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INTRODUCTION
INTRODUCTION
1.1.1 OVERVIEW
Derivatives:
Derivatives are defined as financial instruments whose value derived from the prices of
one or more other assets such as equity securities, fixed-income securities, foreign currencies, or
commodities. Derivative is also a kind of contract between two counter parties to exchange
payments linked to the prices of underlying assets.
Definition:
In the Indian context the Securities Contracts (Regulation) Act, 1956 (SC(R)A) defines
derivative to include1. A security derived from a debt instrument, share, loan whether secured or unsecured,
risk instrument or contract for differences or any other from of security.
2. A contract which derives its value from the prices, or index or prices, of underlying
securities
The above definition conveys that
Derivatives are financial products and derive its value from the underlying assets.
Derivatives are derived from a matter financial contract called the underlying.
Statistical tool
Data Analysis
Statistical tool:
The data collected from the above sources have been analyzed through Moving Average
Method, which is one of the popular statistical tool in technical analysis is considered for the
study. To examine the underlying trend by smoothing of the data and to provide the Buy and Sell
signals to the selected stocks this method serves the best.
Moving averages are used along with the price of the scrip. The stock price
may intersect the moving average at a particular point. Downward penetration of
the rising average indicates the possibility of a further fall and gives sell
signal. Upward penetration of the falling average would indicate the possibility
of the further rise and gives the buy signal.
1.10.2
Secondary sources:
The data had been collected through Books, Journals and Websites.
1. The study is confined to only two weeks trading of JAN month contract.
2. The study is limited by time and cost factors.
3. The sample size chosen is limited to stock futures of ten underlying scrips.
The limited period of study may not be detailed and full-fledged in all aspects
Brokerage clerks in the operations areas of securities firms perform many duties to
facilitate the sale and purchase of stocks, bonds, commodities, and other kinds of investments.
These clerks produce the necessary records of all transactions that occur in their area of the
business.
Job titles for many of them depend upon the type of work that they perform.
Purchase-and-sale clerks, for example, match orders to buy with orders to sell. They balance and
verify trades of stock by comparing the records of the selling firm with those of the buying firm.
Dividend clerks ensure timely payments of stock or cash dividends to clients of a particular
brokerage firm. Transfer clerks execute customer requests for changes to security registration
and examine stock certificates to make sure that they adhere to banking regulations. Receiveand-deliver clerks facilitate the receipt and delivery of securities among firms and institutions.
Margin clerks record and monitor activity in customers accounts to ensure that clients make
payments and stay within legal boundaries concerning their purchases of stock.
Technology is changing the nature of many of these jobs. A significant and growing
number of brokerage clerks use custom-designed software programs to process transactions more
quickly. Only a few customized accounts are still handled manually. Furthermore, the rapid
expansion of online trading reduces the amount of paperwork because brokerage clerks are able
to make trades electronically.
Types of stockbrokers
The stock brokers the key players in secondary market. There are various categories
of brokers as stated below.
Floor Brokers: They are representatives of the brokers, who enter the trading floor and
execute orders for their clients of for members.
Commission Broker: A commission broker is a broker who buys and sells securities on
behalf of his clients for a commission. He does not purchase or sell his own name. A
broker act for the large number of his clients, and therefore, he deals in a large variety of
securities.
Arbitragers: They are brokers who buy securities in one market and sell them in another
market to take the advantages of the price differences prevailing in different markets for
same scripts.
Wolves: They are clever speculators. They perceive the changing trends in the market
and trade fast and make a fast duck.
computer terminal. Once matching order is found, the order is executed. The broker delivers
the contract note.
To the investor, it gives the details regarding the name of the company,
number of scripts bought, price, brokerage, and the date of delivery of share. In the physical
trading form, once the broker gets the script certificate through the clearing houses the stock
broker delivers the share certificate along with transfer deed to the investor. The investor has
to fill the transfer deed and stamp it. The stamp duty is one of the percentage consideration,
the investor should lodge the share certificate and transfer deed to the register or transfer
agent of the company if it is bought in the demit form the broker has to give a matching
instruction to his depository participant to transfer shares bought to the investor account. The
investor should be account holder in any of depository participant. In the case of sell of
shares on receiving payment from the purchasing broker, the broker effects the payment to the
investor
Orders:
Buy and sell orders placed with members of the stock exchange by the investor. The
broker is responsible for getting the best price for his customer at the time the order is placed.
Online Trading:
The Net is used as a medium of trading in Internet trading. Orders are communicated to
the stock exchange through website. Internet trading started in India on 1 st April 2000 with 79
members seeking permission for online trading.
securities trading services trading services has allowed the net to be used as an Order Routing
System (ORS) through registered stock brokers on behalf of their clients for execution of
transaction.
The user should have the user id and password to enter into the electronic ring. He
should also have a demat account and bank account. The system permits only a registered client
to log in using user ID and password. Order can be placed using place order window of the
website.
The client has to enter stock code and other parameters such as quantity and price of the
scrip on the place order window.
The client can review the order placed by clicking the review option. He can also reset to
clear the values
Satisfactory orders are sent by clicking the send option.
The client receives an order confirmation message with order number and value of the
order.
If the order is rejected by the broker or stock exchange of r certain reasons such as invalid
price limit, a related message appears at the bottom of the screen. The time taken to
execute the order is 10 seconds.
When the trade is executed, the broker asks for the transfer of funds by the investor to his
account.
accounts.
Regulatory Framework
The securities and Exchange Board of India was constituted in 1998 under a resolution of
government of India. It was later made statutory body by the SEBI act 1992. According to this
act, the SEBI shall constitute of a chairman and five other members appointed by the central
government with the coming into effect of the Securities and Exchange Board of India act, 1992.
Some of the power and functions exercised by the central government, in respect of the
regulation of stock exchange were transferred to the SEBI.
Individuals
AGE
Minimum
Firms
age:
21 years
Maximum
Minimum
Corporate
age:
Minimum
age:
for directors)
60 years
STATUS
Indian Citizen
Registered
partnership
under
partnership
Corporate
firm registered under The
Indian Companies
Act,
1932
The Tatas are amongst the most respected business houses in the world. Tata Capital aims to
bring the trust and expertise of the Tatas to an economically and socially relevant sector like
financial services.
The essence of brand Tata Capital is encapsulated in our brand proposition We only do whats
right for you'. The proposition reflects our strong resolve to deliver financial solutions that are
right for our customers and the society at large.
Tata Capital seeks to build strong relationships with its customers and deliver superior and
consistent customer experience across all products and touch-points.
VISION
Leaders with a vision Tata Capital Board consists of valuable and extensively experienced
individual experts in their domains. They direct and nurture the Company with their priceless
guidance, foresight and vision. Farrakhan K. Kavarana is a Director of Tata Sons Limited and
Tata Industries Limited, the apex holding companies of the Tata Group. He is the Chairman of
several ... to that; he shared his experience and vision as the Vice-Chairman and Managing
Director of Tata
Our motto We only do whats right for you emphasizes that our vision reaches
beyond financial services. Our belief in employee ownership offers a unique experience in
entrepreneurialism. A strong national, and soon to be global, footprint enables our employees to
learn from a diverse group of colleagues whose insight, integrity and commitment, set the
standard for success in our industry.
To ensure that this culture that promotes the desire to win in a competitive atmosphere
does not lead people to succeed by stepping over each other, we inculcate an environment of
equal opportunity, high growth and meritocracy thus becoming the employer of choice for both
existing and aspiring employees. To gain a sustainable competitive advantage and to ensure that
each individual working with us is satisfied, loyal and productive, we marry opportunities for
both the individuals and the Company.
Lets talk about YOU now. Are you an individual with an inner passion and fire to
succeed? Would you like the opportunity to bloom and grow in a positively driven, high learning,
ethical and ambitious work culture? If you possess pride, passion and drive together, you possess
the DNA of a Tata Capital employee! Were looking for individuals who want to make a
difference, develop and inspire others, drive innovative ideas and deliver results, and who live
the TATA values.
If you believe Tata Capital is the right place for you, take the next step now and send us
your resume. Get ready to enjoy a thrilling ride with us!
MISSION
Safety Precautions while applying for Auto Loan To ensure your safety and to prevent
anyone from taking undue advantage of your loan application, here are some safety tips that you
must always follow: Each position is designed with the ultimate mission at its core We only do
whats right for you. You will be provided opportunities, services, and advice, enabling you to
achieve your long-term financial goals. Be a part of the team that is geared to be the financial
pillar.
The advantages of joining Tata Capital are numerous. Each position is designed with an
ultimate mission at its core We only do whats right for you .You will be provided
opportunities, services, and advice, enabling you to achieve your long-term financial goals. Be a
part of the team that is geared to be the financial pillar of strength for the Tatas and the leader in
the financial services sector. Rewarding and recognizing outstanding talent as part of the Tatas
one that is rich in people
Each position is designed with an ultimate mission at its core We only do whats right for you.
You will be provided opportunities, services, and advice, enabling you to achieve your long-term
financial goals. Be a part of the team that is geared to be the financial pillar of strength for the
Tatas and the leader in the financial services sector.
MILE STONES
Asia assignments fuel regional expansion. Diversification of assets in Japan gives glimpse of
the future
Capital Servicing Co., Ltd. established in 1998 to service a major US investment bank's
Japan NPL Portfolios
Utilizing the resources and personnel of US asset management firms and experienced
local personnel, Capital provides an immediate foundation and a platform for future
growth
Capital Serving Co., Ltd. obtained servicer license no.23 for commercial loan servicing
from the Japanese Ministry of Justice in September 1999
Began commercial operations in December 1999
Localizing the Capital Servicing Co., Ltd. model the Capital Services Group opens
offices in Thailand and Taiwan in 2000
Capital begins to manage structured loans in 2001
Beginning of the conduit programs with the first MBS loans coming under management
in 2002
2008-20011
Investments under management surge. Capital emerges as a leading independent
servicer and real estate asset management specialist in Asia
Industry leading proprietary asset management system (SCORE) developed and rolled
out in 2003
Capital emerges as a leading Japan and regional servicer. Multiple rating agency upgrades
Dramatic growth in structured loans, conduit and CMBS products under management
Capital Services Group opens offices in Singapore and the Philippines in 2005
Commercial licensing of SCORE commences
Ratings upgraded. Standard & Poor's issues its highest possible servicer rating of
"Strong" to Capital's Japan special servicing operation in 2006
2012-2015
Capital affirmed with Standard & Poor's and Fitch's highest servicer ratings
Capital is issued the highest Fitch rating of any special servicer in Japan in 2007.
Standard & Poor's assigns Capital high ratings as a primary servicer
Capital's Thailand operation becomes the first loan servicer to be rated in Thailand by
Fitch or any other agency in 2007
SCORE's Business Intelligence tool (SCORE B.I.) added allowing integration with
external systems
Capital Services Group establishes office in Malaysia
Capital enters Joint Venture with UK based Invested Real Estate Asset Management to
assist in creation of their Asia real estate platform in 2008
Reaffirmations for all Fitch and Standard & Poor's servicer ratings through 2010
2016-Present
Capital continues expansion into new markets
Capital Portfolio Services LLC established in Miami, Florida
Capital partners with IFC and Tata Capital to establish servicing operations in India
In the first chapter theoretical aspects relating to Technical analysis of Derivative stock
futures is presented.
In the fourth chapter study on Technical Analysis of Derivative stock futures analyzed.
In the fifth chapter findings and suggestions of the study are given.
TYPES OF DERIVATIVES:
The following are the most common types of derivatives. They are
FORWARDS:
A forward contract is a customized contract between two entities, where settlement takes
place on a specific date in the future at todays pre-agreed price.
FUTURES:
A futures contract is an agreement between two parties to buy or sell an asset at a certain
time in the future at a certain price. Futures contracts are special types of forward contracts in the
sense that the former are standardized exchange-traded contracts. These are one of the most
popular and widely used derivative instruments.
OPTIONS:
Options are of tow types calls and puts.
Calls give the buyer the right but not the obligation to buy a given quantity of the
underlying asset, at a given price on or before a given future date.
Puts give the buyer the right, but not the obligation to sell a given quantity of the
underlying asset at a given price on or before a given date.
WARRANTS:
Options generally have lives of up to one year, the majority of options traded on options
exchanges having a maximum maturity of nine months. Longer-dated options are called warrants
and are generally traded over-the-counter.
LEAPS:
The acronym LEAPS means Long-Term Equity Anticipation Securities. These are
options having a maturity of up to three years.
BASKETS:
Basket options are options on portfolios of underlying assets. The underlying asset is
usually a moving average of a basket of assets. Equity index options are a form of basket
options.
SWAPS:
Swaps are private agreements between two parties to exchange cash flows in the future
according to a prearranged formula. They can be regarded as portfolios of forward contracts. The
two commonly used swaps are:
CURRENCY SWAPS:
These entail swapping both principal and interest between the parties, with the cash flows
in one direction being in a different currency than those in the opposite direction.
SWAPTIONS:
Swaptions are options to buy or sell a swap that will become operative at the expiry of
the options. Thus a swaption is an option on a forward swap. Rather than have calls and puts, the
swaptions market has receiver swaptions and payer swaptions. A receiver swaption is an option
to receive fixed and pay floating. A payer swaption is an option to pay fixed and receive floating.
DATE
PARTICULARS
14 DEC 1996
18 NOV 1996
7 JULY 1999
RBI
gave
permission
of
OTC
Forward
Rate
25 MAY 2000
9 JUN 2000
22 JUN 2000
JULY 2001
NOV 2001
Stock Futures.
3 OCT 2003
Commodity Futures.
REGULATORY FRAMEWORK:
The trading of derivatives is governed by the provisions contained in the SC (R) A, the
SEBI Act and the regulations framed there under the rules and byelaws of stock exchanges.
SEBI set up a 24 member committed under Chairmanship of Dr. L. C. Gupta develop the
appropriate regulatory frame work for derivative trading in India. The committee submitted its
report in March 1998. On May 11, 1998 SEBI accepted the recommendations of the committee
and approved the phased introduction of Derivatives trading in India beginning with Stock Index
Futures. SEBI also approved he Suggestive bye-laws recommended by the committee for
regulation and control of trading and settlement of Derivatives contracts.
The provision in the SC (R) A governs the trading in the securities. The amendment of the
SC(R) A to include DERIVATIVES within the ambit of Securities in the SC (R) A Made
trading in Derivatives possible within the frame work of the Act.
1. Eligibility criteria as prescribed in the L.C. Gupta committee report may apply to SEBI
for grant of recognition under Section 4 of the SC(R)A 1956 to start Derivatives Trading.
The derivatives exchange/segment should have a separate governing council and
representation of trading/ clearing members shall be limited to maximum of 40% of the
total members of the governing council. The exchange shall regulate the sales practices of
its members and will obtain approval of SEBI before start of Trading in any derivative
contract.
Risk management
Price discovery
Transactional efficiency
Risk management:
The principal benefit of the Derivative market is that it provides the opportunity for risk
management through Hedging.
Legal risk:
Derivatives cut a cross judicial boundaries therefore the legal aspects Associated with the
deal should be looked into carefully.
Risk management/Hedging strategies can be broadly grouped into three categories:
1. Inventory hedging to protect the value of existing portfolio of assets.
2. Anticipatory hedging to sell/buy derivatives especially forwards and futures instead of
the anticipated inflows (assets)/ outflows (liabilities). A classic example is that of
exporters and importers who sells/buys currency futures/options.
3. Return enhancement hedge using derivatives to create synthetic securities, which manic
cash assets.
Price discovery:
The second major function of derivative market is price discovery. This is a process of
providing equilibrium prices that reflect current and prospective demands on current and
prospective supplies, and making these prices visible to all.
Transactional efficiency:
Derivative markets allow institution to transact more efficiently than otherwise. They
reduce the direct cost of transacting in cash/financial markets are also provided, through clearing
houses, an efficient mechanism to deal with counter party risk.
On the basis of the underlying asset they derive, the futures are divided into following types.
STOCK FUTURES
The stock futures are the futures that have the underlying asset as the individual securities.
The settlement of the stock futures is of cash settlement and the settlement price of the future
is the closing price of the underlying security.
INDEX FUTURES
Index futures are the futures, which have the underlying asset as an Index. The Index
futures are also cash settled. The settlement price of the Index futures shall be the closing
value of the underlying index on the expiry date of the contract.
COMMODITY FUTURES
In this case, the underlying asset is a commodity. It can be an agricultural commodity like
wheat corn, or even a precious asset like gold, silver etc.
FINANCIAL FUTURES
In this case, the underlying assets are financial instruments like money market paper,
Treasury Bills, notes, bonds etc.
CURRENCY FUTURES
Currency futures are those in which the underlying assets are major
convertible
currencies like the U.S. dollar, the Pound Sterling, the Euro and the Yen etc.
PARTIES IN THE FUTURES CONTRACT:
There are two parties in a future contract, the Buyer and the Seller.
The buyer of the futures contract is one who is LONG on the futures contract and
The seller of the futures contract is one who is SHORT on the futures contract.
PROFIT
The pay off for the buyer and the seller of the futures contract are as follows.
PAYOFF FOR A BUYER OF FUTURES:
LOSS
E2
E1
CASE 1:
The buyer bought the future contract at (F); if the futures price goes to E1 then the buyer
gets the profit of (FP).
CASE 2:
The buyer gets loss when the future price goes less then (F), if the futures price goes to
PROFIT
LOSS
E2
E1 F
F-FUTURES PRICE
E1, E2-SETTLEMENT PRICE
CASE 1:
The Seller sold the future contract at (f); if the futures price goes to E1 then the Seller
gets the profit of (FP).
CASE 2:
The Seller gets loss when the future price goes grater than (F), if the futures price goes to
E2 then the Seller gets the loss of (FL).
MARGINS:
Margins are the deposits, which reduce counter party risk, arise in a futures contract.
These margins are collected in order to eliminate the counter party risk. There are three types of
margin.
INITIAL MARGINS:
Whenever a futures contract is signed, both buyer and seller are required to post initial
margin. Both buyer and seller are required to make security deposits that are intended to
guarantee that they will infact be able to fulfill their obligation. These deposits ate Initial margins
and they are often referred as performance as performance margins. The amount of margin is
roughly 5% to 15% of total purchase price of futures contract.
MARKING OF MARKET MARGIN:
The process of adjusting the equity in an investors account in order to reflect the change
in the settlement price of futures contract is known as MTM Margin.
MAINTENANCE MARGINS:
The investor must keep the futures account equity equal to or grater than certain
percentage pf the amount deposited as Initial Margin. If the equity goes less than that percentage
of Initial margin, then the investor receives a call for an additional deposit of cash known as
Maintenance Margin to bring the equity up to the Initial margin.
The fair value of the futures contract is derived from a model known as the Cost of Carry
model. This model gives the fair value of the futures contract.
Cost of Carry Model:
F=S (1+r-q) t
Where
F Futures Price
S Spot price of the Underlying
R Cost of Financing
t Holding Period.
FUTURES TERMINOLOGY:
SPOT PRICE:
The price at which an asset trades in the spot market.
FUTURES PRICE:
The price at which the futures contract trades in the futures market.
CONTRACTCYCLES:
It is the period over which a contract trades. The index futures contracts on the NSE
have near month (one-month), middle month (two-months) and far month (three-months) expiry
cycles, which expire on the last Thursday of the month. Thus a January expiration contract
expires on the last Thursday of January and a February expiration contract ceases trading on the
last Thursday of February. On the Friday following the last Thursday, a new contract having a
three-month expiry is introduced for trading.
EXAMPLE 1:
DEC 31ST
JAN 27TH
FEB 24TH
MAR 31ST
FAR MONTH
MIDDLE
NEAR MONTH
EXAMPLE 2:
JAN 28TH
FEB 24TH
MAR 31ST
FAR MONTH
MIDDLE
NEAR MONTH
EXPIRY DATE:
It is the date specified in the futures contract. This is the last day on which the correct will
be traded, at the end of which it will cease to exist.
CONTRACT SIZE:
The amount of asset that has to be delivered less than one contract, For instance,
the contract size on NSE s futures market is 50 Niftiest.
BASIS:
In the context of financial futures, basis can be defined as the futures price minus the spot
price. There will be a different basis for each delivery reflects that futures prices normally exceed
spot prices.
COST OF CARRY:
The relationship between futures process and spot prices can be summarized in terms of
what is known as the cost of carry. This measures the storage cost plus the interest that is paid to
finance the asset less the income earned on the asset.
OPEN INTEREST:
Open Interest means the Total outstanding long or short positions in the market at any
specific time. As total long positions for market would be equal to short positions, for
calculation of open interest, only one side of the contract is counted.
CHOICE OF FUTURES:
Choice of futures consists of 3 decisions. They are
ORGANIZATION STRUCTURE
Tata Capital to establish servicing operations in India
INTERNATIONAL ALLIANCES:
Tata Capitals alliances and partnerships are based on and are an extension of the Companys
core objects and values. These include:
With Mizuho Securities Co. Ltd. to foster business cooperation in private equity,
investment banking including cross border mergers and acquisitions, securities business
including broking and distribution, structured finance and other business areas such as
wealth management.
With Mizuho Corporate Bank Limited (MHCB) to foster business cooperation, enhancing
cross-market value creation capabilities, strengthening competitive advantages in
addition to aiding each other in gaining a deeper understanding of the Indian and
Japanese markets. As part of the understanding, Tata Capital and MHCB will cooperate in
a wide-range of business areas. Some of these include Ninja Loans, Project and
Infrastructure Finance and Treasury Products.
With Mitsubishi UFJ Securities Co., Limited to establish a basis of cooperation in a wide
range of strategic business areas that include cross-border investment banking, global
offering of Indian equities and working towards development of the local bond market.
Technical Tools:
Generally used technical tools are, Dow theory, volume of trade, short
selling, bars and line charts, moving averages and oscillators.
Dow Theory:
Dow developed his theory to explain the movement of indices of Dow Jones Averages on the
basis of certain hypotheses. The first hypothesis is that, no single individual or buyer can
influence the major trend of the market. His second hypothesis is that the market discounts
everything. His third hypothesis is that the theory is not infallible.
The theory According to Dow Theory the trend is divided into primary, intermediate and shortterm trend. The primary trend may be the broad upward or downward movement that may last
for a year or two. The intermediate trends are corrective movements, which may last for three
weeks to three months. The short-term trend refers to the day-to-day price movement.
Volume of trade:
Dow gave special emphasis on volume. Volume expands along with the bull market and narrows
down in the market. If the volume falls with rise in price or vice-versa, it is a matter of concern
for the investor and the trend may not persist for a longer time.
Short selling:
Short selling is a technical indicator known as short interest. Short sales refer to the selling of
shares that are not owned. The bears are the short sellers who sell now in the hope of purchasing
at a lower price in the future to make profits.
Moving Average:
The market indices do not rise or fall in straight line. The upward and downward movements are
interrupted by counter moves. The underlying trend can be studied by smoothening of the data.
To smooth the data moving average technique is used. If it is five day moving average, on the
sixth day the body of the data moves to include the sixth day observation eliminating the first
days observation. Likewise continues. For this calculation, closing price of the stock is used.
Oscillators:
Oscillator shows the share price movement across a reference point from one extreme to another.
The momentum indicates:
Bar Charts:
In bar charts, two dots are entered to represent the highest and lowest price at which the stock is
traded. A line is drawn to connect both the points a horizontal nub is drawn to mark the closing
prices.
CHART PATTERNS:
These are used as a supplement to other information and confirmation of signals provided by
trend lines. Some of the chart patterns are discussed her1. V Formation:
The name itself indicates that in the V formation there is a long sharp decline and a fast
reversal. The V pattern occurs mostly in popular stocks where the market interest changes
quickly from hope to fear and vice-versa. In the case of inverted ^ the rise occurs first and
declines. These changes are shown in the following diagram.
Price
Days
2. Double Top and Bottom:
This type of formation signals the end of one trend and the beginning of another. The double top
pattern resembles the letter M. The double top may indicate the onset of the Bear Market.
In a double bottom, the price of the falls to a certain level and increase with diminishing activity.
Then it falls again to the same or to lower price and turns up to a higher level. The double bottom
resembles the letter W. Technical analysis views this pattern as a sign for Bull Market. These
patterns are shown in the following charts.
Price
Price
Days
Days
Neckline
Price
Price
Neckline
Days
Days
CHAPTER-2
DATA ANALYSIS
AND INTERPRETATION
DATA ANALYSIS
The data had been analyzed using Tables and Charts.
LIST OF SCRIPS:
10. TISCO
Table 4.1:
DATE
STOCK PRICE
MOVING AVERAGE
5TH JAN
925.45
6TH JAN
907.05
7TH JAN
893.70
894.38
8TH JAN
824.50
888.87
9TH JAN
921.20
878.70
12TH JAN
897.90
871.91
13TH JAN
856.25
886.77
14TH JAN
859.70
886.76
15TH JAN
898.80
16TH JAN
921.15
Chart 4.1:
Chart showing Daily price movement and Moving averages of
RELIANCE IND.
940
920
900
880
STOCK PRICE
860
STOCK PRICE
MOVING AVERAGE
840
820
800
1
10
DAYS
Interpretation:
Table 4.2
STOCK
PRICE
MOVING AVERAGE
5TH JAN
170.90
6TH JAN
161.55
7TH JAN
154.65
159.73
8TH JAN
151.55
156
9TH JAN
160.00
153.43
12TH JAN
152.25
151.3
13TH JAN
148.70
151.58
14TH JAN
144.00
150.98
15TH JAN
152.95
16TH JAN
157.00
Chart 4.2:
155
STOCK PRICE
MOVING AVERAGE
150
145
140
1
10
DAYS
Interpretation:
From the above chart it is observed that,
The stock price curve shows a decreasing trend during first four days. It formed as
V pattern on JAN 8th and JAN 14th due to a long sharp decline and a fast
reversal. It formed as an inverted ^ pattern on JAN 9 th due to the rise and fast
reversal in the stock price. Finally it settled at a price of 157.00, with a loss of
13.90(170.90-157) points on JAN 16th.
The moving average moves along with the stock price. Downward penetration of
the moving average indicates the further fall. Hence Sell signal is generated on
JAN 8th. Upward penetration of moving average would indicate the possibility of
further rise and gives the Buy signal on JAN 12th.
Table 4.3:
DATE
STOCK PRICE
MOVING AVERAGE
5TH JAN
2625.70
6TH JAN
2568.70
7TH JAN
2503.00
2486.61
8TH JAN
2313.15
2417.63
9TH JAN
2422.50
2333.91
12TH JAN
2280.80
2273.94
13TH JAN
2150.10
2304.14
14TH JAN
2203.15
2338.77
15TH JAN
2464.15
16TH JAN
2595.65
Chart 4.3:
Chart showing Daily price movement and Moving averages of BAJAJ AUTO.
2700
2600
2500
2400
STOCK PRICE
2300
STOCK PRICE
MOVING AVERAGE
2200
2100
2000
1
10
DAYS
Interpretation:
From the above chart it is observed that,
The stock price curve shows a decreasing trend during first four days. It formed
as V pattern on the fourth day and inverted ^ on the fifth day of the study. The
price of stocks falls and rises that makes the Inverted head and shoulders.
Connecting the tops of the inverted head and shoulders gives the Neckline. When
the price pierces the neckline from below, it indicates the end of bear-market and
the beginning of the bull market.
The moving average moves along with the stock price. Downward penetration of
the moving average indicates the further fall. Hence Sell signal is generated on
JAN 8th. Upward penetration of moving average would indicate the possibility of
further rise and gives the Buy signal on JAN 12th.
Table 4.4:
DATE
STOCK PRICE
MOVING AVERAGE
5TH JAN
2808.80
6TH JAN
2768.25
7TH JAN
2752.40
2761.54
8TH JAN
2689.80
2747.81
9TH JAN
2788.45
2721.81
12TH JAN
2740.15
2669.71
13TH JAN
2638.25
2675.58
14TH JAN
2491.90
2676.82
15TH JAN
2719.15
16TH JAN
2794.65
Chart 4.4:
2900
2800
STOCK PRICE
2700
STOCK PRICE
MOVING AVERAGE
2600
2500
2400
1
10
DAYS
Interpretation:
From the above chart it is observed that,
The stock price curve shows a decreasing trend during first four days. It
formed
as V pattern on JAN 8th and again on JAN 14th due to a long sharp decline and a
fast reversal in the stock price and it formed as inverted ^ pattern on JAN 9 th and
finally it settled at a price of 2794.65, with a loss of 14.15(2808.80-2794.65)
points on JAN 16th.
The moving average moves along with the stock price. Downward penetration of
the moving average indicates the further fall. Hence Sell signal is generated on
JAN 8th. Upward penetration of moving average would indicate the possibility of
further rise and gives the Buy signal on JAN 12th.
Table 4.5:
DATE
STOCK PRICE
MOVING AVERAGE
5TH JAN
734.35
6TH JAN
726.25
7TH JAN
714.80
727.86
8TH JAN
708.95
728.2
9TH JAN
754.95
722.63
12TH JAN
736.05
715.54
13TH JAN
698.40
717.02
14TH JAN
679.35
711.49
15TH JAN
716.35
16TH JAN
727.30
Chart 4.5:
Chart showing Daily price movement and Moving averages
of MARUTI.
760
750
740
730
720
STOCK PRICE
710
STOCK PRICE
MOVING AVERAGE
700
690
680
670
1
10
DAYS
Interpretation:
By observing the above chart,
The stock price curve shows a decreasing trend during first four days. It
formed
Table 4.6:
STOCK PRICE
5TH JAN
1927.10
6TH JAN
1851.60
7TH JAN
1820.70
1835.83
8TH JAN
1726.10
1792.51
9TH JAN
1853.65
1741.21
12TH JAN
1710.50
1695.68
13TH JAN
1595.10
1713.63
14TH JAN
1593.05
1715.23
15TH JAN
1815.85
16TH JAN
1861.65
Chart 4.6:
Chart showing Daily price movement and Moving averages
of BHEL.
MOVING AVERAGE
2000
1900
1800
STOCK PRICE
STOCK
1700PRICE
MOVING AVERAGE
1600
1500
1
10
DAYS
Interpretation:
By observing the above chart,
The stock price curve shows a decreasing trend during first four days. It
formed
Table 4.7:
DATE
STOCK PRICE
MOVING AVERAGE
5TH JAN
151.40
6TH JAN
148.75
7TH JAN
143.50
148.25
8TH JAN
143.90
147.48
9TH JAN
153.70
145.1
12TH JAN
147.55
143.53
13TH JAN
136.85
145.22
14TH JAN
135.65
143.97
15TH JAN
152.35
16TH JAN
147.45
Chart 4.7:
Chart showing Daily price movement and Moving averages
of MTNL.
155
150
145
STOCK PRICE
STOCK
140 PRICE
MOVING AVERAGE
135
130
1
10
DAYS
Interpretation:
By observing the above chart,
The stock price curve shows a decreasing trend during first four days. It
formed
Table 4.8:
STOCK PRICE
MOVING AVERAGE
5TH JAN
742.65
6TH JAN
728.70
7TH JAN
710.60
727.57
8TH JAN
700.35
722.4
9TH JAN
755.55
717.07
12TH JAN
716.80
714.23
13TH JAN
702.05
722.06
14TH JAN
696.40
717.73
15TH JAN
739.55
16TH JAN
733.85
Chart 4.8:
Chart showing Daily price movement and Moving averages of ACC.
760
750
740
730
STOCK PRICE
720
STOCK PRICE
MOVING AVERAGE
710
700
690
1
10
DAYS
Interpretation:
By observing the above chart,
The price of the ACC stock falls to a certain level and increase with a diminishing
activity. Then it falls again to the same or to a lower price and turns up to a higher
level. It resembles a Double Bottom, which looks like the letter W. The double
bottom is a sign for Bull market.
The moving average moves along with the stock price. Downward penetration of
the moving average indicates the further fall. Hence Sell signal is generated on
JAN 8th. Upward penetration of moving average would indicate the possibility of
further rise and gives the Buy signal on JAN 12th.
Table 4.9:
STOCK PRICE
MOVING AVERAGE
5TH JAN
406.15
6TH JAN
385.20
7TH JAN
360.60
369.91
8TH JAN
338.20
359.86
9TH JAN
359.40
353
12TH JAN
355.90
349.74
13TH JAN
350.65
354.86
14TH JAN
344.55
357.19
15TH JAN
363.80
16TH JAN
371.05
Chart 4.9:
Chart showing Daily price movement and Moving averages
of RANBAXY.
400
380
360
STOCK PRICES
STOCK
340PRICE
MOVING AVERAGE
320
300
1
10
DAYS
Interpretation:
By observing the above chart,
The stock price curve of Ranbaxy shows a decreasing trend during first four days.
It formed as V pattern on JAN 8 th due to a long sharp decline and a fast reversal.
Finally it settled at a price of 371.05 with a loss of 35.10(406.15-371.05) points on
JAN 16th.
The moving average moves along with the stock price. Downward penetration of
the moving average indicates the further fall. Hence Sell signal is generated on
JAN 9th. Upward penetration of moving average would indicate the possibility of
further rise and gives the Buy signal on JAN 12th.
Table 4.10:
Table showing Closing price and Moving Average of TISCO:
DATE
STOCK PRICE
MOVING AVERAGE
5TH JAN
490.60
6TH JAN
479.25
7TH JAN
460.00
462.11
8TH JAN
423.95
448.27
9TH JAN
456.75
429.55
12TH JAN
421.40
414.56
13TH JAN
385.65
412.79
14TH JAN
385.05
412.26
15TH JAN
415.10
16TH JAN
454.10
Chart 4.10:
490
470
450
430
STOCK PRICES
410 PRICE
STOCK
MOVING AVERAGE
390
370
350
1
10
DAYS
Interpretation:
By observing the above chart,
The stock price curve shows a decreasing trend during first four days. It
formed
Table 4.11:
DATE
5TH JAN
2959.00
6TH JAN
2886.70
7TH JAN
2842.00
8TH JAN
2691.00
9TH JAN
2825.55
12TH JAN
2690.00
13TH JAN
2619.45
14TH JAN
2648.00
15TH JAN
2793.00
16TH JAN
2846.20
Chart 4.11:
3000
2900
2800
2700
2600
2500
2400
5TH JAN6TH JAN7TH JAN8TH JAN9TH JAN
12TH JAN
13TH JAN
14TH JAN
15TH JAN
16TH JAN
Interpretation:
By observing the above chart,
The Nifty Index Future shows a downtrend during the study period. It settled at
the price of 2846.20 with a loss of 112.80(2959.00-2846.2) points on Jan 16th.
CHAPTER-3
FINDINGS,
SUGGESTIONS&CONCLUSIONS
FINDINGS:
The following are the major findings of the study.
1. The stock price of RELIANCE IND decline from 925.45 to 921.15 during the
study period. It shows the V and inverted ^ patterns which are the signs of
fluctuations in the price of the stock. The intersection of stock price and moving
average curves gives a sell signal on January 9th and a buy signal on January 13th.
2. There is a downtrend observed in the stock price of HINDALCO during the study
period. The stock price curve shows the V and inverted ^ patterns which are
the signs of fluctuations in the price of the stock. The intersection of stock price
and moving average curves gives a sell signal on January 8 th and a buy signal on
January 12th
3. The daily price movement of BAJAJ AUTO scrip included the V and inverted
^ patterns which are the signs of fluctuations in the stock price. The price of
stocks falls and rises that makes the Inverted head and shoulders that is an
indication of the end of bear market and the beginning of the bull market. The
intersection of stock price and moving average curves gives a sell signal on
January 8th and a buy signal on January 12th.
4. The stock price curve of INFOSYS shows a decreasing trend during the study
period. It falls down from 2808.8 to 2794.65. The formation of V and inverted
^ patterns of the stock price shows the changes in the market interest quickly
from hope to fear and vice-versa. The intersection of stock price and moving
average curves gives a sell signal on January 8th and a buy signal on January12th.
5. The daily price movement of MARUTI scrip also shows a decreasing trend like
the other scripts including some fluctuations due to changes in the market interest
which is indicated through the formation of the V and inverted ^ patterns. The
intersection of stock price and moving average curves gives a sell signal on
January 8th and a buy signal on January 12th.
6. The same downtrend is observed in the stock price of BHEL like other scripts. The
formation of the V and inverted ^ patterns shows the fluctuations in the stock
price. Though it settled with a loss, it indicates an increasing trend from January
14th. The intersection of stock price and moving average curves gives a sell signal
on January 8th and a buy signal on January12th.
7. There is a downtrend observed in the stock price of MTNL during the study
period. The stock price curve shows the V and inverted ^ patterns which are
the signs of fluctuations in the price of the stock. The intersection of stock price
and moving average curves gives a sell signal on January 8 th and a buy signal on
January 12th.
8. The price of ACC scrip resembles a Double Bottom form during the study period,
which indicates the sign for bull market. The intersection of stock price and
moving average curves gives a sell signal on January 8 th and a buy signal on
January 12th.
9. The stock price curve of RANBAXY shows a decreasing trend during the study
period. It formed as V pattern on January 8 th due to a long sharp decline and a
fast reversal. The intersection of stock price and moving average curves gives a
sell signal on January 9th and a buy signal on January 12th.
10. There is a downtrend observed in the stock price of TISCO during the study
period. The stock price curve shows the V and inverted ^ patterns which are
the signs of fluctuations in the price of the stock. The intersection of stock price
and moving average curves gives a sell signal on January 8 th and a buy signal on
January 12th.
11. The Nifty Index Future shows a downtrend during the study period. It settled with
a loss of 112.80 points on January 16th.
SUGGESTIONS:
The following are the suggestions of the study.
1. The findings of the study reveals the buying and selling signals relating to
RELIANCE stock future it is suggested to sell the scrip on January 9th and buy the
scrip on January 13th.
2. The downtrend observed in the stock price of HINDALCO indicates that it is the
right time to buy the stock as it may rise in future. It is suggested to sell the stock
future on January 8th and buy the scrip on January 12th.
3. It is suggested to sell the BAJAJ AUTO stock future on January 8th and buy the
scrip on January 12th.
4. It is suggested to sell the INFOSYS stock future on January 8th and buy the scrip
on January 12th.
5. It is suggested to sell the MARUTI stock future on January 8th and buy the scrip on
January 12th.
6. It is suggested to sell the BHEL stock future on January 8 th and buy the scrip on
January 12th.
7. As study reveals that the intersection of the stock price and the moving average
curves gives a sell signal on January 8 th and a buy signal on January 12th. It is
suggested to follow these signals.
8. The price of ACC scrip resembles a Double Bottom form during the study period,
which indicates the sign for bull market. The intersection of the stock price and the
moving average curves gives a sell signal on January 8 th and a buy signal on
January 12th. It is suggested to follow these signals.
9. The intersection of stock price and moving average curves of RANBAXY scrip
gives a sell signal on January 9th and a buy signal on January 12th. It is suggested to
follow these signals.
10. It is suggested to sell the TISCO stock future on January 8th and a buy signal on
January 12th.
CONCLUSIONS:
By using the tools and techniques helps us to assess and evaluate the companys financial
position and also its share value and moving averages. In this study I used statistical tool of moving
averages which indicates on which date to buy or sell the shares in respected companies.
For example Sell signal is generated on JAN 9 th. Upward penetration of moving
average would indicate the possibility of further rise and gives the Buy signal on JAN
13th for reliance ltd.
BIBLIOGRAPHY
S.NO
BOOK NAME/PUBLISHER
AUTHOR
FINANCIAL MANAGEMENT
Prasanna Chandra
Portfolio Management
JOURNALS
Business line
Punithavathi pandian
NCFM Material
Economic Times
WEBSITES
www.derivativesindia.com
www.nseindia.com
www.5paisa.com
www.bseindia.com
www.indiainfoline.com