This document is a project report submitted by Parshuram Omkar to the University of Mumbai for the Master of Commerce program in partial fulfillment of the requirements for the semester 3 credit and grading system. The project report is on "A Study of Changing Trends in the Capital Market" and was guided by Dr. Rajeshwary G. It includes an introduction to the topic, objectives and hypothesis of the study, need for the study, research methodology, chapter outline, and limitations of the study.
This document is a project report submitted by Parshuram Omkar to the University of Mumbai for the Master of Commerce program in partial fulfillment of the requirements for the semester 3 credit and grading system. The project report is on "A Study of Changing Trends in the Capital Market" and was guided by Dr. Rajeshwary G. It includes an introduction to the topic, objectives and hypothesis of the study, need for the study, research methodology, chapter outline, and limitations of the study.
This document is a project report submitted by Parshuram Omkar to the University of Mumbai for the Master of Commerce program in partial fulfillment of the requirements for the semester 3 credit and grading system. The project report is on "A Study of Changing Trends in the Capital Market" and was guided by Dr. Rajeshwary G. It includes an introduction to the topic, objectives and hypothesis of the study, need for the study, research methodology, chapter outline, and limitations of the study.
This document is a project report submitted by Parshuram Omkar to the University of Mumbai for the Master of Commerce program in partial fulfillment of the requirements for the semester 3 credit and grading system. The project report is on "A Study of Changing Trends in the Capital Market" and was guided by Dr. Rajeshwary G. It includes an introduction to the topic, objectives and hypothesis of the study, need for the study, research methodology, chapter outline, and limitations of the study.
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UNIVERSITY OF MUMBAI
PROJECT REPORT ON A SYUDY INTO THE CHANGING TRENDS IN THE CAPITAL MARKET
MASTER OF COMMERCE (Banking & Finance)
SUBJECT: RESEARCH METHODOLOGY SEMESTER III 2015-16 In Partial Fulfillment of the Requirement under Semester Based Credit and Grading System for Post Graduates (PG) Programme under Faculty of Commerce
SUBMITTED BY PARSHURAM OMKAR
Roll No.: 38
PROJECT GUIDE Subject Teacher name Dr. RAJESHWARY G.
THE BEST COLLEGE OF UNIVERSITY OF MUMBAI FOR THE ACADEMIC YEAR 2010 Prin. Dr. Minu Madlani (M. Com., Ph. D.)
CERTIFICATE
This is to certify that Mr. PARSHURAM OMKAR
of
M.Com (Banking &
Finance) Semester 3rd [2015-2016] has successfully completed the Project on A
STUDY OF CHANGING TRENDS IN CAPITAL MARKET under the guidance of Dr. RAJESHWARY G.
________________ Project Guide coordinator
________________ Co-
________________
________________
Internal Examiner
External Examiner 3
________________
________________
Principal
College
Seal
DECLARATION
I Mr. PARSHURAM OMKAR student of M.Com-Banking & Finance, 3rd
semester (2015-2016), hereby declare that I have completed the project on A STUDY OF CHANGING TRENDS IN CAPITAL MARKET
The information submitted is true and original copy to the best of our knowledge.
(Signature) Student
TABLE OF CONTENTS
SR. NO
PARTICULARS
PAGE NO.
1.1
Introduction
6-8
1.2
Objectives Of Study
1.3
Hypothesis
1.4
Need for the Study
1.5
Research Methodology
10
1.6
Chapter Scheme
10
1.7
Limitations
10
2.1
Review of Literature
11-12
2.2
Reference
13
An Overview of Indian Capital Market
Bibliography
14-16 17
4 5
QUESTIONNAIRE
Chapter 1 1.1
Introduction
After a period of sustained growth, the Indian capital markets suffered a slowdown due to the global financial crisis. However, since early 2009, the markets have recovered. Indices have gained over 80%, and market cap has more than doubled, making India one of the top performing markets. In a new report, Indian Capital Markets: Trends and Prospects, Celent analyzes trends and opportunities in various segments of the Indian capital market including the equity, debt, and derivatives segment. The report focuses on the drivers of growth in each area and the roadblocks hampering development. It also studies trends in the retail and institutional segments, with a focus on the issues responsible for the current lull in the retail investment space.
Capital market research is an essential activity for companies because it enables them to provide products and services that are useful for the targeted consumers. Such a focused and logical approach enhances the profit making possibilities of companies. The companies can earn more dividends and at the same time minimize risks as a result of research on capital markets. One big advantage of capital market research is establishment of proper communication between the companies and the customers. The customer reactions to various services provided by the companies can be measured as a result of capital market research.
The companies can thus do away with wrong policies and look to take the right steps. The companies can also locate the right opportunities through market research. If the company 6
undertakes capital market research before launching a new product or service then it stands a better chance of getting a good return. Risk minimization is another reason for undertaking capital market research. Through this research, the exact needs of the market and the general public can be gauged and the products and services can be made very demand oriented.
The companies can also analyze whether they are making progress in the right direction. Capital market research should be done as early as possible in order to avoid problems in the future. Before investing in the stock market, capital market research needs to be undertaken. Research involves finding the companies and stock prices that would best suit the financial situation of the investor. The company profile needs to be studied and the size of the company is another important parameter of stock market investment research. Gathering information on the history of the company is another facet. Its history of profits and popularity and its performance in the past must be analyzed before investing in the shares of that company. Research on the products and services of various companies is also very important. Investments should be made for the long term. This minimizes risk and increases profitability. Lastly, investment should be made wisely and regularly and this results from a good capital market research.
Every company needs long-term as well as short-term capital. Long-term capital is required essentially for investment in fixed assets such as land, building, plant and machinery, vehicles, etc. It also includes core working capital and certain kinds of R&D, pre-operating expenses and preliminary expenses incidental to setting up a business, which are required to be deployed or incurred for the production or rendering of goods and services.
Short-term capital or working capital on the other hand, is required essentially for financing the requirements of the day-to-day operations of the business, such as raw materials, work-inprogress, finished goods, trade debtors, etc. capital market is thus a broad term, which includes primary markets, secondary markets, term lending institutions, long-term bonds and debenture markets, banks, investors, and almost anybody who is engaged in providing long-term capital(whether equity or debt capital) to the industrial sector.
Year 2008 was the most eventful year for the capital market. The year that started on the bull note has lost their entire lustrous gain that they gained in 2007 .This was sparked by the subprime crisis and their ripple effects, bad economic news started from the USA and spread throughout the world and the effect was so cascading that they ruined the sentiments in capital markets globally and indexes of global market secularly crashed more than 65%. Any positive development, long term growth story, fundamental storey everything blown by bears that came in hurry.
The market where investment instruments like bonds, equities and mortgages are traded is known as the capital market. The capital market offers both long term and overnight funds. The different types of financial instruments that are traded in the capital markets are: 1. equity instruments 2. credit market instruments 3. Insurance instruments 4. Foreign exchange instruments 5. Hybrid instruments and derivative instruments.
Nature of capital market
The nature of capital market is brought out by the following facts: i.
It Has Two Segments Buyers & Sellers
8
ii.
It Deals In Long-Term Securities
iii.
It Helps In Capital Formation
iv.
It Helps In Creating Liquidity
1.2
Objectives of Study
The present study has been carried out with the following objectives:
1. To know changing trend of the capital structure.
2. To determine that how the Indian economy affected through the changing trends in share market. 3. To determine that how the changing trends affect investors behavior.
1.3
Hypothesis
i.
H0: Investors are affected by the changing trends in the capital market. H1: Investors are not affected by the changing trends in the capital market.
ii.
H0: The changing trends is not useful for the Indian Economy. H1: The changing trends is not useful for the Indian Economy.
1.4
Need for the Study
This study will serve as a baseline for improvement actions using feedback by providing, overall satisfaction level of investors with different aspects of their experience and to know about how investors perceive their day to day experiences at Capital Markets.
1.5
Research Methodology
This information is been collected from both Primary and Secondary source. Secondary information includes data collected from sources such as Reference Books, Articles and Websites.
1.6
Chapter Scheme
This study consists of the following chapters 1. Introduction
2. Review of Literature 3. An Overview of Capital Market.
10
1.7
Limitations
This study is restricted with respect to changing trends in capital market only and not any other Market. The study is restricted to collect information or survey from 30 respondents. The research is restricted to analyze only changing trends in Capital Market and not any other market.
Chapter 2 Review of Literature A Review of Literature is a significant aspect of any research work to know, what others have learned from similar research situations and areas of agreement and disagreement. For the survey of existing literature, the research and articles published on Internet was referred. The observations and findings presented in this section are based on this literature review. Raghunathan and Varma (1992): point out that any comparison of the Indian stock market with those elsewhere must be carried out on a common currency base. They find that in dollar terms, the SENSEX return over the 1960-92 period is only about 0.5%, while during the same period the returns in the U.S. (based on the S & P Index) and the Japanese (based on the NIKEI index) are 6.1% and 11.4% per year respectively. Over the twelve year period 1980-92, the dollar returns for SENSEX, S & P and NIKEI indices turn out to be 6.5%, 10.65% and 13.6% respectively. For a shorter span of seven years, namely 1985-92, the returns for the three indices turn out to be quite comparable at 15%, 13% and 14% respectively.
Venkateshwar (1991): explores the relationships of the Indian stock markets as reflected by the Bombay Stock Exchange Index, vis-a-vis other prominent international stock markets. 23 11
international Stock indices are used over the period 1983-87. He concludes that there is practically no meaningful relationship between the BSE index and other international stock market indices, though the British and South Korean indices are inversely related to BSE.
Pandya (1992): observes that as a regulatory and development body, SEBI's efforts in the direction of investor protection are varied and unlimited. The measures brought in by SEBI broadly cover measures for allocative efficiency in the primary market with fair degree of transparency, reforms in the secondary market for visible and mutual funds, regulation of various market intermediaries and above all for the protection of the investing public.
Barua (1993)). Dhillon (1993): in his doctoral dissertation studies the regulatory policies of Bombay Stock Exchange (BSE) over a four year period (July 1986 - June 1990). His findings show that regulatory authorities decide changes in their margin policy on the basis of market activity. He finds that the margins are prompted by changes in settlement returns, price volatility, trading volume and open positions. Granger causality results show that there is limited causality in the reverse direction: margin changes do not affect returns, and have only a limited impact on price volatility, trading volume and open positions. Event study methodology applied to daily margins show similar results, except that daily margin on sellers do not appear to be affected by market variables.
Zahir and Yakesh (1982): Examines the impact of leverage on equity prices and concludes that Modigliani-Miller hypothesis is not supported. However, the risk proxy used in the paper, namely, coefficient of variation of net operating income, is highly questionable. Find the dividend per share to be the most important variable affecting the share price, followed by dividend yield, book value per share, dividend coverage and the return on investment, in that order.
Obaidullah (1992) : Also concludes that there is no evidence to suggest that learning lags exist or that the assimilation of information is slow. Rights issues made below market prices are similar to bonus issues in some respects. In fact, a rights issue at a discount from the market price can be decomposed conceptually into a bonus issue and a rights issue at market prices.
12
References: 1.
Raghunathan V & Varma J R (1992a) "Why the Dollars do not Flow into India", Unpublished Paper, Indian Institute of Management, Ahmedabad.
2. Venkiteswaran N (1990), "Guidelines on Share Valuation : How Fair is Fair Value?"
3. Pandya V H (1992), "Securities and Exchange Board of India: Its Role, Powers, Functions and Activities", Chartered Secretary. 4. Barua S K & Varma J R (1993), "RBI Autonomy and the Indian Financial Sector. 5.
Zahir M A & Khanna Yakesh (1982), "Determinants of Stock Prices in India".
6. Obaidullah M (1992), "How do Stock Prices React to Bonus Issues?"
13
Chapter 3 An Overview of Indian Capital Market The Indian capital market is more than a century old. Its history goes back to 1875, when 22 brokers formed the Bombay Stock Exchange (BSE). Over the period, the Indian securities market has evolved continuously to become one of the most dynamic, modern, and efficient securities markets in Asia. Today, Indian market confirms to best international practices and standards both in terms of structure and in terms of operating efficiency .Indian securities markets are mainly governed by a) The Companys Act1956, b) the Securities Contracts (Regulation) Act 1956 (SCRA Act), and c) the Securities and Exchange Board of India (SEBI) Act, 1992. A brief background of these above regulations are given below a) The Companies Act 1956 deals with issue, allotment and transfer of securities and various aspects relating to company management. It provides norms for disclosures in the public issues, regulations for underwriting, and the issues pertaining to use of premium and discount on various issues.
14
b) SCRA provides regulations for direct and indirect control of stock exchanges with an aim to prevent undesirable transactions in securities. It provides regulatory jurisdiction to Central Government over stock exchanges, contracts in securities and listing of securities on stock exchanges. c) The SEBI Act empowers SEBI to protect the interest of investors in the securities market, to promote the development of securities market and to regulate the security market. The Indian securities market consists of primary (new issues) as well as secondary (stock) market in both equity and debt. The primary market provides the channel for sale of new securities, while the secondary market deals in trading of securities previously issued. The issuers of securities issue (create and sell) new securities in the primary market to raise funds for investment. They do so either through public issues or private placement. There are two major types of issuers who issue securities. The corporate entities issue mainly debt and equity instruments (shares, debentures, etc.), while the governments (central and state governments) issue debt securities (dated securities, treasury bills). The secondary market enables participants who hold securities to adjust their holdings in response to changes in their assessment of risk and return. A variant of secondary market is the forward market, where securities are traded for future delivery and payment in the form of futures and options.
The futures and options can be on individual stocks or basket of stocks like index. Two exchanges, namely National Stock Exchange (NSE) and the Stock Exchange, Mumbai (BSE) provide trading of derivatives in single stock futures, index futures, single stock options and index options. Derivatives trading commenced in India in June 2000
Other leading cities in stock market operations
Ahmadabad gained importance next to Bombay with respect to cotton textile industry. After 1880, many mills originated from Ahmadabad and rapidly forged ahead. As new mills were floated, the need for a Stock Exchange at Ahmadabad was realized and in 1894 the brokers formed "The Ahmadabad Share and Stock Brokers' Association".
15
What the cotton textile industry was to Bombay and Ahmadabad, the jute industry was to Calcutta. Also tea and coal industries were the other major industrial groups in Calcutta. After the Share Mania in 1861-65, in the 1870's there was a sharp boom in jute shares, which was followed by a boom in tea shares in the 1880's and 1890's; and a coal boom between 1904 and 1908. On June 1908, some leading brokers formed "The Calcutta Stock Exchange Association".
In the beginning of the twentieth century, the industrial revolution was on the way in India with the Swadeshi Movement; and with the inauguration of the Tata Iron and Steel Company Limited in 1907, an important stage in industrial advancement under Indian enterprise was reached. Indian cotton and jute textiles, steel, sugar, paper and flour mills and all companies generally enjoyed phenomenal prosperity, due to the First World War. In 1920, the then demure city of Madras had the maiden thrill of a stock exchange functioning in its midst, under the name and style of "The Madras Stock Exchange" with 100 members. However, when boom faded, the number of members stood reduced from 100 to 3, by 1923, and so it went out of existence. In 1935, the stock market activity improved, especially in South India where there was a rapid increase in the number of textile mills and many plantation companies were floated. In 1937, a stock exchange was once again organized in Madras - Madras Stock Exchange Association (Pvt) Limited. (In 1957 the name was changed to Madras Stock Exchange Limited). Lahore Stock Exchange was formed in 1934 and it had a brief life. It was merged with the Punjab Stock Exchange Limited, which was incorporated in 1936.
QUESTIONNAIRE A STUDY INTO THE CHANGING TRENDS IN CAPITAL MARKET Please tick the appropriate in below mentioned questions. Name: _______________________________________________________________________ Gender: a) Male ______________
b) Female ______________
Age:
b) 22 to 24 years ______
a) 18 to 21 years ______
c) 25 to 30 years ______
Qualification: a) Undergraduate ________ b) Graduate ________ c) Post-graduate ________
1. Are you satisfied with the changing trends in capital market? a) Yes ______________
b) No _______________
2. Are the services offered satisfactory according to your needs?
18
a) Yes ______________
b) No _______________
3. How easy is it to open demat a/c in the bank?
a) Very Easy _____
b) Easy _____
c) Difficult _____
d) Very Difficult _____
4. Do the counter services at the capital market meet the needs of the customers? a) Yes ______________
b) No _______________
5. How easy it is to obtain resources you need from the Capital Market? a) Very Easy _____
b) Easy _____
c) Difficult _____
d) Very Difficult _____
6. Do you find the staff and counter members Co-operative?
a) Yes ______________
b) No _______________
7. Is the services providing members of capital market are enthusiastic?
a) Yes ______________
b) No _______________
8. Based on your experience, Please indicate your level of satisfaction with the changing trends in capital market? a) Highly Satisfied ____ b) Satisfied ____ c) Neither ____ d) Not Satisfied ____ 9. Are you satisfied with the services provided by the capital market in all its insturments? a) Highly Satisfied ____ b) Satisfied ____ c) Neither ____ d) Not Satisfied ____ 10. Is the new Demat System introduced helpful to you? a) Yes ______________
b) No _______________
11. Are you satisfied with the new E-Payment System?
a) Highly Satisfied ____ b) Satisfied ____ c) Neither ____ d) Not Satisfied ____ 12. Do you think that it creates opportunities for the customers? a) Yes ______________
b) No _______________
13. Does the pattern of services provided by the capital market inspire you to continue with the Capital Market? 19
a) Yes ______________
b) No _______________
14. Overall are you satisfied with your experience at Capital Market? a) Highly Satisfied ____ b) Satisfied ____ c) Neither ____ d) Not Satisfied ____
