Professional Documents
Culture Documents
BSE s popular equity index the S&P BSE SENSEX - is indias most
widely tracked stock market benchmark index . it is traded
internationally on the EUREX as well as leading exchange of the BRCS
nations (Brazil,Russia,and china ,southafrica ).BSE has own several
awards and recognizations that acknowledge the work done and progress
made like the golden peacock Global CSR award for its initiatives in
corporate social responsibility, NASSCOM -CNBC-TV18 s IT user
award s,2010 in financial service category, skoch virtual corporation
2010 Award in the BSE STAR MF category and responsibility Award by
world council of corporate governance. Its recent milestones include the
launching of BRICSMART indices derivatives ,BSE-SME exchange
platform, S&P BSE GREENEX to promote investment in green
india .Affects Stock Prices :Stock market prices are affected by
business fundamentals company and world events,human psychology,
and much more stock trading is driven by psychology just as much as it
is by business fundamentals ,belive it or not . fear and greed are the two
of strongest human emotions that affect the market .for example it is to
get caught in the trap of selling of stock permturely because it dipped
temporarily and fear set in . on the other hand ,it is also easy to miss out
on a respectable gain because greed was telling you to hold out or more,
and then the stock drops back down.
Store Closings
This event often causes the stock price to go up for the same reasons as
layoffs. However. this is not always the case. Closing stores actually
requires a lot of money, and the positive effects of it do not take place
immediately. This could be a sign that the company is truly in trouble at
the moment. They probably have lower sales and higher expenses than
they want, possibly due to a slowdown in the industry or the overall
economy. The good news is that their management is being pro-active
about maintaining profitability. Unfortunately, the stock price may go
down for the next few months.
Firing of CEO or Company Official
This may sound very negative at first, but it does show that the
company's board of directors was bold enough to take drastic actions to
help the company in the long run. The stock price could go up or down
after this announcement, depending on the situation. In some cases this
event could be a sign of corruption that reaches beyond these individuals
and there could be more negative announcements to come.
Market Scandals
Trader tend to frown upon corruption in the stock market. Mutual fund
scandals that have occurred in the past few years and corporate
corruption such as Enron are two such examples. If people cannot trust
the stock market. why would they investtheir hard-earned money in it?
In these situations it is harder for the market to go up because there is a
lower demand for stocks.
Analyst Recommendations
Many traders rely on experts' opinions about companies and future stock
prices. Are they always correct? Of course not. Nobody can predict what
will happen in the future. They can, however. make educated guesses
based on past performances and future prospects for the companies and
industries they follow.
Round Numbers
Traders often like nice round numbers for their perceived stock price,
such as $10.00 or $35.00. It is common for prices to settle near these
round numbers, at least briefly. Also, many traders place automatic buy
or sell orders right near these round numbers, causing the stock price to
become slightly erratic when it first reaches that target.
Technical Analysis
One of the most popular methods for helping predict a .stock's price, at
least in the short term, is called Technical Analysis. This method
involves looking for patterns or indicators in stock prices, volumes,
moving averages, and many others, over time. Obviously nobody can
predict the future but this method can be effective in many cases because
human beings are somewhat predictable. For example, when people see
a stock start falling dramatically they often panic and sell their positions
without investigating what caused the fall. This causes even more people
to sell their shares and this often leads to an "overshoot" of the stock
price. If you believe the price went too far down you can try to buy it at
the bottom and hope that it will come back up to a more reasonable
level.
Another common example involves Moving Averages. Man)
traders like to chart the 50-day and 200-day moving averages of their
stock prices along with the prices themselves. When they see the current
price cross over one of these Moving Averages on the charts it can be an
exposed. No matter how the law of value is distorted, the exchange rate
is subject to its action, and expresses correlation of the national and
world economy, where the actual ratio of exchange rates is reflected.
When selling products on the world market, a product receives public
recognition based on international measures of value. Thus, the
exchange rate mediates absolute exchange products in the world
economy. The cost basis of the exchange rate is due to the fact that
international prices of production, Which are the base for the world
prices. osounded on the national prices of production in the countries
that are major suppliers to the world market.
The exchange rate is needed for:
Mutual exchange of currencies for trade in goods, services, capital
movements and credits. Exporter exchanges the proceeds in
foreign currency exchanges Ibr the national one as currencies of
other countries cannot be treated as purchasing and payment means
on the territory of the state. Importer exchanges a foreign currency
to pay for the goods purchased abroad. Debtor buys a foreign
currency to repay the national debt and interest payments on
external loans;
Compare of prices of the world and national markets as well as the
cost parameters of different countries, expressed in the national or
foreign currencies;
periodic reassessment of the company and bank accounts in
foreign currencies.
The exchange rate regime
Is the way a country manages its currency in respect to foreign
currencies and the foreign exchange market. It is closely related to
monetary policy and the two are generally dependent on many of the
same factors. There are administrative and market regimes.
The administrative regime Is in the plural form of exchange rates, i.e.
it is existence of differentiated exchange ratios for different types of
currency transactions, commodity groups and regions. The
administrative regime is used as a stabilization step during a crisis to
reduce inflation and to accumulate gold and currency reserves.
Introduction of administrative regime is an temporary step towards the
normalization of the economic situation in the country and the transition
to market conditions of forming exchange rate. For the first time such a
regime was used during the economic crisis of 1929-1933.
the courses. Exchange rates can move freely, changing under the
influence of factors of supply and demand, etc. Such a regime has
subcategories:
Free float (freely fluctuating);
Managed floating (managed fluctuating);
Exchange rate that is periodically adjusted.
Factors that affect exchange rates.
Like any price, the exchange rate deviates from the cost basis - the
purchasing power of currencies under the influence of supply and
demand of currency. The ratio of the supply and demand depends on
several factors. It reflects connections with other economic categories cost, price, money, interest, balance of payments, etc. There is a complex
of interweaving and nomination of decisive factors. Among them are the
following.
The rate of inflation
The ratio of currency in their purchasing power (purchasing power pail))
sen cs as a kind of axis of the exchange rate reflecting the law of\ alue.
That's wh) the rate of inflation has an impact on the exchange rate. All
other things being equal. the inflation rate in the country has inversely
proportional impact on the value of national currency. i.e. an increase in
inflation in the country leads to a reduction in the national currency. and
vice versa. Inflationary depreciation of money in the country reduces the
purchasing power and a tendency to a drop in their currency's exchange
rate against currencies of countries where the rate of inflation is lower.
Alignment of the 'exchange rate and adjustment to purchasing power
parity are occurred within two years. This is because the daily quotation
of exchange rates is not corrected on the basis of their purchasing power,
and there are other factors of forming of exchange rates.
If the rate of a currency tends to decline firms and banks sell it for a
more stable currency and it worsens the position of weakened currency.
Currency markets react quickly to changes in the economy and politics,
fluctuations in exchange ratios. In doing so, they increase opportunities
of currency speculations and spontaneous movement of money
Market factors.
These factors can significantly change the value of currency at short
intervals. Thus, the overall expectations for future economic growth,
changes in fiscal and foreign trade deficits directly affect the exchange
rate. In addition, the foreign exchange market participants' expectations
have a significant impact on the value of the exchange rate. Seasonal
peaks and downs of business activity in the country have a significant
impact on the rate of national currency.
FIXING THE VALUE OF THE CURRENCY IS DUNE IN WHAT
BASIS :
Internal Developments
Developments that can occur within companies will affect the price of
its stock, including mergers and acquisitions, earnings reports, the
suspension of dividends, the development or approval of a new
innovative product, the hiring or firing of company executives and
Exchange Rates
Foreign currency rates have a direct impact on the price and value
of stocks in foreign countries, and changes in exchange rates will
increase or decrease the cost of doing business in a country, which
will affect the price of stocks of companies doing business abroad.
While long-term movements in exchange rates are affected by
fundamental
Market forces of supply and demand and purchase price parity,
short-term movements are driven by news, events and futures
trading and are difficult to predict.
Hype
Stocks and the stock market also can be affected by hype about a
company or the release of new products or services.
Many people and organizations have an interest in promoting
particular stocks and industries to increase the value of their own
shares and profits. and positive financial reports and stock market
newsletters. Internet blogs. press releases and news reports can
build high expectations for the performance of companies. which
will raise the price of their stocks.
This can occur even when the hype has no foundation in truth:
investors are wise to consider peoples reaction to hype rather than
analyze the merits of the positive promotion.rnrnll)pe (and its
opposite) can be advanced by respected stock market authorities
such as Warren Buffet, Peter Lynch and hedge fund investor and
financial speculator George Soros; such is the respect given to
these individuals skill and past success that they sometimes can
$5.3 trillion per day in April 2013. This is up from $4.0 trillion in
April 2010 and $3.3 trillion in April 2007. Foreign exchange swaps
were the most actively traded instruments in April 2013, at $2.2
trillion per day, followed by spot trading at $2.0 trillion. According
to the Bank for International Settlements, as of April 2010, average
daily turnover in global foreign exchange markets is estimated at
$3.98 trillion, a growth of approximately 20% over the $3.21
trillion daily volume as of April 2007. Some firms specializing on
foreign exchange market had put the average daily turnover in
excess of US$4 trillion.
The $3.98 trillion break-down is as follows:
History
Currency trading and exchange first occurred in ancient times Moneychanging people. people helping others to change mono and also taking
a commission or charging a fee were lip ing in the times of the talmudic
writings (Biblical times). these people (sometimes called "kollybistes")
used city-stalls. at least times the temples Court of the Gentiles instead.
Money-changers were also in more recent ancient times silver-smiths
and, or. gold-smiths During the fourth century. the Byzantium
government kept a monopoly on the exchange of currency. Currency and
exchange was also a vital and crucial element of trade during the ancient
world so that people could buy and sell items like food, pottery and raw
materials. If a Greek coin held more gold than an Egyptian coin due to
its size or content, then a merchant could barter fewer Greek gold coins
for more Egyptian ones. or for more material goods. This is why the vast
majority of world currencies are derivatives of a universally recognized
standard like silver and gold. Medieval and later
During the fifteenth century the Medici family were required to open
banks at foreign locations in order to exchange currencies to act on
behalf of textile merchants. To facilitate trade the bank created the nostro
(from Italian translated "ours") account book which contained two
columned entries showing amounts of foreign and local currencies,
information pertaining to the keeping of an account with a foreign bank.
During the 17th (or 18t) century Amsterdam maintained an active forex
market.' During 1704 foreign exchange took place between agents acting
in the interests of the nations of England and Holland. Early modern
Alex. Brown & Sons traded foreign currencies exchange sometime
about 1850 and was a leading participant in this within U.S.A. During
1880 J.M. do Espirito Santo de Silva (Banco Espirito e Comercial de
Lisboa) applied for and was given permission to begin to engage in a
foreign exchange trading business.
The year 1880 is considered by at least one source to be the beginning of
modern foreign exchange, significant for the fact of the beginning of the
gold standard during the year.
Prior to the First World War there was a much more limited control of
international trade. Motivated by the outset of war countries abandoned
the gold standard monetary system.
Modern to post-modern I mill 1899 to 1913. holdings of countries'
toreign exchange increased at an annual rate of while holdings of gold
increased at an annual rate of 6.3% between 1903 and 1913. At the time
of the closing of the year 1913. nearly half of the world's foreign
exchange was conducted using the Pound sterling. The number of
foreign banks operating w ithin the boundaries of London increased in
the years from 1860 to 1913 from 3 to 71. In 1902 there were altogether
two London foreign exchange brokers In the earliest years of the
twentieth century trade was most active in Paris. New York and Berlin.
Markets close
Due to the ultimate ineffectheness of the Bretton Woods Accord and the
European Joint Float the fore\ markets were forced to close sometime
during 1972 and March 1973. The very largest of all purchases of dollars
in the history of 1976 was when the West German government achieved
an almost 3 billion dollar acquisition (a figure given as 2.75 billion in
total by The Statesman: Volume 18 1974). this event indicated the
impossibility of the balancing of exchange stabilities by the measures of
control used at the time and the monetary system and the foreign
exchange markets in "West" Germany and other countries within Europe
closed for two weeks (during February and. or. March 1973. Giersch,
Paque, & Schmieding state closed after purchase of "7.5 million
Dmarks" Brawley states "... Exchange markets had to be closed. When
they re-opened ... March 1 That is a large purchase occurred after the
close.
After 1973
The year 1973 marks the point to which nation-state, banking trade and
controlled foreign exchange ended and complete floating, relatively free
conditions of a market characteristic of the situation in contemporary
times began (according to one source)) although another states the first
time a currency pair were given as an option for U.S.A. traders to
purchase was during 1982, with additional currencies available by the
next year.
On 1 January 1981 (as part of changes beginning during 1978 the Bank
of China allowed certain domestic "enterprises" to participate in foreign
exchange trading Sometime during the months of 1981 the South
Korean government ended forex controls and allowed free trade to occur
for the first time. During 1988 the countries government accepted the
IMF quota for international trade.
Intervention by European banks especially the Bundes bank influenced
the forex market, on February the 27th 1985 particularly. The greatest
proportion of all trades world-wide during 1987 were within the United
Kingdom, slightly over one quarter, with the U.S. of America the nation
with the second most places involved in trading. During 1991 the
republic of Iran changed international agreements with some countries
from oil-barter to foreign exchange
Review of literature:
(Gauan deep Sharma) This paper's contributions are as IblItms. First by
embracing a stud) period that extends beyond January 2008, this paper
provides the first attempt to analyze the health of stock market near to
the elections. The time period examined by existing studies on time
series behaviour of BSE do not cover the post election period.
Naka(1990) employed a vector error correction model (VECM)
(Johansen (1991)) in a system of five equations to investigate the
presence of cointegration among these factors. analyzed a negative
relationship between interest rates or inflation and stock prices, and a
positive relation between output growth and stock prices. Sharma (2008)
tests weak form of efficiency of the BSE. Bhattacharya (2001) by
applying the techniques of unitroot tests, cointegration and the long
run Granger non causality test recently proposed by Toda and Yamamoto
(1995), tests the causal relationships between the BSE Sensitive Index
and the five macroeconomic variables, viz.. money supply, index of
industrial production, national income, interest rate and rate of
inflation using monthly data for the period 1992-93 to 2000-01. They
found that (i) there is no causal linkage between stock prices and money
supply, stock prices and national income and stock prices and interest
rate, (ii)index of industrial production lead the stock price, and (iii) there
exists a two way causation between stock price and rate of inflation.
(Dr. Nikhil Saket) The rupee's decline affects everyone in the
economy because it feeds directly and indirectly into general inflation,
which is a continuing problem even as output growth decelerates, and
therefore hits common people hard. There are several ways in which the
falling rupee immediately has an inflationary impact, one of the most
important of which is the price of energy. The govt should concentrate
Capital Market:
A financial market consists of primary and secondary markets. A
primary market is where new securities are initially placed and
distrihuted. A secondary market is where securities arc bought and sold
after initial distribution. The most tradable financial instruments on the
financial markets are shares and bonds. Shares are certificates of
ownership that represent a shareholder's share in a joint stock company's
equity. Equity is defined as capital permanently used in business which
does not have to be paid out unless the enterprise is in liquidation. The
term is often used to mean the shareholders' ownership.
Some types of shares are: common. preferred. and employee share
Common shares confer voting rights at the Stockholders' Annual
General Meeting (AGM) and a dividend. if the company makes a profit
STOCK MARKET:
The market in which shares of publicly held companies are issued
and traded either through exchanges or over-the-counter markets. Also
known as the equity market. the stock market is one of the most vital
components of a free-market economy, as it provides companies with
access to capital in exchange for giving investors a slice of ownership in
the company. The stock market makes it possible to grow small initial
sums of money into large ones. and to become wealthy without taking
the risk of starting a business or making the sacrifices that often
accompany a high-paying career. Investopedia explains 'Stock Market'
The stock market lets investors participate in the financial achievements
of the companies whose shares they hold. When companies are
profitable, stock market investors make money through the dividends the
companies pay out and by selling appreciated stocks at a profit called a
capital gain. The downside is that investors can lose money if the
companies whose stocks they hold lose money, the stocks' prices Goes
down and the investor sells the stocks at a loss.
The stock market can be split into two main sections: the primary market
and the secondary market. The primary market is where new issues are
first sold through initial public offerings. Institutional investors typically
purchase most of these shares from investment banks. All subsequent
trading goes on in the secondary market where participants include both
institutional and individual investors.
Stocks are traded through exchanges. The two biggest stock exchanges
in the United States are the New York Stock Exchange, founded in 1792,
and.the Nasdaq, founded in 1971. Today, most stock market trades are
executed electronically, and even the stocks themselves are almost
always held in electronic form, not as physical certificates.
If you want to know how the stock market is performing, you can
consult an index of stocks for the whole market or for a segment of the
market. Examples include the Dow Jones Industrial Average, Nasdaq
index, Russell 2000, Standard and Poor's 500, and Morgan Stanley
Europe, Australasia and Far East index.
Research methodology:
Research design : (Explanatory research )
The way in which researchers develop research designs is
fundamentally affected by' whether the research question is descriptive
or explanatory. It affects what information is collected. Accurate
Factors involved:
Stock. BSE. rupee valuation
Research period
Last one year
Collection of data:
From secondary sources like company web Sites, Articles.
Hypothesis:
H1: Currency Fluctuations Influence (High) Stock Market Performance.
H2: Currency Fluctuations Influence (Low) Stock Market Performance.
Objective of the study:
To explore the major macro economic ariables for rupee devaluation. To
study the eticet of macroeconomic variables on stock prices.
Need of the study:
In the changed economic scenario study India like developed
country should have international stability to face the global
computation.
International currency value is very important for a sustainable
foreign trade development.
If currency price changes are predictable the foreign trade can gain
maximum profits.
Stock market :
Date
3 Jan,
2014
3 Feb,
2014
3 Mar,
2014
3 Apr,
2014
3 May,
2014
3 Jun,
2014
3 Jul,
2014
3 Aug,
2014
3 Sep,
2014
3 Oct,
2014
3 Nov,
2014
3 Dec,
2014
Open
High
Low
Close
Avg Vol
21,222.1
9
20,479.0
3
21,079.2
7
22,455.2
3
22,493.5
9
24,368.9
6
25,469.9
4
25,753.9
2
26,733.1
8
26,681.4
7
27,943.0
4
28,748.2
2
21,409.6
6
21,140.5
1
22,467.2
1
22,939.3
1
25,375.6
3
25,735.8
7
26,300.1
7
26,674.3
8
27,354.9
9
27,894.3
2
28,822.3
7
28,809.6
4
20,343.
78
19,963.
12
20,920.
98
22,197.
51
22,277.
04
24,270.
20
24,892.
00
25,232.
82
26,220.
49
25,910.
77
27,739.
56
26,469.
42
20,513.
85
21,120.
12
22,386.
27
22,417.
80
24,217.
34
25,413.
78
25,894.
97
26,638.
11
26,630.
51
27,865.
83
28,693.
99
27,499.
42
9,100
9,300
18,800
9,100
16,000
13,300
10,900
8,600
8,400
8,800
9,900
8,800
Currency prices
Month
Open
High
Low
Close
3-Jan 61.905
62.012
59.149
61.125
3-Feb 62.565
63.021
60.822
59.215
3-Mar 61.831
61.947
56.459
50.201
3-Apr 51.965
53.216
50.021
51.012
3-May 60.325
61.548
54.213
59.456
3-Jun 59.205
60.564
57.261
60.213
3-Jul 59.521
62.897
54.932
61.021
3-Aug 60.214
61.126
53.974
59.562
3-Sep 60.025
62.025
59.543
61.021
3-Oct 61.213
63.012
60.822
61.412
3-Nov 61.895
63.546
56.584
62.394
3-Dec 62.325
63.235
60.125
69.897
R Square
.389
.151
Adjusted R
Square
0.67
FLACTIONS(HIGH)
B.Dependent Variable :Q_3 STOCK MARKET
PERFORMENCE(SENSEX)
Interpretation :
The Summary part of the output is most useful when
you are performing multiple regressions (Which we are NOT doing.)
Capital R is the multiple correlation coefficent that tell us how strongly
the multiple independent variables are related to the dependent
variable. In the simple bivariate case (what we are doing) R =|r|
(multiple correlation equals the absolute value of the bivariate
correlation.) R square is useful as it gives us the coefficent of
determination
ANOVA
Model
Sum
Squares
of Df
Mean Square
Regression 13294010.29
7
13294010.297 1.785
Residual
10
7445585.076
Sig.
.211
74455850.76
2
Total
11
87749861.05
9
a.
Dependent
variable : Q_3 STOCK MARKET
PERFORMENCE (SENSEX)
b. Predictor: (constant), Q_1 CURRENCY FLACTIONS (HIGH)
The ANOVA basically tells us whether the regression equation is
explaining a statistically significant portion of variability in the
dependent variables. The Above table shows that the sum of squares
13294010.297. the f value 1.785 and asymmetric significant value .
211. So at 5% level of significant p value is insignficant (p>0.05).
Those hypotheses Currency Fluctuations influence (high) Stock
Market performence as been rejected. It means there is no impact of
changes in currency value performence of stock market.
Coefficients
Model
un
Standardized
coefficient
B
(constant)
5635.328
Q_1 currency
flactations(hig
h)
220.212
Standardize
d
coefficient
Std.erro Beta
r
9888.97
1
T
Sing.
.570
.581
.211
.389
1.336
164.802
The Coefficents part of the output gives us the values that we need in
order to write the regression equation . the regression equation will take
the form predcted variable (dependent variable) =slope * independent
variable +intercept
Model Summary
Model
R Square
Adjusted R Square
.424
.180
.098
Std.Error of the
Estimate
2682.61486
Interpretation
ANOVA
Model
Sum
Squares
of Df
Regression 15785636.45
4
Residual
10
71964224.60
5
Total
Mean Square
Sig.
15785636.45
4
2.194
.169
7196422.461
11
87749861.05
9
b .PREDICTORS:(Constant),Q_2CURRENCY FLACTIONS(LOW)
interpretation:
Model
(constant)
Unstand
a
Rized
B
-352.162
coefficent S.D
T
coefficent
Std error Beta
12959.40
8
-027
Sig.
.979
Q_2
CURRENCY
FLACTION 331.412
.424
1.481 .169
S
223.767
(LOW)
a. Dependent variable: Q_3 STOCK MARKET
PERFORMENCE (SENSEX)
Interpretation:
The coefficents part of the output gives us the
values that we need in order to write the regression equation.
The regression equation will take the form:
Predicted variable (dependent
variable)=slope * independent variable +intercept The slope is
how steep the line regression line is. A slope of 0 is a horizantal
line, a slope of 1 is digonal line form the lower left to the upper
right, and a vertical line has a infinite slope. The intercept is
where the regression line strikes the Y axis when the
independent variable has a value of 0.
The predicted variable is the
dependent variable given under the boxed table. In this case it is
i d rather stay at home than go out with my friends. The slope
is found at the inter section of line labeled with the independent
variable (in this case extravert) and the coloumn labled B. In this
example , the slope equals 331.412 the independent variable was
extravert (we specifide that when ew set up the regression.) The
intercept is fpund at the intersection of the line labled
(constat)and the coloumn labled B. In this example, the
intercept is -352.162. Putting it all together , the regression
equation:
FINDINGS :
Currency Fluctuations Influence (high) Stock Market Performance:
Influence
(low)
Stock
Market
Conclusion:
In the Study Mutable regression model is employed to test for
effects of micro economic factors on stock price on the period of March
References