Project Report

On

TO STUDY OF BOMBAY STOCK EXCHANGE

Submitted By:

SAYYED ZAMIN ABBAS

SYBBA FINANCE

Under the Guidance of:

Ms. Sonal Purohit ma’m

Panchavati College of Management and Computer Science, Nashik

Affiliated to Savitribai Phule Pune University, Pule

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 Students Declaration

This is to certify that I have completed the Project titled” (TO STUDY OF
BOMBAY STOCK EXCHANGE.)” under the guidance Of “ Ms. Sonal Purohit
Ma’m ” in partial ful fillment of the requirement for the award of Degree Of
Bachelor of Business Administration at Panchavati College of Management and
compute Science Nashik. This is an original piece of work & I have not submitted
it earlier elsewhere.

Date:. Signature :

Place:. Name:

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 CERTIFICATE FROM THE INSTITUTE GUIDE

This is to certify that the project titled “.TO STUDYOF

BOMBAYSTOCKEXCHANGE”I s an academic work Done by “Prashant
Manohar Chaudhari ” submitted in the partial Fulfillment of the requirement for
the Award of the degree of Bachelor of Business Administration at Panchavati
College of Management And Computer Science Nashik , under my guidance &
direction. To the best of my knowledge and belief the data & information
presented by Him/her in the project Has not been submitted earlier.

SIGNATURE:

NAME OF FACULTY:

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 ACKNOWLEDGEMENT

Would like to thank our Vice Principal Mr. Dipak Dandvate sir for their Immense support and
blessings. I thank our HOD Dr Lakshmi Karanjikar mam for his support. I would like to
Express my special thanks of gratitude to my research guide ms. Sonal Purohit Ma’am
Associate Professor Of Department of BBA for her valuable suggestions and guidance and for
giving me the golden Opportunity to do this wonderful research project on the topic: TO
STUDY OF BOMBAY STOCK EXCHANGE Without her help it would have been difficult
for me to have reached this state Of completion of my project report. Also, I would like to
thank my parents and friends who helped me a lot In the preparation of this project.

I wish to acknowledge the help of all those who have provided me information, guidance and
other help During my research period.

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 CONTENTS
Sl. No. CHAPTER 1 Page no.

Design of the study

1.1 Introduction 10

1.2 Significance of study 11

1.3 Objectives 12

1.4 Methodology 12

1.5 Review of literature 13

1.6 Limitations 20

1.7 Chapter scheme 20

Sl. No. Chapter 2 Page no.

Stock market an over view

2.1 Stock market 21

2.2 How stock market works 21

2.3 Functions of stock market 23

2.4 Stock market participants 25

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 2.5 Types of stock market 26

2.6 Overview of stock market 30

2.6.1 Stock market at global level 30

Sl. No. Chapter 3 Page No.

Data Analysis

3.1 Emerging stock market in India 34

3.1.1 NSE Emerge 34

3.1.2 Bombay stock exchange 36

3.2 Year effect of stock markets 38

3.2.1 Year effect of NSE 38

3.2.2 Year effect of BSE 43

3.3 Market capitalisation of stock markets 47

3.3.1 Market capitalisation of NSE 48

3.3.2 Market capitalisation of BSE 52

3.4 Risk and returns of stock markets 56

3.4.1 Risk and returns of NSE 57

3.4.2 Risk and returns of BSE 60

3.5 Analysing the trading pattern of stockholders. 65

3.5.1 Reason for trading in stock market 65

3.5.2 Source of information on stock market 66

3.5.3 Time horizon preferred for trading 68

3.5.4 Year of experience in trading 69

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3.5.5 Mode of trading 70

Sl. No. Chapter 4 Page no.

Findings

4.1 Findings of the study 71

4.2 Conclusion 73

4.3 Bibliography 74

4.4 Websites 74

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CHAPTER 1 INTRODUCTION

The stock market refers to the collection of markets and exchanges where regular activities
of buying, selling, and issuance of shares of publicly-held companies take place. Such
financial activities are conducted through institutionalized formal exchanges or over-
thecounter (OTC) marketplaces which operate under a defined set of regulations. There can
be multiple stock trading venues in a country or a region which allow transactions in stocks
and other forms of securities. The stock market or equity market and is primarily known
for trading stocks/equities, other financial securities - like exchange traded funds (ETF),
corporate bonds and derivatives based on stocks, commodities, currencies, and bonds - are
also traded in the stock markets. While both terms - stock market and stock exchange - are
used interchangeably, the latter term is generally a subset of the former. If one says that she
trades in the stock market, it means that she buys and sells shares/equities on one (or more)
of the stock exchange(s) that are part of the overall stock market. The leading stock
exchanges in the U.S. include the New York Stock Exchange (NYSE), Nasdaq, and the
Chicago Board Options Exchange (CBOE). These leading national exchanges, along with
several other exchanges operating in the country, form the stock market of the U.S.

Stock market is a place where people buy/sell shares of publicly listed companies. It offers
a platform to facilitate seamless exchange of shares. In simple terms, if A wants to sell
shares of Reliance Industries, the stock market will help him to meet the seller who is
willing to buy Reliance Industries. However, it is important to note that a person can trade

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in the stock market only through a registered intermediary known as a stock broker. The
buying and selling of shares take place through electronic medium. We will discuss more
about the stock brokers at a later point.

There are two main stock exchanges in India where majority of the trades take place -
Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). Apart from these
two exchanges, there are some other regional stock exchanges like Bangalore Stock

Exchange, Madras Stock Exchange etc but these exchanges do not play a meaningful role
anymore.

National Stock Exchange (NSE)

NSE is the leading stock exchange in India where one can buy/sell shares of publicly listed
companies. It was established in the year 1992 and is located in Mumbai. NSE has a
flagship index named as NIFTY50. The index comprises of the top 50 companies based on
its trading volume and market capitalisation. This index is widely used by investors in
India as well as globally as the barometer of the Indian capital oil markets.

Bombay Stock Exchange (BSE)

BSE is Asia’s first as well as the oldest stock exchange in India. It was established in 1875
and is located in Mumbai. It has a total of ~5,295 companies listed out of which ~3,972 are
available for trading as on August 21, 2017. BSE Sensex is the flagship index of BSE. It
measures the performance of the 30 largest, most liquid and financially stable companies
across key sectors.

Historically, stock trades likely took place in a physical marketplace. With the invent of
new technologies and due to the covid-19 pandemic, the stock market works electronically,
through the internet and online stockbrokers. Each trade happens on a stock-by-stock basis,
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but overall stock prices often move in tandem because of news, political events, economic
reports and other factors.

1.2 SIGNIFICANCE OF THE STUDY

Stock market is the best indicator of how well the economy is doing. Stock markets cover
all industries across all sectors of the economy. This means they serve as a barometer of
what cycle the economy is in and the hopes and fears of the population who generate growth
and wealth. Stock market have been the regulated where people can buy and sell shares

of different companies. Stock markets today are emerging as a very popular and a better
financial market instrument for a large number of investors. A large variety of stocks or
shares are available in Indian stock market to cater the needs and expectations of all types
of investors. The rapid growth in the number of intermediaries and stock market
applications indicate the increasing importance of stock market investments. Still large
section of Indian investors has little information to take prudent investment decisions. Such

information drought is the breeding grounds for misguidance, leading the investors to opt
for a particular stock or share without an in-depth analysis, resulting in the dissatisfaction
over the return. Stock market enable companies to be traded publicly and raise capital. The
transfer of capital and ownership is traded in a regulated, secure environment. Stock
markets promote investment. The raising capital allows companies to grow their
businesses, expand operations and create jobs in the economy. The present study analyses
the important Indian stock market (NSE and BSE) with respect to their market
capitalisation, year effect, risk and return from 2000 to 2020.The study also includes the
much more data regarding the history and functioning of BSE and NSE.

1.3 OBJECTIVES:
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 1. To study about the emerging stock markets in india such as NSE and BSE.
2. To study about the year effect of the Indian stock market (BSE and NSE) from
2000 to 2020.
3. To examine the market capitalisation of Indian stock market (NSE and BSE)
from 2000 to 2020.
4. To examine the trend of risk and return of Indian stock market (NSE and BSE)
from 2000 to 2020.
5. To study about the type of trading preferred by the investors in stock market.

1.4 METHODOLOGY

The purpose of this study is to analyse the market capitalisation, year effect and the risk
and returns of the important stock market (NSE and BSE) of about 20 years from 2000 to
2020 and to analyse the investment pattern of traders in stock market. In order to assess the
objective both primary data and secondary data were used. The primary data was collected
from 30 respondents from Thrichur district by using google form. The secondary data was
collected from various journals, articles, publications and online websites.

1.6 LIMITATION

The study was conducted mainly based on the secondary data. As our study was during the
time covid-19 pandemic and lock down, the data collection was narrowed by online
sources. Many online sites have given insufficient information and data. So, there was a
dependency on various sites. The unavailability of books and other physical materials had
been a major limitation of our project.

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 1.7 CHAPTER SCHEME

The first chapter shows the introduction, significance of the study, objective of the study,
review of literature, methodology, limitation and chapter scheme. The second chapter
includes stock market, How stock market works, functions of stock market, stock market
participants, Types of stock market, Overview of stock market. The third chapter includes
Indian stock market: Nse and Bse, Year effect of Nse and Bse, Market capitalization of Nse
and Bse, Risk and Return of Nse and Bse, Analysis of trading pattern among stockholders.
The fourth chapter includes Findings of the study, Bibliography, Websites, Conclusion.

CHAPTER 2 STOCK MARKET AN OVER VIEW

2.1 STOCK MARKET

A stock market, equity market, or share market is the aggregation of buyers and sellers
of stocks (also called shares), which represent ownership claims on businesses; these may
include securities listed on a public stock exchange, as well as stock that is only traded
privately, such as shares of private companies which are sold to investors through equity
crowdfunding platforms. Investment in the stock market is most often done via
stockbrokerages and electronic trading platforms. Investment is usually made with an
investment strategy in mind.

Stocks can be categorized by the country where the company is domiciled. For example,
Nestlé and Novartis are domiciled in Switzerland and traded on the SIX Swiss Exchange,
so they may be considered as part of the Swiss stock market, although the stocks may also
be traded on exchanges in other countries, for example, as American depositary receipts
(ADRs) on U.S. stock markets.

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2.2 HOW THE STOCK MARKET WORKS
stock markets provide a secure and regulated environment where market participants can
transact in shares and other eligible financial instruments with confidence with zero- to
low-operational risk. Operating under the defined rules as stated by the regulator, the stock
markets act as primary market and as secondary markets.

As a primary market, the stock market allows companies to issue and sell their shares to
the common public for the first time through the process of initial public offerings (IPO).
This activity helps companies raise necessary capital from investors. It essentially means
that a company divides itself into a number of shares (say, 20 million shares) and sells a
part of those shares (say, 5 million shares) to common public at a price (say, $10 per share).

To facilitate this process, a company needs a marketplace where these shares can be sold.
This marketplace is provided by the stock market. If everything goes as per the plans, the
company will successfully sell the 5 million shares at a price of $10 per share and collect
$50 million worth of funds. Investors will get the company shares which they can expect
to hold for their preferred duration, in anticipation of rising in share price and any potential
income in the form of dividend payments. The stock exchange acts as a facilitator for this
capital raising process and receives a fee for its services from the company and its financial
partners.

Following the first-time share issuance IPO exercise called the listing process, the stock
exchange also serves as the trading platform that facilitates regular buying and selling of
the listed shares. This constitutes the secondary market. The stock exchange earns a fee for
every trade that occurs on its platform during the secondary market activity.

The stock exchange shoulders the responsibility of ensuring price transparency, liquidity,
price discovery and fair dealings in such trading activities. As almost all major stock

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markets across the globe now operate electronically, the exchange maintains trading
systems that efficiently manage the buy and sell orders from various market participants.
They perform the price matching function to facilitate trade execution at a price fair to both
buyers and sellers.

A listed company may also offer new, additional shares through other offerings at a later
stage, like through rights issue or through follow-on offers. They may even buyback or
delist their shares. The stock exchange facilitates such transactions.

The stock exchange often creates and maintains various market-level and sector-specific
indicators, like the S&P 500 index or Nasal 100 index, which provide a measure to track
the movement of the overall market. Other methods include the Stochastic Oscillator and
Stochastic Momentum Index.

The stock exchanges also maintain all company news, announcements, and financial
reporting, which can be usually accessed on their official websites. A stock exchange also

supports various other corporate-level, transaction-related activities. For instance,

profitable companies may reward investors by paying dividends which usually comes from
a part of the company’s earnings. The exchange maintains all such information and may
support its processing to a certain extent. (For related reading, see "How Does the Stock
Market Work?")

2.3 FUNCTIONS OF A STOCK MARKET

A stock market primarily serves the following functions:

Fair Dealing in Securities Transactions: Depending on the standard rules of demand and
supply, the stock exchange needs to ensure that all interested market participants have
instant access to data for all buy and sell orders thereby helping in the fair and transparent
pricing of securities. Additionally, it should also perform efficient matching of appropriate
buy and sell orders.

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For example, there may be three buyers who have placed orders for buying Microsoft shares
at $100, $105 and $110, and there may be four sellers who are willing to sell Microsoft
shares at $110, $112, $115 and $120. The exchange (through their computer operated
automated trading systems) needs to ensure that the best buy and best sell are matched,
which in this case is at $110 for the given quantity of trade.

Efficient Price Discovery: Stock markets need to support an efficient mechanism for price
discovery, which refers to the act of deciding the proper price of a security and is usually
performed by assessing market supply and demand and other factors associated with the
transactions.

Say, a U.S.-based software company is trading at a price of $100 and has a market
capitalization of $5 billion. A news item comes in that the EU regulator has imposed a fine
of $2 billion on the company which essentially means that 40 percent of the company’s
value may be wiped out. While the stock market may have imposed a trading price range
of $90 and $110 on the company’s share price, it should efficiently change the permissible
trading price limit to accommodate for the possible changes in the share price, else
shareholders may struggle to trade at a fair price.

Liquidity Maintenance: While getting the number of buyers and sellers for a particular
financial security are out of control for the stock market, it needs to ensure that whosoever
is qualified and willing to trade gets instant access to place orders which should get
executed at the fair price.

Security and Validity of Transactions: While more participants are important for
efficient working of a market, the same market needs to ensure that all participants are
verified and remain compliant with the necessary rules and regulations, leaving no room
for default by any of the parties. Additionally, it should ensure that all associated entities
operating in the market must also adhere to the rules, and work within the legal framework
given by the regulator.

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Support All Eligible Types of Participants: A marketplace is made by a variety of
participants, which include market makers, investors, traders, speculators, and hedgers. All
these participants operate in the stock market with different roles and functions. For
instance, an investor may buy stocks and hold them for long-term spanning many years,
while a trader may enter and exit a position within seconds. A market maker provides
necessary liquidity in the market, while a hedger may like to trade in derivatives for
mitigating the risk involved in investments. The stock market should ensure that all such
participants are able to operate seamlessly fulfilling their desired roles to ensure the market
continues to operate efficiently.

Investor Protection: Along with wealthy and institutional investors, a very large number
of small investors are also served by the stock market for their small number of investments.
These investors may have limited financial knowledge, and may not be fully aware of the
pitfalls of investing in stocks and other listed instruments. The stock exchange must
implement necessary measures to offer the necessary protection to such investors to shield
them from financial loss and ensure customer trust.

For instance, a stock exchange may categorize stocks in various segments depending on
their risk profiles and allow limited or no trading by common investors in high-risk stocks.

Exchanges often impose restrictions to prevent individuals with limited income and
knowledge from getting into risky bets of derivatives.

Balanced Regulation: Listed companies are largely regulated and their dealings are
monitored by market regulators, like the Securities and Exchange Commission (SEC) of
the U.S. Additionally, exchanges also mandate certain requirements – like, timely filing of
quarterly financial reports and instant reporting of any relevant developments - to ensure
all market participants become aware of corporate happenings. Failure to adhere to the
regulations can lead to suspension of trading by the exchanges and other disciplinary
measures.

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Regulating the Stock Market
A local financial regulator or competent monetary authority or institute is assigned the task
of regulating the stock market of a country. The Securities and Exchange Commission
(SEC) is the regulatory body charged with overseeing the U.S. stock markets. The SEC is
a federal agency that works independently of the government and political pressure. The
mission of the SEC is stated as: "to protect investors, maintain fair, orderly, and efficient
markets, and facilitate capital formation."1

2.4 STOCK MARKET PARTICIPANTS

Along with long-term investors and short-term traders, there are many different types of
players associated with the stock market. Each has a unique role, but many of the roles are
intertwined and depend on each other to make the market run effectively.

• Stockbrokers, also known as registered representatives in the U.S., are the licensed
professionals who buy and sell securities on behalf of investors. The brokers act as
intermediaries between the stock exchanges and the investors by buying and selling
stocks on the investors' behalf. An account with a retail broker is needed to gain
access to the markets.
• Portfolio managers are professionals who invest portfolios, or collections of
securities, for clients. These managers get recommendations from analysts and
make the buy or sell decisions for the portfolio. Mutual fund companies, hedge
•

• funds, and pension plans use portfolio managers to make decisions and set the
investment strategies for the money they hold.
• Investment bankers represent companies in various capacities, such as private
companies that want to go public via an IPO or companies that are involved in
pending mergers and acquisitions. They take care of the listing process in
compliance with the regulatory requirements of the stock market.

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2.5 TYPES OF STOCK MARKET

1.Classification based on stock classes

There are some stocks that do not give the shareholders the power to vote at the annual
meetings where the decisions regarding the management of the company and such issues
take place. Unlike these stocks, there are some other stocks that allow shareholders to
participate in the decision making in the company matters, by casting their votes. Another
kind of stocks offer shareholders the opportunity to cast multiple votes in matters pertaining
to different aspects of the company.

2.Classification based on market capitalization

Stocks can be classified on the basis of the market capitalization of the company, which is
the total shareholding of a company. This is calculated by multiplying the current price of
the company stock with the total number of shares outstanding in the market. Listed below
are the types of stocks based on market capitalization.

i. Large Cap Stocks

These are often stocking of Blue-chip companies which are established enterprises with
large reserves of cash at their disposal. It is interesting to note that the larger size of the
large cap companies does not mean that they grow more rapidly. In fact, it is the small
stock companies that tend to outperform them over the longer time frame. But large cap
stocks do come with the benefit of allowing the investors to reap higher dividends in
comparison to the smaller and mid cap companies’ stocks, ensuring that the capital is
preserved over the long-term period.

ii. Mid Cap Stocks

These are the stocks of medium sized companies that have a market capitalization of INR
250 Crore to about INR 4000 crore. These companies have a well recognize name in the
market which brings along the benefit of potential for growth, as well as the stability that

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is usually accompanied with being a seasoned player in the market. Mid cap companies
have a good track record of steady growth and are very similar to blue chip stocks barring
their size. In the long term these stocks do and grow well.

iii. Small Cap Stocks

As is suggestive of the name, small cap stocks have the smallest value in the market as
compared to its counterparts. These are small sized companies that have a market
capitalization of up to INR 250 and have the potential to grow at a good pace in the future.
Investors who are willing to commit to a long term and are not very particular about the
current dividends, and are willing to stand their ground during price volatility, can make
significant gains in the future. As an investor you can buy these stocks when they are
available at a cheap price during the initial stage of the company. There is no surety about
the how the company will perform in the market since they are relatively new. Because
these small cap companies are new, they are highly volatile and their growth impacts the
value and revenue of the company to a huge extent.

3. Classification based on ownership

Based on wonder ship, there are three types of stocks that investors can own which offer
them different rights and growth potential.

i. Preferred & common stocks

Preferred stocks offer investors a fixed amount of dividend every year unlike common
stocks. The price of preferred stocks is not as volatile as a common stock but it is common
stock that gets the benefit of priority when the company has surplus money to distribute.

At the time of company liquidation, it is the company’s creditors, its bond holders,
debenture holders who get priority over the preferred shareholders. Common stockholders
have voting rights, a privilege preferred shareholder do not enjoy.

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ii. Hybrid Stocks

There are companies that offer preferred shares with the option of converting them to
common shares, with conditions, at a certain point in time. These are known as hybrid
stocks or convertible preferred shares and may or may not have voting rights.

iii. Stocks with embedded derivative options

Stocks that come with the embedded derivative option means that they can be ‘callable’ or
‘potable’ and are not as commonly available. A ‘callable’ stock has the option of being
bought back by the company for a certain price at a certain point in time. Similarly, a
‘potable’ stock offers its holder to sell it to the company at a certain price and time.

4. Classification based on dividend payment

I. Growth Stocks

These stocks do not pay high dividends as the company prefers to reinvest the earnings to
enable it to grow faster, hence, the name growth stocks. The value of the shares of the
company rises with the fast growth rate which in turn allows investors to profit through
higher returns. It is best suited for those investors who seek long term growth potential and
not an immediate second source of income. Growth stocks carry higher risk than their
counterpart.

ii. Income Stocks

In comparison to growth stocks, income stocks hand out a higher dividend in relation to the
price of the share. Higher dividends translate to higher income; hence, the name Income
Stocks. Income stocks are indicative of a stable company that can afford consistent
dividends but these are also companies that do not promise very high growth. This means
that the stock price of such companies may not rise much. Income stocks also includes

preferred stocks. IT is a good investment for those investors who seek a secondary source
of income through relatively low risk stocks. The dividend income in income stocks is not

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taxed and thus is great for investors of low risk profile who want long term investment.
You may want to use the dividend yield measure to find such stocks that offer high
dividends.

5. Classification based on fundamentals

Investors who believe that a share price must equal the intrinsic value of the company’s
share, the value investing investors, compare the share prices with components like per
share earnings, profits etc. to reach at an intrinsic value per share.

I. Overvalued Shares

These are shares with prices that exceed the intrinsic value and are considered overvalued.

ii. Undervalued Shares

These types of shares are popular amongst the value investors as they believe that the price
of the share would rise in the future.

6. Classification based on Risk

The risk level of stocks differs depending on the share price fluctuations. Stocks with higher
risk reward the investor with higher returns, while low risk stocks generate low returns.

I. Beta Stocks

The beta or the measure of risk is derived by calculating the price volatility of the stock.
Beta can be positive or negative which denotes whether it moves in sync with the market
or against it. The higher the beta, higher is the risk quotient of the stock. If the beta value
is more than 1 it means that the stock is more volatile than the market. A lot of investors
with knowledge of this measure use it to make their investment decisions.

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ii. Blue Chip Stocks

Blue chip stocks are stocks of those companies that have lower liabilities and stable
earnings and which pay regular dividends. These very large and well-recognised companies
that have a long history of sound financial performance are a good bet for Investors who
seek safer avenues of investment.

7. Classification based on price trends

This classification is based on the movement of stock prices in tandem with or against the
company earnings.

I. Defensive Stocks

These are stocks that are somewhat unfazed by economic conditions and are preferred when
the market conditions are poor. Food and beverage companies are a common example.

ii. Cyclical Stocks

Stocks of companies that are greatly affected by economic conditions and see high price
fluctuations with market changes are cyclical stocks. These types of stocks grow rapidly
during the boom cycle but the growth is slowed down in the slow economy. Automobile
stocks fall in this category.

2.6 OVERVIEW OF STOCK MARKET

2.6.1 STOCK MARKET AT GLOBAL LEVEL

Stock markets are some of the most important parts of today’s global economy. Countries
around the world depend on stock markets for economic growth. However, stock markets
are a relatively new phenomenon. They haven’t always played an important role in global
economics.

The first genuine stock markets didn’t arrive until the 1500s. However, there were plenty
of early examples of markets which were similar to stock markets. In the 1100s, for
example, France had a system where courtiers de change managed agricultural debts
22
throughout the country on behalf of banks. This can be seen as the first major example of
brokerage because the men effectively traded debts. Later on, the merchants of Venice were
credited with trading government securities as earl y as the 13th century. Soon after, bankers
in the nearby Italian cities of Pisa, Verona, Genoa, and Florence also began trading
government securities. The world’s first stock markets are generally linked back to
Belgium. Bruges, Flanders, Ghent, and Rotterdam in the Netherlands all hosted their own

“stock” market systems in the 1400s and 1500s.However, it’s generally accepted that
Antwerp had the world’s first stock market system. Antwerp was the commercial centre of
Belgium and it was home to the influential Van der Buerse family. As a result, early stock
markets were typically called Beursen.All of these early stock markets had one thing
missing: stocks. Although the infrastructure and institutions resembled today’s stock
markets, nobody was actually trading shares of a company. Instead, the markets dealt with
the affairs of government, businesses, and individual debt. The system and organization
were similar, although the actual properties being traded were different.

The top 10 biggest stock exchanges in the world.

1) New York Stock Exchange

The New York Stock Exchange (NYSE) is additionally referred to as ‘The Big Board’. The
NYSE is the first on the list of the largest stock exchanges in the world and is a highly
esteemed stock exchange in the USA. The NYSE has remained the largest stock exchange
in the world by market capitalisation ever since the end of World War. It is located at 11,
Wall Street, Lower Manhattan, New York City. It consists of 2,400 listed companies which
span sectors such as finance, healthcare, consumer goods and energy. The blue-chip
companies which are listed under NYSE are Berkshire Hathaway Inc,
Coca-Cola, Walt Disney Company, Mc Donald’s Corporation, etc. Date of establishment:
May 17, 1792. Valuation: $19.3 Trillion

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2) NASDAQ
Second on the list of the largest stock exchange in the world is NASDAQ, an abbreviation
of National Association of Securities Dealers Automated Quotations. Nasdaq, an American
stock exchange is headquartered at 151 W, 42nd Street, New York City. Nasdaq never

operated on a usual open outcry system, instead, it has always used a computer and
telephone-based system of trading, which has made the NASDAQ the world’s first
electronically traded stock market. The enlistment of the world’s humongous tech giants
such as Apple, Microsoft, Google, Facebook, Amazon, Tesla,
and Intel make NASDAQ ‘The Mecca of Technology Companies’. Date of
establishment: February 4, 1971. Valuation: $13.8 Trillion

3) Tokyo Stock Exchange

The Tokyo Stock Exchange (TSE) which is also known as TYO and Tōshō is located in
Tokyo, Japan. It is listed as the third-largest stock exchange in the world. TSE has around
3,575 listed companies which has taken its market capitalization to a whooping US$ 5.67
trillion. The TSE’s benchmark index is Nikkei 225 and it is home to Japanese giants with
international exposure, including Toyota, Suzuki, Honda, and Mitsubishi and Sony. Date
of establishment: January 1, 2003. Valuation: $5.7 Trillion

4) Shanghai Stock Exchange

The Shanghai Stock Exchange (SSE) is a Chinese stock exchange situated in the city of
Shanghai, China. It is one of the three stock exchanges plying autonomously in the
People’s Republic of China. Date of establishment: November 26, 1990. Valuation:
$4.9 Trillion

5) Hong Kong Stock Exchange

The Hong Kong Stock Exchange (SEHK) is located in Hong Kong and is the world’s fifth-
largest and Asia’s third-largest stock exchange on the basis of market capitalization. It is
one of the three stock exchanges in China. SEHK consists of 2,315 listed companies with
a wholesome market capitalization of HK$29.9 trillion. It is reported as the fastest-growing
stock exchange in Asia. Date of establishment: February 3, 1891. Valuation: $4.4 Trillion

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6) EURONEXT
EURONEXT stands for European New Exchange Technology. With it’s registered office
in Amsterdam and corporate address at La Défense in Greater Paris, EURONEXT was
established in 2000 to represent Europe’s economy which is also the reason why it operates
in euros. It is the sixth-largest stock exchange in the world with a market capitalization
worth €4.1 trillion. Date of establishment: September 22, 2000. Valuation: $3.9 Trillion.

7) Shenzen Stock Exchange

The Shenzhen Stock Exchange (SZSE) is one of the three independently working stock
exchanges in China. Although it was founded in 1987, it wasn’t established until 1990. It
is the 7th largest stock exchange in the world and has approximately 1,300 listed companies
with a combined market capitalization of $3.92 trillion. Date of establishment: December
1, 1990. Valuation: $3.5 Trillion

8) London Stock Exchange

The London stock exchange (LSE) is based in London and is the sixth-largest stock market
within the world. It was established in 1571 and is the oldest stock exchange in the world.
It has more than 3,000 listed companies with a combined market capitalization of $4.59
trillion. Date of establishment: January 23, 1571. Valuation: $3.2 Trillion

9) Toronto Stock Exchange

The Toronto Stock Exchange (TSX) is situated in Toronto, Canada. It was introduced in
1852 and is held and wielded as a subsidiary of the TMX Group. Enlistment of 2,207
companies with a combined market capitalization of $2.3 trillion. Date of establishment:
October 25, 1861. Valuation: $2.1 Trillion

25
26
CHAPTER 3 DATA ANALYSIS

3.1 EMERGING STOCK MARKETS IN INDIA

3.1.2 BOMBAY STOCK EXCHANGE (BSE)

BSE Limited, formerly known as the Bombay Stock Exchange is an Indian government
owned stock exchange located on Dalal Street in Mumbai. Established in 1875, it is Asia's
oldest stock exchange. The BSE is the world's 7th largest stock exchange with an overall
market capitalization of more than US$2.8 trillion on as of February 2021. While Bombay
Stock Exchange Limited is now synonymous with Dalal Street, it was not always so. In the
1850s, five stock brokers gathered together under Banyan tree in front of Mumbai Town
Hall, where Horniman Circle is now situated. A decade later, the brokers moved their
location to another leafy setting, this time under banyan trees at the junction of Meadows
Street and what was then called Esplanade Road, now Mahatma Gandhi Road. With a rapid
increase in the number of brokers, they had to shift places repeatedly. At last, in 1874, the
brokers found a permanent location, the one that they could call their own. The brokers
group became an official organization known as "The Native Share & Stock Brokers
Association" in 1875. The Bombay Stock Exchange continued to operate out of a building
near the Town Hall until 1928. The present site near Horniman Circle was acquired by the
exchange in 1928, and a building was constructed and occupied in 1930. The street on
which the site is located came to be called Dalal Street in Hindi (meaning "Broker Street")
due to the location of the exchange.

27
On 31 August 1957, the BSE became the first stock exchange to be recognized by the
Indian Government under the Securities Contracts Regulation Act. Construction of the
present building, the Phiroze Jeejeebhoy Towers at Dalal Street, Fort area, began in the late
1970s and was completed and occupied by the BSE in 1980. Initially named the BSE
Towers, the name of the building was changed soon after occupation, in memory of Sir
Phiroze Jamshedji Jeejeebhoy, chairman of the BSE since 1966, following his death.

3.2 YEAR EFFECT OF STOCK MARKETS

3.2.1 YEAR EFFECT OF NSE

Indian benchmark indices posted their biggest daily percentage decline in 10 months on
Friday, as a North Korean threat to carry out a hydrogen bomb test in the Pacific Ocean
rattled global markets. The Indian government’s stimulus spending plan and jitters that it
would widen the fiscal deficit also contributed to the decline, which was led by bank stocks.

The National Stock Exchange’s 50-share Nifty index dipped 1.56% to close below the
psychological 10,000-point mark at 9,964.40 points. The BSE Sensex tumbled 1.38% to
end at 31,922.44 points. North Korea struck back at US President Donald Trump’s threats
to destroy it, with Kim Jong Un warning of the “highest level of hard-line countermeasure
in history" and his foreign minister suggesting that could include testing a hydrogen bomb
in the Pacific Ocean.

Indian stocks are the most expensive among peers, prompting concerns about valuations
overshooting fundamentals amid slow economic growth and an elusive corporate earnings
recovery. “Impact of good and services tax (GST) could be more prolonged and earnings
recovery could be delayed by a quarter or two. As a result, a market correction at this
juncture should not come as a surprise," said Ravi Gopala Krishnan, head of equities at
Canara Robeco Mutual Fund. The price-to-earnings ratio for FY19 is 18.48 and 18.18 for
the Sensex and Nifty respectively, whereas that for MSCI Emerging Markets is 12.76 and

28
MSCI World 16.50. Analysts described the correction in the Indian markets as healthy and
long overdue.

Most stocks in the capital goods, healthcare and metals sectors were under pressure on
Friday. Among sectoral indices, the BSE Metal index fell 3.9%, reacting to China’s credit
downgrade by S&P Global Ratings, triggering concerns that demand from the world’s
second-biggest economy may decline. So far this year, FIIs have bought a net $6.4 billion
worth of stocks, but sold $761.55 million worth of Indian equities in September.

The Sensex ended 5 points higher at 47,751 and Nifty 50 index closed unchanged at 13,982.
In the calendar year 2020, the Sensex rallied 15.75 per cent and the Nifty climbed 14.90
per cent, making it the best year for the indices since 2017, news agency Reuters reported.
For the decade ended 2020, the Sensex has gained a whopping 173 per cent and Nifty
surged 169 per cent. A gush of liquidity by foreign investors has lifted the benchmarks to
new highs, according to analysts. On Wednesday, foreign institutional investors (FIIs) had
net bought Indian shares worth ₹ 1,824 crore. So far this calendar year, FIIs have net
purchased domestic equities worth $22.44 billion but net sold assets worth $14 billion in
the debt markets, NSDL data showed.

Six of 11 sector gauges compiled by the National Stock Exchange ended higher, led by the
Nifty Metal and Pharma indices, which rose 0.7 per cent each. Auto, financial services,
media and realty shares also witnessed buying interest. On the other hand, PSU banking,
FMCG, IT and private banking shares witnessed mild selling pressure. Mid- and small-cap
shares witnessed buying interest, with the Nifty Midcap 100 index rising 0.5 per cent and
the Nifty Small cap 100 index gaining 0.3 per cent. HDFC was the top Nifty gainer, rising
1 per cent to close at ₹ 2,550 apiece on the BSE. Sun Pharma, Divi's Labs, ICICI Bank,
Asian Paints, Dr Reddy's Labs, Hindalco and HCL Technologies were also among the
gainers. NSE believes that Small and Medium Enterprises (SME) are crucial not only for

29
economic growth, but also critical for employment and inclusive growth. As of March 31,
2019, there are 189 SME companies listed on NSE Emerge (SME Platform), of which 62
were listed during 2018-19 raising more than H1,048 crores. During fiscal 2019, the
aggregate value of Initial Public Offerings (IPOs) and Offer for Sale (OFS) was around
H208.33 billion. During FY2019, the number of listed companies available for trading on
NSE was 1,884 compared to 1,758 at the end of March 31, 2018. The market capitalisation
of securities available for trading on the Capital Market segment has increased by 6.34%
during 2018-19.

Table 3.1 YEAR EFFECT OF NSE

Year Year effect

2000 1264

2001 1059

2002 1094

2003 1880

2004 2081

2005 2837

2006 3966

2007 6139

2008 2959

2009 5201

30
 2010 6185

2011 4624

2012 5905

2013 6304

2014 8283

2015 7946

2016 8786

2017 10531

2018 10863

2019 12168

2020 13982
Source:www.nseindia.com

Fig: 3.1

Out of the total market capitalisation of H1,49,34,227 crores as on March 29, 2019,
H1,05,921 crores were contributed by newly listed companies. Introduction of an electronic
platform for the IPO process has resulted in paperless filing and significantly easing the
31
process for the issuers. Intermediaries and issuers no longer need to be present at Exchange
premises for completing the activity of allotment. NSE has taken proactive measures by
sending email alerts to shareholders of listed companies alerting them on non-compliances
and impending suspension of the listed company in which they hold shares which
shareholders have found to be very valuable. NSE has accorded high priority for resolution
of investor complaints and the Investor Services Cell facilitates resolution of complaints of
investors against the listed corporate entities and NSE members.

3.2.2 YEAR EFFECT OF BSE

Ariel (1987) found that, on an average, rates of return were significantly lower during the
second half of the month as compared to the first half. This research found that month of
the year effect occurred in USA as well as few other developed countries. The research
revealed that the return was higher in January month and in December was generally lower
in comparison to returns in other months. Similar results were found by Jeffrey Jaffe and
Randolph Westfield (1988) in their investigation of stock markets of Australia, UK, Japan,
and Canada. This research found that returns over the second half of the month were lower
than the returns over the first half for Australia, UK and Canada. Wachtel (1942) was the
first researcher to investigate the January Effect. Haugen and Lakonishok (1988) studied
the January Effect in detail and has authored a book on this well-known calendar effect.
Kok Kim Lian (2002) studied the Year of Month Effect and Half Month Effect in the Asia
Pacific stock markets.

Companies with innovative products, increasing distribution reach, technology-driven

processes and healthy balance sheet would revive the growth momentum post lockdown.
Lower oil prices and high capital expenditure by the government in turn creating capital
which will provide a platform to flourish when we overcome COVID 19 pandemic.

Table 3.2 YEAR EFFECT OF BSE

Year Year effect
2000 5006

32
 2001 3972

2002 3262

2003 3377

2004 5839

2005 6603

2006 7378

2007 13787

2008 20187

2009 9647

2010 17465

2011 20509

2012 15455

2013 19427

2014 21171

2015 27499

2016 26118

2017 26626

2018 34057

2019 36054

2020 41306
Source: www.bseindia.com

33
 Fig :3.2

3.3 MARKET CAPITALISATION OF STOCK MARKETS (2000-2020)

Market capitalisation Market capitalization is one of the most effective ways of evaluating
the value of a company. The evaluation of a company’s value is done based on a company’s
stocks. Essentially, this is defined by the total market value of the outstanding shares of a
company. This simple fact also means that publicly owned companies are the only ones
which can be evaluated by this method of evaluation. Fluctuating market conditions and
stock prices also impact the evaluation of a company when this method of evaluation is
being used.

Large-cap: These are some of the most stable groups of companies in the market.
Consequently, investing in these companies is the least risky option.

Mid-cap: Companies which have had a certain growth and are somewhat stable; and yet
have immense potential of growth, come under this group of evaluation by market
capitalization.
Small-cap: Constituting companies which have the least market cap are the riskiest of all
stocks.

Table: 3.3 Top 10 Indian companies based on market cap

Company name Market capitalization (in crore)

34
 Reliance Industries Limited Rs.8,49,234

Tata Consultancy Services Limited Rs.7,91,772

HDFC Bank Limited Rs.6,22,521

ITC Limited Rs.3,73,950

Hindustan Unilever Limited Rs.3,72,708

Development Finance Corporation Rs.3,46,629

Infosys Limited Rs.3,16,410

State Bank of India Rs.2,81,705

Kotak Mahindra Bank Limited Rs.2,61,730

ICICI Bank Limited Rs.2,53,192

Source: www.businessinsider.in
India's stock market is now the seventh biggest, up three spots, in the world as total market
capitalisation increased to $2.7 trillion. The BSE Sensex crossed the 51,000, while the NSE
benchmark Nifty crossed the 15,000 level for the first time on February 2021. The
benchmark Nifty has gained 6.9% so far in 2021. India's stock market is now bigger than
Canada, Germany and Saudi Arabia. India's stock market is the second-best performer
among the top 15 countries in 2021 and soon it may overtake France to become the sixth
biggest in the world.
3.3.1. MARKET CAPITALISATION OF NSE (NIFTY)
NIFTY 50 is NSE's diversified index comprising stocks from top 50 Indian companies
across 14 sectors. It tracks the market performance of the largest cap companies & hence,
broadly reflects the Indian economy. The NIFTY 50 index is India’s premier stock index.
Launched on April 1, 1996, it's computed using the free float market capitalization method.

35
 Table 3.4 Nifty 50 companies as on 18-Mar-2021

Company CMP Price Market 52W 52W RO P/E P/ EV/

Name (M. Change % Cap (Cr) High Low E B EBIT
Cap) V DA

Shree 26,659 -0.59 96,759 29,098 15,500 13.60 45.38 6.99 26.31
Cement(L)

Nestle(L) 16,203 -1.55 1,58,682 18,821 12,589 70.26 76.20 55.3 54.62
7

Bajaj 9,460 -0.89 1,51,894 10,586 3,986 21.78 41.21 4.51 -

Finserv(L)

Maruti 7,114 0.72 2,13,364 8,400 4,002 7.13 47.72 4.36 28.86
Suzuki(L)

Ultratech 6,514 -0.09 1,88,167 6,946 2,913 15.64 27.43 4.62 22.22
Cement(L)

Bajaj 5,372 0.24 3,22,908 5,922 1,783 19.13 87.60 9.61 -

Finance(L)

Dr. Reddys 4,211 -3.34 72,455 5,515 2,498 13.41 33.31 4.35 29.10
Lab(L)

Bajaj Auto(L) 3,663 2.46 1,03,462 4,361 1,793 23.05 22.20 4.36 19.67

Britannia 3,439 -0.84 83,525 4,015 2,101 31.13 44.56 31.2 45.54
Inds(L) 3

Divis Lab(L) 3,270 -3.19 89,682 3,913 1,633 17.94 47.95 10.7 48.52
8

Hero 3,108 -2.62 63,770 3,629 1,475 21.32 23.45 4.36 14.83

MotoCorp(L)

36
TCS(L) 3,037 -2.44 11,68,005 3,345 1,547 36.47 37.40 12.3 26.89
8

37
 Eicher 2,664 0.67 72,342 3,036 1,246 19.49 64.30 7.01 30.45
Motors(L)

HDFC(L) 2,517 0.11 4,53,378 2,895 1,473 22.02 40.92 4.52 -

Asian 2,404 -0.76 2,32,380 2,871 1,432 27.51 84.53 21.0 55.57
Paints(L) 7

Hindustan 2,215 -0.63 5,23,765 2,614 1,756 84.35 71.51 11.1 52.50
Unilever(L) 9

Reliance 2,010 -2.22 13,89,707 2,369 867.5 9.85 32.89 2.26 18.28
Industries(L)

Kotak 1,831 -1.96 3,70,157 2,049 1,000 13.08 56.52 6.22 -

Mahindra
Bank(L)

HDFC Bank(L) 1,490 -0.35 8,24,226 1,650 738.9 16.54 26.87 4.29 -

Titan Co(L) 1,468 -0.33 1,30,740 1,621 720.0 23.00 185.5 19.9 54.78
0 3

Larsen & 1,428 -0.68 2,01,993 1,593 661.0 11.32 86.56 3.45 29.33
Toubro(L)

Grasim 1,394 1.79 90,106 1,409 380.0 7.49 22.25 1.50 8.93
Industries(L)

Infosys(L) 1,336 -3.67 5,91,039 1,406 511.1 24.90 31.78 8.32 25.50

Indusind 1,003 -0.63 78,037 1,119 235.6 14.71 34.49 1.98 -

Bank(L)

Tech 996.1 -2.36 98,772 1,081 470.2 16.70 23.80 4.16 16.15
Mahindra(L)

38
HCL Tech.(L) 948.3 -3.97 2,67,974 1,074 375.5 23.73 20.28 4.73 15.07

SBI Life 890.1 0.15 88,886 984.0 520.0 0.00 61.13 9.20 -
Insuran(L)

Mahindra & 845.4 1.03 1,04,024 952.1 245.8 1.08 0.00 3.02 17.36
Mahindra(L)

Cipla(L) 754.9 -2.32 62,327 878.5 363.9 13.05 23.44 3.31 22.68

Axis Bank(L) 717.9 -1.37 2,22,968 800.0 285.0 2.15 88.35 2.28 -

Tata Steel(L) 705.0 0.08 84,818 782.0 250.9 9.40 12.90 1.07 8.17

HDFC Life 680.5 -1.26 1,39,265 746.0 339.1 0.00 102.8 17.8 -
Insurance(L) 6 0

Adani Ports 679.9 -1.31 1,39,967 768.4 203.4 19.74 34.64 5.04 22.78
&Special(L)

UPL(L) 602.4 -0.85 46,419 639.2 240.3 12.48 19.14 2.44 10.04

ICICI Bank(L) 578.4 -1.85 4,07,463 679.3 269.0 7.25 31.32 3.02 -

Sun Pharma 574.5 -1.83 1,40,409 653.7 315.2 8.93 58.27 3.12 19.67
Inds.(L)

Bharti 526.0 0.60 2,85,244 623.0 381.1 -7.33 0.00 3.44 17.66
Airtel(L)

BPCL(L) 426.9 -1.16 93,690 482.4 252.0 13.24 16.32 2.47 16.32

JSW Steel(L) 423.1 0.04 1,02,248 435.0 132.5 18.29 22.15 2.57 11.10

Wipro(L) 410.8 -2.09 2,29,876 467.2 159.6 16.76 22.65 3.94 16.55

39
 SBI(L) 366.6 -0.39 3,28,470 426.4 149.6 7.16 18.73 1.48 -

Hindalco(L) 331.2 1.47 73,343 361.2 85.05 6.19 32.98 1.23 7.93

Tata 306.9 0.34 1,01,552 357.0 63.60 - 0.00 1.87 8.74

Motors(L) 16.69

Power Grid 221.1 0.23 1,15,409 239.0 129.8 15.80 11.70 2.22 8.15
Corpn.(L)

ITC(L) 217.4 3.25 2,59,142 239.2 139.0 25.01 19.88 4.50 13.08

Coal India(L) 137.1 -2.04 86,217 162.9 109.5 57.06 6.76 2.32 2.92

GAIL India(L) 135.2 -2.31 62,398 157.9 65.70 14.13 10.40 1.37 8.22

ONGC(L) 110.0 0.55 1,37,628 122.3 57.55 9.11 83.22 0.70 5.21

NTPC(L) 104.3 -1.97 1,03,221 114.8 74.00 9.79 15.60 0.92 9.52

Indian oil 97.30 -0.92 92,447 105.0 71.15 12.77 11.75 0.90 8.30
Corp.

Source: www.nseindia.com

Benefits of investing in NIFTY50 Index Funds:

Diversification – It deploys the investment in multiple companies and sectors thereby

reducing risk compared to investing in a single or small set of companies. Over time Nifty 50
replaces the underperforming companies at a market level with performing one. Wide market
presence – Nifty 50 Index funds are quite popular in India and have a substantial market
presence.
Low cost - These funds have lower operating expenses as fund managers simply need to
replicate the index.
Inflation + returns - Index funds have consistently generated inflation beating returns over
the long term. Coupled with low costs it becomes excellent value for investors.

40
3.3.2 MARKET CAPITALISATION OF BSE (SENSEX)

The sum of the market value of BSE-listed companies crossed Rs 200 trillion for the first
time, on February 2021. The Sensex, ended at 50,614.29, up 358.54 points. In dollar terms,
the market cap figure of BSE-listed firms is $2.75 trillion -- the seventh highest globally.
The country’s market cap-to-GDP ratio is now more than 100 per cent. Its nominal GDP
(revised estimate for FY21) at current prices is around Rs 195 trillion.

The combined market cap of BSE-listed companies had topped the Rs 100 trillion-mark in
December 2014. Back then, the market cap-to-GDP ratio was at 80 per cent. In September
2007, when the market cap crossed Rs 50 trillion, the ratio was similar to the current level.
The markets had come off more than 50 per cent in the following year due to the global
financial crisis. In less the one year, India’s market cap (based on BSE-listed companies)
has nearly doubled. At the peak of the coronavirus-induced sell-off in March 2020, the
market cap had plunged to Rs 102 trillion.

BSE MD and CEO, Ashishkumar Chauhan said, "It is heartening to note BSE continues to
remain the primary wealth creator of the nation. It is also good to note that no other
developing country at the stage of India’s development has a thriving capital market as
compared to India. BSE has also become the world's 9th largest exchange in terms of listed
companies market capitalization, as on date." The four recently listed companies which
include Antony Waste Handling, Indian Railway Financing Corporation, Indigo Paints, and
Home First Finance Company, added ₹52562.21 crore in total m-cap. The table below is
an important data on BSE 30 Companies Share prices, 52-week High and Low, PE ratio
etc.
Table 3.5 BSE 30 companies as on Mar-2021

Company CMP Price Market 52W 52W ROE P/E P/BV EV/
Name (M. Change Cap High Low EBITDA
Cap) (Cr)

Power Grid 227.5 2.89% 1,15,670 239.0 129.8 15.80 11.73 2.22 8.16
Corpn.(L)

NTPC(L) 105.7 1.83% 1,00,603 114.8 74.00 9.79 15.20 0.90 9.43

Hindustan 2,250 1.56% 5,20,464 2,614 1,756 84.35 71.06 11.12 52.17
Unilever(L)

ITC(L) 220.3 1.36% 2,67,573 239.2 139.0 25.01 20.53 4.65 13.55

41
HCL Tech.(L) 960.5 1.29% 2,57,337 1,074 375.5 23.73 19.47 4.55 14.45

Table 3.5 BSE 30 companies as on Mar-2021

Company CMP Price Market 52W 52W ROE P/E P/BV EV/
Name (M. Change Cap High Low EBITDA
Cap) (Cr)

TCS(L) 3,071 1.14% 11,39,524 3,345 1,547 36.47 36.48 12.08 26.21

Nestle(L) 16,368 1.02% 1,56,219 18,821 12,589 70.26 75.02 54.51 53.76

Kotak 1,847 0.87% 3,62,904 2,049 1,000 13.08 55.41 6.10 -

Mahindra
Bank(L)

Bharti 529.1 0.60% 2,86,962 623.0 381.1 -7.33 0.00 3.46 17.74
Airtel(L)

Reliance 2,020 0.54% 13,58,838 2,369 867.5 9.85 32.16 2.21 17.93
Industries(L)

Sun Pharma 577.1 0.45% 1,37,842 653.7 315.2 8.93 57.21 3.06 19.30
Inds.(L)

SBI(L) 367.0 0.11% 3,27,176 426.4 149.6 7.16 18.65 1.47 -

Infosys(L) 1,335 -0.12% 5,69,331 1,406 511.1 24.90 30.62 8.02 24.52

Asian 2,400 -0.16% 2,30,615 2,871 1,432 27.51 83.89 20.91 55.14
Paints(L)

ICICI 577.0 -0.23% 3,99,926 679.3 269.0 7.25 30.74 2.97 -

Bank(L)

Titan Co(L) 1,464 -0.24% 1,30,314 1,621 720.0 23.00 184.90 19.86 54.60

Axis Bank(L) 716.0 -0.26% 2,19,920 800.0 285.0 2.15 87.14 2.25 -

42
HDFC 1,486 -0.29% 8,21,305 1,650 738.9 16.54 26.77 4.28 -
Bank(L)

HDFC(L) 2,505 -0.46% 4,53,865 2,895 1,473 22.02 40.96 4.52 -

Table 3.5 BSE 30 companies as on Mar-2021

Company CMP Price Market 52W 52W ROE P/E P/BV EV/
Name (M. Change Cap High Low EBITDA
Cap) (Cr)

Indusind 997.2 -0.54% 77,546 1,119 235.6 14.71 34.28 1.97 -

Bank(L)

Tech 990.3 -0.59% 96,444 1,081 470.2 16.70 23.24 4.06 15.74
Mahindra(L)

Ultratech 6,473 -0.61% 1,87,999 6,946 2,913 15.64 27.41 4.61 22.20
Cement(L)

Tata 700.4 -0.65% 84,884 782.0 250.9 9.40 12.91 1.07 8.17
Steel(L)

Bajaj 9,365 -0.68% 1,50,059 10,586 3,986 21.78 40.71 4.45 -

Finserv(L)

Bajaj 3,637 -0.72% 1,06,008 4,361 1,793 23.05 22.75 4.47 20.17
Auto(L)

ONGC(L) 109.0 -0.91% 1,38,383 122.3 57.55 9.11 83.68 0.70 5.24

Mahindra & 835.5 -1.16% 1,05,093 952.1 245.8 1.08 0.00 3.05 17.55
Mahindra(L)

Maruti 7,003 -1.56% 2,14,904 8,400 4,002 7.13 48.06 4.39 29.06
Suzuki(L)

Bajaj 5,276 -1.78% 3,23,686 5,922 1,783 19.13 87.81 9.64 -

Finance(L)

43
 Larsen & 1,398 -2.13% 2,00,617 1,593 661.0 11.32 85.97 3.43 29.14
Toubro(L)

Source: www.bseindia.com

Benefits of investing in SENSEX top 30 companies include:

• 1. Better returns – A historical back test on the top indices in India viz. the Nifty 50 and
BSE Sensex, reveals that investing in the Sensex can return slightly higher returns than the
Nifty 50. Keep in mind to choose a Sensex based index fund with high liquidity.
• 2. Diversification – Investing in an index fund automatically extends you the benefit of
portfolio diversification, thereby reducing portfolio risk.
• 3. Less expensive - Being a passively managed fund you are required to pay minimal fees.
This essentially means lesser expenses to eat into your returns.

3.4 RISK AND RETURN OF INDIA STOCK MARKETS (2000-2020)

One of the major objectives of investment is to earn and maximize the return. Return on
investment may be because of income, capital appreciation or a positive hedge against
inflation. The expected return may differ from realized return. In security analysis, we are
primarily concerned with returns from the investor perspective. Our main concern is to
compute or estimate the returns for an investor on a particular investment.

According to the dictionary, Risk means existence of volatility in the occurrence of an

expected incident. Higher the unpredictability greater is the risk. According to this
definition risk may or may not involve money. All investments involve risk of one type or
the other. Risk and return are of two sides of the investment coin. Risk is associated with
the possibility of not realizing return or realizing less return than expected. The degree of
risk varies on the basis of features of the assets, investment instruments, the mode of
investment, the issuer of the securities etc. Thus, risk of an investment is the variance
associated with its returns. The chance that an investment's actual return will be different
than expected. Risk includes the possibility of losing some or all of the original investment.
Different versions of risk are usually measured by calculating the standard deviation of the
historical returns or average returns of a specific investment. A high standard deviation
indicates a high degree of risk. We can distinguish between expected return and realized
return from an investment. The expected return is uncertain future return that an investor

44
expects to get from his investment. The realized return, on contrary, is the certain return
that an investor makes the investment decision based on expected returns from the

investment. The actual return realized from an investment may not correspond to expected
return. This possibility of variation of the actual return from the expected return is termed
as risk. Where realization corresponds to expectations exactly, there would be no risk.

The empirical evidence against the CAPM by Fama and French (1992) has generated a lot
of debate in the west and has called for major re-examination of the CAPM model. While
many studies have been conducted on CAPM in the capital markets of the western
countries, there are few studies in the Indian context. Studies by Varma (1988), Yalwar
(1988), Srinivasan (1988) have generally supported the CAPM theory. Sudies by Basu
(1977), Gupta and Sehgal (1993), Vaidyanathan (1995), Madhusudhan (1997), Sehgal
(1997), Ansari (2000), Rao (2004), Manjunatha and Mallikarjunappa (2006,2007) have
questioned the validity of CAPM in Indian markets. But Ansari (2000) has opined that the
studies of CAPM on the Indian markets are scanty and no robust conclusions exist on this
model.

3.4.1 RISK AND RETURN OF NSE

Nifty50 is a broader index compared to Sensex, consisting of 50 large companies listed on

National Stock Exchange of India (NSE). Over the years, Nifty50 has be-come the most
widely used benchmark for exchange traded products in Indian equity market. Growth rate
of India’s GDP is fairly captured in the growth story of Nifty50. Over the years, India has
been one of the fastest growing large economies of the world which is also reflected in the
rise of Nifty50 Index.

Nifty 50 returns and Nifty 50 total returns index

The dividends of the stocks in the Nifty 50 are assumed to be reinvested in the index after

45
the close of the ex-date. Such an index is called the Total Returns index. The Nifty 50 has
a TRI version also available and the same is used as a benchmark for several mutual funds.
The total returns index therefore has a higher return than the Nifty 50 when considered for
any period of time.

Table 3.6

Annual returns of Nifty

Year Annual return

2000 -14.65%
2001 -16.18%
2002 3.25%
2003 71.90%
2004 10.68%
2005 36.34%
2006 39.83%
2007 54.77%
2008 -51.79%
2009 75.76%
2010 17.95%
2011 -24.62%
2012 27.70%
2013 6.76%
2014 31.39%
2015 -4.06%

46
 2016 3.01%
2017 28.65%
2018 3.15%
2019 12.02%
2020 14.17%
Source: www.nseindia.com

Fig: 3.3

Nifty has a CAGR of 11.1% in the last 20 years (since 1999) and 8.87% in the last 10 years
(since 2009 – this is an aberration as it came on back of monster recovery from the lows of
March 2009 to Dec 2009 and thereby depressing the returns from Dec 2009 to Dec 2019
period). s at 1205 on February 27, 2002, just before a lacklustre budget dashed investors’
hope. The annual low came in late October with Nifty at 920. With an average value of
1056 for Nifty and a standard deviation of 68 points, this is a very narrow range. But the
returns were a lot better than in calendar year 2001 (minus 20 per cent) and 2000 (minus
23 per cent). That’s too bad years, followed by a marginal recovery. The market pulled
above it

47
The annual high of Nifty was own 200 DMA in the last quarter and has stayed above that
benchmark. This is a reliable signal of a new bull market. The moving average signal is
reinforced by the breach of a falling minus 40-degree trend line that connected successively
lower tops between February and November. The recovery has come on decent volumes,
which suggests that it's based on rising demand and, hence, sustainable.

"Oil is a big question mark -- there will be volatility here but we don't know the direction.
The Iraq situation will affect global prices and the speed of divestment of public sector
units will affect domestic sentiments. If India's economy does show strong overall
recovery, there will be turnarounds in many other sectors". Devangshu Datta, independent
analyst.

Nifty has shed over 29 per cent since May 11, 2006. The mid-cap and small-cap stocks
continue to be the worst affected in this market. The CNX mid-cap index is lighter by 35
per cent since May. The market saw the beginning of a bullish formation, an Ascending
Triangle, on the monthly chart at the beginning 2007. This formation took seven years to
complete. In 2014, the Nifty50 achieved a positive breakout. This Ascending Triangle
formation was between 3,818 on the lower side and 6,350 on the higher side.

3.4.2 RISK AND RETURN OF BSE

The 2+ decades-long journey has been a volatile one. In the last 20 years, we have had:

• 15 years with positive returns

• 5 years with negative returns

In 2002-2003, the annual index returns after that have been 3.5%, 72.9%, 13.1%, 42.3%,
46.7%, 47.1%. And this is not normal. This was unprecedented and chances are high that
such a sequence of high positive returns, might not get repeated again for many years if not
decades. So do not have such expectations of multi-year high returns from stock markets.
Infact, we should be ready to face ugly years like 2008-2009 – when index itself fell by
more than 50% and individual stocks crashed by 80-90%. I have said countless times that
one should invest more in market crashes or when everyone else is giving your reasons to
not invest. But that is easier said than done. When a crisis like the one in 2008-2009 comes,
it is not easy to combine your cash with courage.
48
Intense selling today brought the BSE Sensex to its lowest closing of 2006. Weak global
markets and worries over inflation and higher interest rates continued to drag stock prices
down to sharply lower levels on the major Indian bourses.

During the financial crisis of 2007–2008, the stock markets in India fell on several
occasions in 2007 as well as 2008. In 2007, there were five sharp falls in the stock markets.

On 2 April 2007, The Sensex fell by 617 points to 12,455 though during the course of the
day, it fell further. As per the analysts at rediff, "The Sensex opened with a huge negative
gap of 260 points at 12,812 following the Reserve Bank of India [Get Quote] decision to
hike the cash reserve ratio and repo rate. Unabated selling, mainly in auto and banking
stocks, saw the index drift to lower levels as the day progressed. The index tumbled to a
low of 12,426 before finally settling with a hefty loss of 617 points (4.7%) at 12,455.

On 21 November 2007, trying to explain the fall, rediff recounted that "Mirroring weakness
in other Asian markets, the Sensex saw relentless selling." The index tumbled to a new low
of 18,515 - down 766 points from the previous day's close. It finally ended with a loss of
678 points at 18,603. " On 21 Jan 2008, the BSE fell by 1408 points to 17,605 leading to
one of the largest erosions in investor wealth. The BSE stopped trading for a while at 2:30
pm due to a technical snag although its circuit filter allows swings of up to 15% before
stopping trading for an hour. Referred to in the media as "Black Monday", the fall was
blamed by analysts at HSBC mutual fund and JP Morgan on a large variety of reasons
including change in the global investment climate, fears of United States' economy going
into a recession, FIIs and foreign hedge funds selling in order to reallocate their funds from
risky emerging markets to stable developed markets, a cut in US interest rates, global
bourses (often referred to as event related volatility), volatility in commodities markets, a
combination of global and local factors ("...other emerging markets were down nearly 20%
so India is playing catch-up..."), huge build-ups in derivatives positions leading to margin
calls and that many IPOs had sucked out liquidity from the primary market into the
secondary market. HSBC mutual funds analysts predicted further falls in the stock market,
and the analysts at JP Morgan were of the opinion that market would fall a further 10-15%.

49
On the next day on 22 January 2008, the Sensex again fell by 875 points to 16,729. Jan 22,
2008: The Sensex saw its biggest intra-day fall on Tuesday when it hit a low of 15,332,
down 2,273 points. However, it recovered losses and closed at a loss of 875 points at
16,730. The Nifty closed at 4,899 at a loss of 310 points. Trading was suspended for one
hour at the Bombay Stock Exchange after the benchmark Sensex crashed to a low of
15,576.30 within minutes of opening, crossing the circuit limit of 10 per cent.

On 24 August 2015, the BSE Sensex crashed by 1,624 points. Finally, the indices closed at
25,741 points and the Nifty to 7,809 points. The reason given for this crash was given as a

ripple effect due to fears over a slowdown in China, as the Yuan had been devalued two
weeks ago leading to a fall in the currency rates of other currencies and the rapid selling of
stocks in China and India. The Shanghai stock exchange too fell by 8.5%. A variety of
other reasons too were given for this fall by analysts including disappointing earnings in
the first quarter for many Indian companies, somber commentaries by their management
leading to doubts regarding their recovery and a below average monsoon for that year.

Table 3.7 Annual returns of Sensex

Year Annual return
2000 -20.6%
2001 -17.9%
2002 3.5%
2003 72.9%
2004 13.1%
2005 42.3%
2006 46.7%
2007 47.1%
2008 -52.4%
2009 81.0%
2010 17.4%
2011 -24.6%
2012 25.7%
2013 9.0%
2014 29.6%
2015 -5.0%
2016 1.9%

50
 2017 27.9%
2018 5.9%
2019 14.38%
2020 15.75%
Source: www.bseindia.com

Fig : 3.4

The stock markets in India continued to fall in 2016. By 16 February 2016, the BSE had
seen a fall of 26% over the past eleven months, losing 1607 points in four consecutive days
of February. The reasons given for this included NPAs of Indian banks, "global
weaknesses" and "global factors". In the four months from November 2015 to February
2016, FIIs were reported to have sold equities worth Rs 17,318 crore as, in the opinion of
analysts, concerns grew over growth in China and as crude oil prices tumbled below $30
per barrel.

On 9 November 2016, crashed by 1689 points, believed by analysts to be due to the crack
down on black money by the Indian government, resulting in franctic selling. The Sensex
nosedived by 6% to 26,902 and the Nifty dropped by 541 points to 8002. These were said
to be due to the demonetization drive by the Modi government. The Hindu was of the
opinion that the weakening rupee and the US presidential election too had some bearing on
the behavior of investors. The S&P had also fallen by 4.45%. Although not classified as a
crash, the BSE and NSE fell sharply on 2 and 5 February 2018, sparked by the comments

51
of the Finance minister's proposal in the budget speech to introduce a 10% long term capital
gains tax (LTCG) on equity shares sold after 12 months. The BSE Sensex fell by 600 points
in two days, and the Nifty 50 fell by about 400 points to 10,676 on 5th. Earlier, the BSE
Sensex had fallen by 570 points to 35,328 on 2 February and the NSE Nifty by 190 points
to a low of 10,826.

On 1 February 2020, as the FY 2020-21 Union budget was presented in the lower house of
the Indian parliament, Nifty fell by over 3% (373.95 points) while Sensex fell by more than
2% (987.96 points). The fall was also weighed by the global breakdown amid coronavirus
pandemic centered in China. On 28 February 2020, Sensex lost 1448 points and Nifty fell
by 432 points due to growing global tension caused by coronavirus, which W.H.O said has
a pandemic potential. Both BSE and NSE fell for the entire five days of the week ending
with the worst weekly fall since 2009.On March 4 and 6, markets fell by around 1000 points
and several crores of wealth was wiped out. On 6 March 2020, Yes Bank was taken over
by RBI under its management for reconstruction and will be merged with SBI. This was
done to ensure smooth functioning of the bank as it was struggling for couple of years to
cope up with heavy pressure due to cleaning of bad loans. On 9 March 2020, the Sensex
fell by 1,941.67 points, while Nifty-50 broke down by 538 points. The fear of COVID-19
outbreak has created havoc all over the globe and India is no exception. Further, the recent
Yes Bank crisis also made the markets fell. The markets ended in red with Sensex closing
on 35,634.95 and Nifty-50 on 10,451.45.

3.5 ANALYSIS OF INVESTMENT PATTERN OF STOCK HOLDERS

3.5.1 Reason for investing in stock market

52
 Table 3.8 Reason for investing in stock market

Source: survey data

Fig 3.5 Reason for investing in stock market

According to the above diagram, the major reason for trading in stock market is mainly due
to Higher returns( 80%). Another main reason behind stock market trading is for safety(
16.7%). None of the respondent has selected liquidity as the reason for stock market
trading.

3.5.2 source/medium of information on stock market

Table 3.9 source of information on stock market

53
Fig 3.6 source of information on stock market

54
 The above diagram give us an idea about the source of information about the source
of information about the stock market investment. About 50% respondents gave the
credit to their financial advisors or brokers who introduced them or gave them
monthly information. 3% respondents got their information from Newspaper and
financial journals. The rest of the respondents got their information from
TV/Internet and from friends/relatives.

3.5.3 Time horizon preferred for trading

55
 Table 3.10 Time horizon preferred for trading

Fig 3.7 Time horizon preferred for trading

The above figure shows that 63% of the respondents prefer to have a long term trading as
long term trading is considered as safer and it involves lower risk. Another 17% prefer
small term trading. 13% prefer medium term trading. Only 7% of the respondents prefer
intraday trading and it involves huge risk. 3.5.4 Year of experience in trading

Table 3.11 Year of experience in trading

56
 Fig 3.8 Year of experience in trading

From the above chart it is clear that 37% of the respondents have 1 to 3 years of experience.
27% of respondents have 3 to 5 years of experience. 23% of the respondents have less than
1 year of experience. And only 13% of the respondents are having experience above 5 years
in stock market trading.

57
3.5.5 Mode of trading

Table 3.12 Mode of trading

From the above table it is clear that 100% of the respondents are prefer online trading. With
the advancement of technology, most of the stock market are working under online mode.

58
 CHAPTER 4

FINDINGS AND SUGGESTIONS

Stock market is the physically existing institutionalised set up where instruments of security
stock market like shares, debentures, bonds, securities are traded. Stock market makes a
floor available to the buyers and sellers of stocks and liquidity comes to the stocks. At this
scenario the importance of investing in stock market is getting higher. The number of
investors and the number of stock market out of which a majority are online markets , are
increasing day to day. Currently investing in stock market and having an intraday trading
is considered as the best way to earn money. Considering its importance the present
study concentrate on ‘A Study on Indian Stock Market: NSE and BSE’. The
objectives of the study are to study about the emerging stock markets in India such as
NSE and BSE, to study about the trend of year effect of the Indian stock market (BSE and
NSE) from 2000 to 2020, to examine the market capitalisation of Indian stock market (NSE
and BSE) from 2000 to 2020, to examine the trend of risk and return of Indian stock market
(NSE and BSE) from 2000 to 2020 and to study about the type of trading preferred by the
investors in stock market. In order to assess the objective both primary data and secondary
data were used. The primary data were collected from 30 respondents from Thrichur district
by using google form. The secondary data was collected from various journals, articles,
publications and online websites.
4.1 Findings of the study

• Due to covid-19 pandemic, Sensex lost 3,934.72 points (13.15%) to 25, 981.24 and
Nifty lost 1,135 points (12.98%) to 7610.25.
• The biggest stock market crashes in India were caused mainly due to covid19
pandemic, 2008 financial crisis, Harshad Mehta scam.

59
• Nifty has less risk and higher liquidity than Sensex. Nifty suffer lower market
impact cost than Sensex.
•

• Covid-19, strong correlation with the trends and indices of the global market as BSE
Sensex and Nifty 50 fell by 38%. The total market cap lost a staggering 27.3% from
the start of the year.

• Pre covid-19, market capitalisation on each major exchange in India was about $2.6
trillion. The Sensex returned around 14% for the year 2019 prominently featured
blue chip companies such as HDTV bank, TCS, Infosys, Reliance, ICICI, without
which Sensex return would have been negative.
• Despite a population of over 1.2 billon, there exist only 20 million active trading
accounts in India.
• The banking sector have maximum risk and return of 1.9 and 10 respectively ICICI
in automobile sector Eicher motor have maximum return of 35.9 Ashok Leyland
have maximum risk of 1.9 IT sectors have maximum return of 17.7 and maximum
risk of Oracle of 6.6 and in fast moving consumer goods sector, Godrej have
maximum return of 14.8 and highest risk in ITC of 0.5.
• The stock of bank of India, HDTV bank, Mahindra bank are less volatile in nature.
The stock of federal bank, Indus land bank, Canara bank, ICICI bank, PNB, SEBI
are moderately volatile in nature. The stock of yes bank and axis Bank have high
volatile in nature.
• Among all the investment avenues in the stock market banking is considered as the
most sensitive investment avenue the fine stocks of banking sectors shows Arch
effect which means period of high vitality is followed by similar high volatility and
low is followed by low volatility.
• The S&P 500 experienced it’s fastest ever bear market, clocking in at just 33 days
before it’s third fastest recovery to a break-even level in about 5 months.

60
• 80% of the stockholders invest/trade in stock market for higher return rather than
safety and liquidity.
• 50% of the stockholders got information regarding stock market from financial
advisors or brokers.
•
•
•
•
• 63% of the stockholders prefer to have long term trading as it involves less risk.
Intraday trading has higher risk thus only 7% preferred intraday trading.
• All the stockholders prefer to have online mode of trading. As the advancement of
technology and the pandemic scenario have made stock market into an online node
of trading.

61
CHAPTER 5 CONCLUSUON

Indian stock market now grown into a great material with a lot of qualitative inputs and
emphasis on investor protection and disclosure norms. The market has become
automated, transparent and self-driven. It has integrated with global markets, with
Indian companies seeking listing on foreign capital markets exchange, off shore
investments coming to India and foreign funds floating their schemes and thus bringing
expertise in to our markets. India has achieved the distinction of possessing the largest
population of investors next to the U.K., perhaps ours is the country to have the largest
number of listed companies with around several equity fund management avenues and
National Fund managers most of them automated. India now has world class regulatory
system in place. Thus, at the dawn of the new millennium, the equity funds market has
increased the wealth of Indian companies and investors. No doubt strong economic
recovery, upturn in demand, improved market structure, and other measures have also
been the contributory driving forces. Even though Covid pandemic has fall in India
stock market, it recovered with huge hikes along with the economic recovery of the
nation.

62
 BIBLIOGRAPHY
BOOKS/JOUNALS

• Anju balan (2013), Indian stock market- review of literature, TRANS Asian journal
of marketing and management research
• Avijan Datta, gautham bandopadhyay, prediction of stock performance in the
Indian stock market using logistic regression, international journal of business and
information.
• Gangan deep sharma &B. S Bodla, Inter linkages among stock market of south
Asia, Asia Pacific journal of business administration
• Peter sellin, monetary policy and stock market: theory and empirical evidence
sveriges riskbank working paper series.
• Alok kumar Mishra, stock market and foreign exchange market in india: are they
related? South Asia economic journal
• Mara madalino & carlo pinho, time frequency effects on market indices: world
commovements paris, 2009 finance international meeting AFFI -EUROFIDAI
• Vivek rajput & sarika bobde, stock market predictions using hybrid approach,
international journal of computer science and mobile computing.
• Vanita tripathi & shruthi sethi, integration of Indian stock market with world stock
markets, Asian journal of business and accounting.

63
• Marcia oli sigao, effects of temperature on stock market indices: a study on BSE &
NSE in India, international journal of economic research.

4.4 WEBSITES:

• www.nseindia.com
• www.bseindia.com
• www.businessinsider.in

QUESTION SCHEDULE

1. Name
2. Address
3. Age
4. Gender
5. Occupation
6. Monthly income
7. Name of the stock
8. Why do you invest in stock market?
• Safety
• Liquidity
• High returns
• Other

9. How do you get information on stock market?

• TV/ Internet
• Newspaper/ Financial Journal
• Financial advisor/ Brokers
• Friend/ Relative
• Other

10. Name the type of trading

• Long term
64
 • Medium term
• Short term
• Intraday

11. Year of experience in trading

• Less than 1 year
• 1 – 3 years
• 3 – 5 years
• Above 5 years

12. Mode of trading

• Offline
• Online

65