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Causes of fluctuation in stock mrkt.

Causes of fluctuation in stock mrkt.

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Englishppt.Ppt F Presentation Transcript

  • 1. BUSINESS COMMUNICATION PRESENTATION ‘FLUCTUATION IN INDIAN STOCK MARKET’ CAUSES AND CONTROLS
  • 2. OBJECTIVES OF THE STUDY
    • To find out what are the reasons for irregular fluctuations or functioning.
    • To show how the authorities tries to minimize the fluctuations and control the market
    • To grasp better understand of the working of stock market.
  • 3. CAUSES
    • The first reason is due to HUMAN NATURE .
    • The stock market is an emotional creature that feeds on fear and greed. Both emotions are in ample supply in the market, and there’s money is to be made from the mistakes that occur because of them.
    • Not everyone has the same investment motivation. This results in different people buying and selling at different times, and different types of stocks. Speculators , for example, might be buying a stock, not necessarily because of its price or intrinsic value, but because it is “in play.” This occurs when the trading volume is higher than normal.
  • 4.
    • Not everyone has the same investment motivation. This results in different people buying and selling at different times, and different types of stocks. Speculators , for example, might be buying a stock, not necessarily because of its price or intrinsic value, but because it is “in play.” This occurs when the trading volume is higher than normal.
    • Investors prefer a slow, steady course of fundamental research and analysis. They’re looking for the under-valued stock prices
  • 5.
    • Whether you’re an investor, trader, or speculator, you can take advantage of stock market price fluctuations. The important thing is to know why they are happening, and whether you should get in line or wait it out at the caramel apple stand.
    • When the investor sees a lower correlation between his income and the stocks, he is more comfortable owning stocks, and demands a lower risk premium from equities.
  • 6.
    • Some of the uncomfortable events like the state elections are behind us and irrespective of the result, favorable or unfavorable, there can be no  speculation  on  the  outcome,  which  can  affect market sentiment adversely.
    • The  monsoons  have a significant impact on our markets.
  • 7.
    • Another reason for the fluctuation is due to the MEDIA.
    • Published quarterly earnings announcements can spike or spiral a stock’s price.
    • A positive or negative story regarding a company can be perhaps more effective in determining the sale-purchase of stocks in market. These events are part of what is known as investor sentiment .
  • 8.
    • I nternational correlations .
    • Many observers have bemoaned the extent to which Indian markets are correlated with global markets.
    • There are two parts to this problem:
    • The most basic idea is that the GDR markets close for trading after the Indian market does. News that breaks after 3:30 Indian time (when NSE closes) is impounded in GDR prices which are visible in the next morning's newspaper.
  • 9.
    • It is hence perfectly normal to see "the NASDAQ price driving the Indian price". Conversely, traders on NASDAQ would wake up and closely look at the Indian price which would guide their trading in the day: they would think that the Indian price drives the NASDAQ price.
    • In terms of correlation between Indian stocks and global markets; we are seeing something of a shift from purely local asset pricing towards global asset pricing.
  • 10.
    • Vulnerability. There is an unfortunate correlation in our past, between scandals and crises within stock exchanges and movements in stock prices owing to factors in the economy .
    • While the Indian equity market has made enormous progress in the decade of the 1990s -- with the introduction of electronic trading, novation at the Clearing Corporation, and settlement at the depository -- there are important vulnerabilities that have yet to be addressed.
  • 11.
    • Market Abuse
    • Market abuse is a broad term, which includes abnormal price/ volume movement, artificial transactions, false or misleading impressions, insider trading, etc.
  • 12.
    • The Sensex melted like waxwork as it plunged over 1,100 points below the 10,000 level. It was the day of a bloodbath on the Dalal street.
    • The free fall in share prices led the Sensex and the Nifty down by 10% by early afternoon trading session, as a result, the trading was suspended for 1 hour between 11:55 am to 12.55 pm. It was the second time in the indices' history. The first being on May 17, 2004.
  • 13.
    • Among the stocks that ended in positive territory on Monday were Satyam Computer up 2.3% at Rs 680, Bhel moved ahead 0.5% at Rs 1,970, Cipla moved up 0.2% at Rs 222, and ICICI Bank jumped up 0.2% at Rs 558. Whereas, index heavyweights Reliance Industries moved down 5% at Rs 926.050 and Infosys moved down 5.3% at Rs 2,814 ended with heavy losses for the day.
    • Monday's free fall is attributed to be due to heavy selling of funds .
    • RBI said on Monday it is in touch with major settlement banks and the stock exchanges to ensure that payment obligations on the exchanges are met smoothly. The central bank's statement on availability of liquidity follows a 10% fall in share prices in early trade on Monday.
  • 14.
    • This decline can largely be attributed to the following reasons:
    • Sharp correction in commodities, particularly metals and the consequent impact on metal stocks.
    • Weakness in US equities as also weakness in Asian markets
    • Unwinding of leveraged equity positions by domestic retail investors.
  • 15. CONTROLLING MEASURES
    • Regulatory Bodies are formed to make the rules and regulations to operate in the stock market.
    • Securities Exchange Board of India(SEBI)
    • Bombay Stock Exchange(BSE)- Its Rules & Regulations
    • National Stock Exchange(NSE)- Its Rules & Regulations
  • 16.
    • Today, a trading member need not wend his way to the Jeejeebhoy Tower in Dalal Street, Mumbai or to any stock exchange building elsewhere; he can comfortably sit at his computer terminal and execute the order. Laptops, palmtops and hand mobiles, in fact, challenge the relevance of the brick and mortar.
    • An investor, today, need not wait, with his fingers crossed, for a fortnight or more, for getting crossed cheques or crisp notes for the sale proceeds of his securities. The trading cycle has been shortened to T+2. This shortening of the cycle has been done in a phased manner but in a rapid succession – from T+5 to T+3 to T+2, all in a matter of two years.
  • 17.
    • Now 99% of the scrips in the market are dematerialised. Almost 100% of the trades are in D-mat form. Inconvenience of physical custody and transfer, tedium of intimating change of address and problems of bad delivery, late delivery, non delivery and the risks of forgery and frauds have virtually disappeared – or have been dematerialised!
    • At the stock exchanges, robust risk management system has been put in place, Value-at-risk margining and exposure limits, on-line monitoring of margins and positions, Clearing Corporation and Settlement Guarantee Fund mechanism for trade settlement – all these have made Indian capital market now arguably world class, in terms of transparency, efficiency and safety.
  • 18.
    • Antiquated and abused badla system or ALBM stands abolished. In its place, for hedging and trading purposes, a number of derivatives – in the form of futures and options has been introduced.
    • VIGILANCE:SEBI keeps vigil, clamps down appropriate surveillance actions. Any market misconduct or manipulation are sought to be dealt with severely in the interest of the market and the investors.
  • 19.
    • FURTHERENCE: . Margin trading and securities lending have been introduced with adequate checks and balances. The Central Listing Authority has become operational to provide an independent entry-point scrutiny of the corporates to be listed. Straight Through Processing will get broadened market wide in another 3 month’s time.
    • Market surveillance
    • A market surveillance division was set up in SEBI in July 1995, with a view to effectively monitor abnormal market activities and detect market manipulation.
  • 20.
    • Interactive and Proactive Market Oversight by SEBI Market oversight by SEBI is on interactive basis with exchanges and there is frequent informal exchange of information and ideas to create purposeful market monitoring and surveillance. The efficacy of this system was demonstrated on occasions of market volatility. In order to contain market risk, SEBI co-ordinated a series of measures by stock exchanges which included prompt collection of margins, enforcement of exposure limits and application of price bands. These steps helped in protecting the markets from defaults.
  • 21.
    • Investigations From the year 1995-96, SEBI strengthened its investigation activities. This process has been facilitated by the enactment in 1995-96 of regulations prohibiting fraudulent and unfair trade practices, which bring persons who are not registered intermediaries, including investors or clients of intermediaries within the purview of SEBI.
    • Investigations involve the identification of persons who might be involved in the violations, collection of elaborate data regarding primary issues, transactions in the secondary markets, trading details, followed by verification and analysis of the same.
  • 22.
    • Impounding of auction proceeds
    • With a view to preventing manipulators from benefiting from undue gains arising out of manipulation several measures were taken for the first time. These included freezing of the proceeds of manipulation arising from auction and close out. These actions were taken under the overall regulatory powers of SEBI to protect the interest of the investors and the securities markets.
    • Price rigging
    • Investigations were carried out in 67 cases of price rigging. Such actions coupled with effective market surveillance on the part of SEBI and the stock exchanges have resulted in significant reduction in cases of price rigging on the Indian stock exchanges.
  • 23.
    • Surveillance
    • The main objective of the Surveillance function of the Exchange is to promote market integrity in two ways, first, by monitoring price and volume movements (volatility) as well as by detecting potential market abuses at a nascent stage, with a view to minimizing the ability of the market participants, both in Cash and Derivative market, to influence the price of the scrip/ series in the absence of any meaningful information, and second, by managing default risk by taking necessary timely actions.
  • 24.
    • ALSO TO STOP MARKET ABUSE,
    • Price Monitoring
    • The functioning of the Price Monitoring is broadly divided into following activities:
    • On-Line Surveillance
    • Off-Line Surveillance
    • Derivative Market Surveillance
    • Surveillance Actions
    • Rumour Verification
    • Pro-active Measures
  • 25.
    • Position Monitoring
    • Statement of Top 100 Purchasers / Sellers
    • Concentrated Purchases / Sales
    • Purchases / Sales of Scrips having Thin Trading
    • Trading in B1, B2 and Z group Scrips
    • Pay-in liabilities above a Threshold Limit
    • Verification of Institutional Trades
    • Scrutiny
    • Market Intelligence
    • Bulk Deals
    • Block Deals
  • 26. SOURCES
    • We collected data from financial newspapers such as economic times and business times as well as from internet links of these newspapers and from other websites too. The data reveals that the Indian stock market has been facing immense stock price fluctuation for the past few years.
    • Also we interviewed the stock market experts and noted their views and knowledge. Without their help, this report would have been more laborious for us as a learning student.