An Assignment on:
Factors affecting Indian Capital Market
Assignment submitted by:-
There was a time when India was discussed as the land of snake charmers, black magic and epidemics but the revolutionary Indian growth story changed everything. Indian economy at its height compelled the world to change its viewpoint towards India. Out of the several factors which changed the face of modern India, we are going to discuss the most roaring of them i.e. our share market. The earlier reform procedures adopted by India gave India the two most sought after world-class brands i.e. SENSEX and NIFTY. The magical figures displayed by our market turned all the heads on India. And India became one of the most favoured places for investment. Now we are going to deal with the ups and downs in the share market since last two years i.e. since year 2006.our share market has went through many phases in there 2 years. We saw the investors getting overjoyed at 21K and we saw them crying too when it crashed. We saw how the market rewarded the undervalued shares and how the overvalued shares fell down to demonstrate the saying “everything which rise more than expected, has to fall.” So to analyze the saga of Indian share market, we had two indices to follow: BSE sensex and NSE nifty. Though NSE nifty is a more advanced option and has left BSE sensex far behind, still we call BSE sensex as the barometer of our economy. That’s why we have followed the BSE sensex. It was not possible to track each and everyday figure of the sensex since last two years. The performance of the sensex is analyzed with the help of data and graphs collected from various sources and some of the most talked about movements of sensex starting with the secondary market summary of each year, firstly year 2006 and then year 2007.
Year 2006 at a glance:
In the secondary market, the uptrend continued in 2006-07 with BSE indices closing above 14000(14,015) for the first time on January 3, 2007. After a somewhat dull firsthalf conditions on the bourses turned buoyant during the later part of the year with large inflows from Foreign Institutional Investors (FIIs) and larger participation of domestic investors. During 2006, on a point-to-point basis, Sensex rose by 46.7%. The pickup in the stock indices could be attributed to impressive growth in the profitability of Indian corporate, overall higher growth in the economy, and other global factors such as continuation of relatively soft interest rates and fall in the international crude prices. BSE Sensex (top 30stocks) which was 9,398 at end-December 2005 and 10,399 at end-May 2006, after dropping to 8,929 on June 14, 2006, recovered soon thereafter to rise steadily to 13787 by end-December 2006. According to the number of transactions, NSE continued to occupy the third position among the world’s biggest exchanges in 2006, as in the previous three years. BSE occupied the sixth position in 2006, slipping one position from 2005. In terms of listed companies, the BSE ranks first in the world. In terms of volatility of weekly returns, uncertainties as depicted by Indian indices were higher than those in outside India such as S&P 500 of United States of America and Kospi of South Korea. The Indian indices recorded higher volatility on weekly returns during the two-year period. January 2005 to December 2006 as compared to January 2004 to December 2005 The market valuation of Indian stocks at the end of December 2006, with the Sensex trading at a P/E multiple of 22.76 and S&P CNX Nifty at 21.26, was higher than those in most emerging markets of Asia, e.g. South Korea, Thailand, Malaysia and Taiwan; and was the second highest among emerging markets. The better valuation could be on account of the good fundamentals and expected future growth in earnings of Indian corporate Liquidity, which serves as a fuel for the price discovery process, is one of the main criteria...
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