volatility of nifty with selected security and economic factors 9886649997

VOLATILITY OF NIFTY WITH SELECTED SECURITIES & ECONOMIC FACTORS IIFL

EXECUTIVE SUMMARY

Speculators are the risk takers who are inclined to invest all their money into one

risky investment and hope it pays off. Instead of putting all their eggs in one basket more

risk- adverse investors try to reduce their exposure to risk by purchasing a diversified list of

different investments called a portfolio.

In pure financial terms, volatility is defined as ‘the degree to which the price of a

security, commodity or market rises or falls within a short period time’. As is evident from

the definition, volatility relates to the variability in the price of a security. In the context of

the stock market volatility of the market refers to the volatility of the indices of the

securities within the market. In India, for instance the National stock Exchange index Nifty

would be one of the relevant indices to look into for examining stock market volatility.

The study is carried out in two parts. Under first part an attempt is made to test the

performance of selected securities in comparison with the market index nifty, to identify

whether investors can invest in securities by tracing the market indices. The secondary data

is used for the study and is extracted from the available sources such as websites of the

company, NSE, textbooks and magazines, stock brokers. For the purpose of the research the

nifty index is selected as the market index and three companies each under five industries

are selected for the study. Weekly closing price of securities and weekly closing value of

national stock exchange index (nifty) are considered for the study purpose. Testing of

performance of selected securities in comparison with market index is done by using

correlation analysis.

Under second part, a study is conducted to know the relationship in between nifty

and some of the selected economic factors such as net Foreign Institutional Investment (FII)

flows in India, gold prices and Rupee-Dollar exchange rate. Here also for the study purpose

secondary data is used. Here also weekend values of the selected economic factors are used

for the study purpose. Testing of performance of nifty with the selected economic factors is

done by using statistical tools correlation and regression analysis.

From the study conducted it was found that the selected securities are moving with

the market index in all the sectors except one company under telecommunication sector

which is showing negative correlation and also there exists the relationship in between the

nifty and the selected economic factors.

Govt. RC college of commerce and management, Banglore-01


INTRODUCTION

INTRODUCTION

1.1 Financial markets

Financial markets are the centers or arrangements that provide facilities for buying

and selling of financial claims and services. Corporations, financial institutions, individuals

and government trade in financial products on these markets either directly or through

brokers and dealers through an organized exchange or off-exchange.

Capital markets

The capital market is the market for securities, where companies and governments

can raise long-term funds. The capital market includes the stock market and the bond

market. Through the capital market large amounts of money (capital) are raised by

companies, governments and other organizations for long term use and the subsequent trade

of the instruments issued in recognition of such capital.

The capital markets consist of primary markets and secondary markets. Newly issued

securities are bought or sold in the primary markets. Secondary markets allow investors to

sell securities that they hold or buy existing securities.

Primary Market

A market that issues new securities on an exchange. Companies, governments and

other groups obtain financing through debt or equity based securities. Primary markets are

facilitated by underwriting groups, which consist of investment banks that will set a

beginning price range for a given security and then oversee its sale directly to investors, also

known as "new issue market" (NIM).

The primary markets are where investors can get first crack at a new security

issuance. The issuing company or group receives cash proceeds from the sale, which is

then used to fund operations or expand the business. Exchanges have varying levels

of requirements which must be met before a security can be sold.


http://en.wikipedia.org/wiki/Secondary_market

http://en.wikipedia.org/wiki/Primary_market

http://en.wikipedia.org/wiki/Capital_market

http://en.wikipedia.org/wiki/Bond_market

http://en.wikipedia.org/wiki/Bond_market

http://en.wikipedia.org/wiki/Stock_market

http://en.wikipedia.org/wiki/Government

http://en.wikipedia.org/wiki/Corporation

http://en.wikipedia.org/wiki/Security_(finance)

http://en.wikipedia.org/wiki/Market

http://en.wikipedia.org/wiki/Capital_market


Once the initial sale is complete, further trading is said to be conducted on the

secondary market, which is where the bulk of exchange trading occurs each day. Primary

markets can see increased volatility over secondary markets because it is difficult to

accurately gauge investor demand for a new security until several days of trading have

occurred.

Secondary Market

A market where investors purchase securities or assets from other investors, rather

than from issuing companies themselves. The national exchanges - such as the National

Stock Exchange and the NASDAQ are secondary markets.

Secondary markets exist for other securities as well, such as funds, investment banks,

or entities such as Fannie Mae purchase mortgages from issuing lenders. In any secondary

market trade, the cash proceeds go to an investor rather than to the underlying

company/entity directly.

Bombay Stock Exchange:

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

now spanning three centuries in its 133 years of existence. What is now popularly known as

BSE was established as "The Native Share & Stock Brokers' Association" in 1875.

BSE is the first stock exchange in the country which obtained permanent recognition

(in 1956) from the Government of India under the Securities Contracts (Regulation) Act

1956. BSE's pivotal and pre-eminent role in the development of the Indian capital market is

widely recognized. It migrated from the open outcry system to an online screen-based order

driven trading system in 1995. Earlier an Association of Persons (AOP), BSE is now a

corporatized and demutualised entity incorporated under the provisions of the Companies

Act, 1956, pursuant to the BSE (Corporatization and Demutualization) Scheme, 2005

notified by the Securities and Exchange Board of India (SEBI). With demutualization, BSE

has two of world's best exchanges, Deutsche Börse and Singapore Exchange, as its strategic

partners.

National Stock Exchange

The National Stock Exchange of India Limited has its genesis in the report of the

High Powered Study Group on Establishment of New Stock Exchanges, which



recommended promotion of a National Stock Exchange by financial institutions (FIs) to

provide access to investors from all across the country on an equal footing. Based on the

recommendations, NSE was promoted by leading Financial Institutions at the behest of the

Government of India and was incorporated in November 1992 as a tax-paying company

unlike other stock exchanges in the country.

On its recognition as a stock exchange under the Securities Contracts (Regulation)

Act, 1956 in April 1993, NSE commenced operations in the Wholesale Debt Market

(WDM) segment in June 1994. The Capital Market (Equities) segment commenced

operations in November 1994 and operations in Derivatives segment commenced on June

2000.

Stock market index

An index is used to give information about the price movements of products in the

financial, commodities or any other markets. Financial indexes are constructed to measure

price movements of stocks, bonds, T-bills and other forms of investments. Stock market

indexes are meant to capture the overall behavior of equity markets. A stock market index is

created by selecting a group of stocks that are representative of the whole market or a

specified sector or segment of the market. An index is calculated with reference to a base

period and a base index value.

Stock market indexes are useful for a variety of reasons. Some of them are:

They provide a historical comparison of returns on money invested in the stock

market against other forms of investments such as gold or debt.

They can be used as a standard against which to compare the performance of an

equity fund.

It is a lead indicator of the performance of the overall economy or a sector of the

economy.

Stock indexes reflect highly up to date information.

Modern financial applications such as Index Funds, Index Futures, and Index

Options play an important role in financial investments and risk management.


http://www.nseindia.com/content/fo/fo_niftyoptions.htm

http://www.nseindia.com/content/fo/fo_niftyoptions.htm

http://www.nseindia.com/content/fo/fo_niftyfutures.htm

http://www.nseindia.com/content/indices/ind_indexfunds.htm


About nifty 50

The S&P CNX Nifty (Nifty 50 or simply Nifty) is a composite of the top 50 stocks

listed on the National Stock Exchange (NSE), representing 20 different sectors of the

economy. It is a simplified tool that helps investors and ordinary people alike, to understand

what is happening in the stock market and by extension, the economy. If the Nifty Index

performs well, it is a signal that companies in India are performing well and consequently

that the country is doing well.

An upbeat economy is usually reflected in a strong performance of the Nifty Index.

A rising index is also indicative that the investors are optimistic about the future. The Nifty

Index is based upon solid economic research. It is internationally respected and recognized

as a pioneering effort in providing simpler understanding of stock market complexities.

Nifty is the flagship index of NSE, the 3rd largest stock exchange in the world in terms of

number of transactions (Stock Futures)

Nifty has been used to represent S&P CNX Nifty, owned and managed by India

Index Services and Products Ltd. (IISL), a joint venture between NSE and CRISIL.

Nifty index can be used by individuals to track market movements and compare

performance of individual companies’ vis-à-vis market performance.

Shareholders evaluation of management decisions - performance of a company vis-

à-vis the market generally reflects the perception of the investor.

Assist traders and market intermediaries to evaluate performance and sentiments

across the market.

Index funds can replicate Nifty indices to earn market returns.

Derivative trading - Investors can use Nifty indices for hedging their exposures in

the equity markets.

Benchmarking NAV performances - Nifty is the benchmark for performance of

open ended and close ended funds

1.2 Stock market and the economy

The stock market and the economy are deeply intertwined so that when something

happens to one it affects the other. It is said that stock market declines have a wide ranging

effect on many sectors of the economy; therefore, the health of the stock market is seen as



an indicator of the general economic health. A drop in the stock market often translate into

decreased networth for both households and business, thereby, decreasing consumer

spending and confidence, which damages the economy.

Brief introduction to some of the economic factors.

A.Foreign Institutional Investor (FII)

Foreign Institutional Investor (FII) is an investor - mostly of the form of an institution

or entity, which invests money in the financial markets of a country different from the one

where in the institution or entity was originally incorporated. In countries like India,

statutory agencies like SEBI have prescribed norms to register FIIs and also to regulate such

investments flowing in through FIIs.

Some investment highlights:

The Indian growth story has attracted global majors like CLSA, HSBC, Citigroup,

Merrill Lynch, Crown Capital, Fidelity, Goldman Sachs, Morgan Stanley, UBS, T Rowe

Price International, Capital International and ABN Amro among others to enter the Indian

financial market.

• Goldman Sachs and Macquarie have acquired a 20 per cent stake each in PTC India

Financial services Ltd.

• Temasek Holdings, Investment Corporation of Dubai, Goldman Sachs, Macquarie, AIF

Capital, Citigroup and India Equity Partners (IEP) have picked a combined stake of 10 per

cent in Bharti Infratel.

• An entity of Merrill Lynch has picked up 49 per cent stake in seven residential projects of

real estate major, DLF.

• Blackstone has taken up a 26 per cent stake in MTAR Technologies.

• Citigroup, Morgan Stanley, Goldman Sachs and BSMA have picked up a combined stake

of over seven per cent in Gitanjali Gems.

• Fidelity Investments International has picked up close to seven per cent equity in

Transport Corporation of India (TCI).



FIIs are allowed to invest in the primary and secondary capital markets in India

through the portfolio investment scheme (PIS). Under this scheme, FIIs can acquire

shares/debentures of Indian companies through the stock exchanges in India.

The ceiling for overall investment for FIIs is 24 per cent of the paid up capital of the

Indian company. The limit is 20 per cent of the paid up capital in the case of public sector

banks, including the State Bank of India. The ceiling of 24 per cent for FII investment can

be raised up to sectorial cap/statutory ceiling, subject to the approval of the board and the

general body of the company passing a special resolution to that effect. To further increase

FII participation in the Indian market, the Government and Sebi have agreed to allow

foreign individuals, corporate and other investors to register directly as foreign institutional

investors - a move designed to increase transparency and reduce transaction costs for these

investors.

Overseas investors have infused US$ 816.69 million into the stock market in the

first trading week of 2010, reflecting a positive start for the year after record inflows in the

last year. Foreign institutional investors (FIIs) were gross buyers of shares worth US$ 3.03

billion, and sold equities valued worth US$ 2.2 billion, resulting in a net investment of US$

823.74 million, according to the capital market regulator, Securities and Exchange Board of

India (SEBI). FIIs were net investors of US$ 973.22 million in debt instruments in the first

trading week of the year, according to data released by SEBI.

According to SEBI, FIIs transferred a record US$ 17.46 billion in domestic equities

during the calendar year 2010. This FII investment in 2010 proved to be the highest ever

inflow in the country in rupee terms in a single year, breaking the previous high of US$

14.96 billion parked by foreign fund houses in domestic equities in 2007. FIIs infused a net

US$ 1.05 billion in debt instruments during the said period. During the October-December

period in 2009-10, FIIs made a net buy of shares worth US$ 5.19 billion, according to data

compiled from market regulator, the Securities and Exchange Board of India (SEBI).

In the quarter, December attracted the highest inflow of US$ 2.2 billion, followed by

October US$ 1.95 billion and November US$ 1.18 billion. FIIs poured a net US$ 1.26

billion in debt instruments during the said period.



The trend of strong FII inflows to the tune of about US$ 6.3 billion witnessed during

April-June quarter gained further during the September quarter of current fiscal with an

infusion of US$ 7.2 billion.

The number of FIIs who registered themselves with SEBI this year was higher by 7

per cent over 2008. Data sourced from the SEBI shows that number of registered FIIs stood

at 1706 and number of registered sub-accounts rose to 5,331 as of December 31, 2009.

A number of market and equity analysts indicate that a large part of FII inflows have

come from long-only funds, signaling that the quality of foreign investment is good.

India has in fact, emerged the most lucrative markets for short and medium-term

investments. The US is once again at the top of the list of foreign investors in the Indian

stock market, as per data presented in the Lok Sabha by the Finance Ministry. According to

the latest data, till mid-November 2009, US-based foreign institutional investors (FIIs) had

net investments of about US$ 4.46 billion in the Indian markets, as compared with US$

702.37 million in 2006. They are followed by the US$ 2.57 billion net investments routed

through Luxembourg. These two countries are further followed by France, Mauritius and

the UK.

FIIs appear to be betting big on the primary market rather than the secondary market,

says Mr Anoop Bhaskar, Head of Equities at UTI Mutual Fund. Roughly US$ 9 million-

US$ 10 million came in the primary issuance – through qualified institutional placements

(QIPs) or preferential allotment or initial public offerings (IPOs).

Private equity firms invested US$ 1.4 billion over 84 deals in India during October-

December quarter of 2009, taking the annual investment numbers to US$ 3.82 billion over

232 deals, according to a study by Venture Intelligence, a research service focused on

private equity (PE) and merger and acquisition (M&A) transactions.

B. Gold

Gold market in India

Eternally attractive to mankind, gold has found its principal use as a store of value. Its

beauty has made it popular in decoration. Gold has also become an increasingly important



industrial metal. Because of its rarity and its durability, gold has been almost universally

acceptable as money for thousands of years. Gold is the most prominent of the noble metals

(gold, silver, platinum, and other platinum group metals), so termed because of their

inertness, or reluctance to enter into chemical reactions. Gold will not react with common

acids. Gold, the most famous of all precious metals, is widely sought after throughout the

world for both its investment qualities and industrial properties. Indeed, gold traditionally

has served three functions: as a monetary instrument, as a financial asset, and as a raw

material primarily used in jewellery and decorative objects.

As an investment, gold typically is viewed as a financial asset that will maintain its

value during times of political, social, or economic distress. As such, gold can provide

individual and institutional investors alike with a portfolio safety net against sharp

downward spikes in complementary assets such as stocks and bonds. While investment

demand is important, the largest use for gold is in jewellery, with the majority of use

occurring in the United States, Japan, Italy, India, China, and Thailand. Jewellery

production has been growing at a robust pace in the developing countries of Southeast Asia

and the Middle East since 1988. Gold also is used in electronic connectors and dental

alloys. Gold is mined in more than 76 countries around the world, with the large number of

development projects in these countries expected to keep production growing well into the

next century. Currently, South Africa is the largest gold producing country, followed by the

United States, Australia, and Canada. Millions of people all over the world continue to use

gold as a hedge against inflation and as a basic form of savings and a reliable store of value

during times of economic uncertainty or political upheaval.

Weak dollar drives gold

Gold price movements are determined by the perception of gold as a `store of value'

rather than its fundamentals as a commodity. The precious metal's value is also determined

by such factors as inflation, interest rates and the presence of lucrative alternative

investment avenues in the economy. In the past two years, gold has regained popularity as a

`store of value'. The weakening dollar and the prevailing low interest rates at the global

level have left investors with limited alternative investment avenues. The spectre of even a

moderate increase in inflation levels, fuelled by the spurt in commodity prices, would

further squeeze the real rate of return on debt investments. This has forced investors to look



for a relatively risk-free investment option. In these circumstances, there has been a rush

towards gold as it is an eternal asset with an intrinsic value. For long, dollar-denominated

instruments were considered the favourite assets for central banks and institutional

investors.

Is gold a golden investment?

Gold and silver have been sought and prized since prehistoric times. They have also

been both a cause of war and a medium of exchange. Gold is the standard by which the

value of anything is assessed; it is universally accepted. Silver does not lag behind in global

trade markets and as an investment. In the code of Menes, an Egyptian ruler of 3100 BC, it

is declared that .one unit of gold is equal to two and- a-half units of silver in value.. Silver

was actually more widely employed as the standard of value until the nineteenth century.

According to the World Gold Council Report, India stands today as the world’s largest

single market for gold consumption. In developing countries, people have often trusted gold

as a better investment than bonds and stocks. Gold and silver have been popular in India

because historically these acted as a good hedge against inflation. In that sense these metals

have been more attractive than bank deposits or gilt-edged securities.

Despite recent hiccups, gold is an important and popular investment for many

reasons:

In many countries gold remains an integral part of social and religious customs,

besides being the basic form of saving. Shakespeare called it .the saint-seducing

gold. Superstition about the healing powers of gold persists. Ayurvedic medicine in

India recommends gold powder and pills for many ailments.

Gold is indestructible. It does not tarnish and is also not corroded by acid except by

a mixture of nitric and hydrochloric acids.

Gold has aesthetic appeal. Its beauty recommends it for ornament making above

all other metals.

Gold is so malleable that one ounce of the metal can be beaten into a sheet covering

nearly a hundred square feet.

Gold is so ductile that one ounce of it can be drawn into fifty miles of thin gold wire.

Gold is an excellent conductor of electricity.

Gold is so dense that all the 90,000 tonnes estimated to have been mined through



C. FOREIGN EXCHANGE MARKET

The foreign exchange market (forex, FX, or currency market) is a worldwide decentralized

over-the-counter financial market for the trading of currencies. Financial centers around the world

function as anchors of trading between a wide range of different types of buyers and sellers

around the clock, with the exception of weekends.

The purpose of the foreign exchange market 'Forex' is to assist international trade and

investment. The foreign exchange market allows businesses to convert one currency to

another foreign currency. For example, it permits a U.S. business to import European goods

and pay Euros, even though the business's income is in U.S. dollars. Some experts,

however, believe that the unchecked speculative movement of currencies by large financial

institutions such as hedge funds impedes the markets from correcting global current account

imbalances. This carry trade may also lead to loss of competitiveness in some countries.

In a typical foreign exchange transaction a party purchases a quantity of one currency

by paying a quantity of another currency. The modern foreign exchange market started

forming during the 1970s when countries gradually switched to floating exchange rates

from the previous exchange rate regime, which remained fixed as per the Bretton Woods

system.

The foreign exchange market is unique because of

trading volume results in market liquidity

geographical dispersion

continuous operation: 24 hours a day except weekends, i.e. trading from 20:15 UTC

on Sunday until 22:00 UTC Friday

the variety of factors that affect exchange rates

the low margins of relative profit compared with other markets of fixed income

Unlike a stock market, the foreign exchange market is divided into levels of access.

At the top is the inter-bank market, which is made up of the largest commercial banks and


http://en.wikipedia.org/wiki/Commercial_banks

http://en.wikipedia.org/wiki/Exchange_rate

http://en.wikipedia.org/wiki/UTC

http://en.wikipedia.org/wiki/Liquidity

http://en.wikipedia.org/wiki/Bretton_Woods_system

http://en.wikipedia.org/wiki/Bretton_Woods_system

http://en.wikipedia.org/wiki/Fixed_exchange_rate

http://en.wikipedia.org/wiki/Exchange_rate_regime

http://en.wikipedia.org/wiki/Floating_exchange_rate

http://en.wikipedia.org/wiki/U.S._dollars

http://en.wikipedia.org/wiki/Euros

http://en.wikipedia.org/wiki/Over-the-counter_(finance)


securities dealers. Within the inter-bank market, spreads, which are the difference between

the bid and ask prices, are razor sharp and usually unavailable, and not known to players

outside the inner circle. The top-tier inter-bank market accounts for 53% of all transactions.

After that there are usually smaller banks, followed by large multi-national corporations

(which need to hedge risk and pay employees in different countries), large hedge funds, and

even some of the retail FX-metal market makers. According to Galati and Melvin, “Pension

funds, insurance companies, mutual funds, and other institutional investors have played an

increasingly important role in financial markets in general, and in FX markets in particular,

since the early 2000s.” (2004) In addition, he notes, “Hedge funds have grown markedly

over the 2001–2004 period in terms of both number and overall size” Central banks also

participate in the foreign exchange market to align currencies to their economic needs.


Top 10 currency traders [5]

% of overall volume, May 2010

Rank Name Market Share

1 Deutsche Bank 20.96%

2 UBS AG 14.58%

3 Barclays Capital 10.45%

4 Royal Bank of Scotland 8.19%

5 Citi 7.32%

6 JPMorgan 5.43%

7 HSBC 4.09%

8 Goldman Sachs 3.35%

9 Credit Suisse 3.05%

10 BNP Paribas 2.26%

http://en.wikipedia.org/wiki/BNP_Paribas

http://en.wikipedia.org/wiki/Credit_Suisse

http://en.wikipedia.org/wiki/Goldman_Sachs

http://en.wikipedia.org/wiki/HSBC

http://en.wikipedia.org/wiki/JPMorgan

http://en.wikipedia.org/wiki/Citi

http://en.wikipedia.org/wiki/Royal_Bank_of_Scotland

http://en.wikipedia.org/wiki/Barclays_Capital

http://en.wikipedia.org/wiki/UBS_AG

http://en.wikipedia.org/wiki/Deutsche_Bank

http://en.wikipedia.org/wiki/Forex_market#cite_note-4%23cite_note-4

http://en.wikipedia.org/w/index.php?title=Inter-bank_market&action=edit&redlink=1

http://en.wikipedia.org/wiki/Top-tier

http://en.wikipedia.org/wiki/Investment_bank

http://en.wikipedia.org/wiki/Germany

http://en.wikipedia.org/wiki/Switzerland

http://en.wikipedia.org/wiki/United_Kingdom


http://en.wikipedia.org/wiki/United_States




http://en.wikipedia.org/wiki/Switzerland

http://en.wikipedia.org/wiki/France


RESEARCH DESIGN

3.1 LITERATURE REVIEW.

Topic name: Forecasting NIFTY Volatility

July 25, 2007 by Anup Nathani,[email protected]

Abstract.

The Indian economy has been growing rapidly encouraging a bull run in the stock

markets. Index like the S&P CNX NIFTY has shown an impressive 38% annualized returns

from April 2003 (See NIFTY chart below). These unprecedented returns and growing

interest of international investment community in the Indian markets have given a further

boost to the markets resulting in increased volatility. An increase in volatility implies

increasing opportunities for traders and investors1, if they have a forecast of the volatility

ahead. At I-Peritus we use quantitative techniques to study and forecast market. These

forecasts allow investors to understand the behavior of the markets and time their

investment tactics. In this paper we outline our approach for modeling a rolling 5 day

volatility forecast. The paper lists out the span of data used, model implemented and the

accuracy of the technique employed.

Topic name: Investigating causal relationship between stock return with respect to

exchange rate and FII: evidence from India

By,Kumar , Sundaram Birla Institute of Technology & Science Pilani

Abstract

The purpose of this paper is to investigate the relationship between macroeconomic

parameters like Exchange rate and foreign institutional investment with stock returns in

India, in particular at National Stock Exchange. I find that both stock returns and exchange



rate are integrated of order one. The Engle–Granger Cointegration test is then performed,

suggestingthat there is not a long-run equilibrium relationship between stock returns and

exchange rates at 5% significance level. Moreover, there is no evidence suggesting that

there is any causality relationship from the nominal exchange rate to the stock returns.

Furthermore, FII data is found to be I(0) i.e. It doesn’t have a unit root at conventional level.

It also gives positive unidirectional Granger causality results i.e. stock returns Granger

cause FII. No reverse causality is seen even after inserting a structural break in 2003, as

some of the researchers suggest.

OTHERS

Fama (1981) said that stock prices reflect these variables such as inflation, exchange

rate, interest rate and industrial production. Later, Maysami and Koh (2000) and Choi et al.

(1992) examined the impacts of the interest rate and exchange rate on the stock returns and

showed that the exchange rate and interest rate are the determinants in the stock prices.

Frank and Young (1972) investigated the relationship between stock prices and

exchange rates by employing six different exchange rates and concluded no statistically

significant underlying relationship. Solnik (1987) gave positive as well as negative

relationship between real stock returns and real exchange rate movements for different time

frames. Ma and Kao (1990) found a negative relationship whereas Oskooe and Sohrabian

(1992) claimed a bidirectional Granger causality with no long-term relationship.

Rajput and Thaker state that no long run positive correlation exists between exchange

rate and Stock Index in Indian context except for year 2002 and 2005. FII and Stock Index

show positive correlation, but fail to predict the future value. Takeshi (2008) reports

unidirectional causality from stock returns to FII flows irrelevant of the sample period in

India where as the reverse causality works only post 2003. The structural break of 2003 as

suggested by him and some other researchers was introduced in the current model and

hence analyzed.



3.2 RESEARCH METHODOLOGY

Type of research:

The study type is analytical, quantitative and historical. Analytical because facts and

existing information is used for the analysis, Quantitative as relationship is examined by

expressing variables in measurable terms and also Historical as the historical information is

used for analysis and interpretation.

A. STATEMENT OF PROBLEM

Several investors have gained as well as lost in the stock market. There are two way

of determining the stock price, one is fundamental analysis, which believes that the price of

stock is determined by certain basic economic factors and economic fundamentals and

other way is technical analysis, which involves a methodology for forecasting fluctuations

in prices of individual securities or portfolios of securities.

It is said that market index is mirror image of the economy i.e., market index reflects

the performance of different securities and economic factors.

So the statement of problem is to identify whether security moves with the market

index and is there any relationship in between nifty and selected economic factors such as

Net FII Investment, Gold prices and RE-$ exchange rate.

B. SCOPE OF THE PROJECT

The research is confined to the study of performance of selected securities and

selected economic factors in comparison with the market index nifty. Performance will be

assessed by using statistical tools correlation and regression analysis. Five sectors are

selected for the study purpose. Three companies on the basis of total traded volume are

selected from each of the five sector. These selected companies are listed in the national

stock exchange. Other than that economic factors selected for the study purpose are Net

Foreign Institutional Investment, gold prices and Re-$ exchange rates.For the study purpose

weekend figures of the above mentioned factors are taken from Jan 20010 to Dec 20010.



C.SAMPLING DESIGN

Sample size

Sectors selected- 5

Companies selected from each sector- 3

Total companies selected- 15

Total economic factors selected- 3 (Net FII investment, Gold prices, Re-$ exchange rate).

52 weekend figures for the year 2010 of the above mentioned variables are taken for the

study.

Selection of sample

Three companies are selected from five different sectors. These companies are

selected on the basis of total traded volume during the year 2010. Also three economic

factors namely fIIs, gold prices and RE-$ exchange rate are selected.

Collection of data

The data required for understanding are collected from secondary source. They are

collected through stock brokers websites, newspapers and journals.

D. RESEARCH OBJECTIVE

The main objective of the study is to test the performance of selected securities and

selected economic factors in comparison with market index nifty. The research is to know

whether security prices are the reflection of market index and whether any relationship

exists between market index and economic factors. With this, the research deals with

following objectives:-

To understand the performance of selected securities.

To study securities in comparison with market index.

To determine whether investors can invest in security by tracing market indices.

To study economic factors in comparison with market index.



To find out any relationship exists between market index and selected economic

factors.

E. TECHNIQUES AND TOOLS USED.

Tools used for the study purpose are:-

Correlation

Regression analysis.

Correlation:

The Correlation is a statistical tool which studies the relationship between two

variables and Correlation Analysis involves various methods and techniques used for

studying and measuring the extent of the relationship between the two variables.

Positive Correlation: If the values of the two variables deviate in the same direction

i.e., if the increase in the values of one variable results in a corresponding increase in

the values of the other variable or vice versa is referred to as Positive Correlation.

Negative Correlation: If the values of the two variables moves in the opposite

direction i.e., the increase in the values of one variable results in a corresponding

decrease in the values of the other variables. Or vice versa is referred to as Negative

Correlation.

Karl Pearson’s formula for correlation coefficient is given by

Where r is the sample correlation coefficient between x and y,

are the standard deviations of x and y respectively.

is known as the covariance between x and y.

r is also called Pearson’s product moment correlation coefficient.

Regression analysis



Regression analysis is a technique used for the modeling and analysis of numerical

data consisting of values of a dependent variable (response variable) and of one or more

independent variables (explanatory variables). The dependent variable in the regression

equation is modeled as a function of the independent variables, corresponding parameters

("constants"), and an error term. The error term is treated as a random variable. It represents

unexplained variation in the dependent variable. The parameters are estimated so as to give

a "best fit" of the data. Most commonly the best fit is evaluated by using the least squares

method, but other criteria have also been used. Data modeling can be used without there

being any knowledge about the underlying processes that have generated the data, in this

case the model is an empirical model. Moreover, in modelling knowledge of the probability

distribution of the errors is not required. Regression analysis requires assumptions to be

made regarding probability distribution of the errors. Statistical tests are made on the basis

of these assumptions. In regression analysis the term "model" embraces both the function

used to model the data and the assumptions concerning probability distributions. Regression

can be used for prediction (including forecasting of time-series data), inference, hypothesis

testing, and modeling of causal relationships. These uses of regression rely heavily on the

underlying assumptions being satisfied. Regression analysis has been criticized as being

misused for these purposes in many cases where the appropriate assumptions cannot be

verified to hold. One factor contributing to the misuse of regression is that it can take

considerably more skill to critique a model than to fit a model.

Underlying assumptions:

The sample must be representative of the population for the inference prediction.

The dependent variable is subject to error. This error is assumed to be a random variable,

with a mean of zero. Systematic error may be present but its treatment is outside the scope

of regression analysis.

The independent variable is error-free. If this is not so, modelling should be done using

Errors-in-variables model techniques.

The predictors must be linearly independent, i.e. it must not be possible to express any

predictor as a linear combination of the others..

The errors are uncorrelated, that is, the variance-covariance matrix of the errors is diagonal

and each non-zero element is the variance of the error.



The variance of the error is constant (homoscedasticity). If not, weights should be used. The

errors follow a normal distribution. If not, the generalized linear model should be used

.

F. LIMITATION

The research is restricted only to information relating to the national stock

exchange,

The research concentrates only on five industries.

This study has restricted its sample size to 15 companies and hence cannot be

applied for the entire 50 companies in nifty.

The research work considers only equities, other types of securities are neglected

such as debentures, derivatives etc.

Research is restricted only to three economic factors namely net FII flows, Gold

prices and RE-$ exchange rate.

Only weekend gold prices are taken i.e., average of the week is not considered

Only weekend Re-$ exchange rates are taken i.e., average of the week is not

considered.

AN OVERVIEW OF THE CHAPTER SCHEME:



CHAPTER 1: INTRODUCTION

This chapter gives an introduction to financial scenario in Indian context and various

financial markets and their behavior

CHAPTER 3: PROFILE OF THE COMPANY

This chapter contains a profile of the company profile and also the profile of various 15

companies which I have selected from various sectors of industry

CHAPTER 2: RESEARCH DESIGN

This chapter represents research design. It covers various areas such as statement of

problem, scope of the study, objectives of the study, tools and technique of data collection

and organization.

CHAPTER 4: ANALYSIS AND INTERPRETATION

This chapter gives the analysis and tabulation of data collected for the purpose of the study.

CHAPTER 5: SUMMARY OF FINDINGS, CONCLUSION & SUGGESTION

This chapter gives a summary of findings, conclusion and suggestion.

BIBLIOGRAPHY

INDUSTRY/COMPANY PROFILE.



2.1 PROFILE OF INDIA INFOLINE.

INTRODUCTION

They were originally incorporated on October 18, 1995 as Probity Research and

Services Private Limited at Mumbai under the Companies Act, 1956 with Registration

No.11 93797. They commenced their operations as an independent provider of information,

analysis and research covering Indian businesses, financial markets and economy, to

institutional customers. They became a public limited company on April 28, 2000 and the

name of the Company was changed to Probity Research and Services Limited. The name of

the Company was changed to India Infoline.com Limited on May 23, 2000 and later to

India Infoline Limited on March 23, 2001.In 1999, they identified the potential of the

Internet to cater to a mass retail segment and transformed their business model from

providing information services to institutional customers to retail customers. Hence they

launched their Internet portal, www.indiainfoline.com in May 1999 and started providing

news and market information, independent research, interviews with business leaders and

other specialized features.

In May 2000, the name of their Company was changed to India Infoline.com Limited

to reflect the transformation of their business. Over a period of time, they have emerged as

one of the leading business and financial information services provider in India. In the year

2000, they leveraged their position as a provider of financial information and analysis by

diversifying into transactional services, primarily for online trading in shares and securities

and online as well as offline distribution of personal financial products, like mutual funds

and RBI Bonds. These activities were carried on by their wholly owned subsidiaries. Their

broking service was launched under the brand name of 5paisa.com through their subsidiary.

India Infoline Securities Private Limited and www.5paisa.com, the e-broking portal, was

launched for online trading in July 2000. It combined competitive brokerage rates and

research, supported by Internet technology. Besides investment advice from an experienced

team of research analysts, we also of real time stock quotes, market news and price charts

with multiple tools for technical analysis.

KEY MILESTONES


http://www.5paisa.com/

http://www.indiainfoline.com/


·Incorporated on October 18, 1995 as Probity Research & Services.

·Launched Internet portal www.indiainfoline.com in may 1999.

· Commenced distribution of personal financial products like Mutual Funds and RBI

Bonds in April 2000.

· Launched online trading in shares and securities branded as www.5paisa.com in July

2000.

· Started life insurance agency business in December 2000 as a Corporate Agent of

ICICI Prudential Life Insurance.

· Become a Depository participant of NSDL in September 2001.

·Launched stock messaging service in May 2003.

· Acquired commodities broking license in March 2004.

· Launched portfolio management services in August 2004.

· Listed on NSE and BSE on May 17, 2005.

· Acquired NBFC license in May 2005.

· Acquired 75% stake holding in Money tree consultancy services, which is a

distributor of Mortgages and other Loan products, in October 2005.

· Acquired 100% equity of Marchmont Capital Advisors Pvt Ltd in December 2005

through which we have Merchant Banking.

· DSP Merrill Lynch Capital subscribed to convertible bonds aggregating Rs. 80

crores in December 2005. their current stake in India Infoline is a little over 14% as

on 31st March 2007.

· Bennett Coleman & Co Ltd (BCCL) invested Rs. 20 crores in India Infoline by way

of preferential allotment in December 2005.

· Become a Depository participant of CDSL in June 2006.

· Merger of India Infoline Securities Private Limited with India Infoline Limited in

January 2007.

· IRDA license for Insurance Broking in April 2007.

OBJECTIVES OF INDIA INFOLINE

ü To emerge as the most respected financial service company in India

ü To be respected by their stakeholders.


http://www.5paisa.com/

http://www.indiainfoline.com/


ü To provide excellence research and service.

ü To adding more product lines, more channels and probably expand overseas as well.

ü To motivate and support to their team members to perform better.

2.2 BRIEF INTRODUCTION OF THE SELECTED 15 COMPANIES.

BANKING SECTOR

Without a sound and effective banking system in India, there cannot be a healthy

economy. The banking system of India should not only be hassle free but it should be able

to meet new challenges posed by technology and any other external and internal factors

For the study purpose three banks are selected for research. The three banks are Axis

bank, ICICI bank, and State Bank Of India.

Axis Bank was the first of the new private banks to have begun operations in 1994,

after the Government of India allowed new private banks to be established. The Bank was

promoted jointly by the Administrator of the specified undertaking of the Unit Trust of

India (UTI - I), Life Insurance Corporation of India (LIC) and General Insurance

Corporation of India (GIC) and other four PSU insurance companies, i.e. National

Insurance Company Ltd., The New India Assurance Company Ltd., The Oriental

Insurance Company Ltd. and United India Insurance Company Ltd. The Bank today is

capitalized to the extent of Rs. 358.56 crores with the public holding (other than promoters)

at 57.60



ICICI Bank is India's second-largest bank with total assets of Rs. 3,997.95 billion

(US$ 100 billion) at March 31, 2008 and profit after tax of Rs. 41.58 billion for the year

ended March 31, 2008. ICICI Bank is second amongst all the companies listed on the Indian

stock exchanges in terms of free float market capitalization. The Bank has a network of

about 1,308 branches and 3,950 ATMs in India and presence in 18 countries.

Securities business

India’s largest online trading platform with about 1.4 million customers

Ranked first in terms of amount raised through domestic offerings during CY2007

India’s largest online trading platform with about 1.4 million customers

Ranked first in terms of amount raised through domestic offerings during CY2007

State Bank of India (SBI) was nationalized in July

1955 under the SBI Act of 1955. The seven subsidiary banks of SBI were nationalized on

19th July, 1960. The State Bank of India is India's largest commercial bank and is ranked as

one of the top five banks worldwide. It serves 90 million customers through a network of

9,000 branches and it offers either directly or through subsidiaries a wide range of banking

services.

The SBI Edge

Commanding unsurpassed respect and legacy in the Indian financial expanse, the

SBI is committed to offering financial solutions that extract maximum value from business

and market situations.

While the bank is strongly positioned to structure financial packages that anticipate

the changing business environment, its vast network in the world ensures delivery channels

of unmatched reach, both in India and abroad.

PARMACEUTICAL SECTOR



The government started to encourage the growth of drug manufacturing by Indian

companies in the early 1960s, and with the Patents Act in 1970, enabled the industry to

become what it is today. This Patent Act removed composition patents from food and drugs,

and though it kept process patents, these were shortened to a period of five to seven years.

The lack of patent protection made the Indian market undesirable to the multinational

companies that had dominated the market, and while they streamed out, Indian companies

started to take their places. They carved a niche in both the Indian and world markets with

their expertise in reverse-engineering new processes for manufacturing drugs at low costs

For the study purpose three pharmaceutical companies are selected for research. The

three pharmaceutical companies are Cipla Ltd, Ranbaxy Laboratories Ltd, Sun

Pharmaceutical Industries Ltd.

Cipla

Cipla, is a prominent Indian pharmaceutical company, best-known outside its home

country for manufacturing low-cost anti-AIDS drugs for HIV-positive patients in

developing countries. Founded by Khwaja Abdul Hamied as The Chemical, Industrial &

Pharmaceutical Laboratories, Cipla makes drugs to treat cardiovascular disease, arthritis,

diabetes, weight control, depression and many other health conditions, and its products are

distributed in more than 180 countries worldwide. [1] Among the hundreds of generic

medications it produces for international distribution are atorvastatin, amlodipine,

fluoxetine, venlafaxine hydrochloride and metformin. Recently, Cipla sold the

manufacturing rights of its high-end emergency contraceptive pill, I-pill, to its pharma field

counterpart Nicholas Piramal (Piramal Healthcare) for Rs. 95 crores. Cipla earned a revenue

of total Rs. 33 crores (approx.) from the sales of their popular contraceptive pill, to date.

Ranbaxy is one of the leading pharma companies in India commanding a market

share of 5.07%. (Source: ORG-IMS, March, 2007). The company has clocked sales of US$

286 mn (2006) registering a growth of over 17%. Growing ahead of the market the

company has enhanced its competitive position in the domestic market through its focused


http://en.wikipedia.org/wiki/Nicholas_Piramal

http://en.wikipedia.org/wiki/I-pill

http://en.wikipedia.org/wiki/Cipla#cite_note-0%23cite_note-0

http://en.wikipedia.org/wiki/Khwaja_Abdul_Hamied

http://en.wikipedia.org/wiki/AIDS

http://en.wikipedia.org/wiki/Pharmaceutical_company

http://en.wikipedia.org/wiki/India

http://en.wikipedia.org/wiki/Patent

http://www.ircc.iitb.ac.in/IPcourse/patent.html

http://en.wikipedia.org/wiki/Government_of_India


approach. The company’s business has been realigned to its customer groups and

investments have been made in high growth segments. These efforts have resulted in

strengthening its chronic franchise (Life Style led) as well as reinforced its leading position

in the acute segment. In the NDDS segment, Ranbaxy is the market leader with 7.9%

market share and its NDDS product portfolio contributes to about 9% of its total turnover.

Sun Pharmaceutical

Sun Pharmaceutical (or Sun Pharmaceutical Industries Limited) (BSE: 524715 and

scrip ID SUNPHARMA) is an international pharmaceutical company based in Mumbai,

India. It makes many generic and brand name drugs that are distributed in the United States,

Europe, Asia and worldwide.[1] Sun manufactures both pharmaceuticals and active

pharmaceutical ingredients (API), in essence, ingredients to be used in finished

pharmaceutical products. Its products are in several therapeutic areas, including psychiatry,

neurology, cardiology, diabetology, gastroenterology, respiratory, and orthopedics.

Established in 1983, Sun Pharma was a start-up company with five products. Since

1996, Sun has grown largely through a combination of internal growth, and acquisition of

other pharmaceutical companies. For example, it bought US-based Caraco Pharm Labs, and

ICN Hungary.

POWER SECTOR

Power development is the key to the economic development. The power sector has been

receiving adequate priority ever since the process of planned development began in 1950.

The power sector has been getting 18-20% of the total public sector outlay in the initial plan

periods. Remarkable growth and progress have led to extensive use of electricity in all the

sectors of economy in the successive five years plans.

For the study purpose three power sector companies are selected for research. The three

companies in the power sector are NTPC, Reliance Power Ltd, Power Grid Corporation Ltd.

NTPC

NTPC Limited is the largest power generating company of India. A public sector

company, it was incorporated in the year 1975 to accelerate power development in the

country as a wholly owned company of the Government of India. At present, Government


http://en.wikipedia.org/wiki/Sun_Pharmaceutical#cite_note-0%23cite_note-0


http://en.wikipedia.org/wiki/Pharmaceutical_company

http://www.bseindia.com/stockreach/stockreach.htm?scripcd=524715

http://en.wikipedia.org/wiki/Bombay_Stock_Exchange


of India holds 89.5% of the total equity shares of the company and the balance 10.5% is

held by FIIs, Domestic Banks, Public and others. Within a span of 32 years, NTPC has

emerged as a truly national power company, with power generating facilities in all the

major regions of the country.

Top line (total income) growth by 20.59%, rising to Rs. 353,807 million from Rs.

293,393 million in the previous year.

Bottom line (net profit after tax) growth of 17.95%, reaching Rs. 68,647 million

from Rs. 58,202 million in the previous year.

Strong cash flow with 100% realization of billing for the 4th consecutive year.

Contribution of about 29% of the total power generation in the country, with about

20% of the country's installed capacity; the Company emerges as the fourth largest

generating Company in Asia after Tokyo Electric Power Company, Korea Electric

Power Company and Taiwan Power.

Highest ever generation of 188.674 billion units, an increase of 10.41% over the

previous year's generation of 170.880 billion units.

Reliance Power Limited

Reliance Power Limited, a part of the Reliance Anil Dhirubhai Ambani Group, was

established to develop, construct and operate power projects in the domestic and

international markets. Reliance Energy Limited, an Indian private sector power utility

company along with the Anil Dhirubhai Ambani Group promotes Reliance Power.

Along with its subsidiaries, it is presently developing 13 medium and large-sized

power projects with a combined planned installed capacity of 33,480 MW

The company was incorporated in January 1995 as Bawana Power Private Limited

and changed its name to Reliance Delhi Power Private Limited in February 1995. Later, it

changed its name to Reliance EGen Private Limited in January 2004, to Reliance Energy

Generation Limited in March 2004, and to Reliance Power Limited in July 2007.[1]

Power Grid Corporation Of India Limited


http://en.wikipedia.org/wiki/Reliance_Power#cite_note-companyoverview-0%23cite_note-companyoverview-0

http://en.wikipedia.org/wiki/Watt

http://en.wikipedia.org/wiki/Reliance_Energy

http://en.wikipedia.org/wiki/Anil_Dhirubhai_Ambani_Group


POWER GRID CORPORATION OF INDIA LIMITED (POWERGRID), India’s

Central Transmission Utility (CTU) & National Grid Operator owns about 48,000 ckt. Kms

transmission lines with 82 sub- stations having transformation capacity of 46,000 MVA

under its operation. It maintains the transmission system with availability consistently over

99% by deploying best standards and practices, which are at par with the international

utilities. Its transmission network traverses the entire length and breadth of the country,

transmitting power of about 200 billion units valued at Rs. 400 billion annually.

POWERGRID is the first power utility in the country to be accredited with ISO 9001.

TELE-COMMUNICATION SECTOR

In 1994 the Government of India issued its National Telecommunications Policy. The

policy was issued in recognition of the "urgent need" to provide universal access to basic

telecommunications services by 1997 and offers guidelines for entry of the private sector

into basic telecommunications services. To facilitate private-sector participation, licensing

procedures were established in the Department of Telecommunications in India, and equity

participation for companies registered in India

For the study purpose three tele-communication companies are selected for research.

The four Tele communication companies are BHARTI AIRTEL, IDEA CELLULAR,

RELAINCE COMMUNICATION.

Bharti Airtel

The businesses at Bharti Airtel have been structured into three individual strategic

business units (SBU’s) - mobile services, telemedia services (ATS) & enterprise services.

The mobile services group provides GSM mobile services across India in 23 telecom

circles, while the ATS business group provides broadband & telephone services in 94 cities.

The enterprise services group has two sub-units - carriers (long distance services) and

services to corporates. All these services are provided under the Airtel brand.

The equity shares of Bharti Airtel are currently listed on National Stock Exchange of

India Limited (NSE) and The Stock Exchange, Mumbai, (BSE). Bharti Airtel offered

185,336,700 equity shares in the initial public offering (IPO) and raised Rs 8,340.15 million

through this process. The shares were oversubscribed 2.56 times.



Idea Cellular

IDEA Cellular is part of the Aditya Birla Group, a US$ 24 billion corporation with a

market capitalization of US$ 31.5 billion and in the league of Fortune 500. Anchored by an

extraordinary force of over 100,000 employees belonging to 25 different nationalities, over

50% of its revenues flow from its overseas operations. The Group has been adjudged ‘The

Best Employer in India and among the Top 20 in Asia' by the Hewitt-Economic Times and

Wall Street Journal Study 2007. IDEA Cellular is a publicly listed company, having listed

on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) in March

2007.

Reliance Communications Ltd.

Communications (formerly Reliance Infocomm), along with Reliance Telecom and

Flag Telecom, is part of Reliance Communications Ventures (RCoVL). According to

National Stock Exchange data, Anil Ambani controls 66.75 per cent of the company, which

accounts for more than 1.36 billion shares of the company. It is an Indian

telecommunications company. It is the flagship company of the Reliance-Anil Dhirubhai

Ambani Group, comprising of power (Reliance Energy), financial services (Reliance

Capital) and telecom initiatives of the Reliance ADA Group. Reliance Infocomm is

currently managed by Anil Dhirubhai Ambani.

COMPUTERS – SOFTWARE SECTOR

The Indian IT sector, which is doing exceedingly well going by the July-Sept quarter

results, can sustain the momentum in the coming quarters as Indian IT firms enter new

markets and gain business, experts say.

The Big Three -- TCS [ Get Quote ], Infosys [ Get Quote ] and Wipro [ Get Quote ]

led the way for Indian IT sector during the last quarter by posting net profits growth of over

50 per cent and hiring more than 14,000 people, giving indications that the software sector

is going through one of its most successful phases in recent times.

Companies selected under this sector are Infosys, Tata Consultancy Services and wipro

Infosys


http://portfolio.rediff.com/quotes/wipro+ltd

http://portfolio.rediff.com/quotes/infosys+technologies+ltd

http://portfolio.rediff.com/quotes/tata+consultancy+services+ltd

http://en.wikipedia.org/wiki/Anil_Ambani

http://en.wikipedia.org/wiki/Reliance_Capital

http://en.wikipedia.org/wiki/Reliance_Capital

http://en.wikipedia.org/wiki/Reliance_Energy

http://en.wikipedia.org/wiki/Telecommunications


http://en.wikipedia.org/wiki/Flag_Telecom


Infosys Technologies Limited (BSE: 500209, NASDAQ: INFY) is an information

technology services company headquartered in Bangalore, India. Infosys is one of the

largest IT companies in India with 113,796 employees (including subsidiaries) as of 2010. [2]

It has offices in 22 countries and development centers in India, China, Australia, UK,

Canada and Japan.[3]

Infosys was founded on 2 July 1981 by seven entrepreneurs N R Narayana Murthy,

Nandan Nilekani, Neeraj Singh, Kris Gopalakrishnan, S. D. Shibulal, Prabal nandi and

Abhishek Rastogi[4] with N. S. Raghavan officially being the first employee of the company.

Tata Consultancy Services

Tata Consultancy Services (TCS) (BSE: 532540) is a software services and consulting

company headquartered in Mumbai, India. TCS is the largest provider of information

technology and business process outsourcing services in India.[1] The company is listed on

the National Stock Exchange and Bombay Stock Exchange of India.

TCS is a subsidiary of one of India's largest and oldest conglomerates, the Tata

Group, which has interests in areas such as energy, telecommunications, financial services,

manufacturing, chemicals, engineering, materials, government and healthcare.[2][3]

Wipro

Wipro Technologies Limited (BSE: 507685, NYSE: WIT) is a giant information

technology services corporation headquartered in Bangalore, India. According to the 2008–

09 revenue, Wipro is one of the largest IT services company in India and employs more

than 108,071 people worldwide as of March 2010.[2] It has interests varying from

information technology, consumer care, lighting, engineering and healthcare businesses.

Azim Premji is the Chairman of the board


http://en.wikipedia.org/wiki/Chairman_of_the_board

http://en.wikipedia.org/wiki/Azim_Premji

http://en.wikipedia.org/wiki/Healthcare

http://en.wikipedia.org/wiki/Engineering

http://en.wikipedia.org/wiki/Lighting

http://en.wikipedia.org/wiki/Customer_service

http://en.wikipedia.org/wiki/Information_technology

http://en.wikipedia.org/wiki/Wipro_Technologies#cite_note-1%23cite_note-1


http://en.wikipedia.org/wiki/Bangalore

http://en.wikipedia.org/wiki/Headquarter



http://www.nyse.com/about/listed/wit.html

http://en.wikipedia.org/wiki/New_York_Stock_Exchange



http://en.wikipedia.org/wiki/Tata_Consultancy_Services#cite_note-2%23cite_note-2


http://en.wikipedia.org/wiki/Tata_Group

http://en.wikipedia.org/wiki/Tata_Group

http://en.wikipedia.org/wiki/Conglomerate_(company)


http://en.wikipedia.org/wiki/National_Stock_Exchange_of_India


http://en.wikipedia.org/wiki/Business_process_outsourcing




http://en.wikipedia.org/wiki/Mumbai



http://en.wikipedia.org/wiki/Infosys#cite_note-3%23cite_note-3

http://en.wikipedia.org/wiki/S._D._Shibulal

http://en.wikipedia.org/wiki/Kris_Gopalakrishnan

http://en.wikipedia.org/w/index.php?title=Neeraj_Singh&action=edit&redlink=1

http://en.wikipedia.org/wiki/Nandan_Nilekani

http://en.wikipedia.org/wiki/N_R_Narayana_Murthy

http://en.wikipedia.org/wiki/Infosys#cite_note-2%23cite_note-2

http://en.wikipedia.org/wiki/Japan

http://en.wikipedia.org/wiki/Canada


http://en.wikipedia.org/wiki/Australia

http://en.wikipedia.org/wiki/China

http://en.wikipedia.org/wiki/Infosys#cite_note-factsheetq4-1%23cite_note-factsheetq4-1


http://en.wikipedia.org/wiki/Bangalore

http://quotes.nasdaq.com/asp/SummaryQuote.asp?symbol=INFY&selected=INFY

http://en.wikipedia.org/wiki/NASDAQ




ANALYSIS AND INTERPRETATION

This chapter concentrates on testing the performance of Nifty in comparison with

selected securities and selected economic factors namely Net FII investment, gold price and

re-$ exchange rate. This is done with the help of statistical tools correlation and regression

analysis.

In this study, an attempt is made to test the responsiveness of the selected securities

to the market index (NSE, NIFTY). For this purpose, 15 major companies are considered

from five different sectors (banking, computer-software, pharmaceutical, power and tele-

communication) .

Also an attempt is made to know the relationship in between Nifty and selected

economic factors and also how and to what extent each economic factor has an impact on

the nifty.



Table no 1: List of companies under nifty.

Company Name Industry

ABB Ltd. ELECTRICAL EQUIPMENT

ACC Ltd.CEMENT AND CEMENT PRODUCTS

Ambuja Cements Ltd.CEMENT AND CEMENT PRODUCTS

Axis Bank Ltd. BANKSBharat Heavy Electricals Ltd. ELECTRICAL EQUIPMENTBharat Petroleum Corporation Ltd. REFINERIES

Bharti Airtel Ltd.TELECOMMUNICATION – SERVICES

Cairn India Ltd.OIL EXPLORATION/PRODUCTION

Cipla Ltd. PHARMACEUTICALSDLF Ltd. CONSTRUCTIONGAIL (India) Ltd. GAS

Grasim Industries Ltd.CEMENT AND CEMENT PRODUCTS

HCL Technologies Ltd. COMPUTERS – SOFTWAREHDFC Bank Ltd. BANKS

Hero Honda Motors Ltd.AUTOMOBILES - 2 AND 3 WHEELERS

Hindalco Industries Ltd. ALUMINIUMHindustan Unilever Ltd. DIVERSIFIEDHousing Development Finance Corporation Ltd. FINANCE – HOUSINGI T C Ltd. CIGARETTESICICI Bank Ltd. BANKS

Idea Cellular Ltd.TELECOMMUNICATION – SERVICES

Infosys Technologies Ltd. COMPUTERS – SOFTWAREInfrastructure Development Finance Co. Ltd. FINANCIAL INSTITUTIONJaiprakash Associates Ltd. DIVERSIFIED

Jindal Steel & Power Ltd.STEEL AND STEEL PRODUCTS

Larsen & Toubro Ltd. ENGINEERING

Mahindra & Mahindra Ltd.AUTOMOBILES - 4 WHEELERS

Maruti Suzuki India Ltd.AUTOMOBILES - 4 WHEELERS

NTPC Ltd. POWER



Oil & Natural Gas Corporation Ltd.OIL EXPLORATION/PRODUCTION

Power Grid Corporation of India Ltd. POWERPunjab National Bank BANKSRanbaxy Laboratories Ltd. PHARMACEUTICALSReliance Capital Ltd. FINANCE

Reliance Communications Ltd.TELECOMMUNICATION – SERVICES

Reliance Industries Ltd. REFINERIESReliance Infrastructure Ltd. POWERReliance Power Ltd. POWERSiemens Ltd. ELECTRICAL EQUIPMENTState Bank of India BANKS

Steel Authority of India Ltd.STEEL AND STEEL PRODUCTS

Sterlite Industries (India) Ltd. METALSSun Pharmaceutical Industries Ltd. PHARMACEUTICALSSuzlon Energy Ltd. ELECTRICAL EQUIPMENTTata Consultancy Services Ltd. COMPUTERS – SOFTWARE

Tata Motors Ltd.AUTOMOBILES - 4 WHEELERS

Tata Power Co. Ltd. POWER

Tata Steel Ltd.STEEL AND STEEL PRODUCTS

Unitech Ltd. CONSTRUCTIONWipro Ltd. COMPUTERS – SOFTWARE



Table no.2: Selected securities from nifty

Company Industry

Axis Bank Ltd. BANKS

ICICI Bank Ltd. BANKS

State Bank of India BANKS

NTPC Ltd. POWER

Reliance Power Ltd. POWER

Power Grid Corporation of India Ltd. POWER

Infosys Technologies Ltd. COMPUTERS – SOFTWARE

Tata Consultancy Services Ltd. COMPUTERS – SOFTWARE

Wipro Ltd. COMPUTERS – SOFTWARE

Cipla Ltd. PHARMACEUTICALS

Ranbaxy Laboratories Ltd. PHARMACEUTICALS

Sun Pharmaceutical Industries Ltd. PHARMACEUTICALS

Bharti Airtel Ltd.TELECOMMUNICATION – SERVICES

Idea Cellular Ltd.TELECOMMUNICATION – SERVICES

Reliance Communications Ltd.TELECOMMUNICATION – SERVICES



4.1RELATIONSHIP BETWEEN NIFTY AND SELECTED SECURITIES

BANKING SECTOR

Table No 3: Price movement of AXIS BANK shares and NIFTY index in 2010

Week AXIS NIFTYJan 1st week 989.90 5252.75

2nd week 1015.60 5257.00

3rd week 1077.55 5258.45

4th week 1032.30 5221.55

5th week 1025.70 4897.80

Feb 1st week 1025.00 4760.10

2nd week 1028.40 4801.35

3rd week 1094.70 4922.45

4th week 1124.90 4882.65

March 1st week 1103.95 5088.15

2nd week 1152.90 5137.25

3rd week 1100.40 5262.05

4th week 1198.05 5282.65

April 1st week 1177.60 5290.05

2nd week 1183.60 5361.05

3rd week 1148.25 5462.40

4th week 1235.60 5504.75

5th week 1270.30 5278.95

May 1st week 1191.25 5018.70

2nd week 1295.60 5095.65

3rd week 1215.85 4842.50

4th week 1225.95 5086.95

June 1st week 1245.50 5135.90

2nd week 1245.75 5119.40

3rd week 1211.15 5262.60

4th week 1249.05 5269.50

July 1st week 1237.35 5237.25

2nd week 1273.25 5352.90

3rd week 1357.10 5393.95

4th week 1343.95 5449.55

5th week 1365.15 5367.45

Aug 1st week 1314.65 5439.40



2nd week 1328.10 5452.05

3rd week 1367.45 5530.80

4th week 1326.85 5408.35

Sep 1st week 1379.25 5479.40

2nd week 1368.90 5460.55

3rd week 1506.85 5484.05

4th week 914.80 5035.95

Oct 1st week 1009.30 5143.40

2nd week 1475.45 5103.20

3rd week 1574.50 5177.15

4th week 1570.05 5066.05

5th week 1502.40 5117.70

Nov 1st week 1464.90 5312.15

2nd week 1471.10 5071.95

3rd week 1549.05 5490.45

4th week 1492.20 5451.75

Dec 1st week 1384.05 5492.90

2nd week 1330.75 5457.30

3rd week 1406.30 5348.70

4th week 1323.35 5011.40

5th week 1309.20 5134.05

Ho: There is no correlation between price movement of AXIS bank shares and NIFTY

index.

Hl: There is correlation between price movement of AXIS bank shares and NIFTY index

Conclusion: There is a positive correlation, so accept H1

Interpretation: The correlation between AXIS shares and NIFTY index is => r=0.9814, it

means price of AXIS shares and NIFTY index are highly positively correlated.


r (AXIS share price and NIFTY index) =0.9814


0

300

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3000

3300

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4800

5100

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5700

AXIS

NIFTY

Graph No 1: Graph showing price movement of AXIS BANK shares

and NIFTY index in 2010



Table No 4: Price movement of ICICI BANK shares and NIFTY index in 2010

Week ICICI NIFTYJan 1st week 875.25 5252.75

2nd week 873.60 5257.00

3rd week 841.75 5258.45

4th week 840.85 5221.55

5th week 773.25 4897.80

Feb 1st week 798.10 4760.10

2nd week 826.40 4801.35

3rd week 830.85 4922.45

4th week 871.55 4882.65

March 1st week 901.15 5088.15

2nd week 936.65 5137.25

3rd week 954.05 5262.05

4th week 937.20 5282.65

April 1st week 953.70 5290.05

2nd week 977.80 5361.05

3rd week 921.85 5462.40

4th week 975.10 5504.75

5th week 950.20 5278.95

May 1st week 876.75 5018.70

2nd week 911.70 5095.65

3rd week 834.65 4842.50

4th week 863.15 5086.95

June 1st week 866.75 5135.90

2nd week 845.45 5119.40

3rd week 867.05 5262.60

4th week 857.15 5269.50

July 1st week 840.95 5237.25

2nd week 871.85 5352.90

3rd week 902.85 5393.95

4th week 911.55 5449.55

5th week 904.50 5367.45

Aug 1st week 851.10 5439.40

2nd week 975.85 5452.05

3rd week 994.40 5530.80

4th week 956.60 5408.35

Sep 1st week 999.90 5479.40



2nd week 1050.15 5460.55

3rd week 1115.20 5484.05

4th week 1114.00 5035.95

Oct 1st week 1135.60 5143.40

2nd week 1127.80 5103.20

3rd week 1126.10 5177.15

4th week 1090.70 5066.05

5th week 1269.80 5117.70

Nov 1st week 1202.55 5312.15

2nd week 1148.95 5071.95

3rd week 1124.00 5490.45

4th week 1182.90 5451.75

Dec 1st week 1117.45 5492.90

2nd week 1104.50 5457.30

3rd week 1119.35 5348.70

4th week 1144.90 5011.40

5th week 1190.00 5134.05

Ho: There is no correlation between price movement of ICICI bank shares and NIFTY

index.

Hl: There is correlation between price movement of ICICI bank shares and NIFTY index


Interpretation: The correlation between ICICI shares and NIFTY index is => r=0.9819, it

means price of ICICI shares and NIFTY index are highly positively correlated.


r (ICICI share price and NIFTY index) =0.9819


Graph No 2: Graph showing price movement of ICICI BANK shares




Table No 5: Price movement of State Bank Of India shares and NIFTY index in 2010

Week SBI NIFTYJan 1st week 1331.85 5252.75

2nd week 1221.10 5257.00

3rd week 1164.15 5258.45

4th week 1041.50 5221.55

5th week 1151.00 4897.80

Feb 1st week 1118.60 4760.10

2nd week 1193.80 4801.35

3rd week 1044.05 4922.45

4th week 1025.30 4882.65

March 1st week 941.10 5088.15

2nd week 953.05 5137.25

3rd week 954.70 5262.05

4th week 1124.30 5282.65

April 1st week 1147.05 5290.05

2nd week 1140.30 5361.05

3rd week 1304.80 5462.40

4th week 1311.15 5504.75

5th week 1278.60 5278.95

May 1st week 1324.55 5018.70

2nd week 1313.50 5095.65

3rd week 1732.00 4842.50

4th week 1868.85 5086.95

June 1st week 1817.65 5135.90

2nd week 1634.60 5119.40

3rd week 1724.60 5262.60

4th week 1749.25 5269.50

July 1st week 1809.65 5237.25

2nd week 1543.65 5352.90

3rd week 1673.95 5393.95

4th week 1698.60 5449.55

5th week 1811.65 5367.45

Aug 1st week 1743.30 5439.40

2nd week 1800.75 5452.05

3rd week 1775.85 5530.80

4th week 1781.75 5408.35



Sep 1st week 1762.45 5479.40

2nd week 1920.50 5460.55

3rd week 2147.80 5484.05

4th week 2138.50 5035.95

Oct 1st week 2210.75 5143.40

2nd week 2067.55 5103.20

3rd week 2446.35 5177.15

4th week 2354.55 5066.05

5th week 2191.05 5117.70

Nov 1st week 2205.00 5312.15

2nd week 2299.90 5071.95

3rd week 2334.95 5490.45

4th week 2242.90 5451.75

Dec 1st week 2328.05 5492.90

2nd week 2266.45 5457.30

3rd week 2145.35 5348.70

4th week 2219.05 5011.40

5th week 2269.00 5134.05

Ho: There is no correlation between price movement of SBI bank shares and NIFTY index.

Hl: There is correlation between price movement of SBI bank shares and NIFTY index


Interpretation: The correlation between State Bank of India shares and NIFTY index is =>

r=0.9624, it means price of State Bank of India shares and NIFTY index are highly

positively correlated.


r (SBI share price and NIFTY index) =0.9624


Graph No 3: Graph showing price movement of SBI shares


POWER SECTOR



Table No 6: price movement of NTPC Ltd. shares and NIFTY index in 2010

Week NTPC Ltd. NIFTYJan 1st week 184.15 5252.75

2nd week 178.25 5257.00

3rd week 179.85 5258.45

4th week 179.85 5221.55

5th week 189.65 4897.80

Feb 1st week 180.35 4760.10

2nd week 182.95 4801.35

3rd week 177.75 4922.45

4th week 185.00 4882.65

March 1st week 177.65 5088.15

2nd week 170.25 5137.25

3rd week 177.55 5262.05

4th week 182.10 5282.65

April 1st week 183.75 5290.05

2nd week 194.20 5361.05

3rd week 193.50 5462.40

4th week 191.10 5504.75

5th week 190.00 5278.95

May 1st week 189.90 5018.70

2nd week 187.55 5095.65

3rd week 216.60 4842.50

4th week 215.40 5086.95

June 1st week 219.60 5135.90

2nd week 221.50 5119.40

3rd week 198.00 5262.60

4th week 194.95 5269.50

July 1st week 204.40 5237.25

2nd week 193.10 5352.90

3rd week 205.25 5393.95

4th week 210.65 5449.55

5th week 215.60 5367.45

Aug 1st week 212.40 5439.40

2nd week 206.05 5452.05

3rd week 204.85 5530.80

4th week 209.80 5408.35

Sep 1st week 206.30 5479.40



2nd week 205.20 5460.55

3rd week 207.65 5484.05

4th week 213.15 5035.95

Oct 1st week 210.50 5143.40

2nd week 209.95 5103.20

3rd week 214.95 5177.15

4th week 214.85 5066.05

5th week 212.40 5117.70

Nov 1st week 210.55 5312.15

2nd week 214.95 5071.95

3rd week 215.10 5490.45

4th week 208.10 5451.75

Dec 1st week 209.85 5492.90

2nd week 209.10 5457.30

3rd week 207.30 5348.70

4th week 229.95 5011.40

5th week 235.65 5134.05

Ho: There is no correlation between price movement of NTPC LTD shares and NIFTY

index.

Hl: There is correlation between price movement of NTPC LTD shares and NIFTY index


Interpretation: The correlation between NTPC shares and NIFTY index is => r=0.9160, it

means price of NTPC shares and NIFTY index are highly positively correlated.


r (NTPC share price and NIFTY index) =0.9160


Graph No 4: Graph showing price movement of NTPC shares




Table No 7: Price movement of Reliance Power Ltd. shares and NIFTY index in 2010

Week REL Power 5252.75

Jan 1st week 123.50 5257.00

2nd week 106.70 5258.45

3rd week 101.00 5221.55

4th week 98.05 4897.80

5th week 106.40 4760.10

Feb 1st week 100.25 4801.35

2nd week 108.20 4922.45

3rd week 97.80 4882.65

4th week 99.95 5088.15

March 1st week 94.75 5137.25

2nd week 98.50 5262.05

3rd week 100.85 5282.65

4th week 109.95 5290.05

April 1st week 110.85 5361.05

2nd week 119.90 5462.40

3rd week 115.95 5504.75

4th week 133.10 5278.95

5th week 123.30 5018.70

May 1st week 133.30 5095.65

2nd week 129.15 4842.50

3rd week 165.00 5086.95

4th week 180.90 5135.90

June 1st week 184.25 5119.40

2nd week 192.40 5262.60

3rd week 175.85 5269.50

4th week 173.60 5237.25

July 1st week 176.75 5352.90

2nd week 150.55 5393.95

3rd week 166.00 5449.55

4th week 172.70 5367.45

5th week 168.20 5439.40

Aug 1st week 161.15 5452.05

2nd week 162.85 5530.80

3rd week 156.30 5408.35

4th week 161.20 5479.40



Sep 1st week 161.95 5460.55

2nd week 162.95 5484.05

3rd week 172.25 5035.95

4th week 166.00 5143.40

Oct 1st week 166.70 5103.20

2nd week 160.30 5177.15

3rd week 163.45 5066.05

4th week 159.00 5117.70

5th week 138.45 5312.15

Nov 1st week 143.95 5071.95

2nd week 143.65 5490.45

3rd week 148.20 5451.75

4th week 141.10 5492.90

Dec 1st week 150.10 5457.30

2nd week 147.85 5348.70

3rd week 143.80 5011.40

4th week 147.00 5134.05

5th week 155.10 5252.75

Ho: There is no correlation between price movement of Reliance Power Ltd shares and

NIFTY index.

Hl: There is correlation between price movement of Reliance Power Ltd shares and NIFTY

index


Interpretation: The correlation between Reliance Power Ltd. shares and NIFTY index is

=> r=0.8428, it means price of Reliance Power Ltd. shares and NIFTY index are highly

positively correlated.


r (REL Power share price and NIFTY index) =0.8428


0

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900

1200

1500

1800

2100

2400

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4800

5100

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5700

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Feb

Mar

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Aug Sep OctNov

Dec

Rel Power

NIFTY

Graph No 5: Graph showing price movement of Reliance Power Ltd. Shares and NIFTY index in 2010



Table No 8: Price movement of Power Grid shares and NIFTY index in 2010

Week Power Grid NIFTYJan 1st week 84.35 5252.75

2nd week 77.15 5257.00

3rd week 75.35 5258.45

4th week 86.25 5221.55

5th week 88.25 4897.80

Feb 1st week 86.40 4760.10

2nd week 93.80 4801.35

3rd week 86.30 4922.45

4th week 96.90 4882.65

March 1st week 92.55 5088.15

2nd week 94.90 5137.25

3rd week 96.60 5262.05

4th week 94.55 5282.65

April 1st week 93.60 5290.05

2nd week 95.95 5361.05

3rd week 97.50 5462.40

4th week 100.05 5504.75

5th week 92.60 5278.95

May 1st week 97.35 5018.70

2nd week 100.95 5095.65

3rd week 118.70 4842.50

4th week 114.95 5086.95

June 1st week 125.05 5135.90

2nd week 121.25 5119.40

3rd week 108.05 5262.60

4th week 110.85 5269.50

July 1st week 112.95 5237.25

2nd week 102.65 5352.90

3rd week 111.70 5393.95

4th week 113.05 5449.55

5th week 117.40 5367.45

Aug 1st week 112.80 5439.40

2nd week 111.90 5452.05

3rd week 107.70 5530.80

4th week 107.60 5408.35

Sep 1st week 107.15 5479.40



2nd week 108.20 5460.55

3rd week 107.85 5484.05

4th week 111.30 5035.95

Oct 1st week 109.70 5143.40

2nd week 107.85 5103.20

3rd week 112.00 5177.15

4th week 110.30 5066.05

5th week 104.35 5117.70

Nov 1st week 106.70 5312.15

2nd week 104.75 5071.95

3rd week 106.80 5490.45

4th week 102.15 5451.75

Dec 1st week 103.75 5492.90

2nd week 105.15 5457.30

3rd week 104.55 5348.70

4th week 108.80 5011.40

5th week 110.15 5134.05

Ho: There is no correlation between price movement of Power Grid shares and NIFTY

index.

Hl: There is correlation between price movement Power Grid shares and NIFTY index

Conclusion: There is a positive correlation, so accept H1.

Interpretation: The correlation between Power Grid shares and NIFTY index is =>

r=0.7937, it means price of Power Grid shares and NIFTY index are highly positively

correlated.


r (Power Grid share price and NIFTY index) =0.7937


0

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600

900

1200

1500

1800

2100

2400

2700

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5100

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5700

Jan

Feb

Mar

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Aug Sep OctNov

Dec

Power Grid

NIFTY

Graph No 6: Graph showing price movement of Power Grid shares




COMPUTERS-SOFTWRAE SECTOR

Table No 9: Price movement of Infosys Technologies Ltd. shares and NIFTY index in 2010

Week Infosys NIFTYJan 1st week 1,132.10 5252.75

2nd week 1,203.40 5257.00

3rd week 1,267.40 5258.45

4th week 1,204.65 5221.55

5th week 1,306.65 4897.80

Feb 1st week 1,288.90 4760.10

2nd week 1,251.65 4801.35

3rd week 1,177.15 4922.45

4th week 1,231.25 4882.65

March 1st week 1,219.35 5088.15

2nd week 1,297.05 5137.25

3rd week 1,296.20 5262.05

4th week 1,344.90 5282.65

April 1st week 1,419.40 5290.05

2nd week 1,427.00 5361.05

3rd week 1,397.30 5462.40

4th week 1,448.60 5504.75

5th week 1,509.25 5278.95

May 1st week 1,520.70 5018.70

2nd week 1,592.80 5095.65

3rd week 1,522.30 4842.50

4th week 1,605.10 5086.95

June 1st week 1,698.90 5135.90

2nd week 1,728.45 5119.40

3rd week 1,770.40 5262.60

4th week 1,827.10 5269.50

July 1st week 1,805.15 5237.25

2nd week 1,721.15 5352.90

3rd week 1,866.30 5393.95

4th week 2,003.65 5449.55

5th week 2,064.35 5367.45

Aug 1st week 2,039.65 5439.40



2nd week 2,042.35 5452.05

3rd week 2,033.10 5530.80

4th week 2,190.65 5408.35

Sep 1st week 2,201.05 5479.40

2nd week 2,267.40 5460.55

3rd week 2,364.25 5484.05

4th week 2,240.50 5035.95

Oct 1st week 2,336.75 5143.40

2nd week 2,177.60 5103.20

3rd week 2,189.95 5177.15

4th week 2,260.00 5066.05

5th week 2,206.20 5117.70

Nov 1st week 2,218.60 5312.15

2nd week 2,359.70 5071.95

3rd week 2,426.70 5490.45

4th week 2,327.85 5451.75

Dec 1st week 2,383.60 5492.90

2nd week 2,460.75 5457.30

3rd week 2,525.95 5348.70

4th week 2,591.80 5011.40

5th week 2,601.10 5134.05

Ho: There is no correlation between price movement of Infosys shares and NIFTY index.

Hl: There is correlation between price movement Infosys shares and NIFTY index


Interpretation: The correlation between Infosys shares and NIFTY index is => r=0.9504, it

means price of Infosys shares and NIFTY index are highly positively correlated.


r (Infosys share price and NIFTY index) =0.9504


Graph No 7: Graph showing price movement of Infosys shares


Table no 10: Price movement of Tata consultancy Services Ltd. shares and NIFTY index in 2010.



Week TCS NIFTYJan 1st week 498.30 5252.75

2nd week 536.95 5257.00

3rd week 503.00 5258.45

4th week 486.15 5221.55

5th week 511.60 4897.80

Feb 1st week 502.80 4760.10

2nd week 511.20 4801.35

3rd week 474.05 4922.45

4th week 483.10 4882.65

March 1st week 481.70 5088.15

2nd week 506.85 5137.25

3rd week 509.80 5262.05

4th week 574.85 5282.65

April 1st week 578.75 5290.05

2nd week 602.55 5361.05

3rd week 573.10 5462.40

4th week 583.90 5504.75

5th week 623.60 5278.95

May 1st week 630.95 5018.70

2nd week 644.05 5095.65

3rd week 634.05 4842.50

4th week 704.60 5086.95

June 1st week 721.35 5135.90

2nd week 764.55 5119.40

3rd week 379.80 5262.60

4th week 397.40 5269.50

July 1st week 390.95 5237.25

2nd week 395.15 5352.90

3rd week 434.10 5393.95

4th week 482.00 5449.55

5th week 525.95 5367.45

Aug 1st week 509.10 5439.40

2nd week 521.50 5452.05

3rd week 509.25 5530.80

4th week 540.80 5408.35

Sep 1st week 531.90 5479.40

2nd week 560.35 5460.55

3rd week 584.00 5484.05



4th week 587.40 5035.95

Oct 1st week 629.85 5143.40

2nd week 561.75 5103.20

3rd week 598.30 5177.15

4th week 639.80 5066.05

5th week 628.30 5117.70

Nov 1st week 622.15 5312.15

2nd week 670.15 5071.95

3rd week 693.15 5490.45

4th week 670.45 5451.75

Dec 1st week 695.20 5492.90

2nd week 706.10 5457.30

3rd week 727.50 5348.70

4th week 749.30 5011.40

5th week 750.25 5134.05

Ho: There is no correlation between price movement of TCS shares and NIFTY index.

Hl: There is correlation between price movement TCS shares and NIFTY index


Interpretation: The correlation between TCS shares and NIFTY index is => r=0.4738, it

means price of TCS shares and NIFTY index are highly positively correlated.


r (TCS share price and NIFTY index) =0.4738


Graph No 8: Graph showing price movement of TCS shares

and nifty index in 2010



Table No 11:Price movement of Wipro Ltd. shares and NIFTY index in 2010.

Week Wipro NIFTYJan 1st week 243.70 5252.75

2nd week 250.95 5257.00

3rd week 238.35 5258.45

4th week 213.55 5221.55

5th week 231.55 4897.80

Feb 1st week 224.25 4760.10

2nd week 223.80 4801.35

3rd week 215.25 4922.45

4th week 207.50 4882.65

March 1st week 213.30 5088.15

2nd week 224.90 5137.25

3rd week 231.05 5262.05

4th week 253.05 5282.65

April 1st week 270.10 5290.05

2nd week 274.45 5361.05

3rd week 274.95 5462.40

4th week 312.25 5504.75

5th week 330.85 5278.95

May 1st week 355.10 5018.70

2nd week 377.60 5095.65

3rd week 369.35 4842.50

4th week 382.25 5086.95

June 1st week 393.45 5135.90

2nd week 410.00 5119.40

3rd week 380.35 5262.60

4th week 384.30 5269.50

July 1st week 385.35 5237.25

2nd week 384.75 5352.90

3rd week 429.45 5393.95

4th week 460.60 5449.55

5th week 490.15 5367.45

Aug 1st week 499.80 5439.40

2nd week 511.45 5452.05

3rd week 513.00 5530.80

4th week 564.90 5408.35



Sep 1st week 552.30 5479.40

2nd week 550.95 5460.55

3rd week 569.15 5484.05

4th week 566.35 5035.95

Oct 1st week 608.05 5143.40

2nd week 551.60 5103.20

3rd week 572.40 5177.15

4th week 588.80 5066.05

5th week 605.90 5117.70

Nov 1st week 598.45 5312.15

2nd week 632.90 5071.95

3rd week 649.05 5490.45

4th week 622.60 5451.75

Dec 1st week 637.90 5492.90

2nd week 644.40 5457.30

3rd week 674.70 5348.70

4th week 694.40 5011.40

5th week 680.00 5134.05

Ho: There is no correlation between price movement of Wipro shares and NIFTY index.

Hl: There is correlation between price movement Wipro shares and NIFTY index


Interpretation: The correlation between Wipro shares and NIFTY index is =>

r=0.9515, it means price of Wipro shares and NIFTY index are highly positively

correlated.


r (Wipro share price and NIFTY index) =0.9515


Graph No 9: Graph showing price movement of Wipro shares




PHARMACEUTICALS SECTOR

Table No 12: Price movement of Cipla Ltd. shares and NIFTY index in 2010

Week Cipla NIFTYJan 1st week 191.60 5252.75

2nd week 188.85 5257.00

3rd week 183.20 5258.45

4th week 186.05 5221.55

5th week 191.95 4897.80

Feb 1st week 191.20 4760.10

2nd week 191.75 4801.35

3rd week 188.35 4922.45

4th week 191.50 4882.65

March 1st week 203.65 5088.15

2nd week 202.95 5137.25

3rd week 197.65 5262.05

4th week 219.40 5282.65

April 1st week 225.20 5290.05

2nd week 227.20 5361.05

3rd week 230.00 5462.40

4th week 240.30 5504.75

5th week 240.75 5278.95

May 1st week 225.90 5018.70

2nd week 230.90 5095.65

3rd week 222.95 4842.50

4th week 222.80 5086.95

June 1st week 233.95 5135.90

2nd week 251.05 5119.40

3rd week 265.45 5262.60

4th week 261.55 5269.50

July 1st week 260.75 5237.25

2nd week 262.45 5352.90

3rd week 279.55 5393.95

4th week 283.85 5449.55

5th week 275.05 5367.45

Aug 1st week 273.60 5439.40

2nd week 282.20 5452.05



3rd week 259.15 5530.80

4th week 272.15 5408.35

Sep 1st week 267.80 5479.40

2nd week 265.10 5460.55

3rd week 259.05 5484.05

4th week 267.20 5035.95

Oct 1st week 272.50 5143.40

2nd week 293.20 5103.20

3rd week 292.70 5177.15

4th week 285.10 5066.05

5th week 287.10 5117.70

Nov 1st week 291.65 5312.15

2nd week 304.05 5071.95

3rd week 308.75 5490.45

4th week 320.40 5451.75

Dec 1st week 358.95 5492.90

2nd week 340.40 5457.30

3rd week 356.55 5348.70

4th week 345.70 5011.40

5th week 335.05 5134.05

Ho: There is no correlation between price movement of Cipla Ltd shares and NIFTY index.

Hl: There is correlation between price movement Cipla Ltd shares and NIFTY index


Interpretation: The correlation between Cipla shares and NIFTY index is => r=0.8890, it

means price of Cipla shares and NIFTY index are highly positively correlated.


r (Cipla share price and NIFTY index) =0.8890


Graph No 10: Graph showing price movement of Cipla shares




Table no 13: Price movement of Ranbaxy Laboratories Ltd. shares and NIFTY index in 2010

Week Ranbaxy NIFTYJan 1st week 250.25 5252.75

2nd week 219.10 5257.00

3rd week 218.15 5258.45

4th week 188.10 5221.55

5th week 215.85 4897.80

Feb 1st week 223.40 4760.10

2nd week 212.65 4801.35

3rd week 206.80 4922.45

4th week 161.80 4882.65

March 1st week 141.30 5088.15

2nd week 138.60 5137.25

3rd week 145.40 5262.05

4th week 164.40 5282.65

April 1st week 186.50 5290.05

2nd week 189.30 5361.05

3rd week 185.30 5462.40

4th week 175.90 5504.75

5th week 166.00 5278.95

May 1st week 178.55 5018.70

2nd week 199.80 5095.65

3rd week 220.25 4842.50

4th week 278.90 5086.95

June 1st week 284.80 5135.90

2nd week 282.65 5119.40

3rd week 281.00 5262.60

4th week 255.10 5269.50

July 1st week 251.55 5237.25

2nd week 244.65 5352.90

3rd week 262.70 5393.95

4th week 280.20 5449.55

5th week 280.05 5367.45

Aug 1st week 261.05 5439.40

2nd week 297.00 5452.05

3rd week 311.65 5530.80



4th week 334.35 5408.35

Sep 1st week 321.55 5479.40

2nd week 338.40 5460.55

3rd week 360.30 5484.05

4th week 409.75 5035.95

Oct 1st week 408.15 5143.40

2nd week 386.85 5103.20

3rd week 390.75 5177.15

4th week 372.45 5066.05

5th week 390.40 5117.70

Nov 1st week 414.40 5312.15

2nd week 412.30 5071.95

3rd week 422.65 5490.45

4th week 444.35 5451.75

Dec 1st week 506.20 5492.90

2nd week 497.75 5457.30

3rd week 530.35 5348.70

4th week 520.00 5011.40

5th week 517.95 5134.05

Ho: There is no correlation between price movement of Ranbaxy shares and NIFTY index.

Hl: There is correlation between price movement Ranbaxy shares and NIFTY index


Interpretation: The correlation between Ranbaxy shares and NIFTY index is => r=0.8552,

it means price of Ranbaxy shares and NIFTY index are highly positively correlated.


r (Ranbaxy share price and NIFTY index) =0.8552


Graph No 11: Graph showing price movement of Ranbaxy shares




Table No 14: Price movement of Sun Pharmaceutical Industries Ltd. shares and NIFTY index in 2010

Week Sun Pharma NIFTYJan 1st week 1,048.75 5252.75

2nd week 1,099.45 5257.00

3rd week 1,119.90 5258.45

4th week 1,071.65 5221.55

5th week 1,074.45 4897.80

Feb 1st week 1,056.45 4760.10

2nd week 1,066.90 4801.35

3rd week 1,022.35 4922.45

4th week 1,017.50 4882.65

March 1st week 1,020.90 5088.15

2nd week 1,017.75 5137.25

3rd week 1,036.40 5262.05

4th week 1,080.50 5282.65

April 1st week 1,066.80 5290.05

2nd week 1,127.55 5361.05

3rd week 1,206.45 5462.40

4th week 1,196.30 5504.75

5th week 1,278.40 5278.95

May 1st week 1,291.25 5018.70

2nd week 1,302.45 5095.65

3rd week 1,290.60 4842.50

4th week 1,213.75 5086.95

June 1st week 1,346.10 5135.90

2nd week 1,321.60 5119.40

3rd week 1,312.40 5262.60

4th week 1,141.15 5269.50

July 1st week 1,151.65 5237.25

2nd week 1,115.10 5352.90

3rd week 1,244.10 5393.95

4th week 1,246.55 5449.55

5th week 1,174.75 5367.45

Aug 1st week 1,201.45 5439.40

2nd week 1,223.25 5452.05

3rd week 1,188.05 5530.80

4th week 1,200.20 5408.35



Sep 1st week 1,209.60 5479.40

2nd week 1,207.65 5460.55

3rd week 1,196.60 5484.05

4th week 1,308.30 5035.95

Oct 1st week 1,404.35 5143.40

2nd week 1,365.40 5103.20

3rd week 1,355.25 5177.15

4th week 1,350.55 5066.05

5th week 1,378.65 5117.70

Nov 1st week 1,402.90 5312.15

2nd week 1,453.60 5071.95

3rd week 1,436.80 5490.45

4th week 1,459.80 5451.75

Dec 1st week 1,482.70 5492.90

2nd week 1,442.25 5457.30

3rd week 1,504.75 5348.70

4th week 1,567.00 5011.40

5th week 1,508.80 5134.05

Ho: There is no correlation between price movement of Sun Pharma shares and NIFTY

index.

Hl: There is correlation between price movement Sun Pharma shares and NIFTY index


Interpretation: The correlation between Sun Pharma shares and NIFTY index is =>

r=0.8323, it means price of Sun Pharma shares and NIFTY index are highly positively

correlated.


r (Sun pharma share price and NIFTY index) =0.8323


Graph No 12: Graph showing price movement of Sun Pharma shares




TELECOMMUNICATION-SERVICES SECTOR

Table No 15: Price movement of Bharti Airtel Ltd. shares and NIFTY index in 2010

Week Bharti Airtel NIFTYJan 1st week 704.90 5252.75

2nd week 638.90 5257.00

3rd week 634.75 5258.45

4th week 613.15 5221.55

5th week 633.95 4897.80

Feb 1st week 647.05 4760.10

2nd week 651.75 4801.35

3rd week 642.70 4922.45

4th week 638.50 4882.65

March 1st week 602.25 5088.15

2nd week 557.65 5137.25

3rd week 569.40 5262.05

4th week 621.85 5282.65

April 1st week 638.70 5290.05

2nd week 666.05 5361.05

3rd week 680.55 5462.40

4th week 749.75 5504.75

5th week 752.75 5278.95

May 1st week 768.35 5018.70

2nd week 799.85 5095.65

3rd week 859.60 4842.50

4th week 820.90 5086.95

June 1st week 826.75 5135.90

2nd week 828.15 5119.40

3rd week 807.20 5262.60

4th week 810.10 5269.50

July 1st week 819.05 5237.25

2nd week 777.65 5352.90

3rd week 826.25 5393.95

4th week 415.95 5449.55

5th week 410.10 5367.45

Aug 1st week 383.90 5439.40

2nd week 408.75 5452.05



3rd week 411.70 5530.80

4th week 435.20 5408.35

Sep 1st week 405.00 5479.40

2nd week 421.20 5460.55

3rd week 442.95 5484.05

4th week 414.55 5035.95

Oct 1st week 435.10 5143.40

2nd week 343.30 5103.20

3rd week 326.20 5177.15

4th week 331.05 5066.05

5th week 292.85 5117.70

Nov 1st week 320.05 5312.15

2nd week 302.10 5071.95

3rd week 288.75 5490.45

4th week 283.65 5451.75

Dec 1st week 310.10 5492.90

2nd week 331.55 5457.30

3rd week 317.85 5348.70

4th week 321.15 5011.40

5th week 329.75 5134.05

Ho: There is no correlation between price movement of Bharti Airtel shares and NIFTY

index.

Hl: There is correlation between price movement Bharti Airtel shares and NIFTY index

Conclusion: There is a negative correlation, so accept H1.

Interpretation: The correlation between Bharti Airtel shares and NIFTY index is => r= -

0.5633, it means price of Bharti Airtel shares and NIFTY index are highly negatively

correlated.


r (Bharti Airtel share price and NIFTY index) = -0.5633


Graph No 13: Graph showing price movement of Bharti Airtel shares




Table No 16: Price movement of Idea Cellular Ltd. shares and NIFTY index in 2010

Week Idea Cellular NIFTYJan 1st week 53.90 5252.75

2nd week 46.40 5257.00

3rd week 43.95 5258.45

4th week 42.80 5221.55

5th week 47.00 4897.80

Feb 1st week 44.80 4760.10

2nd week 51.50 4801.35

3rd week 48.40 4922.45

4th week 47.00 4882.65

March 1st week 45.60 5088.15

2nd week 44.25 5137.25

3rd week 46.30 5262.05

4th week 52.55 5282.65

April 1st week 51.05 5290.05

2nd week 55.20 5361.05

3rd week 54.00 5462.40

4th week 60.55 5504.75

5th week 58.05 5278.95

May 1st week 59.20 5018.70

2nd week 65.05 5095.65

3rd week 71.35 4842.50

4th week 84.15 5086.95

June 1st week 82.85 5135.90

2nd week 83.30 5119.40

3rd week 80.20 5262.60

4th week 79.50 5269.50

July 1st week 74.40 5237.25

2nd week 67.60 5352.90

3rd week 73.95 5393.95

4th week 81.55 5449.55

5th week 78.95 5367.45

Aug 1st week 73.00 5439.40

2nd week 78.05 5452.05

3rd week 82.80 5530.80

4th week 81.60 5408.35

Sep 1st week 80.50 5479.40



2nd week 76.85 5460.55

3rd week 76.75 5484.05

4th week 75.95 5035.95

Oct 1st week 73.80 5143.40

2nd week 62.45 5103.20

3rd week 63.40 5177.15

4th week 58.85 5066.05

5th week 52.05 5117.70

Nov 1st week 50.50 5312.15

2nd week 50.40 5071.95

3rd week 51.05 5490.45

4th week 48.95 5451.75

Dec 1st week 54.75 5492.90

2nd week 59.75 5457.30

3rd week 56.95 5348.70

4th week 58.30 5011.40

5th week 58.05 5134.05

Ho: There is no correlation between price movement of Idea Cellular shares and NIFTY

index.

Hl: There is correlation between price movement Idea Cellular shares and NIFTY index


Interpretation: The correlation between Idea Cellular shares and NIFTY index is =>

r=0.5734, it means price of Idea Cellular shares and NIFTY index are highly positively

correlated.


r (Idea Cellular share price and NIFTY index) =0.5734


Graph No 14: Graph showing price movement of Idea Cellular shares




Table No 17:Price movement of Reliance Communications Ltd. shares and NIFTY index in 2010

Week Reliance Commn. NIFTYJan 1st week 250.95 5252.75

2nd week 186.85 5257.00

3rd week 182.70 5258.45

4th week 160.30 5221.55

5th week 170.05 4897.80

Feb 1st week 162.70 4760.10

2nd week 181.55 4801.35

3rd week 155.35 4922.45

4th week 155.45 4882.65

March 1st week 137.90 5088.15

2nd week 146.85 5137.25

3rd week 158.95 5262.05

4th week 183.75 5282.65

April 1st week 197.25 5290.05

2nd week 211.95 5361.05

3rd week 218.20 5462.40

4th week 232.45 5504.75

5th week 214.80 5278.95

May 1st week 230.05 5018.70

2nd week 232.50 5095.65

3rd week 315.85 4842.50

4th week 305.65 5086.95

June 1st week 339.55 5135.90

2nd week 332.30 5119.40

3rd week 305.05 5262.60

4th week 312.35 5269.50

July 1st week 292.55 5237.25

2nd week 242.70 5352.90

3rd week 273.10 5393.95

4th week 276.25 5449.55

5th week 275.75 5367.45

Aug 1st week 254.80 5439.40

2nd week 258.55 5452.05

3rd week 248.45 5530.80

4th week 265.65 5408.35



Sep 1st week 292.05 5479.40

2nd week 297.85 5460.55

3rd week 306.35 5484.05

4th week 301.40 5035.95

Oct 1st week 318.50 5143.40

2nd week 248.85 5103.20

3rd week 234.15 5177.15

4th week 229.65 5066.05

5th week 175.85 5117.70

Nov 1st week 178.15 5312.15

2nd week 173.60 5071.95

3rd week 173.85 5490.45

4th week 166.60 5451.75

Dec 1st week 179.20 5492.90

2nd week 183.60 5457.30

3rd week 172.00 5348.70

4th week 174.70 5011.40

5th week 172.35 5134.05

Ho: There is no correlation between price movement of Reliance Communications Ltd.

shares and NIFTY index.

Hl: There is correlation between price movement Reliance Communications Ltd. shares and

NIFTY index


Interpretation: The correlation between Reliance Communications Ltd. shares and NIFTY

index is => r=0.4435, it means price of Reliance Communications ltd. shares and NIFTY

index are positively correlated.


r (Rel. Commn. share price and NIFTY index) =0.4435


Graph No 15: Graph showing price movement of Reliance Communnications Ltd. Shares and NIFTY index in 2010



Table no 18: Correlation between nifty and different securities.

Stock Correlation with nifty (r)

ICICI 0.9819

Axis Bank 0.9814

State bank Of India 0.9624

Wipro 0.9515

Infosys 0.9504

NTPC 0.9160

Cipla 0.8890

Ranbaxy 0.8552

Reliance Power 0.8428

Sun Pharma 0.8323

Power grid corporation 0.7937

Idea Cellular 0.5734

Tata Consultancy services 0.4738

Reliance communication 0.4435

Bharti Airtel -0.5633

The above table shows the correlation in between nifty and selected securities.

Almost all the securities are positively correlated except Bharti Airtel. Among them only

two securities TCS and Reliance Communications have low degree of positive correlation

with nifty and all others have high degree of correlation.

This shows that, with the increase in the value of these securities nifty value also

increases and with the decrease in the value of these securities nifty value also decreases.

But in case of Bharti Airtel this is opposite, with the increase in its share value nifty value

decreases and vice-versa.



4.2 RELATIONSHIP BETWEEN NIFTY AND SELECTED ECONOMIC

FACTORS

Economic factors selected for the study are as follows:

Net FII investment

Gold price

Rupee-Dollar exchange rate.

Table No 19: Weekend figures of nifty and different economic factor for the year 2010.

Week Nifty FII(week avg) Gold price RE-$ Ex rateJan 1st week 5252.75 107.10 13547 50.095

2nd week 5257.00 -118.93 13314 50.2553rd week 5258.45 -161.56 12965 50.00634th week 5221.55 -396.84 13800 49.66355th week 4897.80 11.00 14229 49.4441

Feb 1st week 4760.10 -17.22 14241 49.11622nd week 4801.35 89.08 14636 49.08023rd week 4922.45 -339.14 15550 50.13224th week 4882.65 -338.53 15411 50.4739

Mar 1st week 5088.15 -437.78 15493 51.85752nd week 5137.25 34.67 15190 52.78693rd week 5262.05 198.16 15479 51.80764th week 5282.65 471.82 15145 51.6635

Apr 1st week 5290.05 -16.25 14913 51.74752nd week 5361.05 249.00 14277 50.82633rd week 5462.40 649.75 14036 49.99524th week 5504.75 219.36 14660 50.67635th week 5278.95 670.13 14520 50.8528

May 1st week 5018.70 902.06 14602 49.23682nd week 5095.65 1083.20 14821 50.08623rd week 4842.50 863.24 14525 47.62524th week 5086.95 1272.88 14845 47.9166

Jun 1st week 5135.90 519.80 14838 47.33362nd week 5119.40 703.02 14606 47.93943rd week 5262.60 -338.74 14530 48.61324th week 5269.50 -364.32 14710 48.9686

Jul 1st week 5237.25 352.00 14448 48.23352nd week 5352.90 461.62 14453 49.25053rd week 5393.95 445.22 14735 48.86074th week 5449.55 532.44 14910 48.62945th week 5367.45 659.00 14680 48.4519

Aug 1st week 5439.40 -177.88 14934 47.8573



2nd week 5452.05 466.86 14959 48.32193rd week 5530.80 -319.32 14915 48.89734th week 5408.35 853.32 15070 49.0919

Sep 1st week 5479.40 -192.16 15701 49.02112nd week 5460.55 675.48 15785 48.79923rd week 5484.05 1371.02 15857 48.31754th week 5035.95 1992.55 15575 48.3349

Oct 1st week 5143.40 1327.83 15625 48.15392nd week 5103.20 91.18 15832 46.47893rd week 5177.15 1185.33 15780 46.06214th week 5066.05 258.48 16030 46.77995th week 5117.70 140.18 15955 47.4954

Nov 1st week 5312.15 169.15 16585 47.0862nd week 5071.95 680.58 16665 46.5813rd week 5490.45 267.10 17305 46.60034th week 5451.75 -24.86 17763 46.5113

Dec 1st week 5492.90 1080.66 18075 46.23532nd week 5457.30 282.60 17205 46.853rd week 5348.70 110.98 16835 47.05894th week 5011.40 532.88 16765 46.9752

5th week5134.05

524.07 16705 46.8936



Nifty

Graph no 16: Weekly fluctuations in Nifty from Jan 2010 to Dec 2010.

Net FII investment

Graph no 17: Weekly fluctuations in Net FII investment from Jan 2010 to Dec 2010.



Gold Price

Graph no 18: Weekly fluctuations in gold price from Jan 2010 to Dec 2010.

Re-$ EXCHANGE RATE.

Graph no 19: Weekly fluctuations in exchange rates from Jan 2010 to Dec 2010.



CORRELATION AND REGRESSION ANALYSIS IN BETWEEN NIFTY AND ECONOMIC FACTORS

Correlations

Table no.20: Correlation between nifty and economic factors

Correlations

Nifty FII(week avg) Gold price RE-$ Ex rate

Nifty Pearson Correlation 1 .469** .638** -.852**

Sig. (2-tailed) .000 .000 .000

N 53 53 53 53

FII(week avg) Pearson Correlation .469** 1 .181 -.307*

Sig. (2-tailed) .000 .195 .025

N 53 53 53 53

Gold price Pearson Correlation .638** .181 1 -.583**

Sig. (2-tailed) .000 .195 .000

N 53 53 53 53

RE-$ Ex rate Pearson Correlation -.852** -.307* -.583** 1

Sig. (2-tailed) .000 .025 .000

N 53 53 53 53

**. Correlation is significant at the 0.01 level (2-tailed).

*. Correlation is significant at the 0.05 level (2-tailed).

Interpretation of the above table

Nifty and FII

There is a significant relationship between nifty and FII at 0.01 level

Correlation in between nifty and FII is 0.469.

Therefore there is a positive correlation in between these variables.

Coefficient of determination r² is 0.219961. r²*100=21.99%

Therefore from the above we can interprete that change in FII flows have 21.99%

effect on the nifty values.



To illustrate if net FII investment increases then nifty value may increase by

21.99%.

Nifty and Gold Price.

There is a significant relationship between nifty and gold price at 0.01 level

Correlation in between nifty and gold price is 0.638.

Therefore there is a positive correlation in between these variables.

Coefficient of determination r² is 0.407044. r²*100=40.70%.

Therefore from the above we can interprete that change in gold prices have 40.7%

effect on the nifty values.

To illustrate if gold prices increases then nifty value may increase by 40.7%.

Nifty and Re-$ Exchange Rate.

There is a significant relationship between nifty and Re-$ Exchange rate at 0.01

level

Correlation in between nifty and Re-$ Exchange rate is -0.852.

Therefore there is a negative correlation in between these variables.

If it is interpreted further it shows that, when nifty value increases, RE-$ exchange

rate (in absolute figures) decreases. Decrease in Re-$ exchange rate means rupee is

strengthening against the dollar. From this we can say that if rupee strengthens

against the dollar then nifty value increases.

Coefficient of determination r² is 0.725904. r²*100=72.59%.

Therefore from the above we can interprete that change in Re-$ exchange rate have

72.59% effect on the nifty value.

To illustrate if Re strengthens against the dollar then the nifty value may increase

by 72.59%.



Relationship in between independent variables

FII and Gold Price

There is no significant relationship between FII and gold price because significant

level is not less than 0.05.

Correlation in between FII and gold price is 0.181.

Therefore there is a positive correlation in between these variables

FII and RE-$ Exchange rate

There is a significant relationship between FII and Re-$ Exchange rate at 0.05 level

Correlation in between FII and Re-$ Exchange rate is -0.307.

Therefore there is a negative correlation in between these variables

Gold Price and Re-$ Exchange rate

There is a significant relationship between gold price and Re-$ Exchange rate at

0.01 level

Correlation in between gold price and Re-$ Exchange rate is -0.583.

Therefore there is a negative correlation in between these variables

Regression Analysis

Table no 21 (Table name: Model summary, Anova and Coefficients):

Regression analysis between nifty and economic factors



Variables Entered/Removedb

Model

Variables

Entered

Variables

Removed Method

1 RE-$ Ex rate,

FII(week avg),

Gold pricea

. Enter

a. All requested variables entered.

b. Dependent Variable: Nifty

Interpretation of the above table.

Variables considered for the regression analysis are:

Dependant variable: Nifty

Independent variables: Net FII investment, gold prices, Re-$ exchange rate

Model Summary

Model R R Square

Adjusted R

Square

Std. Error of the

Estimate

1 .896a .803 .791 405.70025

a. Predictors: (Constant), RE-$ Ex rate, FII(week avg), Gold price

ANOVAb

Model Sum of Squares df Mean Square F Sig.

1 Regression 3.2897 3 1.0967 66.608 .000a

Residual 8065041.921 49 164592.692

Total 4.0957 52

a. Predictors: (Constant), RE-$ Ex rate, FII(week avg), Gold price

b. Dependent Variable: Nifty

Interpretation of the above table:

Sig .000 indicates that model taken for the regression is the correct one.



R square is 0.803 and adjusted R square is 0.791.

This indicates that 79% of change in nifty is because of variables Net FII

investment, gold prices and Re-$ exchange rate and remaining 21% is due to other

variables.

Coefficientsa

Model

Unstandardized Coefficients

Standardized

Coefficients

t Sig.B Std. Error Beta

1 (Constant) 18483.250 2788.518 6.628 .000

FII(week avg) .383 .112 .229 3.433 .001

Gold price .175 .064 .214 2.740 .009

RE-$ Ex rate -352.288 43.258 -.657 -8.144 .000

a. Dependent Variable: Nifty

Interpretation of the above table:

The above table can be explained with the help of the following regression equation:

Y=a+b1X1+b2X2+b3X3

Where, a= constant

B1, b2 and b3 are beta values.

X1, X2, X3 are variables.

Y is dependant variable nifty.

Applying values to the above equation:

Y=18483.250+0.229(FII)+0.214(Gold Price)-0.657(Re-$ exchange rate).

With the above equation it can be interpreted as follows:

With a beta of -0.657 Re-$ exchange rate has negative and high impact effect on

nifty than other two variables

Here minus sign indicates that, when nifty value increases, RE-$ exchange rate (in

absolute figures) decreases. Decrease in Re-$ exchange rate means rupee is

strengthening against the dollar. From this we can say that if rupee strengthens

against the dollar then nifty value increases.



Beta figures of Net FII(0.229) and gold price(0.214) indicates that, net FII

investment has high impact on nifty than gold price

FINDINGS

Findings:

Out of 15 securities selected for comparison 14 securities have positive correlation

with market index nifty.

Only one security i.e., Bharti Airtel is negatively correlated with nifty, with r value

of -0.5633.

Almost all the securities have high degree of positive correlation with nifty.

TCS and Reliance Communications have low degree of positive correlation with

nifty, with r value of 0.47 and 0.44 respectively.

So nifty value moves with prices of the securities.

There exists the strong relationship in between nifty values and Gold Prices with a

correlation of 0.638.

There exists the strong relationship in between nifty values and Re-$ exchange Rate

with a correlation of -0.852.

There exists the relationship in between nifty values and Net FII investment, but it is

not so strong as the correlation in between them is 0.469.

Effect of net FII investment on nifty value is positive i.e., more FII inflows and more

FII net investment has led to the increase in the nifty value.

Effect of gold prices on nifty value is positive i.e., increase in the value of gold

prices has led to the increase in nifty values.

There is a high degree of negative correlation in between nifty values and Re-$

exchange rates. But it shows that appreciation in the Rupee against the dollar has led

to the increase in the nifty values.



RECOMMENDATIONS & SUGGESTIONS.

RECOMMENDATIONS:

Investor can analyse the performance of securities which are usually traded at high

volume, by observing the market index.

The investor can decide whether to invest in the particular securities by checking the

movement of the market index.

It is recommended that since the Net FII investment has a positive effect on share

prices and nifty the government should encourage their investment which inturn

boost the economy.

Rupee-dollar exchange rate have a positive effect on the share prices and nifty. But

the correlation in between these two is negative. So these factors need to be

considered while making investment in shares.

If FII starts selling shares it is better to exit and vice-versa.

Re-Dollar exchange rate affect the share market the most which inturn affected by

FII flows. So close examination of these factors have to be made while making

investment.

Investors should consider other factors also while investing in the stock market apart

from the macro-economic factors while are discussed in the project work.



CONCLUSION

Conclusion:

From the study conducted, it is found that almost all the share prices show high

positive correlation with the nifty index. Observing over all performances an investor who

wants to buy shares can track the NIFTY index and do so.

The present study examines the relationship between nifty and economic factors.

During the past one year there have been several ups and downs in the Indian stock market

and foreign portfolio investment patterns.

FIIs are more attracted for investing' (they buy heavily). The reverse happens (FIIs

sell heavily) when market capitalization is low. When FII s are net buyers, prices and

trading volume both go up thereby increasing the market capitalization. On the other hand

heavy selling by FIIs brings down the market capitalization by reduced trading volume

and/or share prices.

Likewise gold prices and Re-$ exchange rate have high degree of relationship with

market index nifty. But these factors are also indirectly affected by other factors. So those

factors are also to be considered while making investment.

Finally it can be concluded that volatility of nifty is due to the changes in the share

prices of different securities and movement of different economic factors. So an investor

while making investment has to consider all these factors.



BIBLIOGRAPHY

BOOKS

FINANCIAL MANAGEMENT – 9TH EDIDTION, VIKAS PUBLICATIONS

I.M. PANDAY

INVESTMENT ANALYSIS MANAGEMENT – 3RD EDITION, TMH

PRASANNA CHANDRA

FINANCIAL MANAGEMENT AND ANALYSIS – 2ND EDITION, WILLEY

FRANK J. FABOZZI

FUNDAMENTAL OF STATISTICS ––3rd EDITION, HIMALAYA PUBLICATION

S.C. GUPTA

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