A

COMPREHENSIVE PROJECT REPORTON

“ A study on shareholding pattern and volatility of stock market”

Submitted to

SARDAR PATEL COLLEGE OF ADMINISTRATION & MANAGEMENT, BAKROL, ANANDIN PARTIAL FULFILLMENT OF THE

REQUIREMENT OF THE AWARD FOR THE DEGREE OF

MASTER OF BUSINESS ASMINISTRATIONIn

Gujarat Technological UniversityUNDER THE GUIDANCE OF

Faculty Guide MS. Varshakuchara

(Assistance professor)

Submitted byHiralpatelVidhithaker

Enroll No.:127550592094EnrollNo : 127550592150

MBA SEMESTER III

( 2012-2014)

SARDAR PATEL COLLEGE OF ADMINISTRATION & MANAGEMENT, BAKROL, ANAND

MBA PROGRAMME

Affiliated to Gujarat Technological University

Ahmedabad ,December , 2013

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Introduction of stock marketA stock market is a place where different kinds of securities are traded in the

secondary market and in the primary market. The whole stock market is

regulated by the SEBI that is security exchange board of India. So the

combination of primary and secondary market is called capital market. So,

capital market is an important constituent of the financial system. It is a

market for long-term-for both equity and debt and fund rose within and outside

the country.

The capital market aids economic growth by mobilizing the savings of the

economic sectors and directing the same towards channels of productive use.

This is facilitated through the following measures:

Issue of primary securities in the primary market i.e. IPO

Issue of the secondary securities in the primary market i.e. FPO

Secondary market transaction in outsourcing securities which

facilitates liquidity.

The Indian stock marketThe Indian stock market today is actually comprised of two key entities and

over 20 other exchanges. These 2 primary entities are the Bombay Stock Exchange Limited (BSE) and the National Stock Exchange of India Limited

(NSE). There is an interesting past history regarding where the two markets

originated from. During the 1850's, the first stock exchange in India was

established when the East India Company created and developed a

"community" of brokers.

By 1860, there were already 60 broker members of the exchange. As of 1874

and the results of a rapidly expanding share trading industry, these brokers

gathered regularly (at a well-know locationwhich is now known as Dalal

Street) in order to conduct their business. Stockbrokers began gathering in

front of Mumbai's Town Hall, conducting there meeting underneath Banyan

trees, and the Indian stock market was born.

Although there are actually over 20 different stock exchanges in India today,

but the two most powerful ones are the two mentioned above. The Bombay

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Stock Exchange Limited oftentimes referred to as the BSE, was originally

established in 1875. Interestingly enough, it is the oldest stock market on the

entire Asian continent that has been operating since the very beginning.

Today there are over 4,700 companies listed on the BSE as well as over

7,700 stock exchange scripts.

The National Stock Exchange of India Limited, or NSE as it is called, is an

Indian stock market based in the city of Mumbai and was originally

established only 18 years ago in 1992. In that short period of time, it has

grown to nearly 1,600 company listings and has a current market

capitalization of 47, 01,923 Rupees (Wikipedia). It was predicted that the NSE

would be the largest stock exchange in India where market capitalization was

considered when 2009 ended.

Up until the 1980‘s there were no way to measure or scale the ups and downs

in stock values. However, in 1986, the BSE implemented SENSEX, which

was a stock index. Three years later, India witnessed the launch of the BSE

National Index. It was renamed the BSE-100 Index in October of 1996

because it was comprised of 100 different stocks listed with India's 5 major

stock exchanges. These 5 major markets were Ahmadabad, Calcutta, Delhi,

Madras, and Mumbai. Additionally, the dollar-linked version of the BSE-100

was launched in May of 2006.

Numerous banks, financial intermediaries, insurance companies, and leading

financial institutions mutually own the NSE. However, the entities of

management and ownership are completely separate entities. Interestingly

enough, 2 of the NSE's foreign investors have taken a serious position in the

NSE - Goldman Sachs and NYSE Euro next.

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Introduction of the volatility The year 1991 brings lots to the nation. Mr. P V Narsinhmaro came with the

Concept of liberalization, privatization and globalization, and after that the

journey of Prosperity start. The economic developments touch two digit

growth rates. Our export import breaks all record and climb to new reach.

India attracts the highest foreign funds after China. This entire goody picture

attracts huge funds from abroad. They start to invest in India and Indian

companies. In result, companies get huge & cheap funds. They converted

these funds into profit and growth. And finally all these things are reflecting in

stock prices of the companies.

The journey of Indian stock market starts form February, 2006. In 2006

Sensex kissed 10000 points. And within two years it touches 21000 in

December, 2007. The sensex rose from 13000 t0 21000 from January 2007 to

December. And within 6 month again it reaches to 7800 from January to

October 2008. We can feel high volatility in the Indian stock market. The

reasons for this volatility are FIIs inflow, Inflation rate, interest rate, govt.

policy, Investors‘ awareness etc.

This research mainly focuses on the volatility of BSE SENSEX.

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Literature ReviewThe first study (Khanna&Palepu, 1999) established that there is a positive

linear relationship between insider ownership and performance of the firm by

using single year (1993) data and both accounting (ROA) and market (Tobin‘s

q) based performance measures to study this relationship.

According to Jensen and Meckling (1976) cash flow ownership by an

entrepreneur reduces incentives for expropriation and raises incentives to pay

out dividends. They also (La Porta et al. (1999b)) show that this need for

higher cash flow ownership shows a commitment to limit expropriation and is

higher in countries with inferior shareholder protection.

The nature of relation between the ownership structure and firm‘s economic

performance, have been the core issue in the corporate governance literature.

From a firms‘ point of view, firms‘ portability, enjoyed by agents, is affected by

ownership structure of the firm. In particular, Ownership structure is an

incentive device for reducing the agency costs associated with the

Separation of ownership and management, which can be used to protect

property rights of the firm (Barbosa and Louri (2002)).

The dispersion of ownership led to the evolution of the control and the rise of

Management as power in the management. The trend showed that a vast

Majority of shareholders purchased stock only for the purpose of investment

and Were no longer interested in the management of the corporation. The

modern Shareholder is in fact a shareholder very often institutional and

impersonal and Completely without any loyalty to the company and without

any ambition to take

Part in the management.Under the modern corporate system, control over the

Corporation was being exercised with minimum ownership interest.4

In the Indian context, early study by Thenmozhi (2002) reported decline in

volatility due to increased flow of information while Shenbagaraman (2003)

did not find significant impact on market volatility in India. Raju and Karnade

(2003) also studied the behaviour of volatility of the S&P CNX Nifty index after

the introduction of derivatives trading. All the above studies relating to S&P

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Nifty reported a decline in the volatility. Bandivadekar and Ghosh (2003)

studied volatility behaviour of both NSE Nifty and BSE Sensex after the

introduction of futures trading and documented ‗ futures effects‘ in the

volatility behavior of NSE Nifty.5 Shareholding pattern & volatility of stock 41.

We study the relation between institustional ownership and volatility across

dividend paying and non dividend paying firms.we find that institustional

ownership and volatility are positively correlated for dividend paying

firms,while they are negatively correlated for non dividend paying firms.

This study examines empirically the effects of ownership structure on the firm

performance For a panel of Indian corporate firms, from an `agency

perspective'. We examine the effect of interactions between corporate,

foreign, institutional, and managerial ownership on firm Performance. Using

panel data framework, we show that a large fraction of cross-sectional

Variation, in firm performance, found in several studies, can be explained by

unobserved Firm heterogeneity. We also provide some evidence that the

shareholding by institutional investors and managers affect firm performance,

after controlling for observed firm characteristics and unobserved firm

heterogeneity and the effect is non-linear.

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Back ground of the study

SHAREHOLDING PATTERN & VOLATILITY OF STOCKgives

complete Review and analysis of shareholding pattern of the various

companies included in the SENSEX & the volatility of their various

stocks.

The initial part of this report contains the brief information about the

SENSEX, its stock selection criteria‘s, the information about the free

float methodology & how to calculate the free float methodology.

The core project areas, which have been focused, are impact of

shareholding pattern in to price volatility.

Scope of the study

This share holding pattern gives the idea regarding the liquidity of that

company stock.

To reduce the managerial opportunism.

The main reason for the prominent roie that volatility plays in financial

markets is that volatility is that volatility associated with risk and

uncertainty, the key attributes in investing, option pricing, and risk

management.

To proper liquidity of the company‘s share

To reduce the speculation in the stock market.

To fulfil the requirement of the SEBI.

Problem statement

A Study on Share holding pattern and volatility of stock market.

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Objective of the study

Primary Objective

The main reason for selecting that topic is to find out

Is there any relationship between share holding pattern and the

volatility of share price?

Secondary Objectives:- 1.To know about the overview of the Indian stock market.

2. To project the investor behavior about the stock markets & about the share

holding pattern.

3. The SEBI guidelines about the share holding pattern.

Research design

As research design expresses both the structure of the research

problem and plan of investigation used to obtain empirical evidence on

relations of the problems, we have used descriptive Research. The

descriptive research is done to provide insights into, and an

understanding of, the problem confronting the researcher.

Our descriptive research includes the use of Analysis of Data.

AssumptionHypothesis is a one kind of assumption that the researcher have to be made

before starting to the overall project.

The stock with more than 50% promoter stake has not higher

volatility.

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SOURCES OF INFORMATION:- Secondary source: -

we have visited the BSE website for the information about the various share

holding pattern of the 30 companies which is included in the SENSEX in BSE

and prepare a one excel sheet which contains all the data regarding the

shareholding pattern that contains promoter holding, various public holding

and the shares issued to the various custodians and the depository receipts.

Population :The top companies having various stocks under BSE on 2nd dec,2013 are as

follows :

Bajaj auto ltd

Bhart heavy electrical ltd

BhartiAirtel ltd

Clipa ltd

DLF ltd

HDFC ltd

Hero Honda motors ltd

Hindalco industries ltd

Hindustan unilever ltd

Hdfc

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Limitation of study

Limitations are the limiting lines that restrict the work in some way or other. in

this research study there are also some limiting factors , some of them are as

under:

1. data collection :

the most important constraint in this study is data collection as

secondary data was selected for study. secondary data means the data

that are already available i.e. they referred top data which are already

collected and analysed by someone.

2. Time period :Time period was one of the main factor as only six month was allotted

and the topic covered for research having wide scope. So, it was not

possible to cover it is in such a short period.

3. Reliability :The data collected in research was secondary data so this gets a

question mark on reliability of the data. which is very important factor of

this study and conclusion based and derived from this secondary data

only.

4. Misrepresentation of data :

If the data is misrepresented in earlier time than it will bring mistakes for

further report.thus misrepresentation of data can become as limitation.

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Bibliographyhttp://www.bseindia.com/shareholding/sharehold_search.asp

http://www.bseindia.com/stockinfo/stockprc.aspx

http://www.moneycontrol.com

http://www.bseindia.com/about/introbse.asp

http://www.nseindia.com/about

Refrences for literature review:-1. Khanna, Tarun and Krishna Palepu (1999). ―Emerging Market Business

Groups, Concentrated Ownership, Foreign Investors and

Corporate.Governance,‖ Randall Morck (ed.), Chicago: University of Chicago

Press. Jensen, C. Michael, and William Meckling (1976). ―Theory of the

Firm: Managerial Behavior,

2. Agency Cost, and Capital Structure,‖Journal of Financial Economics, 3,

October, 305-360.

3 .from survey of Shleifer and Vishny (1997) and Megginson and Netter

(2001).

4. Compare S.C. Sen, The New Frontiers of Company Law, 21, (Eastern Law

House, Calcutta, 1971

5 Bandivadekar, S and SaurabhGhosh, ―Derivatives and Volatility on Indian

Stock Markets‖, RBIOccasional Papers, Vol.24, No. 3, Winter 2003

6. Also, dividend disbursement is one of the most important factors influencing

S&P stock ratings. Firms who do not pay dividends can not receive a rating

higher than a B+ (taken from Standard&Poors Publication, Aug 17,2006)

7.Agrawal, A. and C. Knober [1996], Firm performance and mechanisms to

control agency problems

between managers and shareholders, Journal of Financial and Quantitative

Analysis 31, 377, 397

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