STOCK EXCHANGE

A stock exchange is an entity which provides trading facilities for investors with the guidance of stock broker to trade stocks and other securities. Stock exchanges also provide facilities for the issue and redemption of securities as well as other financial instruments and capital events including the payment of income and dividends. Stock markets refer to a market place where investors can buy and sell stocks. The price at which each buying and selling transaction takes is determined by the market forces (i.e. demand and supply for a particular stock). The stock exchange is the important segment of its capital market. If the stock exchange is wellregulated function smoothly, then it is an indicator of healthy capital market. If the state of the stock exchange is good, the overall capital market will grow and otherwise it can suffer a great set back which is not good for the country. The government at various stages controls the stock market and the capitals market. Those having short maturities that are non transferable like bank savings and current accounts set the identification of the monetary financial assets. This market is known as money market, Equity, Preferential shares and bonds and debentures issued by companies and securities issued by the government constitute the financial assets, which are traded in the capital market.A capital market deals in financial assets, excluding coin and currency. MONEY MARKET AND CAPITAL MARKET: Both money market and capital market constitute the financial market. Capital market generally known as stock exchange. This is an institution around which every activity of national capital market revolves. Through the medium stock exchange the investor gets on impetus and motivations to invest in securities without which they would not be able to liquidate the securities. If there would have been no stock exchange many of the savers would have hold their saving either in cash i.e. idle or in bank with low interest rate or low returns.

RESEARCH DESIGN:
STATEMENT OF THE PROBLEM: The above study is undertaken to compare the selected technical analysis tools available for forecasting. The study tries to capture the contradicting views of different tools used in technical analysis. This study aims to explore the topic TECHNICAL ANALYSIS OF BELLWETHER STOCKS.And helps the investor in the investment process. OBJECTIVE OF STUDY: To find out the accuracy of technical analysis in individual stock price prediction. To introduce a structured approach to market analysis that will helps to perform a quick top to bottom assessment of the market, to decide which actions are appropriate. To give the fair guidelines or recommendation to the investors on the basis of all the above analysis.

SCOPE OF THE STUDY Technical analysis of market data has long been a pervasive activity in both security and future markets. Technical analyst believe that price and volume data provide indicators of future price movements, and that by examining these data, information may be extracted on the fundamentals driving returns. If markets are efficient in the sense that the current price impounds all information then such activity is clearly pointless. But if the process by which prices adjust to information is not immediate, then the market statistics may impound information that is not yet incorporated into the current market price. Technical analysis is very useful because it provides tools that allow investors to identify the signs that new information is being priced into a stock before news is released. Stocks that trade abnormal moving average line often do so because of significant new information, both positive and negative. In this way, technical analysis helps to reveal fundamental changes in the company before the broader market is aware of it.

In spite of a long list of publications showing that market movement is random or at least very difficult to predict, a lot of effort has been made in forecasting future stock prices. In this dissertation, the market data is investigated to find out the future stock price movements. The charts we keep will become increasingly valuable to the traders as the charts history builds up. In this connection I hope this study is resourceful to the technical analysts. This study is useful for those who are risk savers and those who want to protect themselves from the risk arising from the unexpected market movements and also this study focuses on the effectiveness of the hedged portfolio and also tests that effectiveness METHODOLOGY: Primary data is collected through direct interactions with the clients of India infoline Ltd. The Secondary data is collected from the relevant text books on the subject matter and companys official website: www.indiainfoline.com

SOURCES:
The data collected for the research purpose are secondary data. Index prices were collected through yahoo finance website. The data employed in this study comprises of five year observations of various stocks of NIFTY index. Monthly data are preferred in this study. The choice of monthly closing price is realistic and helpful to calculate and test the results of technical analysis. The data regarding index share price was also taken from website: www.yahoofinance.com

SAMPLE SIZE: Five year monthly closing prices of various stocks of nifty index have been taken for testing the relevance of technical analysis.

STATISTICAL TOOLS USED: Moving Average Analysis. Relative strength index. Support and Resistance Level. LIMITATIONS OF THE STUDY: The study is limited to only 3 companies. Here, an attempt is made to predict the future movement stock. It contains an element of guess work.
Here, I have used only 3 Technical tools to predict the movement of Scripts.

The stock exchange provides the opportunity to investors for the continuous trading in securities. It is continuously engaged in the capital mobilization process. Another consequence of nonexistence of stock exchange would have been low saving of the community, which means low investment and lower development of the country.

COMPANY PROFILE

BACKGROUND AND INCEPTION OF THE COMPANY: The INDIA INFOLINE LTD (IIFL) was incorporated on 18th October in the year 1995 as Probity Research & Services Private Limited at Mumbai. The India Infoline is a one-stop shop for information, advice as well as transaction execution of financial services. India infoline is an investment consultancy firm offering planning, investment advisory and facilitating services to retail investors, corporate and institutions. The range of Investment options includes Research, Portfolio management, Mortgages, Mutual funds, Wealth management and newsletter.

India Infoline Ltd is listed on both the leading stock exchanges in India, viz. Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). The India Infoline group, comprising the holding company, India Infoline Ltd and its subsidiaries, straddles the entire financial services space with offerings ranging from Equity research, Equities and derivatives trading, Commodities trading, Portfolio Management Services, Mutual Funds, Life Insurance, Fixed deposits, Government bonds and other small savings instruments to loan products and Investment banking.

ANALYSIS OF FINANCIAL STATEMENTS:

BALANCE SHEET AS ON 31ST MARCH 2010(Rs. in Crores)
Standalone

Consolidated Mar-11 SOURCES OF FUNDS : Share Capital Reserves Total Total Shareholders Funds Secured Loans Unsecured Loans Total Loan Funds Total Liabilities APPLICATION OF FUNDS : Loan / Non-Current Assets Fixed Assets Gross Block
122.33 108.83 143.68 98.32 73.09 8.75 0.00 0.00 0.00 0.00 0.00 0.00 57.28 1,031.36 1,088.64 0.56 465.00 465.56 1,554.20 57.04 1,050.67 1,107.71 1.17 496.58 497.75 1,605.46 56.68 980.13 1,036.81 1.71 0.10 1.81 1,038.62 57.10 932.75 989.85 0.00 130.57 130.57 1,120.42 50.17 235.18 285.35 44.68 36.27 80.95 366.30 45.10 123.83 168.93 1.50 80.09 81.59 250.52

Mar-10

Mar-09

Mar-08

Mar-07

Mar-06

Less: Accumulated Depreciation Less:Impairment of Assets Net Block Lease Adjustment Capital Work in Progress Investments Current Assets,Loans& Advances Inventories Sundry Debtors Cash and Bank Balance Loans and Advances Total Current Assets Less: Current Liab. & Provisions Current Liabilities Provisions Total Current Liabilites& Provisions Net Current Assets Miscellaneous Expenses not written off Deferred Tax Assets Deferred Tax Liability Net Deferred Tax Total Assets Contingent Liability

83.24 0.00 39.09 0.00 0.92 1,000.09

60.63 0.00 48.20 0.00 1.75 1,104.22

44.94 0.00 98.74 0.00 4.51 869.31

35.08 0.00 63.24 0.00 0.49 915.68

24.38 0.00 48.71 0.00 0.00 171.45

5.23 0.00 3.52 0.00 0.00 100.25

53.22 289.46 626.79 496.28 1,465.75

53.76 577.50 561.84 281.98 1,475.08

0.56 103.53 430.25 240.59 774.93

0.00 342.81 214.37 312.61 869.79

0.00 130.72 95.08 219.75 445.55

0.00 5.49 2.09 172.16 179.74

961.64 0.41 962.05 503.70 0.00 11.33 0.60 10.73 1,554.53 7.44

1,025.80 7.23 1,033.03 442.05 0.00 9.64 0.00 9.64 1,605.86 0.77

552.68 148.64 701.32 73.61 0.00 3.82 0.00 3.82 1,049.99 0.00

514.86 156.74 671.60 198.19 0.00 2.59 0.00 2.59 1,180.19 0.00

244.51 51.03 295.54 150.01 0.00 0.55 0.00 0.55 370.72 0.00

8.47 20.30 28.77 150.97 0.00 0.20 0.00 0.20 254.94 0.00

CURRENT ASSETS RATIO:

Current assets Current liabilities

2011: 1465.75 962.05

= 1.52

2010: 1475.08 = 1.42 1033.03

2009: 774.93 701.32

= 1.10

2008: 869.79 671.60

= 1.29

2007: 445.55 295.54

= 1.50

2006: 179.74 = 6.35 28.27

QUICK ASSETS RATIO:

Quick Assets Current liabilities

2011: 1412.53 962.05

= 1.46

2010: 1421.32 1033.03

= 1.37

2009: 774.37 701.32

=1.10

2008: 867.79 671.60

= 1.29

2007: 445.55 295.54

= 1.50

2006: 179.74 28.27

= 6.35

DEBT RATIO: Total liabilities

Total asset

2011: 1554.20 1554.53

= 0.9996

2010: 1605.46 1605.86

= 0.9987

2009: 1038.62 1049.99

= 0.9891

2008: 1120.42 1180.19

= 0.9493

2007: 366.30 370.72

= 0.9880

2006: 250.52 254.94

= 0.9826

NET WORKING CAPITAL RATIO:

CA-CL TA

2011: 1465.75 962.05 = 0.32 1554.53

2010: 1475.08 1033.03 1605.86

= 0.27

2009: 774.93 701.32 1049.99

= 0.070

2008: 869.79 671.60 1180.19

= 0.16

2007: 445.55 295.54 370.72

= 0.40

2006: 179.74 28.27 254.94

= 0.59

DEBT EQUITY RATIO:

Total share holders equity

Total liabilities

2011: 1554.20 1088.64

= 1.42

2010: 1605.46 1107.71

= 1.44

2009: 1038.62 1036.81

= 1.001

2008: 1120.42 989.85

= 1.13

2007: 366.30 285.35

= 1.28

2006: 250.52 168.93

= 1.48

TABLE1: Table showing closing prices of RELIANCE STOCK FROM 2007-11 (In Rs.000,s)

SL.NO
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

DATE
01-Jan-07 01-Feb-07 01-Mar-07 02-Apr-07 01-May-07 01-Jun-07 02-Jul-07 01-Aug-07 03-Sep-07 01-Oct-07 01-Nov-07 03-Dec-07 01-Jan-08 01-Feb-08 03-Mar-08 01-Apr-08 01-May-08 02-Jun-08 01-Jul-08

CLOSE
1,366.45 1,352.50 1,370.30 1,561.05 1,758.80 1,700.55 1,893.50 1,958.00 2,297.00 2,785.00 2,846.00 2,887.50 2,495.00 2,433.80 2,252.70 2,608.00 2,401.10 2,083.00 2,214.00

SL.NO
31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49

DATE
01-Jul-09 03-Aug-09 01-Sep-09 01-Oct-09 03-Nov-09 01-Dec-09 04-Jan-10 03-Feb-10 02-Mar-10 01-Apr-10 03-May-10 01-Jun-10 01-Jul-10 02-Aug-10 01-Sep-10 01-Oct-10 01-Nov-10 01-Dec-10 06-Jan-11

CLOSE
1,974.00 1,998.70 2,199.00 1,927.00 1,058.00 1,093.35 1,085.90 979.3 1,074.50 1,031.55 1,046.50 1,089.15 1,009.00 915.9 987.3 1,097.15 986.4 1,058.00 1,085.00

20 21 22 23 24 25 26 27 28 29 30

01-Aug-08 01-Sep-08 01-Oct-08 03-Nov-08 01-Dec-08 01-Jan-09 02-Feb-09 02-Mar-09 01-Apr-09 01-May-09 01-Jun-09

2,125.30 1,945.10 1,365.00 1,135.00 1,232.55 1,329.80 1,255.50 1,522.10 1,810.20 2,258.00 2,029.00

50 51 52 53 54 55 56 57 58 59 60

23-Feb-11 31-Mar-11 04-Apr-11 02-May-11 07-Jun-11 25-Jul-11 02-Aug-11 08-Sep-11 28-Oct-11 03-Nov-11 02-Dec-11

996 1,049.00 1,050.00 964.00 958.00 882.00 837 852 900.00 886 812.00

ANALYSIS:
From the above table it can be analyzed that price of RIL has been fluctuating between a low of `812.00 to a high of `2887.5 from the year 2007-2011. However the highs have been achieved in 2007 and the lows have been experienced by 2011.

GRAPH1: GRAPH SHOWING CLOSING PRICE OF RELIANCE STOCK

3,500.00 3,000.00 2,500.00 2,000.00 1,500.00 1,000.00 500.00 0.00 01/Jan/07

01/Jan/08

01/Jan/09

01/Jan/10

01/Jan/11

INTERPRETATION:
In 2007 the crude oil prices were low,there was global economic was booming In 2008 the crude oil price went up but there was recession. In 2009 there was economic stimulus package was announced by government for public sector units and it is still persisting in 2010&2011.

FINDINGS:
RELIANCE INDUSTRIES LTD:

It always had an upward trend there by indicating a strong performance of the company. It must be noted that by 2008 the reliance experienced the benefits of high crude oil prices and better refining margins.

SUGGESTIONS:
RELIANCE INDUSTRIES LTD:

It is a stock to sell for long term investor and the crude oil sector is not doing so well and fundamentally less strong, considering the present market condition, in the future the oil sector is expected to perform low and hence its a stock to sell.

CONCLUSION:
Technical analysis can offer great insight, but if used improperly they can also produce false signals. While trend lines have become a very popular aspect of technical analysis they are merely one tool for establishing, analyzing, and confirming a trend. Trend lines should not be the final arbiter, but should serve merely as a warning that a change in trend may be very useful.

The price set by the market reflects the sum knowledge of all participants, and we are not dealing with lightweights here. These participants have considered (discounted).