impact of research calls and financial news on investors' sentiments

8/14/2019 impact of research calls and financial news on investors' sentiments

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A REPORT

ON

ANALYZING THE IMPACT OF RESEARCH CALLS AND

TOP FINANCIAL NEWS ON INVESTORS

SENTIMENTS

BY

VISHAL JAIN


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NAME OF ORGANIZATION:

RELIGARE SECURITIES LTD.

A REPORT

ON

ANALYZING THE IMPACT OF RESEARCH CALLS AND

TOP FINANCIAL NEWS ON INVESTORS

SENTIMENTS

BY

VISHAL JAIN

NAME OF ORGANIZATION:

RELIGARE SECURITIES LTD.


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Date of submission

18th APRIL 2009

Declaration

I hereby declare that this dissertation entitled ANALYSING THE IMPACT OF

RESEARCH CALLS & TOP FINANCIAL NEWS ON INVESTORS SENTIMENTS is a

bona fide and genuine work carried out by me under the guidance of Dr. Renu Verma,

Faculty Member, ICFAI School of Financial Studies, Gurgaon. The work is original andhas not been submitted in part or full to any other submitted in part or full to any other

university for the award of any degree or diploma.

The report is submitted as partial fulfillment of the requirement of MBA Program of IBS.


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Acknowledgement

I would like to acknowledge and extend my heartfelt gratitude to thefollowing person who has made the completion of this Summer InternshipProgram possible:

Mr. Sunil Godwani (C.E.O. of the organization), for giving me the opportunityto work in the organization

Mr. Vivek Agarwal (Company Guide), for his encouragement, understandingand assistance in the project throughout my internship period.

Dr. Renu Verma (Faculty Guide), for the constant reminders and much

needed motivation. Without her help and guidance this project would not

have been possible.

Mr. Vivek Ranjan, for the inspiration he extended. He also helped me by

clearing any doubts that used to crop-up and also providing me with all the

information that might help me with the report.

All Religare members and Staff, for assisting me in understanding the

terminologies of market

Most especially to my family and to God who made all things possible.


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Abstract

Religare believes in providing independent research for clients to makeinvestment decisions, with strict emphasis on self-regulation, avoiding

possible conflict of interest in objectivity. Religare is spending a huge amounton the development of the quality of such research. The project is inclinedtowards the successability of such expenditure. The success of research ismeasured in terms of increase in price or volume of the concerned security.That means if investors react as per the research call then there will be anincrease/decrease in price or volume of that security. The flow of informationis as follows:

Also, a step has been taken to get the reaction of investors on particularfinancial news. The hypothesis is that top financial news is also one of thecomponents which affect the investment decision.


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Table of contents

Declaration(i)Acknowledgement(ii)Abstract(iii)

1. Introduction ..11.1Purpose, scope & limitations of the project .

....11.2Scope & limitations of the study

..21.3Sources & background materials.

.3

2. Main text ...42.1Description of the project

42.2Methodology

...52.3Schedule ..

.62.4Illustration

...82.4.1 Interpretation & assumption

......9

2.4.2 Results obtained ....10

3. Analysis ..123.1Tool for analysis- Z test for proportion ..

123.2Market analysis

.....14


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3.3EMH theory

..17

4. Impact of financial news on investors sentiments

18

4.1Financial events: frequency & intensity

19

4.2Important financial events ..

....20

4.3Inflation, rate of interest (fisher effect), M&A, insider tradin .

22

5. Conclusion

.26

6. Recommendation

.....27

7. Appendix

.28

7.1Closing value of NSE index and 3 securities .......

28

7.2About NSE .

357.3Sub- prime crisis

36

8. Bibliography.....

37

Introduction

A report is said to be effective when it brings some value addition to theorganization. The concerned project is helpful in the strategic decision of thetop level management. With this note, a brief introduction of the report is asunder:


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Purpose of the report:

Investment decision is affected by a number of factors. The purpose of reportis that out of too many factors how much Research calls and top financialnews effect the investment decision. On one hand, company is incurring ahuge expenditure on Research Department. On the other hand company hasto survive in the current recessionary period. So to balance the situation, itbecomes important to analyze whether to continue or discontinue withexpenditure on research department. If investors react as per the researchcalls then it is fruitful to carry on otherwise no expenditure is required to be

made in order to develop the research calls.

Scope of the report:

The report covers a number of areas such as fundamental and technicalresearch, intraday research calls etc. Besides that it also covers the basicknowledge of stock exchange trading in equities, commodities, factorsaffecting investment decisions etc. It also provides the understanding of howa small step taken by the company can affect its market price and how a

particular news (i.e. change in government policy) can affect the investors,how different sectors are connected, how a single action of a companyaffects the share prices of other companies (change in share price of twowheelers companies when NANO car was launched). So the report covers alot of aspects of financial market.

Limitations of the report:

Though the report covers a lot of aspect of financial market but if fails to

include the other emerging aspects of different sectors like portfoliomanagement, insurance, FDI management, current investment avenues andeffect of recession on different other fields like infrastructure, banking,manufacturing, consultancy, import-export etc. There is no scope ofindustrial relations and innovative marketing strategies in the report.


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Scope of study:

For the effective implementation of project report the basic knowledge ofstock exchange trading is required. I need to update myself from the currentfinancial news and an analytical view on the international market. So for thisreason, newspaper reading is compulsory along with the reading of othermaterial from different magazines, articles and information over the net.Ability of applying conceptual knowledge in the practical business ismandatory.

Limitations of study:

Though the project carries a lot of learning but it cannot be escaped fromcertain limitations.

Direct contacts with the clients cannot be made. I may not getthe feeling of investors or reaction of investors through a directmode but indirectly by looking at the success ratio of Researchcalls and buy/sell quantity of a security on the basis of decidednews.

Most of the work is repetitive in nature, so it may limit the

creativity and a sense of applying the skills again and again.

The project would limit the knowledge as it would not be helpfulin exploring all the sectors and other financial issues like portfoliomanagement, fund management etc.

Project does not reveal the methodology, adopted by Research

Department for developing a call.

Sources of data:

Basic software has been installed by the IT Department of the company onmy laptop. I get all the research calls on real time basis as provided to thedealers. I can watch the online price/volume of any security listed on BSE orNSE. Newspaper reading provides a lot of insights of the world market. Input


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is also obtained from the internet. Besides this, a lot of stuff and practical knwledge is developed by interacting with the dealers, investors and listeningto experts comments over the T.V. o

Background materials:

A lot of factors move in the background of the report such as world marketsituations, confidence level of the investors, current inflation rate,government policies, availability of funds (C.R.R. rate, S.L.R. rate), policies of

the companies, mergers, acquisitions, demand for currency, economicgrowth, FDI, bi-lateral agreements between countries, slow down of worldeconomy and steps taken to fight against recession. A careful watch on allthese factors makes the project more analytical.


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Main text

Description of project:

The research calls are developed by the Research Department which issitting at Mumbai. These calls are merely a prediction about the probableBuy/Sell price of a security. This information is the internal asset of theorganization which is passed on all the dealers of the organization across thecountry at the same site. These calls work as a weapon for the dealers whotake the help of such calls while suggesting to their clients for makinginvestment in that security.

I too get these calls on my laptop. I record the calls on real time basis andkeep an eye on the performance of that particular security. If the predictionmatches with the actual Buy/Sell price of that security, then the call is said tobe successful otherwise failure. I need to perform some calculations inorder to figure out the success/failure ratio of such calls.

Also, I take the help of Economics Times and CNBC TV18 in order to obtainthe top financial news of the day. Top news is decided on the basis of dealersreaction and emphasis by the experts on that news over the net or TV. Then Ilook at the buy and sell quantities as well as prices of those securities inorder to find out how quickly and judiciously investors react on the upcoming

news. If there is a rapid change in the Buy/Sell quantity of that security thenit shows that investors are interested in making short-term profits ratherthan associated with a security for a long period of time by way of theirportfolio or Systematic Investment Plan (SIP).


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Methodology:

I get the calls on regular basis. At the end of the day, I need to carry on thecalculations. Also the top news is to be decided on regular basis. So my timeframes of all these activities are as follows:

TIME ACTIVITY 09:30 A.M. Reporting at the organization

09:30A.M.-09:55A.M.

Initial settings are done like: connecting to LANwire, opening up the concerned files on laptop etc.

09:55A.M.-03:30P.M.(Trading Hours)

The following steps are taken up:

1. All the Research calls are noted down which

are flashed at different times during thetrading hours.

2. I need to look at the performance of thatsecurity until the target is hit or the next callcomes for the same security.

3. With the help of newspaper reading, watching


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CNBC TV 18, surfing internet and dealersreaction in the trading room I decide the topfinancial news of the day.

4. On the basis of the news I look at the marketperformance of the security and analyze thereaction of the investors by looking atbuy/sell quantity of that security.

03:30P.M.-04:00P.M.

Final calculations are done in order to find out thehit ratio of Research calls.

04:00P.M.-05:30P.M.

Discussion with the dealers and other staff of theoffice to get more insides of equity trading.

05:30P.M. Check out.

Schedule:

Whole project has been divided into 3 phrases. The time frame and main

activity under all phrases are as follows:

Phrase Main activity Description

Phrase 1Analyzing theefficiency of

Under this phrase, with the help ofproposed methodology,


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Research calls. success/failure ratio of research callswould be found out. This task wouldgo on regular basis.

Phrase 2Analyzing theimpact of financial news oninvestorssentiments.

At this phrase a careful study ofmarket situation would fetch the topfinancial news of the day. This newswould show the reaction of theinvestors in terms of change inbuy/sell quantity of the security.

Phrase 3Generating theanalytical reports.

All the work done under phrase 1 & 2would be combined to get themathematical and analytical reportwhich would show impact of Researchcalls and financial news on investorssentiments.

All these phrases would go on during the entire period of SIP. Phrase 1 & 2would be carried on simultaneously in weekdays i.e. Monday- Friday. Phrase3 would be accomplished on weekends. In this way weekly reports would begenerated. At the end of SIP period all the reports generated under phrase 3

would be combined in order to get the trend and final analysis of thefindings.


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Illustration:

The following are the research calls which I get over the net.

Data collection (research calls) on 25-06-2009

10:23 Buy Siemens around 241 stop below 238

10:25 ADLAB 153 BOOK SMALL PROFIT AND EXIT SHORT POSITION

10:28 Book part profits for Siemens long position around 244.5

10:41 Buy Tata power around 702 stop below 697

10:46 BUY HLL 240.50 SL 237 TRGT 247

10:47 Book part profits for Tata power long position around 712

10:54 Book part profits for Bharti short position around 594 and lower stopfor remaining short position to 600

11:07 Raise stop for balance long position in Tata power to 702

11:10 ICICI Bank around 358 lower stop for short position to cost and bookpart profits

11:33 Book part profits for balance long position in Tata power around 718

11:38 Book part profits for Hind petro long position around 256.5 and raisestop for balance long position to 253

11:48 HLL 239.50 pl close long position

13:42 BUY SMALL QTY HDFC 1586 SL 1569 TRGT 1608

15:01 BTST BUY SUZLON 44.60 SL 43 TRT 48

15:07 BTST Siemens stop below 235


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Interpretation:

These are the predictions of the research team. Now here, the top left sideshows the time when such calls were displayed. These calls are inclinedtowards the following actions:

Buy- It suggests the investor to buy the security at a particular price.

Sell- It suggests the investor to sell the security at a particular price.

Stop loss- The prices of a security moves as per the marketconditions. So sometimes researchers do tell the price up to which riskcan be beard.

For example- the very first research call displayed at 10:23 A.M. showsthat investors should purchase Siemens shares at a price level of Rs.241. If price goes down below Rs.241 then investor should sell theshares at a price level of Rs. 238. Reason is that prices might go downfurther which add losses to the investor. So to minimize the lossresearchers sometime display the stop loss.

Target- Target is the price level up to which the price of a security isexpected to move.For example- the call at 13:42 A.M. shows that price of HDFC isexpected to go at the level of Rs. 1608.

Assumption:

The basic assumption is that whenever there is a call to buy, the buyingquantity would be 100 units. If the call is to sell, then half the sharespurchased would be sold.For example- if two calls are hit for ICICI Bank then each time 100 units

would be purchased. If 3

rd

call is to sell ICICI Bank then half of purchasedunits i.e. (100+100)/2= 100 units would be sold. If 4th call is again to sellICICI Bank then out of available 100 units, 50 units would be sold and so on.


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Results obtained:

Now all this data is entered in the excel sheet in order to get the results. Theabove calls of a day have been entered in the excel sheet which seems asfollows:

S.

No.

T

ime

Scrip buy/se

ll

buy

price

buy

qty

sell

price

sell

qty

stop

loss

qt

y

targ

et

S/

F

1 10:2

3

Siemen

s

buy 241 100 - - 238 10

0

- S

2 10:2

5

Adlab sell - - 153 50 - -5

0

- S

3 10:2

8

Siemen

s

sell - - 244.5 50 - -5

0

- S

4 10:4

1

tatapow

er

buy 702 100 - - 697 10

0

- S

5 10:4

6

Hll buy 240.5 100 - - 237 10

0

247 F

6 10:4

7

tatapow

er

sell - - 712 50 - -5

0

- F

7 10:5

4

Bharti sell - - 594 50 600 -5

0

- S

8 11:0

7

tatapow

er

buy 702 100 - - - 10

0

- S

9 11:1

0

iciciban

k

sell - - 358 50 - -5

0

- S

10 11:3

3

tatapow

er

sell - - 718 75 - -7

5

- F

11 11:3

8

hindprtr

o

sell - - 256.5 50 253 -5

0

- S

12 11:4 Hll sell - - 239.5 50 - -5 - S


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8 0

13 13:4

2

Hdfc buy 1586 100 - - 1569 10

0

1

608

S

14 15:0

1

Suzlon buy 44.6 100 - - 43 10

0

48 S

15 15:0

7

Siemen

s

sell - - 235 50 - -5

0

- S

Once the data is entered in the excel sheet I have to immediately look at theongoing market price of the security. If the investors react as per the call,(i.e. if there is a large number of buying or selling, as the case may be, takesplace) the call is marked as S which means success otherwise F which

means failure.

Example of a Success call and a Failure call

A Success Call

IVRCL Current Time Research Time

Sell Price 54.75 56

Sell Quantity 51 2144


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The call is to sell IVRCL at Rs. 56. At the time of this call the sell price ofIVRCL is Rs. 54.75. Now when price is Rs54.75, only 51 quantities were sold.When price actually hit the call price which is Rs. 56, quantities sold at thisprice is 2144 shares. It can be seen that there is a sharp rise in the numberof shares sold. Thus investors have reacted as per the research call and thecall is successful.

A Failure Call

SUZLON Current Time Research Time

Sell Price 155.65 157

Sell Quantity 108 25

The call is to sell Suzlon at Rs. 157. At the time of this call the sell price ofSuzlon was Rs. 155.65. Now when price is Rs. 155.65, total 108 quantitieswere sold. When price actually hit the call price which is Rs. 157, quantitiessold at this price is only 25 shares. It can be seen that there is no rise in thenumber of shares sold. Thus investors have not reacted as per the research

call and the call is failure.

Applying the mathematical tool to get the success ratio of

the calls:

ABC security ltd. claims that its 80% research calls are successful. To test thisclaim, a random sample of 50 calls has been taken out of which 45 calls werefound successful. Test at = .05 significance level whether the hypothesis istrue.


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Step 1- Stating the hypothesis

Ho : = 0.8H1 : 0.8

Step 2- Specifying the desired level of significance & sample

size

= 0.05 & n= 50

Step 3- Determining the appropriate technique

Z-test for proportion

Step 4- Determining the critical values

For = 0.05 the critical Z values are 1.96

Step 5- Computing the test statistic

p (proportion) = 45/50 = 0.9 or 90%

Step 6- Is the test statistic in the acceptance/rejection region?

Reject .025 Reject .025

1.77

50

0.8)0.8(1

0.80.9

n

)(1

pZ =

=

=


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- 1.96 0 1.77

+ 1.96

Step 7- Conclusion

Here, Z = 1.77 < 1.96. So, the test statistics is in the acceptance

region. Therefore, Ho is

accepted i.e. companys claim of 80% of research calls being successful is

true.

Market analysis

In this section a step has been taken to show how the performance ofdifferent securities affects the index value. In the following example closing


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value of 3 different securities listed on NSE has been taken for the periodending 31st March 2009.

List of prices of the securities and index has been attached in

appendix.

CHART-1

Analysis

At the beginning of the graph, all securities are performing well whichmake index move upward.

When there is decline in all the security prices, index also falls.

As soon as securities start performing well index also improves.

CHART-2

Analysis-

At the first half of the graph both the securities are following the sametrend which shows reaction pattern of both the sectors is same.


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Due to economic slowdown, Relcapital declines rapidly but due tosteps taken by RBI on different time period, the decline in HDFCBank isnot so rapid.

So it can be concluded that any change in one sector effect theperformance of security in other sector. Thus market needed to bestudied as whole.

CHRAT-3

Analysis-

Satyam prices start declining rapidly as soon as the frauds on accountscome out. So prices went as low as Rs. 23 per share from the pricerange of Rs. 450 at the beginning of the year.

As one of the hot stock on NES, decline in satyam share price affect

the index. Though this effect was very low on index but it shacked the

confidence level of investors thus decline the value of index.

Now the Satyam has been taken over by Mahendra so there is a hope

for Satyam to get its grace back.


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Efficient Market Hypothesis

The efficient-market hypothesis (EMH) asserts that Financial markets are

"informationally efficient", or that prices on traded assets, e.g., stocks,

bonds, or property, already reflect all known information.

The efficient-market hypothesis states that it is impossible to consistently

outperform the market by using any information that the market already

knows, except through luck.

Information or news in the EMH is defined as anything that may affect prices

that is unknowable in the present and thus appears randomly in the future.

Weak Form Efficiency - Share prices exhibit no serialdependencies, meaning that there are no "patterns" to asset prices.

Semi Strong Efficiency share prices adjust to publicly available

new information very rapidly and in an unbiased fashion, such that no

excess returns can be earned by trading on that information.

Strong Form Efficiency - Share prices reflect all information, public

and private, and no one can earn excess returns.


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Impact of top financial news on investors

sentiments

Stock markets are volatile in nature, makes several ups and downs, thereby

provide hefty returns and sometimes wipe out the whole wealth of investors.

The objective behind taking this initiative is to ascertain which news

(specifically financial news) holds greater importance in the stock price

movement thereby affecting investors sentiments.

Any news, be it financial, political, economical, social etc. has effects on the

stock price movements. Investors take into consideration all these things &then invest. Only financial news has been taken into consideration as the

objective is to determine which financial news should be given greater

weightage so that an idea can be taken as to the importance of news &

suggestions can be given more proximately to the investor regarding the

future price movement of company stock.


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Events with of low frequency that is there news comes less time but

there impact is much higher.

Similarly, Management and Operations are the events whose newscomes very many times but they impact less on the stock prices.

So it can be concluded that every financial news has some or the other

effect on investors sentiments.

Important financial events which affect the stock prices:

Macro Economic Events:

1. Economy Specific Events: Economy Specific Events like

Budget, Inflation, GDP, Annual growth, Liberal Monetary policy,

etc. have not been analyzed as it will have same tendency for all

the stocks in the sector.

2. Industry Specific Events: Government plan to regulate or

deregulate the sector, Change in sector specific interest rate onborrowing, Subsidy, Change in tax structure, etc will again

impact all the stocks of the market.

So news pertaining to these events shows an instant reaction by the

investors as it will impact all the companies in the same way either positive


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or negative. It just depends upon the scale and level at which company is

working in the market.

Multi Events: There are conditions when more than one news of acompany has come out. For ex: the news for Merger and Acquisition

and Litigation came together. In such cases the share price of the

securities exhibits the result of such news.

Following are the other factors which affects stock price:

Stock market prices are affected by business fundamentals, company and

world events, human psychology, and much more.

Stock trading is driven by psychology just as much as it is by business

fundamentals, believe it or not. Fear and greed are the two of the strongest


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human emotions that affect the market. For example, it is easy to get caught

in the trap of selling a stock prematurely because it dipped temporarily and

fear set in. On the other hand, it is also easy to miss out on a respectablegain because greed was telling you to hold out for more, and then the stock

drops back down.

One of the main business factors in determining a stock's price is a

companys earnings, including the current earnings and estimated future

earnings. News from the company and other national and world events also

plays a large role in the direction of the stock market. Some examples of thisare oil prices, inflation, and terrorist attacks.

Every analyst and trader has a different perception of what that stock price

should be now and where it might be in the future, and trading decisions are

made accordingly.

Companys stock prices are now days not only affected by its Earnings news

which used to come once in a year. Now when the information networking

has developed so much, every news about the company affects the

investorssentiments and in return the stock prices.

An investor now takes decision on every activity of a company and shows

some reactions on all the news. Following are some financial events which

exhibit instant reaction on investors:

Rate of inflation:

As per economic theory, there seem to be three major types of inflation.

The demand pull inflation is when consumers may have a high demand forgoods and services with a constant supply, prices will be driven higher. Overthe past few years there has been an increase in oil prices. US are very muchdependent on oil. Because of our high dependence on oil, it is willing to payhigh prices for oil. Most recently, there has been a decrease in oil prices.Economists believe that the decrease in oil prices will have a direct impacton inflation, possibly leading to an ease in inflation concerns.


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The second type of inflation is cost push inflation. If for some reason, acompany experiences a high cost to produce a good, they will pass the extracost onto the buyer. An example of this type of inflation is the oil crisis of the1970s. When the member states of OPEC increased the cost of oil, oilcompanies passed the increase costs onto the consumer. Since oil isimportant for developed industrialized economies, a large increase in pricescan lead to the increase in the price of some products, thus increasinginflation. This can be seen today as well. With a decrease in petroleumprices, people might see a decrease in airfare along to plastic products whichare made from petroleum.

The third part of inflation is the money supply. If a countries money supply istoo large, one will find that it is easy and relatively inexpensive to borrowmoney. Respectively if there is a decreased money supply, it is more difficultand expensive to borrow money, which contributes to an increase in interestrates and ultimately increased inflation.

Rate of interest:

The relationship between the savings rate and inflation is positively

correlated. As such, when inflation is high it appears that people save more,

and when the inflation rate is low people save less. This is due to the fact

that when inflation is high people attempt to safeguard their money byputting it into a bank and when inflation is low peoples purchasing power

increases and they are more likely to spend their money. This again is

related to interest rates. When inflation rises, interest rates will rise and

people will be more likely to save at higher interest rates and vise-versa.

However, it is very important to note that whatever interest rate you save at,

the inflation rate should be lower otherwise you will lose money due to the

decrease in purchasing power.

Fisher effect:

The Fischer Effect states that as inflation rises so does interest rates, whichin turn makes it tougher for firms to gain investment capital. When firmshave a decrease in investment capital it hinders company growth, and


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management control of a larger or longer established company and keep itsname for the combined entity. This is known as a reverse takeover.

Merger And Acquisition (M&A) is also an event like Earning with less

frequency but with a very high intensity. From the start when a company

thinks about acquiring or merging till the date the deal closed, the stock

prices varies constantly.

Insider trading:

Insider-trading is a term often heard by those investing in the stock market.

Though the term has a surreptitious ring to it and stock market regulators

around the globe spend considerable time framing laws to combat this

menace, it is not always an evil.

The Securities and Exchange Board of India's (SEBI) regulation for prohibiting

insider-trading states that in its illegal form this happens when an insider

buys or sells the shares of a listed company when in possession of any

unpublished price-sensitive information.


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Illegal insider- trading in India includes an insider giving counsel or tipping

any outsider while in possession of such price-sensitive information.

However, it need not be concluded that the persons connected to thecompany are barred from possessing, buying and selling its shares. They are

permitted to deal in the securities of the company, provided they make

adequate disclosure about the transaction to the regulator and the

exchanges on which the shares are listed.

Investors need to have a look at the insider news as it affects the market

price of shares. It would be prudent to ascertain if a piece of information

would fall within the purview of insider-trading before acting on it.

Conclusion

Research department of the company is generating meaningful calls.

So company should make the most of these calls in order to generate

more and more business.


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To the company-

The company should carry on with the research calls as the successratio is 80% (approx.).

Company should make it sure that dealers pass on the research calls to

their clients.

All the dealers must be updated with the current financial news on real

time basis so that they can be more resourceful to their clients.

To the investors:

Investors should not pay attention towards those tips which talk of hotstocks. Instead of it investor should first of all consider the source ofthese tips.

Investor should analyze the ups-downs of the market as per his own

diligence. In case if he himself is not capable enough, he should takethe consultancy of reliable person.

Stock market has eaten the bread and butter of number of people. One

uncertain news can defeat the research of experienced person. Soinvestor should strict it investment up to a level he can afford to lose.


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Appendix

CLOSING VALUE OF NSE INDEX AND 3 SECURITIES ARE:

Date Inde

x

Saty

am

HDFCB

ank

Relcap

ital1-Apr-08 5769

.05

396.

35

1331.2

5

1228.8

2-Apr-08 5786

.85

398.

9

1309.5

5

1211.6

3-Apr-08 5808

.01

408.

4

1328 1214.2

54-Apr-08 5656

.4

430.

1

1331.1

5

1214.6

7-Apr-08 5795

.39

424.

55

1293.8

5

1167.8

8-Apr-08 5732

.64

432.

45

1303.4 1217.4

59-Apr-08 5778

.16

430.

4

1308.5

5

1224.8

10-Apr-08

5761.35

427.2

1379.85

1227.3

11-Apr-

08

5815

.89

423.

3

1326.5

5

1233.5

515-Apr-

08

5939

.87

433 1330.0

5

1281.8

516-Apr-

08

5949

.2

451.

25

1303.3 1313.8

517-Apr-

08

6035

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37/52

08 .55 75 5

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38/52

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39/52

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40/52

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42/52

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45/52

.27 95

9-Jan-09 3530 40.2

5

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5

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12-Jan-

09

3407

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13-Jan-

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15-Jan-

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16-Jan-

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19-Jan-

09

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20-Jan-

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21-Jan-

09

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22-Jan-

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5

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23-Jan-

09

3291

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27-Jan-

09

3405

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5

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28-Jan-

09

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29-Jan-

09

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30-Jan-

09

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09

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3-Feb-

09

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09

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6-Feb-

09

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9-Feb-

09

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10-Feb-

09

3612

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11-Feb-

09

3601

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12-Feb-

09

3561

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5

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13-Feb-

09

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16-Feb-

09

3506

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17-Feb-

09

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18-Feb-

09

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19-Feb-

09

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5

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20-Feb-

09

3369

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24-Feb-

09

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5

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25-Feb-

09

3401

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5

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26-Feb-

09

3430

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5

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27-Feb-

09

3403

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5

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2-Mar-

09

3293

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5

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3-Mar-

09

3229

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4-Mar-

09

3257

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5-Mar-

09

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6-Mar-

09

3226

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9-Mar-

09

3168

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5

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12-Mar-

09

3223

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13-Mar-

09

3348

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5

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16-Mar- 3420 45.5 834.25 310.05


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09 .13

17-Mar-

09

3395

.69

45.2

5

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18-Mar-

09

3441

.57

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19-Mar-

09

3456

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20-Mar-

09

3456

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23-Mar-

09

3620

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5

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24-Mar-

09

3619

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5

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25-Mar-

09

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26-Mar-

09

3796

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5

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27-Mar-

09

3828

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30-Mar-

09

3667

.79

42.7 1001.4

5

371.75

31-Mar-

09

3720

.51

39.3

5

945.5 338.25


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About NSE:

The NSE index (Nifty) has a very important function. Nifty is supposed to bean indicator of the stocks in the NSE. It is supposed to show whether thestocks are generally going up, or generally going down.

To show this accurately, Nifty is calculated taking into consideration stockprices of 50 different NSE listed companies. It is calculated using the free-


49/52

float market capitalization method. This is a worldwide accepted method asone of the best methods for calculating a stock market index.

The method used for calculating Nifty and the 50 companies that are takeninto consideration are changed from time to time. This is done to make theNifty an accurate index and so that it represents the NSE stocks properly.

Sub Prime Crisis:

The US sub-prime mortgage crash created economic reverberations across

the world, impacting treasury in the form of a liquidity crunch. But what


50/52

conditions in the US caused the sub-

prime crisis?

In response to the dot com collapse in2000 and the September 11 terrorist

attacks in 2001, the Federal Reserve

decided to create capital liquidity by

lowering interest rates. The objective

was to boost the US economy by encouraging borrowing, spending and

investments. It worked and the economy began to stabilise in 2002.

However, this went on to provide a thrust to the ever-increasing real estate

prices, and later resulted in the sub-prime mortgage meltdown.

Analysis of the events has focused on potential dynamics among the numberof different dynamics that contributed to the US sub-prime mortgage crisis.

The house prices appreciated following the general principle of demand and

supply - when demand is more than the supply, price increases. Everyone

predicted that housing values would always appreciate and therefore when

customers wanted to buy as an investment, banks also started lending to

sub-prime borrowers, as they receive higher profits over high mortgage rates

associated with sub-prime lending. Financial institutions thought it was a safe

product, as even if a sub-prime customer entered into delinquency, banks

could always sell the property at much higher price and earn more profits.

Banks were further reducing the risk by selling the repackaged mortgageproduct to other financial institutions worldwide. But then why did investors

put their money in such a risky portfolio? Well, simply, even they believed

house prices would continue to increase.

The house prices did increase and reached such a level that it was

completely out of buyers affordability limit. Again the general demand and

supply principle was followed - when the supply is more than demand, price

depreciates. When the house prices begin to fall, not only did the borrowers

fail to make the high interest-based payments but the financial institutions

also stopped investing in the mortgage-based investment products. In order

to compensate for losses, banks increased the mortgage rates, which madethe conditions even worse and resulted in higher delinquency rates.

Sub-prime lending is the practice of providing loans to borrowers

who do not qualify for the best market rates, or have a deficient

credit history (credit score less than 620). This is a risky proposition for

both borrowers and lenders due to the high interest rates on the loans; poor


51/52

credit history; higher fees and pre-payment penalties; balloon payment and

adverse financial situations usually associated with sub-prime borrowers. A

number of factors and causes gave rise to the 2007 US mortgage crisis.

Bibliography

www.smartanalyst.com

www.nasdaq.com

www.wikipedia.com

www.investopedia.com

www.myiris.com

www.economictimes.com www.businessstandard.com

www.google.com

www.rediffnews.com

www.moneycontrol.com

Economics time

CNBC TV-18
http://www.smartanalyst.com/http://www.nasdaq.com/http://www.wikipedia.com/http://www.investopedia.com/http://www.myiris.com/http://www.economictimes.com/http://www.businessstandard.com/http://www.google.com/http://www.rediffnews.com/http://www.moneycontrol.com/http://www.nasdaq.com/http://www.wikipedia.com/http://www.investopedia.com/http://www.myiris.com/http://www.economictimes.com/http://www.businessstandard.com/http://www.google.com/http://www.rediffnews.com/http://www.moneycontrol.com/http://www.smartanalyst.com/


52/52

Documents

impact of research calls and financial news on investors' sentiments