impact of capital marekt volatility

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CHAPTER-1

INTRODUCTION

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IMPACT OF CAPITAL MARKET VOLATILITY ON BULLION

PRICES

INTRODUCTION

Financial markets are routed from the potential investment levels of households and

institutional investors who often prefer high risk return spectrum of investment avenues like

equity shares to optimize the portfolio benefits but the matrix of any portfolio is correlated with

the volatility rate provided the fundamentals of company are strong. The central problem among

the retail investors is that they dont have complete knowledge on the fundamentals due to which

they consider the market bench marks like NIFTY and SENSEX to construct their portfolios.

They are under the hypothesis that any decrease in the bench mark index leads to the steepdecline in speculative return which should be leveraged through another investment sources like

bonds, gold, and silver therefore fundamentally it is assumed that there is a negative correlation

between capital markets and bullion markets. This assumption shall be tested in this project work

with the following objectives.

OBJECTIVES OF THE STUDY

The main objectives of this project are

1. To understand the Indian capital market at glance.

2. To understand the Indian bullion market at glance.

3. To analyze the relation between capital and bullion markets.

4. To suggest whether bullion and capital markets can be equally prefer to construct an

investment portfolio.

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NEED FOR THE STUDY

This project is considered to be necessary owning to the following merits.

1. Bullion market functions on the parallel lines of capital market.

2. Bullion market impacts the circular flow of money which is in turn channelised into capital

markets.

3. Risk levels are assumed to be negligible in bullion market; therefore it can be suggested in

designing the edging strategies.

4. The volume of trade in bullion market is almost equal to that of capital market.

5. Investors have got equal access to both capital and bullion market in India.

6. The decision of government to allow forward trading in precious metals has unlegged the

propulsive sources of speculative trading in bullion market as well.

SCOPE OF THE OBJECTIVE

This prospect shall offer finite but practical scope owing to the following parameters.

The union budget 2011 has allowed Reserve Bank of India to grant licenses for new private

banks. Which will prefer investments in bullion markets has per the norms of Reserve Bank

of India and it quite obviously leads to the increase in bullion trade.

This project shall give much emphasis to silver with respect to bullion market, and it reflects

the unprecedented volatility rates of prices in the recent past.

The common prudent enables us to establish a diction that unleverage investments in capital

markets leads to the frazil consequences which can be avoided through bullion market.

RESEARCH METHADOLOGY

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1. The first and second objectives are preliminary to this project which shall be tested through

secondary data available from the websites of National Stock Exchange and Multi commodity

exchange.The third objective is the core of this project which shall be examined in the following

steps.

1. The closing values of NIFTY are considered to be variable `X`.

2. The closing prices of silver are considered to be variable `Y`.

3. Correlation test shall be conducted with the following formula.

CORRELATION COEFFICIENT (r) = covariance(X, Y)

X.Y

The above equation is formed on the premise of possible hypothesis.i.e.

NULL HYPOTHESIS H= The prices of silver are being increased due to the

volatility in capital markets.

ALTERNATE HYPOTHESIS H1=There is no significant relationship between capital market

volatility and silver prices.

SAMPLE SIZE

This project proposes to consider the sample size of 2 variables i.e., the daily closing values of S&P

NIFTY for 7 months 1st September 2010 to 31 march 2011.

The another variable comprises the daily closing prices of silver for the same time period of 7

months.

LIMITATIONS OF THE PROJECT

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1. This project is confined to a very limited time period of six months through which it is not

practically possible to generalize the conclusions.

2. This project accords much priority to silver although there are other precious metals like gold

and platinum impacting the bullion markets.

3. This project does not consider transactional cost or both capital and bullion markets though

they exhibit significance impact.

TENTATIVE CHAPERISATION

1. COMPANY PROFILE.

2. CAPITAL MARKET AT GLANCE

3. BULLION MARKET AT GLANCE

4. DATA ANALYSIS AND INTERPRETATION.

5. FINDING AND CONCLUSIONS.

6. BIBILOGRAPHY

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CHAPTER-2

COMPANY PROFILE

COMPANY PROFILE

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INTRODUCTION TO INDIABULLS

An India bull is Indias leading Financial and Real Estate Company with a wide presence

throughout India. They ensure convenience and reliability in all their products and services. An

Indiabull has over 640 branches all over India. The customers of Indiabulls are more than

4,50,000 which covers from a wide range of financial services and products from securities,

derivatives trading, depositary services, research & advisory services, consumer secured &

unsecured credit, loan against shares and mortgage & housing finance. The company employs

around 4000 Relationship managers who help the clients to satisfy their customized financial

goals. India bulls entered the Real Estate business in the year 2005 with its group of companies.

Large scale projects worth several hundred million dollars are evaluated by them.

India bulls Financial Services Ltd is listed on the National Stock Exchange (NSE), Bombay

Stock Exchange (BSE) and Luxembourg Stock Exchange. The market capitalization of

Indiabulls is around USD 2500 million (29 thDecember, 2006). Consolidated net worth of the

group is around USD 700 million. Indiabulls and its group companies have attracted USD 500

million of equity capital in Foreign Direct Investment (FDI) since March 2000. Some of the large

shareholders of Indiabulls are the largest financial institutions of the world such as Fidelity

Funds, Goldman Sachs, Merrill Lynch, Morgan Stanley and Farallon Capital.

Indiabulls Financial Services Limited was incorporated on January 10, 2000 as M/s Orbis

Infotech Private Limited at New Delhi under the Companies Act, 1956. The name of company

was changed to M/s. Indiabulls Financial Services Private Limited on March 16, 2001. In the

year 2004, Indiabulls came up with it own public issue & became a public limited company on

February 27, 2004. The name of company was changed to M/s. Indiabulls Financial Services

Limited.

The company was promoted by three engineers from IIT Delhi, and has attracted more than

Rs.700 million as investments from venture capital, private equity and institutional investors and

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has developed significant relationships with large commercial banks such as Citibank, HDFC

Bank, Union Bank, ICICI Bank, ABN Amro Bank, Standard Chartered Bank and IL&FS.

Mr. Rajiv Rattan

Co-Founder &

Vice Chairman

(Indiabulls Group)

Mr. Sameer Gelhaut

Chairman

(Indiabulls Group)

Mr. Saurabh K Mittal

Director

(Indiabulls Group)

The company headquarters are co-located in Mumbai and Delhi, allowing it to access the two

most important regions for Indian financial markets, The marketing and sales efforts are

headquartered out of Mumbai, with a regional headquarter in Delhi. Back office, risk

management, internal finances etc. are headquartered out of Delhi/NCR allowing the company to

scale these processes efficiently for the nationwide network.

Company is listed on:

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National Stock Exchange

Bombay Stock Exchange

Luxemburg Stock Exchange

Market capitalization:

USD 6,300 million (31st December, 2007)

Net worth

USD 905 million (31st December, 2007)

Highest Ratings from CRISIL CRISIL is India's leading Ratings, Research, Risk and Policy

Advisory Company

Vision statement:

To become the preferred long term financial partner to a wide base of customers whilst

optimizing stake holders value

Mission statement:

To establish a base of 1 million satisfied customers by 2014. We will create this by being a

responsible and trustworthy partner

Corporate action:

An Approach to Business that reflects Responsibility, Transparency and Ethical Behavior.

Respect for Employees, Clients & Stakeholder groups

TRADING PRODUCTS OF INDIA BULLS SECURITIES

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Indiabulls Securities provide three products for trading. They are

Cash Account

Intraday Account

Mantra Account

CASH Account: It provides the client to buy 4 times of cash balance in his trading account.

INTRADAY Account: It provides the client to buy 8 times of his cash balance in the trading

account.

MANTRA Account: Also called as margin trading, is a special account to buy on leverage for a

longer duration

INDIABULLS FINANCIAL SERVICES LIMITED

Indiabulls Financial Services Ltd. was incorporated in the year 2005.The Auditors of Indiabulls

Financial Services Ltd. are Deloitte, Haskins & Sells. The main activity of this company is in

relation to securities and stock brokerage. It was also responsible for setting up one of Indias

first trading platforms.

The subsidiaries of Indiabulls Financial Services Ltd. include:

Indiabulls Capital Services Ltd.

Indiabulls Commodities Pvt. Ltd.

Indiabulls Credit Services Ltd.

Indiabulls Finance Co. Pvt. Ltd

Indiabulls Housing Finance Ltd.

Indiabulls Insurance Advisors Pvt. Ltd.

Indiabulls Resources Ltd.

Indiabulls Securities Ltd.

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THE BANKERS OF INDIABULLS FINANCIAL SERVICES LTD

Andhra Bank

Bank of Maharashtra

Bank of Rajasthan Ltd.

Canara Bank

Citibank

Corporation Bank

Dena Bank

HDFC Bank Ltd

HSBC Ltd.

ICICI Bank Ltd.

IDBI Ltd

Industrial Bank Ltd.

ING Vysya Bank Ltd

Karnataka Bank

Punjab National Bank

Standard Chartered Bank

State Bank Of India

Syndicate Bank

Union Bank Of India

UTI Bank Ltd.

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CHAPTER-3

CAPITAL MARKET AT GLANCE

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CAPITAL MARKET AT GLANCE

INTRODUCTION

Capital market is a growing component of the financial system in india.Capital market contains

financial instruments of maturity period exceeding one year. It involves long-term transactions.

Capital market instruments are relatively less liquid in comparsion to the money market

instruments. Capital market in a broad sense encompasses all kinds of arrangements and

financial institutions involved in long term funding.

STRUCTURE OF INDAIN CAPITAL MARKET

Indian Capital Market System is the key structure to all Economic and Financial transaction in

India. This entry provides some simple and important organizational structure details ofCapital

Market Organization Structure of India.

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Source: internet

Capital Market System and Structure in India

Structure Institution

Government

Securities

Government securities market. Reserve Bank of India (RBI) controls all

transactions of government securities,

Industrial Securities Industrial securities divided into Primary market (New issues like IPO) and

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Secondary market (Market for trading the Equity shares through stock

exchange). Popular national level stock exchanges in India, National Stock

Exchange (NSE) and Bombay Stock Exchange (BSE).

Development

Financial Institutions

(DFI)

Financial institutions provide financial aid to develop special sectors.

Financial institutions like IFCI ( Industrial Finance Corporation of India ),

ICICI ( Industrial Credit and Investment Corporation of India), SFC ( State

Finance Corporations ), IDBI ( Industrial development Bank of

India ), UTI ( Unit Trust of India ), etc.

Financial

Intermediaries

All other state controlled finance intermediaries like, Merchant banking,

Mutual funds, Leasing finance companies, Venture capital funds, etc.

SEBI ( Securities Exchange Board of India )is the capital market regulator in India.

INSTRUMENTS STATED IN INDIAN CAPITAL MARKET

1. EQUITY SHARES

2. PREFERENCE SHARES

3. MUTUAL FUNDS

4. DEBENTURES

5. DERIVATIVES

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1. EQUITY SHARES

When the total capital of a company is divided into equal units, it is called share. For example,

the total capital of Rs. 10,000 of a company is divided into 1,000 units, the price of each unit

works out to Rs 10.This is what is called a share. The capital raised by issue of these shares is

called share capital. The person who subscribes to these shares and gets a allotment then the

person becomes the shareholder of that company.

Equity shares are regarded as corner stone of financial structure of a company without which a

company cannot be founded. Equity shareholders are considered as owners of the company.

They will be paid dividend after the claims of all other stockholders are satisfied. Similarly, at

the time of liquidation of the company they will be last to receive anything from out of the assets

of the company. If company earns sufficiently larger profits, they are the maximum beneficiaries.

Contrastly they are the worst loosers when company passes through financial crisis. They are

exposed to maximum risk. Therefore, this share capital is also known as risk capital.

2. PREFERENCE SHARES

As the name implies, preference shares represent that part of share capital of a company which

carry preferential rights and privileges with respect to income and assets over equity shareholder.

Section 85 of the Indian Companies Act, 1956 describes as one which fulfills two requirements.

With regard to dividends it carries a preferential right to be paid a fixed amount,

and

With regard to capital it carries a preferential right to be repaid.

Generally, the dividends on preference shares will be paid at a fixed rate while it is fluctuating in

case of equity shares.

TYPES OF PREFERENCE SHARES

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As per the provisions of the Articles of Association of Companies, they can issue different types

of preference shares as follows.

Cumulative preference shares; in any financial year, if a company fails to pay dividend to

this type of preference shareholders, the dividend gets accumulated. Therefore, these are

called cumulative preference shares. In subsequent years, whenever company pays dividends

out of the available profits, the dividend arrears will be paid to the shareholders.

Non-cumulative shares; dividend on these shares will not get accumulated. If in any

financial year, company does not pay dividends. In other words, no dividend arrears will be

paid to this type of shareholders.

Convertible preference shares; the shares which can be converted into equity shares after a

stipulated period are called convertible preference shares.

Non-convertible preference shares; If the Articles of Articles is silent about the

convertibility feature, these preference shares are deemed to be non-convertible throughout

the life of the company, these shares remain as preference shares only.

Redeemable preference shares; after a stipulated period, form the date of issue of

preference shares, or on demand or on the convenience of the company if the shareholders

are paid back their preference share capital they are called redeemable preference shares.

Again, the permission of articles of association of such companies is essential for the issue of

such redeemable preference shares. Generally these shares are issued subject to the following

conditions.

A separate capital redemption reserve account should be created to redeem such

redeemable preference shares. They can be redeemed out of the accumulated surplus profits

or out of the funds realized through the new issue of shares.

If at all, any premium is to be paid on redemption that can be tapped either from profits or

share premium account.

The details of such preference shares should be clearly disclosed in the prospectus and also

the balance sheet of the company.

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Irredeemable preference shares; the principal amount on these shares is not paid back

to the shareholders. It can be paid only on the event of liquidation of the company.

Participating preference shares; generally, the dividend on preference shares will be

paid at a fixed rate. But, when there is a clause relating to the participation, the

shareholders are entitled to a fixed dividend plus a fluctuating dividend along with equity

holders depending on the availability of excess profits. Similarly, at the time of winding

up of the company apart from their principal amount, they have got a claim over surplus

assets along the with equity shareholders.

Non-participating preference shares; a fixed rate of dividend is paid on all these

shares. These shareholders cannot have any claim on the surplus profits. When there is no

clause in the articles of association of the company, all the preference shares are to be

treated as non-participating preference shares only

3. MUTUAL FUNDS

Mutual fund is nothing but pooling of money collected from investors

like(individuals/corporate) by issuing units to them and is invested in marketable securities such

as Equity shares, Government securities Bonds, Debentures etc.., according to the investment

objective.

Types of mutual funds

1. By structure

Open-ended scheme

Close-ended scheme

2. By investment objective

Growth schemes

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Income schemes

Balanced schemes

3. Other schemes

Tax saving schemes

Index schemes

Sector specific schemes

Open ended schemes

Open ended schemes have no fixed duration. They will continue to exist till the fund decides

to terminate the scheme as per regulations with the consent of its investors.

Majority of the schemes offered these days are open ended schemes.

Like other mutual fund schemes open ended schemes have an intitial offer period when the

scheme is launched. I.e.., investor can subscribe to the scheme at face value at the time of

initial offer.

Close ended schemes

Close ended schemes have a fixed duration which will be specified at the time of the initial offer.

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The fund can change the duration with the consent of the investors, subject to relevant rules and

regulations.

Unlike open ended schemes close ended schemes are available for purchase only during the

initial offer period. The fund will not issue units to investors after the initial offer period.

Growth funds

Growth schemes aim to generate capital appreciation over the long term. Major portion of

their investments will be in equities which offer potentially superior returns than other

avenues of investment.

Generally growth funds are not pure equity schemes unless they are specified so. A smaller

portion of the portfolio is invested in fixed income securities like bonds. However it should

be specified in the scheme when it is launching.

Growth schemes offer potentially the best possible returns among all mutual fund schemes

but carry the highest risk as well.

Income schemes

Income schemes aim to return steady and regular income to investors. A large portion of their

investments would be in regular interest paying investments like ,

Government securities

Bonds issued by companies etc.

Income schemes carry the least risk among all mutual fund schemes.

Income funds also invest in equities, but the proportion of equities to the overall portfolio

would be relatively low.

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Balanced schemes

Balance schemes aim to strike a balance between the high returns of growth schemes and

better safety of income schemes. Therefore, both returns and risks would be between those

offered by growth and income schemes.

No specific asset class receives a higher weight in the targeted investment portfolio of a

balanced scheme. Most often, the portfolio will be equally balanced between equity and fixed

income securities.

Index funds

Index funds invest in all the stocks which form part of a stock market index.

A stock market is like a portfolio of stocks with different weights for each stock based on its

relative importance. Index funds invest in stocks in the same proportion of their relative

weights on the index.

Sector funds

Sector specific schemes invest in stocks belonging to a specific category, industry etc.

Such schemes aim to capitalize on the opportunities available in certain categories of stocks

which may have attracted or have the potential to attract market attention.

Such funds carry relatively high risks since the portfolio is not well diversified and it is

concentrated only on one sector or category.

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4. DEBENTURES

A debenture is an acknowledgement of debt or loan, issued by the company under its

seal. The debenture holders are considered as the creditors of the company. They are paid

interest at a fixed rate irrespective of the profits or losses incurred by the company. The

debenture amount will be paid to the debenture holder on the maturity period. At the time

of winding up of the company, debenture holders will have to be paid back their capital

first.

CLASSIFICATION OF DEBENTURS

. SECURED DEBENTURES; Secured debentures are those which are secured by some

charge on the property of the company. The charge or mortgage may be fixed or floating.

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The assets of the company on which charge is created cannot be sold under normal

course of time.

UNSECURED DEBENTURES; In case of unsecured debentures, no charge is created

the assets of the company. The holders of such debentures are just like ordinary creditors

of the company.

REGISTERED DEBENTURES; These debentures are registered in the debenture hold

register of the company. The regular interest payment and the principal amount maturity

will be made to the person whose name appears in the register.

BEARER DEBENTURES; These debentures are transferable by mere delivery. The

company is neither informed about their transfer nor it records any transfer. These are

similar to share warrants and interest is paid to the holder of these documents, on

production of interest coupon which are attached to them.

REDEEMABLE DEBENTURES; in case of redeemable debentures, the principal

amount is paid back either on fixed date or upon demand or notice.

IRREDAMABLE DEBENTURES; in this case, the issuing company does not fix any

date by which they should be redeemed and the holders of such debentures cannot

demand payment from the company, so long it is a going concern.

5. DERIVATIVES

A derivative is a tradeable financial instrument the value of which is determined on the basis of

its underlying asset.

Classification of derivatives in Indian capital market

1. FORWARD DERIVATIVES; Forward is the most conventional derivate drafted over the counter to

buy or sell the under lying asset at predetermined price known as striking price.

2. FUTURE DERIVATES; Future is also a forward contract but the only difference lies in the

following 2 important aspects.

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Forward is over the counter contract in which the rate of default risk is more where as future is an

exchange trader contract in which default risk is 0.

Forward contracts are preferred to settle the inter bank transactions where as futures are preferred to

settle tor retail transactions.

3. Options;Options It is a financial instrument which gives either to buy or sell the underlying

asset. Options may be of two types.

Call option; which gives the right to buy the underlying asset but not duty.

Put option; which gives the right to sell the underlying asset but not duty.

Securities exchange board of India acts as a regulatory body of capital market in india

Securities and Exchange Board of India

The Securities and Exchange Board of India even though established in the year 1988.

Received statutory powers only on 30th January 1992. Under the SEBI Act, a wide variety of

powers are vested in the hands of SEBI. SEBI has the powers to regulate the business of Stock

Exchanges, other security and mutual funds. Registration and regulation of market intermediaries

are also carried out by SEBI. It has responsibility to prohibit the fraudulent unfair trade practices

and insider dealings. Takeovers are also monitored by the SEBI has the multi pronged duty to

promote the healthy growth of the capital market and protect the investors.

National Stock Exchange

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The National Stock Exchange (NSE) of India became operational in the capital market

segment on third November 1994 in Mumbai. The genesis of the NSE lies in the

recommendations of the pertain committee (1991). Apart from the NSE, It had recommended for

the establishment of National Stock market System also. The committee pointed out some major

defects in the Indian stock market. The defects specified are.

Lack of liquidity in most of the markets in terms of depth and breadth.

Lack of ability to develop markets for debt.

Lack of infrastructure facilities and outdated trading system.

Lack of transparency in the operations that affect investors confidence.

Outdated settlement system that are inadequate to cater to the growing

volume, leading to delays.

Lack of single market due to the inability of various stock exchanges to

function cohesively with legal structure and regulatory framework.

These factors led to the establishment of the NSE.

The main objectives of NSE are as follows

To establish a nation wide trading facility for equities, debt and hybrid

instruments

To ensure equal access investors all over the country through appropriate

communication network.

To provide a fair, efficient and transparent securities market to investors

using an electronic communication network.

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To enable shorter settlement cycle and book entry settlement system.

To meet current international standards of securities market.

Promoters of NSE: IDBI, ICICI, IFCI, LIC, GIC, SBI, Bank of Baroda. Canara Bank,

Corporation Bank, Indian Bank, Oriental Bank of Commerce. Union Bank of India, Punjab

National Bank, Infrastructure Leasing and Financial Services, Stock Holding Corporation of

India and SBE capital market are the promoters of NSE.

NATIONAL STOCK EXCHANGE NIFTY

The National Stock Exchange has index called the NIFTY (officially called S&P CNX NIFTY).

This name can be credited to the 50 stocks that compose its index.

Isnt that a broader representation than the sensex? Youre right.

The Nifty has50 stocks covering 24 sectors, as against 30 stocks & 13 sectors for the sensex.

In case you are shaking your head about 50 also being too small a member, let me remind you

these 50 stocks account for around 60 percent of the market capitalization.

BOMBAY STOCK EXCHANGE

Bombay Stock Exchange limited is the oldest stock exchange in Asia with a rich heritage.

Popularly known as BSE it was established as The Native share & stock brokers Association

in 1875.l It is the first stock exchange in the country to obtain permanent recognition in 1956

from the Government of India under the securities contracts (regulation) Act, 1956.l The

exchanges pivotal and pre-eminent role on the development of the Indian capital market is

widely recognized and its index, SENSEX, is tracked worldwide. Earlier an Association of

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Persons (AOP) the exchange is now a demutualised and corporative entity incorporated under

the provisions of the companies act, 1956, pursuant to the BSE (Corporatisation and

Demutualization) Scheme, 2005 notified by the securities and Exchange board of India

(SEBI).With demutualization, the trading rights and ownership rights have been de-linked

effectively concerns regarding perceived and real conflicts of interest. The exchange is

professionally managed under the overall direction of the board of directors. The board

comprises eminent professionals, representatives of trading members and the Managing Director

of the Exchange. The board is inclusive and is designed to benefits form the participation of

market intermediaries.

In terms of organization structure, the board formulates larger policy issues and exercises

over-all control. The committees constituted by the broad-based. The day-to-day operation of

the exchange is managed by the Managing Director and a management team of professionals.

SENSEX

It is the benchmark index for the Indian Stock Market. It is the most frequently used indicator

while reporting ok the state of the market. The index has just one job. To capture the price

movement. So a stock index will reflect the price movement of the shares while a bond index

captures the manner in which bond prices go up or down.

If the sensex rises, it indicates the market is doing well since stocks are supposed to reflect what

companies expert to earn in the future, a rising index indicates investors expect better earnings

from companies. It is therefore, also a measure of the state of the Indian economy. If Indian

companies are expected to do well, obviously the economy should do well too.

In case you are wondering why as stock market index has a provocative term like sensex, let me

tell you it stands for something quite mundane.

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FACOTRS DERTMINING THE PERFORMANCE OF CAPITAL MARKET

Capital market is affected by a range of factors; some of the factors which influence capital

market are as follows

1. PERFORMANCE OF DOMESTIC COMPANIES;

The performance of the companys or rather corporate earnings is one of the factors which has

direct impact or effect on capital market in a country. Weak corporate earnings indicate that the

demand for goods and services in the economy is less due to slow growth in per capita income of

people. Because of slow growth in demand there is slow growth in employment which means

slow growth in demand in the near future. Thus weak corporate earnings indicate average or not

so good prospects for the economy as a whole in the near term. In such a scenario the investors(both domestic as well as foreign) would be wary to invest in the capital in the capital market and

thus there is bear market like situation. The opposite case of it would be robust corporate

earnings and its positive impact on the capital market and thus there is bear market like situation.

The opposite case of it would be robust corporate earnings and its positive impact on the capital

market.

2. MACRO ECONOMIC NUMBERS;

The macro economic number also influence the capital market, it includes index of Industrial

production (IIP) which is released every month, annual inflation number indicated by wholesale

price index (WIP) which is release every week, Export-Import numbers which are declared every

month, Core industries growth rate (it includes Six core industries coal, crude oil, refining,

power, cement and finished steel) which comes out every month, etc. These macro economic

indicators indicate the state of the economy and the direction in which the economy is headed

and therefore impacts the capital market in India.

3. GLOBAL CUES;

In this world of globalization various economies are interdependent and interconnected. An

event in one part of the world is bound to affect other parts of the world; however the magnitude

and intensity of impact would vary.

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Thus capital market in India is also affected by developments in other Parts of the world i.e.,

U.S, Europe, Japan etc.Global cues includes corporate earnings of MNCs consumer confidence

index in developed countries jobless claims in developed countries, global growth outlook given

by various agencies like IMF, economic growth of major economies, price of crude-oil, credit

rating of various economies given by Moodys S&P,etc.

4. POLITICAL STABILITY AND GOVERNMENT POLICIES;

For any economy to achieve and sustain growth it has to have political stability and pro-growth

government policies. This is because when there is political stability there is stability and

consistency in governments attitude which is communicated through various government

policies. The vice-versa is the case when there is no political stability. So capital market also

reacts to the nature of government, attitude of government, and various policies of the

government.

5. INVESTOR SENTIMENT AND RISK APPETITE;

Another factor which influences capital market is investor sentiment and their risk appetite. Even

if the investors have the money to invest but if they are not confident about the terms from their

investment, they may stay away from investment for sometime. At the same time if the investors

have low risk appetite, which they were having in global and Indian capital market some four to

five month back due to global financial meltdown and recessionary situation in U.S and some

parts of Europe, they may stay away from investment and wait for the right time to come.

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CHAPTER-4

BULLION MARKET AT GLANCE

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BULLION MARKET AT GLANCE

INTRODUCTION TO BULLION MARKET

A bullion market is a place where precious metals such as gold, silver, platinum and

palladium can be bought and sold. Price depends on supply and demand. These two factors drive

the underlying price which is then adjusted upwards or downwards depending on the form of the

precious metal. Modern bullion markets allow small, individual investors all the way up large

institutions to easily buy and sell precious metals. The bullion market generally offers one-

ounce, ten-ounce, and 1-kilo, 24-karat gold bars, and investors are hereby encouraged to

purchase

PURPOSE

Bullion markets exist for two types of customers.

The first type of customer is the producer of goods that require precious metals as

inputs. These customers are jewelry and electronics manufacturers as well as many other

companies in industries ranging from medicine to chemicals to glass. These companies are the

main drivers of demand and the reason precious metals have any value. These companies

participate in the bullion market so they can ensure a steady supply of precious metals to their

manufacturing facilities.

The second type of customer is the speculator. These are people who buy precious

metals because they think it will provide a hedge against inflation or that the price of the

precious metal will increase because demand will exceed supply. While the first type of

customer wants to take actual delivery of the precious metal, the speculator generally does not,which is why investment firms created precious metal derivative investments.

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Historical background

Silver and gold have been known and prized for at least six millennia. The two metals

commonly are found together in nature and were almost certainly the first metals known to man.

In streambed gravel deposits, from which they were first recovered, the gold invariably contains

silver, sometimes enough to form the natural alloy electrum, in which the silver content can

range from about 18 to 36 weight percent.

Silver was valued by the ancients because of its color (it is the whitest of all metals), its

brilliant luster, its noncorrodible nature, and the relative ease with which it can be worked. It still

is valued for those same characteristics today, but in addition, several other useful properties

have transformed it from being a decorative and monetary metal into a predominantly industrial

metal.

According to a fact sheet on gold on the IMF website, the yellow metal played a central role in

the international monetary system until the collapse of the Bretton Woods system of fixed

exchange rates in 1973. Since then, the role of gold has been gradually reduced. However, it is

still an important asset in the reserve holdings of a number of countries, and IMF remains one of

the largest official holders of gold in the world.

Nonmonetary Uses

Like gold, silver is soft, malleable, and ductile; in fact, it is the most ductile of metals.

These properties led to its being fashioned into items of personal adornment and decorative items

of various kinds. Thus, silver belt buckles, bracelets, brooches, chain necklaces, neck rings, and

other items of jewelry were developed early. Later, silver was used for such things as decorative

handles for daggers and swords, and eventually, in relatively modern times, eating utensils and

various items of tableware.

The industrial uses of silver (including photography), which today account for two-thirds

of world silver consumption, did not arise until the 19th and 20th centuries. A short list of some

of the important uses and the dates of their introduction follows:

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Silver and silver salts have been central to the development of photography since

its origins in the 1820s.

Silver-mercury dental amalgams have been used for tooth restorations since the

late 1830s.

Mirrors of polished silver were used by the Egyptians in the third millennium

B.C., and silvering of mirrors with lead, tin, or mercury was practiced in Europe

before and during the Renaissance. The large-scale production of silvered glass

mirrors through the chemical reduction of silver nitrate dates from Justus von

Liebigs 1835 invention of the process.

A patent for a process for the electroplating of silver was granted in 1840; it was

the first patent for the electroplating of any metal.

Although Alessandro Volta had used silver and zinc as the electrodes of his

electric pile, or battery, at the beginning of the 19th century, it was not until

military requirements in the 1940s created a demand for high-energy-density

batteries that the first two types of practical silver batteries were developed.

Silver sleeve bearings were developed in the 1940s for use in high-performance

military aircraft engines.

Silver catalysts for the large-scale production of formaldehyde and the oxidation

of ethylene are developments of the second half of the 20th century.

Although silver was known to be an excellent conductor of electricity in the 19th

century, its widespread use in switch and relay contacts and in conductors arose

gradually during the 20th century.

SIGNIFICANCE OF SILVER

Demand for silver is built on three main pillars: industrial uses, photography and jewelry &

silverware. Together, these three categories represent more than 95 percent of annual silver

consumption, in last couple of years we saw demand for silver is falling in photography, where

as industrial and jewellery demand is rising ever year and likely to rise for next couple of years

to come.

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World gross domestic product (GDP) is expected to increase by 4.6% in 2012. Recovery is

becoming self-sustained, with trade and investment gradually replacing fiscal and monetary

stimulus as the principal drivers of economic growth. Silvers use as an industrial metal is

growing particularly in electronics and thermal applications. Total silver fabrication last year

grew by 12.8 percent to a 10-year high of 878.8 million ounces, chiefly through the recovery in

industrial demand. Jewelry posted a gain of 5.1 percent, the first substantial rise since 2003,

primarily due to strong GDP gains in emerging markets and the industrialized worlds improving

economic picture. Silver price saw heavy correction in market last month on fund selling and less

investment demand from the biggest fund, MCX July contract closed with more than 18% at

Rs.57919 as on 31st may-2011. Silver for June delivery gained 44.6 cents, or 1.2%, to settle at

$38.303 a troy ounce. The most active contract, for July delivery, ended up 44.2 cents, or 1.2%,

at $38.305 a troy ounce. .

Global silver investment grew 40 percent last year to 279.3 million ounces, resulting in a net

flow into silver of $5.6 billion, almost doubling 2009s figure. Silver-based exchange traded

funds (ETFs) in 2010 reached 582.6 million ounces, an increase of 114.9 million ounces over the

total in 2009. The iShares Silver Trust accounted for almost 40 percent of the increase, with

significant gains achieved by Zurcher Kantonalbank, ETF Securities, and the Sprott Physical

Silver Trust.

Silver is a very versatile metal, it has extensive industrial application and is used to makejewellery and utensils.

Silver demand is on rise in India and china.

Industrial usage is expected to rise with growing industrialization.

Higher gold price has also shifted some people towards silver.

Investment interest has increased in silver also with introduction of more products.

The Silver market promises to be interesting over the next few years as there is likely to be a

change-over in the primary driver of demand. In recent years investor buying has been the swing-

factor that has driven prices higher, but demand for safe-havens is likely to wane in the years ahead.

However, a few new applications for Silver have the potential to become swing factors. In the short

term, the global economic situation remains uncertain and there may well be more turmoil in the

financial markets before a more sustainable economic recovery gets going. In this case Silver prices

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have potential to rise further. The longer term outlook for Silver is also interesting with demand

seeming likely to undergo a structural change as new technology (including Silver-zinc batteries)

emerges, some of which could consume meaningful amounts of Silver. This new technology could

substantially reduce Silvers recent dependence on investor off-take to balance supply and demand.

The prospects of this new technology are also likely to make investors even keener to own Silver,

although at the moment it maybe too early for them to do so. The biggest risk to Silvers bull market

is if investors start to reduce their exposure to safe-haven investments. Silver has been in a supply

surplus since 2003, so a lot of Silver has been bought by investors and now that prices are at levels

not seen for 30 years there may be increased interest in taking profits if investors feel that economic

growth will provide better investment opportunities elsewhere. The short-to-medium term outlook

therefore is very much dependent on how long such investors feel the need to keep, or even increase,

money invested in safe-havens. In turn, this will depend on how the global economy performs. New

technology promises a new era for Silver, but between now and when this technology takes-off is

likely to lead to some wild swings in Silver prices and hence produce numerous risks and trading

opportunities.

PARTICIPANTS OF BULLION MARKETS

1. Reserve bank of India

2. Bankers

3. Financial companies

4. speculators

5. Householders

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1. RESERVE BANK OF INDIA

Reserve bank of India is considered to be the central bank of India, reseve bank of india was

established on April,1935 as per the reseve bank act 1934.though originally private owned,it hasfully owned by the government of india since it was nationalised in 1949.among all the

particpants reseve bank is considerd to be the biggest particpant of these market.as rbi directly

will not enage in bullion market activites.but it will buy and sell bullion such as gold ,silver

which it will keep as a reserves.

In 1991, when India faced its worst ever balance of payment crisis, the country had to pledge 67

tones of gold to Union Bank of Switzerland and Bank of England to raise $605 million

(Rs2,843.5 crore today) to shore up its dwindling foreign exchange reserves, which were then

barely enough to buy two weeks of imports. Indias foreign exchange reserves were at $1.2

billion in January 1991 and by June, they were depleted by half. Currently, the Indian central

banks foreign exchange reserves stand at $285.5 billion.

The Reserve Bank of India, or RBI, as bought 200 tones of gold from the International Monetary

Fund (IMF), nearly half of what the fund plans to sell.

2. BANKERS

As per the norms of reserve bank of India every commercial bank as to keep certain part of its

funds in terms of gold, silver and other metal( these is known as statutory liquidity ratio) as a

result banks directly engage in the buying of precious metal like gold and silver.

Consider the following exceedingly simplified schematic diagram of how a bullion dealer trades

gold and silver.

Producer sells to bullion bank sells to jeweler

This is an extremely simplified explanation of how a bullion bank buys gold from a producer and

then sells it to a jeweler. In reality, a bullion dealer will have numerous purchases and sales it is

making at any given time, and several positions representing forward commitments to buy and

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sell; loans; swaps; repurchase agreements; metal held on an unallocated basis; metal owned or

committed to in the form of concentrates, dore, and scrap; and other positions in gold and silver

at any given time.

The collection of these positions is called the gold book run by that bullion bank. In the world of

banking accounting, many of these positions are gold-denominated assets, some of which the

bank can use as collateral for borrowings and lendings in gold or currencies.

Now, let us complicate the diagram by adding a gold loan.

Producer sells to Bullion Bank loans toProducer sells toBullion Bank

sells to Jeweler

In this example, the first producer sells gold to a bullion bank. The bank loans this gold to

another (or the same) producer in a gold loan. The producer then sells the gold to the bullion

bank, which sells the gold to a jeweler. In this way, the banker has made two transactions with

the same volume of gold. Instead of merely earning the very small margin available on spot gold

purchases and sales, the banker has managed to add to its fees for this gold the interest and

banking fees attached to a gold loan and a second purchase. In this way, the bank increases the

profitability of its bullion trading operation.

3. FINANCIAL COMPANIES

Financial companies also engage or participate in bullion markets such as MMTC Limited; (A

Govt. of India Enterprise) is Indias Premier bullion trader, handling more than 185 MTs of Gold

& 690 MTs of Silver during 2010-11. The Precious Metals Division has consistently contributed

considerable proportion of the total turnover of the Company.

MMTCs Precious Metals Division is in to a range of activities covering imports, exports and

domestic retail trade. It helps in promoting exports from India by holding exclusive foreign

exhibitions of gold and studded jewellery at chosen overseas locations.

MMTC is an authorized agency of the Government of India for import of gold, silver, platinum,

palladium, rough diamonds, emeralds, rubies and other semi-precious stones and supplies these

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items to jewellers in India for domestic sales and exports. It is one of the custodians of the

Diamond Plaza Customs Clearance Center in Mumbai. MMTC is also the custodian for import &

export of precious cargo at SEEPZ, SEZ Mumbai.

MMTC has a unit in New Delhi for manufacturing its own brand of gold and silver medallions

since the year 1996. Customized requirements for corporate/institutional orders are serviced from

here throughout the year. MMTC has retail jewellery & its own branded Sterling Silverware

(Sanchi) showrooms in all the major metro cities of India. MMTC also supplies branded

hallmarked gold and studded jewellerys.

4. SPECULATORS

Speculators are those people who participate in the market for the profits and are ready to face

the risk involved in the market. A speculator can be anyone roman individual who has a small

surplus income to treasury desks of banks and corporate.

5. HOUSEHOLDS

In India private holding of bullion has traditionally consisted of gold and silver jewelry of high

purity in the form of bangles, bracelets, anklets that may be worn and are conveniently portable.

In addition, gold and silver coins and bars are also accumulated, and whether as jewelry or as

bullion coins and bars, these two metals are viewed as a measure of true wealth.

How we treat gold and silver

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The bulk of the population living in villages and small towns tend

to accumulate gold and silver of high purity as a handy form of

investment-grade savings. Silver bullion in villages is the

preferred metal because it is more affordable and you can get

more weight of metal for your money. There you will find them

wearing this wealth on them in the form of chunky silver

bracelets, anklets and necklaces.

India bullion in towns and cities is slightly different. The urban dweller also looks at gold and

silver as an investment, but somewhat differently. Traditionally 22 carat (91.667% pure) gold

bangles, or sterling silver (92.5% pure) jewelry, tableware have been a form of everyday use

investment.

Today, the younger professionals and the older wealthy spenders prefer designer jewelry which

carries high premiums. The gold or silver value in such jewelry can be astonishingly low.

Commodity exchanges in India

National Commodity & Derivatives Exchange Limited (NCDEX)

Multi Commodity Exchanges of India limited (MCX)

All the exchanges have been set up under overall control of Forward Market Commission (FMC)

of Government of India.

National Commodity & Derivatives Exchange Limited (NCDEX)

National Commodity & Derivatives Exchange Limited (NCDEX) located in Mumbai is a

public limited company incorporated on April 23, 2003 under the companies act, 1956 and

had commenced its operations on December 15, 2003. This is the only commodity exchange

in the country promoted by national level institutions. It is promoted by ICICI bank limited,

life insurance Corporation of India (LIC), national bank for agriculture and rural

development (NABARD) and National Stock Exchange of India limited (NSE). It is a

professionally managed online multi commodity exchange. NCDEX is regulated by forward

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market commotion and is subjected to various laws of the land like the companies act. Stamp

act, contracts act, forward commission (Regulation) act and various other legislations.

Multi Commodity Exchange Of India Limited (Mcx)

Head quarters in Mumbai multi commodity exchange of India limited (MCX), is an

independent and de-mutualised exchange with a permanent recognition from government

bank of India. Key shareholders of MCX are financial technologies (India) ltd., state bank of

India, union bank of India and canara bank. MCX facilities online trading, clearing and

settlement.

All the exchanges have been set up under overall control of forward market commission

(FMC) of government of India.

Commodity exchange in India plays an important role where the prices of any commodity are

not fixed, in an organized way. Earlier only the buyer of produce and its seller in the market

judged upon the prices. Other never had a say. Today, commodity exchanges are purely

speculative in nature. Before discovering the price, they reach to the producers, end-users, and

even the retail investors, at a grassroots level. It brings a price transparency and risk management

in the vital market.

A big difference between a typical auction, where a single auctioneer announces the bids, and the

exchange is that people are not only competing to buy also to sell. By exchange rules and by law,

no one can bid under a higher bid, and no one can offer to sell higher than someone elses lower

offer. That keeps the market as possible, and keeps the traders on their toes to make no one gets

the purchases or sale before they do.

TRENDS OF SILVER

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Monthly Volumes of silver from 1st September 2010 to 31st march 2011.

Source; National Commodity & Derivatives Exchange Limited (NCDEX)

41

Month Year Quantity

(In 000's)

Volumes

(Rs. In Lakhs)

Traded Contracts

(in Lots)

Sep 2010 46800.275 35234292.32 2854405

Oct 2010 66681.03 45369543.94 4093266

Nov 2010 80631.725 54609767.33 5019135

Dec 2010 61699.85 44214032.96 3954385

Jan 2011 69653.005 50559290.38 4397911

Feb 2011 70534.009 49273860.01 4839644

Mar 2011 84614.611 64149416.11 7062883


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INTERPRETATIONS:

As it is clear from the above trend that volumes (values) are showing an increasing trend From

September to November with an increase in quantity by 72% and traded contracts increases to

76% the volumes in silver are showing an increasing trend. And from October to February these

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volumes are decreased showing a decline in volumes, and in the month of March it should an

tremendous increase in volumes quantity and contracts traded.

CHAPTER-5

DATA ANALYSIS AND INTERPRETATION

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DATA ANALYSIS;

The third objective is the core of this project which shall be examined in the following steps.

The closing values of nifty are considered to be variable X.

The closing values of silver are considered to be variable Y.

Correlation test shall be conducted with the following formula.

CORRELATION COEFFICIENT (r) = cov(X,Y)

X.Y

Date nifty

x

silver

y

1/9/2010 5471 30,74

0

2/9/2010 5486 30,74

0

3/9/2010 5479 30880

4/9/2010 5479 3111

0

5/9/2010 5479 3111

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0

6/9/2010 5576 3113

5

7/9/2010 5604 31217

8/9/2010 5607 3154

0

9/9/2010 5640 3144

5

10/9/201

0

5640 3144

5

11/9/201

0

5640 3144

5

12/9/201

0

5640 3144

5

13/9/201

0

5760 3133

5

14/9/201

0

5795 3187

8

15/9/201

0

5860 3207

0

16/9/201

0

5828 3234

8

17/9/201

5884 3242

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0 0

18/9/201

0

5884 3231

5

19/9/201

0

5884 3231

5

20/9/201

0

5980 3237

3

21/9/201

0

6009 32245

22/9/201

0

5991 3224

5

23/9/201

0

5959 3267

0

24/9/201

0

6018 3282

0

25/9/201

0

6018 3286

8

26/9/201

0

6018 3286

8

6035 3296

46


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27/9/201

0

7

28/9/201

0

6029 3257

1

29/9/201

0

5991 3330

5

30/9/201

0

6029 3356

0

1/10/20

10

6143 3318

5

2/10/201

0

6143 3318

5

3/10/201

0

6143 3318

5

4/10/201

0

6159 3338

0

5/10/201

0

6145 3373

0

6/10/201

0

6186 3462

5

7/10/201

0

6120 3507

0

8/10/201

0

6103 3385

8

47


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9/10/201

0

6103 3494

7

10/10/20

10

6103 3494

7

11/10/20

10

6135 3506

5

12/10/20

10

6090 3497

0

13/10/20

10

6233 3549

0

14/10/20

10

6177 3549

0

15/10/20

10

6062 3658

0

16/10/20

10

6062 3646

5

17/10/20

10

6062 3646

5

18/10/20

10

6075 3607

5

19/10/20

10

6027 3633

5

20/10/20

10

5982 3575

5

21/10/20

10

6101 3603

6

22/10/20

10

6066 3499

5

48


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23/10/20

10

6066 3539

0

24/10/20

10

6066 3539

0

25/10/20

10

6105 3578

0

26/10/20

10

6082 3554

0

27/10/20

10

6012 3583

5

28/10/20

10

5987 3608

5

29/10/20

10

6017 3592

0

30/10/20

10

6017 3719

8

31/10/20

10

6017 3750

0

1/11/201

0

6117 3718

0

2/11/201

0

6119 3742

0

3/11/201

0

6160 3772

0

4/11/201

0

6281 3772

0

5/11/201

0

6312 3772

0

49


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6/10/201

0

6312 3772

0

7/10/201

0

6312 3960

0

8/11/201

0

6273 4142

0

9/11/201

0

6301 4110

0

10/11/20

10

6275 4094

0

11/11/20

10

6194 4063

5

12/11/20

10

6071 3949

0

13/11/20

10

6071 3949

0

14/11/20

10

6071 3985

0

15/11/20

10

6121 3950

0

16/11/20

10

5988 3950

0

17/11/20

10

5988 4037

0

18/11/20

10

5998 4128

0

19/11/20

10

5890 4192

0

50


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20/11/20

10

5890 4192

0

21/11/20

10

5890 4213

0

22/11/20

10

6010 4194

0

23/11/20

10

5934 4223

0

24/11/20

10

5965 4210

0

25/11/20

10

5799 4193

0

26/11/20

10

5751 4132

0

27/11/20

10

5751 4132

0

28/11/20

10

5751 4149

0

29/11/20

10

5830 4207

5

30/11/20

10

5862 4370

0

1/12/201

0

5960 4375

0

2/12/201

0

6011 4380

0

3/12/201

0

5992 4465

0

51


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4/12/201

0

5992 4465

0

5/12/201

0

5992 4500

0

6/12/201

0

5992 4554

0

7/12/201

0

5976 4403

5

8/12/201

0

5903 4360

0

9/12/201

0

5766 4400

0

10/12/20

10

5857 4380

0

11/12/20

10

5857 4380

0

12/12/20

10

5857 4450

0

13/12/20

10

5907 4540

0

14/12/20

10

5944 4420

0

15/12/20

10

5892 4470

0

16/12/20

10

5948 4475

0

17/12/20

10

5948 4479

0

52


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18/12/20

10

5948 4479

0

19/12/20

10

5948 4497

5

20/12/20

10

5947 4472

5

21/12/20

10

6000 4473

0

22/12/20

10

5984 4475

0

23/12/20

10

5980 4485

0

24/12/20

10

6011 4485

0

25/12/20

10

6011 4485

0

26/12/20

10

6011 4480

0

27/12/20

10

5998 4495

0

28/12/20

10

5996 4612

5

29/12/20

10

6060 4675

0

30/12/20

10

6101 4625

0

31/12/20

10

6134 4650

0

53


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1/1/2011 6134 4650

0

2/1/2011 6134 4704

0

3/1/2011 6157 4678

5

4/1/2011 6146 4490

0

5/1/2011 6079 4500

0

6/1/2011 6048 4420

0

7/1/2011 5904 4465

0

8/1/2011 5904 4465

0

9/1/2011 5904 4435

0

10/1/201

1

5762 4490

0

11/1/201

1

5754 4540

0

12/1/201

1

5863 4492

5

13/1/201

1

5751 4420

0

5654 4400

54


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14/1/201

1

0

15/1/201

1

5654 4400

0

16/1/201

1

5654 4365

0

17/1/201

1

5654 4440

0

18/1/201

1

5724 4492

5

19/1/201

1

5691 4405

0

20/1/201

1

5711 4262

5

21/1/201

1

5696 4284

0

22/1/201

1

5696 4284

0

23/1/201

1

5696 4285

0

55


56/69

24/1/201

1

5743 4170

0

25/1/201

1

5687 4170

0

26/1/201

1

5687 4252

5

27/1/2011

5604 4170

0

28/1/201

1

5512 4316

5

29/1/201

1

5512 4316

5

30/1/201

1

5512 4302

0

31/1/201

1

5505 4380

0

1/2/2011 5417 4380

0

2/2/2011 5432 4354

5

3/2/2011 5526 4440

56


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0

4/2/2011 5395 4481

0

5/2/2011 5395 44810

6/2/2011 5395 4470

0

7/2/2011 5396 4476

0

8/2/2011 5312 4587

5

9/2/2011 5253 4560

0

10/2/201

1

5225 4580

0

11/2/201

1

5310 4579

0

12/2/201

1

5310 4579

0

13/2/201

1

5310 4587

5

14/2/2S0

11

5456 4670

0

15/2/201

1

5481 4670

0

57


58/69

16/2/201

1

5485 4640

0

17/2/201

1

5546 4770

0

18/2/201

1

5458 4830

0

19/2/2011

5458 4830

0

20/2/201

1

5458 4943

0

21/2/201

1

5518 4922

5

22/2/201

1

5469 4952

5

23/2/201

1

5437 5010

0

24/2/201

1

5262 4970

0

25/2/201

5303 5025

0

58


59/69

1

26/2/201

1

5303 5025

0

27/2/201

1

5303 5030

0

28/2/201

1

5333 5115

0

1/3/2011 5522 51150

2/3/2011 5522 5170

0

3/3/2011 5536 5170

0

4/3/2011 5538 5315

0

5/3/2011 5538 5315

0

6/3/2011 5538 5470

5

7/3/2011 5463 5480

0

8/3/2011 5520 5450

0

9/3/2011 5531 5420

0

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10/3/201

1

5494 5270

0

11/3/201

1

5445 5430

0

12/3/201

1

5445 5430

0

13/3/201

1

5445 5440

0

14/3/2011

5531 5305

0

15/3/201

1

5449 5240

0

16/3/201

1

5511 5205

0

17/3/201

1

5446 5295

0

18/3/201

1

5373 5295

0

19/3/201

1

5373 5295

0

20/3/201

5373 5417

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1 5

21/3/201

1

5364 5420

0

22/3/201

1

5413 5490

0

23/3/201

1

5480 5640

0

24/3/201

1

5522 56000

25/3/201

1

5654 5570

0

26/3/201

1

5354 5570

0

27/3/201

1

5354 5515

0

28/3/201

1

5687 5515

0

29/3/201

1

5736 5607

5

5787 5650

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30/3/201

1

0

31/3/201

1

5833 5626

5

CORRELATION COEFFICIENT (r) = covariance(X, Y)

X.Y

r= -0.51705

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INTERPRETATION;

It is clear from the analysis that there exists a weak relation or negative relation between nifty

values(x) and silver values (y) i.e., if nifty values increases(decreases) then the corresponding

silver decreases(increases).

Here in the above graph silver values are showing a consistent increase from the 1st September

till the 31st march.

CHAPTER-6

FINDINGS AND CONCLUSIONS

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FINDINGS AND CONCULSIONS

It is found that investments in gold and silver are proliferated to unprecedented levels in

the time span of 2009-2011.

It is found that bullion market is also sending turbulent signals to short term investors due

to unpredictable volatility.

It is also evident from this study that increased conversions among the investment

instruments also led to the uncontroable volatility in bullion markets.

It is evident from the 3rd chapter of this project that conventional investors of financial

markets are not willing to insulate themselves from making investments in bullion

markets.

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Though there are many precious metal segments in Indian bullion market, it is found that

silver has been talking the lead in the recent past.

Silver is demanded not only by speculators but also by the industrial applicants who

started taking positions in the new methods like commodity futures which could have led

to the growth of silver prices with unimaginable profits to the traders.

It is feasible to conclude that Indian bullion markets more independent comparing to the

segments of financial markets because it is examined in the previous chapter that there is

no correlation or their exist a weak correlation between bullion and capital market.

It is also understand that performance of bullion markets should not be compared with

intersegmental investments. Because there is no variance between the spot prices of silverand that of equities replicated in the form of nifty.

Finally it is concluded that Indian bullion markets in the form of silver are emerged to be

the autonomous investments avenues for all kinds of investors in long-run.

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CHAPTER-7

SUGGESTIONS

SUGGESTIONS

1. It is suggested to short run investors to be away from silver segment in the present

condition of inflationary prices of 56,000-58,000 (appox).

2. It is the right time for speculators to take intraday positions in the silver market.

Therefore they are advised to diversify the line share of speculative portfolio to silver.

3. It is suggested to investors not to correlate the profitability levels of silver with other

investment sources, rather they are advised to construct efficient portfolio of both

bullion and equity investments to leverage their risks .

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4. It is advised to all the investors to be away from short selling strategies because the

prices of silver are expected to grow further.

5. Investors of silver are advised to make only institutional purchases such as

commodity exchanges and banks.

BIBILOGRAPHY

www.nseindia.com

www.rbi.org.in

www.mcxindia.com

www.ncdex.com

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http://www.nseindia.com/http://www.rbi.org.in/http://www.mcxindia.com/http://www.ncdex.com/http://www.nseindia.com/http://www.rbi.org.in/http://www.mcxindia.com/http://www.ncdex.com/


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www.silverinsitiute.org

BOOKS

Guide to Indian stock market - Jitendra Gala

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http://www.silverinsitiute.org/http://www.silverinsitiute.org/


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impact of capital marekt volatility

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