Technical Analysis of india Stock Market from 2006-2008

8/14/2019 Technical Analysis of india Stock Market from 2006-2008

1/25

Executive Summery:

Today, BSE is the worlds number 1 exchange in terms of the number of listed companies and the worlds 5th in transaction number.

Of the 23 stock exchanges in the India, Bombay Stock Exchange is thelargest, with over 6,000 stocks listed. The BSE accounts for over two thirdsof the total trading volume in the country. Established in 1875, the exchangeis also the oldest in Asia. Among the twenty-two Stock Exchangesrecognized by the Government of India under the Securities Contracts(Regulation) Act, 1956, it was the first one to be recognized and it is the

only one that had the privilege of getting permanent recognition ab-initio.Moreover, The BSE SENSEX is not only scientifically designed but also based on globally accepted construction and review methodology. The indexis widely reported in both domestic and international markets through printas well as electronic media.The "Free-float Market Capitalization" methodology of BSE indexconstruction is regarded as an industrys best practice globally. All major index providers like MSCI, FTSE, STOXX, S&P and Dow Jones use theFree-float methodology. Due to its wide acceptance amongst the Indianinvestors; SENSEX is regarded to be the pulse of the Indian stock market.As the oldest index in the country, the SENSEX has over the years becomeone of the most prominent brands in the country.The paper therefore emphasizes mainly on BSE sensex and major

fluctuations related to it from time period of 2006 to 2008. The paper also put the light on how various factors such as inflation,investments madethrough participatory notes, rising crude oil prices, the sub-prime mortgagewoes in US, concerns over a slowing down US economy and big role of Foreign Institutional Investors (FIIs) determines markets situation andoperate SENSEX.

1


2/25

Introduction:

There was a time when India was discussed as the land of snake charmers, black magic and epidemics but the revolutionary Indian growth storychanged everything. Indian economy at its height compelled the world tochange its viewpoint towards India. Out of the several factors whichchanged the face of modern India, we are going to discuss the most roaringof them i.e. our share market. The earlier reform procedures adopted byIndia gave India the two most sought after world-class brands i.e. SENSEXand NIFTY. The magical figures displayed by our market turned all the

heads on India. And India became one of the most favoured places for investment. Now we are going to deal with the ups and downs in the share market sincelast two yearsi.e. since year 2006.our share market has went through many phases in there2 years. We saw the investors getting overjoyed at 21K and we saw them

crying too when it crashed. We saw how the market rewarded theundervalued shares and how the overvalued shares fell down to demonstratethe saying everything which rise more than expected, has to fall.So to analyze the saga of Indian share market, we had two indices to follow:BSE sensex and NSE nifty. Though NSE nifty is a more advanced optionand has left BSE sensex far behind, still we call BSE sensex as the barometer of our economy. Thats why we have followed the BSE sensex. Itwas not possible to track each and everyday figure of the sensex since lasttwo years. The performance of the sensex is analyzed with the help of dataand graphs collected from various sources and some of the most talked aboutmovements of sensex starting with the secondary market summary of eachyear, firstly year 2006 and then year 2007.

2


3/25

SENSEX:

The SENSEX, short form of the BSE-Sensitive Index, is a "MarketCapitalization-Weighted" index of 30 stocks representing a sample of large,well-established and financially sound companies.

Objectives of SENSEXTo measure market movementsBenchmark for funds performanceFor index based derivative products

Calculation of SENSEXSENSEX is calculated using a "Market Capitalization-Weighted"methodology. As per this methodology, the level of index at any point of time reflects the total market value of 30 component stocks relative to a base period. The market capitalization of a company is determined by multiplyingthe price of its stock by the number of shares issued by the company. Anindex of a set of a combined variables such as price and number of shares iscommonly referred as a 'Composite Index' by statisticians. A single indexednumber is used to represent the results of this calculation in order to makethe value easier to work with and track over time.The calculation of SENSEX involves dividing the total market capitalizationof 30 companies in the Index by a number called the Index Divisor. TheDivisor is the only link to the original base period value of the SENSEX. Itkeeps the Index comparable over time and is the adjustment point for allIndex maintenance adjustments.

3


4/25

Quick look at year 2006: In the secondary market, the uptrend continued in 2006-07 with BSEindices closing above 14000(14,015) for the first time on January 3, 2007.After a somewhat dull firsthalf conditions on the bourses turned buoyantduring the later part of the year with large inflows from Foreign InstitutionalInvestors (FIIs) and larger participation of domestic investors. During 2006,on a point-to-point basis, Sensex rose by 46.7%.The pickup in the stock indices could be attributed to impressive growth inthe profitability of Indian corporate, overall higher growth in the economy,

and other global factors such as continuation of relatively soft interest ratesand fall in the international crude prices.BSE Sensex (top 30stocks) which was 9,398 at end-December 2005 and

10,399 at end-May 2006, after dropping to 8,929 on June 14, 2006,recovered soon thereafter to rise steadily to 13787 by end-December 2006.According to the number of transactions, NSE continued to occupy the third position among the worlds biggest exchanges in 2006, as in the previousthree years. BSE occupied the sixth position in 2006, slipping one positionfrom 2005. In terms of listed companies, the BSE ranks first in the world.In terms of volatility of weekly returns, uncertainties as depicted by Indianindices were higher than those in outside India such as S&P 500 of UnitedStates of America and Kospi of South Korea. The Indian indices recordedhigher volatility on weekly returns during the two-year period. January 2005to December 2006 as compared to January 2004 to December 2005The market valuation of Indian stocks at the end of December 2006, with

the Sensex trading at a P/E multiple of 22.76 and S&P CNX Nifty at 21.26,was higher than those in most emerging markets of Asia, e.g. South Korea,Thailand, Malaysia and Taiwan; and

4


5/25

was the second highest among emerging markets. The better valuation could be on account of the good fundamentals and expected future growth inearnings of Indian corporateLiquidity, which serves as a fuel for the price discovery process, is one of

the main criteria sought by the investor while investing in the stock market.Market forces of demandand supply determine the price of any security at any point of time. Impactcost quantifiesthe impact of a small change in such forces on prices. Higher the liquidity,lower the impactcost.

5


6/25

The fig. showing monthly mutual fund investments, FIIinvestments & Change in SENSEX in May 2006

Monthly SENSEX changes in 2006

2006 BSE

Jan 9920

Feb. 10370

Mar 11280

Apr 12043

May 10399

Jun 10609

Jul 10744

Aug 11699

Sep 12454

Oct 12962

Nov 13696

Dec 13787

6


7/25

An overview of year 2006:

During December 2005, the greatest demerger of Indian history between theAmbanis paved the way for 9000. And the sensex entered the year 2006 witha 9000 + figure. on Feb. 10th 2006, we saw two roaring figures, both sensexand sachin tendulkar crossing 10000 mark. But the reason behind roaringsensex was not sachins records rather it was rallied by strong FII inflowsand robust data. The government forecasted a GDP growth of 8.1% incurrent year, with manufacturing and the agriculture sectors estimated togrow at 9.4% and 2.3% respectively. The 238-point rally was contrary toexpectations as it came despite negative news flow about a fresh tussle between Ambani brothers over transfer of ownership of the four companies

demerged from erstwhile RIL.Sensexs surge to 11000 points on 21st march 2006 was prompted by PMManmohan Singhs announcements on Capital Account Convertibility. OnSaturday, Prime Minister Manmohan Singh hinted at moving toward a freefloat of the rupee and on Tuesday, the BSE responded by crossing the 11,000mark in a lifetime intraday high. The new trading high was reached 29 days

7


8/25

after Sensex entered the elite 10,000 club on February 6. Only Nikkei, HangSeng and Dow Jones could boast of being above 10,000 at that time. Sincefull convertibility was expected to attract more foreign money and alsoallow local companies to tap foreign debt markets more easily, it was evident

that the move will encourage investors and boost the confidence of themarkets. RBI said it was constituting a panel to thrash out the contours for full convertibility. Although the index later ended lower with investorswanting to book gains, participants said it was evident the markets had sentout a message - that the growth story of Asias third largest economy isintact and that liquidity flows into the bourses would continue to remainfirm.After hitting a high of 11,017.25 points in mid-afternoon trade, Sensex lost35.91 points to close at 10,905.20, fluctuating 153 points, with most of thevolatility coming in the last hour of trading. The rise in share prices was partly attributed to a fall in oil price. The US April crude oil prices plunged3.7% or $2.35, to settle at $60.42 a barrel, on the New York MercantileExchange due to ample US inventories. After falling by 307 points on 12th

April 2006 on account of Heavy selling by FIIs in both cash and futuresmarkets and a move by stock exchanges to raise margins on sharetransactions by about 250 basis points, the 131-year-old BSE on Thursday,April 20, 2006 crossed yet another milestone when it breached the 12,000- point mark, backed by strong corporate earnings, higher liquidity and robusteconomic growth. The index was being driven by the strong flow of

liquidity. Earlier, it was based on the expectations that (corporate) resultswould be great...and by the first few companies were more than matchingthose expectations. Although, Sensex was beaten to the 12,000 mark byvarious global indices, the time it took to breach this milestone has been oneof the fastest. Traders point to the fact that foreign investors, buoyed by a

8


9/25

booming economy, have chosen India as one of their top investmentdestinations. Now, everything was going fine.perhaps it was the lull before the storm.Suddenly the Dalal street experienced its worst single day crash on

Thursday, 18th may 2006 as an ambiguous Government circular on taxinginvestment gains prompted foreign funds to book profits, knocking the bottom off the jittery stock market. Opening amidst weak global markets andreports of rising US interest rates, the BSE-30 Sensex went on to close826.38. However the Dealers said the fall was accentuated by large-scaleselling of client positions by broking firms due to margin calls or the lack of margins. The May crash saw the Sensex shedding its market capitalization by as much as 14% in just one month.Benchmark stock indices vaulted to new highs on Monday, oct 30th 2006driven by a heady cocktail of strong corporate earnings, a rapidly growingeconomy and relatively stable crude oil prices. Sensex ended at its highestclosing level of 13024.26 , a gain of 117.45 points or .9% Marauding bullsdefied the weak trend globally, which was sparked off by weak US GDP

growth figure, pointing to a slowdown. Back home, the mood was upbeateven as some expect that the RBI may raise interest rates by 25 basis pointsin its mid-term credit policy on Tuesday. Market watchers said sentimentcould be affected only if the hike is more than 25 basis points, which isunlikely. Higher interest rates drive up borrowing costs for corporate as wellas the retail consumer, who could then cut back on their investments and

spending, in turn causing a slack in domestic demand.The benchmark 30-share sensex briefly crossed the psychological 14,000-mark on Tuesday, December 5, 2006. While foreign institutional investorshave been aggressive buying stocks over the past few months, the responseof domestic mutual funds has been guarded. In the last two months alone,

9


10/25

FIIs bought net stocks worth Rs 17,001 crore while local mutual funds have pumped in a net Rs 638.07 crore.

Quick look at year 2007:

In the secondary market segment, the market activity expanded further

during 2007-08with BSE and NSE indices scaling new peaks of 21,000 and 6,300,respectively, in January 2008. Although the indices showed someintermittent fluctuations, reflecting change in the market sentiments, theindices maintained their north-bound trend during the year. This could beattributed to the larger inflows from Foreign Institutional Investors (FIIs)

and wider participation of domestic investors,particularly the institutionalinvestors. During 2007, on a point-to-point basis, Sensex and Nifty Indicesrose by 47.1 and 54.8 per cent, respectively. The buoyant conditions in theIndian bourses were aided by, among other things, India posting a relativelyhigher GDP growth amongst the emerging economies, continued uptrend inthe profitability of Indian corporate, persistence of difference in domestic

10


11/25

and international levels of interest rates, impressive returns on equities anda strong Indian rupee on the back of larger capital inflows.The BSE Sensex (top 30 stocks) too echoed a similar trend to NSE nifty.

The sell-off in Indian bourses in August 2007 could partly be attributed to

the concerns on the possible fallout of the sub-prime crisis in the West.While the climb of BSE Sensex during 2007-08 so far was the fastest ever,the journey of BSE Sensex from 18,000 to 19,000 mark was achieved in just four tradingsessions during October 2007. It further crossed the 20,000 mark inDecember 2007 and 21,000 in an intra-day trading in January 2008.However, BSE and NSE indices declined subsequently reflecting concernson global developments. BSE Sensex yielded a Compounded return of 36.5 per cent per year between 2003 and 2007. In terms of simpleaverage, BSE Sensex has given an annual return of more than 40 per centduring the last three years.

11


12/25

12


13/25

Monthly SENSEX changes in 2007

An overview of year 2007:

2007 BSE

Jan 14091

Feb 12938

Mar 13072

Apr 13872

May 14544

Jun 14651

Jul 15551

Aug 15319

Sep 17251

Oct 19838

Nov 19363

Dec 20287

13


14/25

After touching 14K mark on December 5th 2006, sensex entered into 2007with a promising figure of 14000+, though the year started on a rather tentative note with a marked slowdown being observed in the FII inflowsinto the country. The inflows received from FIIs in January and February

2007 was 48 per cent less than what was received during the same period in2006. The return provided by the BSE Sensex for 2007 turned into negativeterritory following the 389-point tumble on Friday, February 23rd; the year-to-date return generated by the Sensex was negative 0.97 per cent.FIIs have pressed substantial sales over those days in contrast to anintermittent surge in inflow in February 2007. As a result, the sensex whichclosed at 14091 on January 31st, closed at 12938 on February 28th.As per provisional data FIIs were net sellers to the tune of Rs 613 crore onFriday 2 March, the day when Sensex had lost 273 points. Their net outflowwas worth Rs 3080.80 crore in four trading sessions from 26 February to 1March 2007. Market continued to reel under selling pressure on 5th march2007 taking cue from weak global markets and heavy FII sales as a result of fall over 400 points, all the indices were in red.

On April 24th, The Sensex again crossed the 14K mark and was trading at14,150.18 having gained 221.85 points or 1.59%. The midcap and smallcapindices were rather moving slow indicating that the actual movers are thelarge cap stocks but at the month end it finally closed at 13872. Further wecan see May and June having month end figures at 14544 and 14651respectively.

The benchmark BSE 30-Share Sensitive Index (Sensex) breached the15,000-mark, to reach a record high of 15007.22, for the first time intra-dayon Friday, July 06 2007 before closing at 14964.12. Despite weak globalcues, Indian stocks were in great demand, especially auto, pharma, IT andmetals stocks. On Friday, this lifted the Bombay Stock Exchange's benchmark 30-share Sensex past the magical 15,000-mark. The Sensex took

14


15/25

146 sessions to cover the 1,000 point distance from 14,000 till 15,000. Thisis the highest since the index took 371 trading sessions to move up from6,000 to 7,000.The sensex experienced its second bigger ever fall on 2nd august 2007. The

fall came in after the Fed Reserve cut its discount interest rate at anemergency meeting and JPMorgan Chase agreed to buy Bear Stearns for USD 2 a share. Sensex closed down 951.03 points or 6.03% at 14809.49,When FIIs were pumping money in stock market and were Net Buyers of Equity worth Crores; the Sensex was moving Up , Up and Up on weekly basis. Many thought that FIIs were playing blind in Indian stock market. Butwhen FIIs have turned Net Sellers of Equity and have started booking profit backed by massive sell off of shares in global markets; Sensex has to godown. As expected; the Sensex plunged by 600 Points in early trading on16th August and most of the shares were down by 4 to 5 per cent.But very soon the sensex surpassed the gloomy days and Stock markets onWednesday, September 19th, 2007 gave thumbs up to the decision of the U.S.Fed Reserve to reduce the rates by 50 basis points, as the benchmark 30-

share BSE Sensex moved up sharply by 653.63 points or 4.17 per cent at16322.75. By staying well above the 16000-mark, it outperformed mostAsian peers and it was the biggest single day gain. This trend shows thatglobal cues had an influential effect on our market.On the auspicious occasion of Ganesh chaturathi, India experienced a flowof good news. The festive spirit did not end with the immersion of Ganapati.

On Wednesday, it boiled over to the streets of Mumbai and its financialdistrict, the Sensex touched the magical 17,000 number. It took Dalal Street just 5 days to travel 1,000 points. Suddenly, tech stocks, which were thewhipping boys till Tuesday, became hot favourites. Why? Hopes that therupee will soften as a result of RBI's latest announcements to allow moreoutflow sparked a rally in tech stocks, pushing the Sensex to a new high of

15


16/25

17,073.87 during the day. At the end of the day, RBI's measures may not beenough to rein in the rupee. But there were no takers for this. The bellwether index finally settled at 16,921.39.On October 9th, 2007, Sensex hits a record high of 18,280 on the back of

eye-popping rallies in Reliance & Reliance. At the height of the dotcommania in 1999-00, the easiest way to maximize returns was to buy into anystock with the suffix Software or Technologies. Eight years on, the sameseems to hold true for any stock with the prefix Reliance, given their baffling run-up over the past one month. Eye-popping rallies in RelianceIndustries, Reliance Energy and Reliance Communications lifted the 30-share Sensex to a record high of 18,327.42 intra-days.On October 15th 2007, amidst heavy buying by investors, the bull roared to breach the 19000 mark in just 4 sessions Sensex was up by 639.63 points or 3.47 per cent at 19058.67. This rise came on the back of some strong sectorsfor which the macro picture is quite bright power, capital goods,infrastructure and telecom.Foreign Institutional Investors were pumping in huge money in the equity

market and this too was pushing up the index. Since September, they nearly pumped in more than Rs. 30,000 crore in the cash market. After the U.S.Federal Reserve cut interest rates by 50 basis points, a re-rating of theemerging markets had been seen wherein liquidity flows were quite robust.Then suddenly happened the second biggest crash the sensex ever experienced when the sensex crashed by 1743 points on 17th October 2007

within minutes of opening, prompting suspension of trade for hour fallout of regulator Sebi's move to curb Foreign Institutional Investors. In a knee-jerk reaction to the cap proposed by the market regulator for the Participatory Notes, an overseas derivative instrument (ODI), used by foreign institutionalinvestors (FIIs), the stock market crashed by 1743 points in intra-day, butrecovered substantially later to close with a loss of 336.04 points or 1.76 per

16


17/25

cent at 18715.82. but it was followed by a huge one-day gain as on October 23 when the BSE barometer rose 878.85 points after market regulator SEBIallowed sub-accounts of Foreign Institutional Investors (FIIS) to trade

It took the index a little over 20 years to reach the first 10,000 mark, but justa little over 20 months to double that score and the sensex made history withtouching the 20000 mark on October 29 2007. Significantly, it was the localinstitutions that were in the drivers seat. As per BSE data, foreign fundshave net sold over Rs 1,100 crore worth of shares over the last three tradingsessions while local funds have net bought over Rs 2,300 crore worth of shares. Sceptics point to the fact that there were only a handful of stocks thatwas driving the market higher.On 13th November, BSE Sensex registered its biggest ever gain in a singleof 893.58 points to settle at the third-highest level ever on buying byinvestors in bank counters and blue chip companies such as RelianceIndustries. The market gain was because of global cues. Besides, the political development also gelled well with the sentiment. The rally was

driven by short covering, strong buying by domestic investors. However,there was not much involvement of foreign investors.But in December 2007, sensex again experienced a black Monday on 17th

December. The market succumbed to profit booking, that came in due toweak global cues as well as profit booking by FIIs in the holiday season. TheSensex ended losing 769 points from the previous close, at 19,261.

Sensex during year 2008:

17


18/25

After scaling new heights of 20000+, sensex entered year 2008 with rosy pictures. The trade pundits, brokers and even investors predicted newheights for the year. And they felt their predictions coming true when sensex

touched the 21000 mark on 8th

January 2008. Its interesting if one sees interms of flows; the journey from 20,000 to 21,000 is dominated by domesticinstitutional investors; FIIs were negative sellers, they sold in the cashmarket to the tune of USD 45 billion. So if one has to take out some pointersfrom this journey from 20,000 to 21,000, it is the longest journey which wehave seen in the last 5,000 marks, the midcaps and smallcaps have beenoutperformers and in terms of flows, it has been domestic institutionalinvestors which have been really putting the money.But the rosy picture soon turned gloomy. The skyrocketing sensex suddenlystarted heading south and Sensex saw the biggest absolute fall in history,shedding 2062 points intra-day. It closed at 17,605.35, down 1408.35 pointsor 7.4 per cent. It fell to a low of 16,951.50. The fall was triggered asaresult of weakness in global markets, but the impact of the global rout was

the biggest in India. The market tumbled on account of a broad based sell-off that emerged in global equity markets. Fears over the solvency of major Western banks rattled stocks in Asia and Europe.After the worst January in the last 20 years for Indian equities, Februaryturned out to be a flat month with the BSE sensex down 0.4%. India finishedthe month as the second worst emerging market. The underperformance can

partly be attributed to the fact that Indian markets outperformed globalmarkets in the last two months of 2007and hence we were seeing the laggedimpact of that outperformance. In the shorter term, developments in the USeconomy and US markets continued to dominate investor sentimentsglobally and we saw volatility move up sharply across most markets.

18


19/25

The Bombay Stock Exchange (BSE) Sensex fell 4.44 percent on Monday,31st march the last day of the financial quarter, to end the quarter of Marchdown 22.9 percent, its biggest quarterly fall since the June 1992 quarter,asreports of rising inflation and global economic slowdown dampened market

sentiments. Financial stocks led the Sensex slide along with IT. Accordingto market analysts, IT stocks fell on worries about the health of the USeconomy. Indian IT firms depend on the US clients for a major share of their revenues.

Reasoning for the slowdown (FY 08-09)

19


20/25

The first month of the financial year 08-09 proved to be a good one for investors with the month ending on a positive note. The BSE sensex showeda gain of 10.5% to close at 17287 points. A combination of firming globalmarkets and technical factors like short covering were the main reasons for

the up move in the markets. Though inflation touched a high of 7.57%against 6.68% in march 2008 as a result RBI hiked CRR by 50 bps to takethe figure to 8%, still emergence of retail investors was also seen; a factreinforced by the strong movement in the mid-cap and small- cap index thatrose 16% and 18% respectively.So April was the last month to close positive. Then after nobody saw a stablesensex even. Sometimes it surged by 600+ points, but very next day it plunged by some 800 odd points and this story is still continuing. Every prediction, every forecasting has failed. The sensex is dancing on the musicof lifetime high inflation rates, historic crude prices, tightening RBI policies,weak industrial production data, political uncertainties and obviously thesentiments of domestic as well as FIIs. The only relief came in the form of weakening Indian rupees which enlightened the IT sector and most recently

the UPA gaining vote of confidence. Presently it is revolving around thefigures of 14000 and no one knows what next?The 30-share BSE Sensex fell 117.89 points or 0.67% at 17,373.01 onTuesday, 6 May 2008. The key benchmark indices ended lower as investorsresorted to profit booking due to lack of positive triggers in the market. On30th May an imminent hike in domestic retail fuel prices due to soaring crude

oil prices weighed on the market last week. Foreign institutional investorssold close to Rs 2204 crore in the first three trading sessions of the week which accentuated the downfall. However better than expected Q4 grossdomestic product figures provided some relief to the bourses on Friday. ITstocks gained on slipping rupee. BSE Sensex rose in two out of five tradingsessions. In May, Indian inflation stood at 8.2%.

20


21/25

The market declined sharply as a hike in fuel prices by about 10%announced by the Union government on Wednesday, 4 June 2008, triggered possibility of a surge in inflation to double digit level. The BSE Sensexdeclined 843.39 points or 5.14% to 15,572.18 in the week ended 6 June

2008. The S&P CNX Nifty fell 242.3 points or 4.97% to 4627.80 in theweek.On 6 June 2008, local benchmark indices underperformed their global peers,hit by rumours that the Reserve Bank of India (RBI) may hike cash reserveratio (CRR) or interest rate later in the day to tame runaway inflation. The30-share BSE Sensex declined 197.54 points or 1.25% to settle at 15,572.18.On 9th June 2008, Bombays Sensex index closed 506.08 points down at15,066.10, having earlier fallen 4.4% and slipped below 15,000 for the firsttime since March. Oil prices surged to record levels, fanning fears that theywill keep climbing and hurt world growth.Central banks across the globe warned that interest rates may have to rise asthey look to keep inflation under control, despite the fact that economicgrowth is slowing in key nations such as the US and UK.

On the week ending 27th June 2008 Sensex declined 769.07 points or 5.28%to 13,802.22. The S&P CNX Nifty lost 210.90 points or 4.85% to 4136.65 inthe week. Equities extended losses for the fifth straight day on 24 June 2008with the barometer index BSE Sensex falling below the psychologicallyimportant 14,000 mark for the first time in 10 months since late August2007. On 25 June 2008, equities staged a solid rebound after touching fresh

calendar 2008 lows in early trade. The initial jolt was caused by the ReserveBank of India's move to hike the key lending rate. A setback to stocks inAsia and US, sharp spurt in crude oil prices and political uncertainty due toIndo-US nuclear deal rattled bourses on 27 June 2008.On July 15th 2008, Indian shares fell 4.9 per cent to their lowest close in 15months, joining a world equities rout as investors dumped financials on

21


22/25

concerns about the fallout from worsening global credit turmoil. AlthoughIndian banks have no direct exposure to the US subprime mortgage sector,the global financial sector turmoil impacts sentiment in the local market andraises worries of more withdrawals by foreign funds.

An 800+ point surge was experienced in the market on the day followingUPA gaining vote of confidence but the very next day market couldntmaintain the momentum and since then its in a doldrums position.Presently, we can saw market plunging after the RBI announced further hikes in Repo rate as well as CRR both increased to 9%. Also, the serial blasts at Ahmadabad and Bangalore adding to the worries and enhancing thenegative sentiments. And above all we can't see any positive trigger that candilute the flow of negative news.

Current Situation of year 2008:

22


23/25


24/25

crashed badly. Now it is revolving around a 14000-16000 figure. Though thesensex is a barometer and after seeing such fluctuations one could be afraidof investing. Still we can say that people can play safe by investing the blue-chips and undervalued shares.

During year 2006, if we keep aside that brief period of loss that the marketwitnessed from may 10 2006 to June 14 2006, investors wealth seem tohave grown double fold with the Sensex touching the 10000, 11000, 12000,13000 and 14000 levels in the same calendar year. Investor wealth in termsof market capitalization has been growing in the range of 6.84-12.41%And talking about year 2007,we can summarize the happenings of year 2007 as a year which redefined the resistance levels at sensex. Strongeconomic data, heavy inflow of funds from FIIs towards the close of previous calendar year and decent to highly encouraging surge in earnings of top notch companies all pointed to a rosy 2007. The rupee's rise against theUS dollar the regulator's decision to restrict investments made through participatory notes, rising crude oil prices, the sub-prime mortgage woes inUS, concerns over a slowing down US economy and The Left parties'

opposition to the Indo-US nuclear pact, did halt the market's progress attimes. But the inherent strength of the Indian economy, fairly buoyant resultsquarter after quarter, the various chops and subsidies announced by thegovernment and sustained efforts made by the market regulator to keepinvestor confidence in the system alive kept the momentum going.Presently the hike and seek being played by crude prices, inflation and RBI

is affecting our market to a great extent.And adding to the worries are globalslowdown, political instability, serial bomb blasts, negative publicsentiments etc. It is indeed surprising that though the epicenter of the sub- prime crisis is the US, the tremors are being felt in India. The loss of marketcap in the US is only 14 per cent vis--vis 38 per cent in India.

24


25/25

But even after analyzing the causes for downturn, we can say that India storyhas not ended; else $200 billion with institutional investors would have fledfor safer waters. Exports being 14 per cent of GDP, India is less vulnerableto external shocks than many other Asian nations. Political uncertainties too

have narrowed down. Savings in India have risen at a historic rate of 35 per cent on the growing GDP base; 17 per cent of this is in gold, commoditiesand real-estate while financial savings represent 18 per cent of GDP. Eventhis is skewed towards deposits both banking and non-banking, while the percentage of savings in shares and debentures is a mere 6.3 per cent. If this percentage goes to 25 per cent, it would amount to $40 billion of incremental money being diverted to capital markets. Indian markets todayare facing extremely negative sentiments on the back of financial crisesacross the globe. US red ink led bloody session on market. Indian markets bounced back after the mid sessions to recover smartly from the dip fall onthe back of Finance Ministers strong statement about Indias financialhealth led to sustained buying across the sectors. Also the bounce back inAsian markets from days low on relaxation in policies in China for second

time this week and along with further pump of $28 billion money into themarkets by Japan, Australia and India, also added to positive sentiment. Soeven after such downturns, we can be hopeful for a positive market.

Documents

Technical Analysis of india Stock Market from 2006-2008