2008 because of the Lehman brothers they were bankrupt in
U.S it was nearly $600billions in assets it had taken credit from many of banks
throughout the world it was unable to pay them so there was a drastic down fall
of stocks in that period
Growth potential story
 The data centre services market in the country is forecast to grow at a compound
annual growth rate (CAGR) of 22.7 per cent between 2009 and 2011, to touch
close to US$ 2.2 billion by the end of 2011, according to research firm IDC
India‘s report published in March 2010. The report further stated that the overall
India data centre services market in 2009 was estimated at US$ 1.39 billion. .
 The BMI India Retail Report Quarter 3, 2010 released in May 2010, forecasts that
total retail sales will grow from US$ 353 billion in 2010 to US$ 543.2 billion by
2014.
 According to a report titled 'India 2020: Seeing, Beyond', published by domestic
broking major, Edelweiss Capital in March 2010, stated that India's GDP is set to
quadruple over the next ten years and the country is likely to become an over US$
4 trillion economy by 2020.
45 | P a g e

46.  India will overtake China to become the world's fastest growing economy by
2018, according to the Economist Intelligence Unit (EIU), the research arm of
London-based Economist magazine.
Economic Survey 2009-10 Highlights
According to the Economic Survey 2009-10, tabled in Parliament on February 25, 2010
by the Union Finance Minister, Mr Pranab Mukherjee, the economy is expected to grow
at 7.2 per cent in 2009-10. The expected growth comes on the back of the growth
momentum witnessed in Q2 2009-10 estimates, when the economy recorded a GDP
growth of 7.9 per cent as against 7.5 per cent in the corresponding quarter of 2008-09.
The industrial and the service sectors are growing at 8.2 and 8.7 per cent respectively, as
per the advance estimates of gross domestic product (GDP) for 2009-10, released by the
Central Statistical Organisation (CSO).
The Economic Survey estimates:
 Growth rate of GDP at factor cost expected to be 7.2 per cent.
 Growth in the manufacturing sector has more than doubled from 3.2 per cent in
2008-09 to 8.9 per cent in 2009-10.
 Growth of private investment demand picked up in 2009-10.
 Savings rate as a percentage of GDP in 2008-09 stood at 32.5 per cent.
 Growth rate of capital formation as a percentage of GDP in 2008-09 stood at 34.9
per cent.
 Foreign Exchange Reserves in 2009-10 as of December 31, 2009 stood at US$
283.5 billion.
 Financing, insurance, real estate and business services have retained their growth
momentum at around 10 per cent in 2009-10.
46 | P a g e

47. The main highlights of the survey are:
 The recovery in GDP growth for 2009-10, as indicated in the advance estimates,
is broad based. Seven out of eight sectors/sub-sectors show a growth rate of 6.5
per cent or higher. Sectors including mining and quarrying; manufacturing; and
electricity, gas and water supply have significantly improved their growth rates at
over 8 per cent in comparison with 2008-09. The construction sector and trade,
hotels, transport and communication have also improved their growth rates over
the preceding year.
 Strong growth in automobiles, rubber and plastic products, wool and silk textiles,
wood products, chemicals and miscellaneous manufacturing; modest growth in
nonmetallic mineral products. .
 There has been improvement in the balance of payments (BoP) situation during
H1 of 2009-10 over H1 of 2008-09, reflected in higher net capital inflows and
lower trade deficit.
 Net capital flows to India at US$ 29.6 billion in April-September 2009 remained
higher as compared to US$ 12 billion in April-September 2008.
 During fiscal 2009-10, foreign exchange reserves increased by US$ 31.5 billion
from US$ 252 billion in end March 2009 to US$ 283.5 billion in end December
2009.
 Growth rate of gross fixed capital formation in 2009-10 has recovered, as per the
revised National Accounts Statistics (NAS).
 Turnaround in merchandise export growth witnessed in November 2009, which
has been sustained in December 2009.
Crisis of automobile sector in 2008-2010
 The automotive crisis not only occurred in our Asian continent it was occurred all
the parts of the world because of the rise of automotive fuels because of that the
purchasing power of the consumers was drastically reduced
47 | P a g e

48.  Decline of BOP in 2009 – 2010 the BOP (Balance of payments) were been
decreased before period of 2008 – 2009 it was good in exports 3.6% decline and
in imports 2.6% decline
Hopes to the automotive sector in 2009 – 2010
Because of the down fall of automotive sector the RBI has decreased the interest rates of
the automotive sector so there was a slight increasing of the stock prices was increased
fall in EPS but it recovered the demand and supply of this company was much when
compare to other companies
48 | P a g e

49. INDUSTRY & COMPANY ANALYSIS OF AUTOMBILE SECTOR
Automobiles
Despite the fiscal slowdown worldwide, India had maintained its growth rate at a steady
8-8.5 per cent and the automobile industry has also grown in excess of 13 per cent over
the last few years. With easy financing options and with the wide range of cars being
launched frequently, the Indian automobile enthusiasts have never seen it better.
According to SIAM, the cumulative production data for April-January 2011 shows
production growth of 27.45 per cent over same period in 2010. In March 2011 as
compared to March 2010, production grew at 20.62 per cent. The industry produced
17,916,035 million vehicles of which share of two wheelers, passenger vehicles, three
wheelers and commercial vehicles were 75 per cent, 17 per cent, 4 per cent and 4 per
cent respectively.
The growth rate recorded for Domestic Sales for 2010-11 was 26.17 per cent amounting
to 15,513,156 vehicles.
49 | P a g e

50. Passenger Vehicles segment grew at 29.16 per cent during April-March 2011 over same
period last year. Passenger Cars grew by 29.73 per cent, Utility Vehicles grew by 18.87
per cent and Multi-Purpose Vehicles grew by 42.10 per cent in this period.
The overall Commercial Vehicles segment registered growth of 26.97 per cent during
April-March 2011 as compared to the same period last year. While Medium & Heavy
Commercial Vehicles (M&HCVs) registered growth of 31.78 per cent, Light
Commercial Vehicles grew at 22.88 per cent.
Three Wheelers sales recorded a growth rate of 19.44 per cent in April-March 2011.
While Passenger Carriers grew by 22.03 per cent during April-March 2011, Goods
Carriers registered growth of 9.45 per cent.
Two Wheelers registered a growth of 25.82 per cent during April-March 2011. Mopeds,
Motorcycles and Scooters grew by 23.53 per cent, 22.86 per cent and 41.79 per cent
respectively.
Maruti Suzuki posted a 14.7 per cent rise in January car sales while Mahindra &
Mahindra reported a sales growth of 22 per cent in comparison to last year.
Tata Motors posted a 15 per cent rise in January sales. Tata Motors has reported a
consolidated net profit of US$ 540.3 million for the quarter ended December 2010, up
273 per cent as compared to US$ 144.89 in same quarter the previous year.
Skoda Auto India has reported impressive sales growth for January 2011, with total sales
for January 2011 at 2825 units, as against 1881 units in January 2010.
50 | P a g e

51. Bajaj Auto
From 2008 the data is taken into account . We see in the figure that the prices of stocks
have fallen in 2008 due to recession but after that there is a continuous increase in the
prices until it again falls in 2011 . But after that it has again increased .
51 | P a g e

52. The sales figure shows that the sales had decrease in 2008 and 2009 after which it had
increased.
The PAT figures show the same trend as the sales figure . It decreased in 2008 and
decreased little bit down in 2009 but again increased in 2010 .it went
52 | P a g e

53. Bajaj Auto
The Rahul Bajaj said that there was a highest ever sales, export, profits were increased in
2009 -10 the sales were increased nearly 35% and there was the sale of 2.5 million motor
cycle in 2009 – 2010. Sales were increased in 2010 – 2011 of 39% exports were
increased 35% i.e. the company reached 1 million mark of sales Bajaj auto is now
focusing on mostly on discover and pulsar only because more sales of those products
Bajaj auto EPS:
In 2008 the EPS was 52.25 because of high recession is going on in 2009 45.37 because
of the automotive crisis there was a drastic increase in 2010 &2011 117.69 & 119.42
Bajaj Auto market capitalization was 42341.63 in 2010-2011
Hero Honda
53 | P a g e

54. Though in 2008 the increase was a little less as compared to other years it again picked
up the pace in 2009. From 2009 there was a drastic increase in sales .
PAT was less in 2008 from next year has increased drastically and fallen in 2011
54 | P a g e

55. Hero Honda :
Before it was hero Honda now it was hero Motor Corporation it had come out from the
joint venture of the Honda and buy the share of the Honda so, in August 2011 the
company was renamed as hero Motor Corporation
Hero Honda sales have increased to 4.6 million and in Economic Times ―The Company
Of the Year‖ it got a record profits and record capitalization on 2009-2010. While
coming to 2010-2011.There was a good sales in 2010-2011 it was of 5.4million
Hero Honda EPS:
The hero Honda EPS was 48.47 in 2008 and drastically increased in 2009-2011 because
of higher sales and profits that was 64.19 & 111.77 it was decline in 2011 because of
hero Honda came out of the joint venture and purchased the Honda shares so that the
EPS of the year was 96.55
Hero Honda market capitalization was 31739.33
55 | P a g e

56. Mahindra and Mahindra
The above figure shows us a wide variation in the stock prices of Mahindra and
Mahindra... Due to recession in 2008 the prices fell down drastically. The prices started
recovering in 2009 and reached at a very high level in 2010.
56 | P a g e

57. Sales of M&M sales shows that there is a decresae in sales after 2008 i.e; in 2009 but
after that it was increased drasticaly untill 2011.
PAT of M&M has increased from 2001 to 2009 . In 2010 it has fallen drastically .
Mahindra and Mahindra
The Mahindra and Mahindra had taken over the Punjab tractors limited 1 st August 2008
In the domestic sales the Mahindra and Mahindra had taken over growth of 47.8%spare
parts sales reached to 514.96crores in that 27 Cr were exporting the spare parts the
company had repaid it foreign currency loans of $94.5 million in 2009-2010. The
company had a growth in net income for the year of 2010-2011 26.60% domestic sales
was 39.8% when compared to previous year it was less
Mahindra and Mahindra EPS:
The EPS of Mahindra and Mahindra of 2008 was 46.15, 2009 there was a slight fall in
EPS because of Automotive crisis, global financial meltdown, inflation touched at
12% from 2010 & 2011 it had gained nice sales the EPS was 36.89 & 45.33
Mahindra and Mahindra market capitalization was 42997.30 in 2010-2011
57 | P a g e

58. Maruti Suzuki
Before 2008 the stock prices of the maruthi suzki was varying . All through out 2008 it
had decreased and started recovering in 2009. The end of 2009 and the beginning of 2010
saw a very drastic increase in the share prices .
58 | P a g e

59. The sales were increaing and decreasing in year on year from 2008 to 2011 .
Even in pat also the same thing will increase and decreasing occurred from 2008 to 2011
Maruti Suzuki:
During the period of the 2008-2009 there was a great fluctuation in the globally. The
Indian economy was less effected even the crisis is going on the company unit sales in
the domestic market it was 1.5% and 3.6% I exports market share had raised to 45.9% to
46.5% So, because of the crisis the company has increased its R&D designed engineers
398 to 730. From the crisis the company had recovered it sales by the R&D department
and they strengthened the customer satisfaction so in 2009-2010 the domestic sales was
grown up to 21% exports 111% it got highest ever income growth of 40%, net profit
increased to 105%
Maruti Suzuki EPS:
In 2008 the EPS was 59.91 and in 2009 42.15 it was because of automotive crisis while
coming to 2010 it was of 86.45 here they had spent on R&D so the EPS was raised to
86.45 but slight decrease in EPS it was 79.21
59 | P a g e

60. Maruti Suzuki market capitalization was 36464.78 in 2010-2011
.Tata Motors
The share prices of Tata Motors also showed a wide fluctuation over the 10 years . It had
gone down in 2008 but in 2009 it started recovering
60 | P a g e

61. The sales figures show there is a decrase after 2009 and it has increased from there
drasticaly.
Here also there is a drastic decrease in after the 2008 and recovered fastly from there the
pat was good when compared to the 2009
Tata Motors growth in 2009
For the first few months of the 2009 the Tata motors conducted widespread of campaign
the entrance of the new car TATA NANO as ―The People Car‖ so this part will make the
people to buy the car for less cost without any credit crisis so it leads to grow in stocks of
the Tata Motors
Tata Motors Eps:
The Tata motors EPS was in 2008 56.88 but when come to the 2009 the EPS was
reduced to 19.48 because of no proper demand as 1st two months of Tata sales it was
declined so by that the profits of the company also decreased. After that in 2010 & 11
was increased to 39.26 & 43.20
Tata motors capitalization was 67070.07 according to 2010-2011
61 | P a g e

62. Final Analysis:
After analyzing all the factors of each company I came to know that every company is doing
better but among them Hero Honda is doing better because even after the automotive crisis
also It had recovered and it had increased the sales, Exports, EPS of the company is most
better when compare to others because of its huge profits. Even the company has come out
from the Honda joint venture in August 2011 it had slight down
62 | P a g e

63. CHAPTER 5
FINDINGS, SUGGESTIONS & CONCLUSION
63 | P a g e

64. FINDINGS
The present project work has been undertaken to study the process of construction of
BSE Sensex of automobile sector and the various factors that influence the share price
moments and Sensex. The construction of Index is very sensitive and complex.
Like any other commodity, in the stock market, share prices are also dependent on so
many factors. So, it is hard to point out just one or two factors that affect the price of the
stocks. There are still some factors that are that directly influence the share prices.
Demand and Supply - This fundamental rule of economics holds good for the equity
market as well. The price is directly affected by the trend of stock market trading.
When more people are buying a certain stock, the price of that stock increases and when
more people are selling he stock, the price of that particular stock falls. Now it is difficult
to predict the trend of the market but your stock broker can give you fair idea of the
ongoing trend of the market but be careful before you blindly follow the advice.
News - News is undoubtedly a huge factor when it comes to stock price. Positive news
about a company can increase buying interest in the market while a negative press release
can ruin the prospect of a stock. Having said that, you must always remember that often
times, despite amazingly good news, a stock can show least movement. It is the overall
performance of the company that matters more than news. It is always wise to take a wait
and watch policy in a volatile market or when there is mixed reaction about a particular
stock.
Market Cap - If you are trying to guess the worth of a company from the price of the
stock, you are making a huge mistake. It is the market capitalization of the company,
rather than the stock, that is more important when it comes to determining the worth of
the company. You need to multiply the stock price with the total number of outstanding
stocks in the market to get the market cap of a company and that is the worth of the
company.
64 | P a g e

65. Earning Per Share - Earning per share is the profit that the company made per share on
the last quarter. It is mandatory for every public company to publish the quarterly report
that states the earning per share of the company. This is perhaps the most important
factor for deciding the health of any company and they influence the buying tendency in
the market resulting in the increase in the price of that particular stock. So, if you want to
make a profitable investment, you need to keep watch on the quarterly reports that the
companies and scrutinize the possibilities before buying stocks of particular stock.
Price/Earning Ratio - Price/Earning ratio or the P/E ratio gives you fair idea of how a
company's share price compares to its earnings. If the price of the share is too much
lower than the earning of the company, the stock is undervalued and it has the potential
to rise in the near future. On the other hand, if the price is way too much higher than the
actual earning of the company and then the stock is said to overvalued and the price can
fall at any point.
Fresh Issue Of Shares
If a company is issuing the fresh shares, then share prices will come down because the
profit will be shared with more investors then before.
BuyBack
This is when the company buys back its own shares. As the number of shares decline, the
company‘s earnings will be distributed to fewer investors. As every investor is entitled to
a larger share of company‘s future earnings, its share price increases.
65 | P a g e

66. SUGGESTIONS
There are three factors which an investor must consider for selecting the right stocks.
 Business: An investor must look into what kind of business the company is
doing, visibility of the business, its past track record, capital needs of the
company for expansion etc.
 Balance Sheet: The investor must focus on its key financial ratios such as
earnings per share, price-earning ratio; debt-equity ratio, dividends per share etc
and he must also check whether the company is generating cash flows.
 Bargaining: This is the most important factor which shows the true worth of the
company. An investor needs to choose valuation parameters which suit its
business.
Following are some of the investment rules to be considered before making
investments in stock markets:
 Invest for long term in equity markets
 Align your thought process with the business cycle of the company.
 Set the purpose for investment.
 Long term goals should be the objective of equity investment.
 Disciplined investment during market volatility helps attains profits.
 Planning, Knowledge and Discipline are very crucial for investment.
66 | P a g e

67. CONCLUSION
Investment is a process, which starts from formulating objectives to construct a portfolio
and regular review of it. BSE and NSE are two prominent exchanges on which
companies are listed and traded in secondary market. These two exchanges functions
according to the protection & surveillance of investors. In this concern, these exchanges
construct indices so that market movements can be observed and valuable decisions can
be taken.
The process of constructing an index is tedious but very useful for a normal investor who
works on his own in his investment game. The process of constructing market leader
index in this present project work is given clearly and any investor can follow this
process to easily construct his own index.
67 | P a g e

68. CHAPTER 6-BIBLIOGRAPHY
68 | P a g e

69. BOOK NAME AUTHOR
1. Security analysis and portfolio management Punithavati Pandian
2. Investment Management V.K. Bhalla
3. Dalal Street
WEB SITES
1. www.nseindia.com
2. www.IndianCapitalMarket.com
3. www.Bseindia.com
4.www.Sify.com
5.www.rediffmoney.com
6.www.angelbroking.com
7.www.stockmarketview.com
69 | P a g e