TREND ANALYSIS OF SELECTED SECURITIES IN BSE INDEX AT SHORTER TIME HORIZONS”

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“TREND ANALYSIS OF SELECTED SECURITIES IN BSE INDEX AT SHORTER
TIME HORIZONS”
A PROJECT REPORT
SUBMITTED TO
UNIVERSITY OF CALICUT
IN PARTIAL FULFILLMENT OF THE REQUIREMENTS
FOR THE AWARD OF THE DEGREE OF
MASTER OF BUSINESS ADMINISTRATION
(2010-2012)
BY
DEEPAK.KD
(Register no: JLAKMBA 009)
Under the guidance of
Miss. NIMMI SOMRAJ, MBA
JAWAHARLAL COLLEGE OF ENGINEERING AND TECHNOLOGY,
MANGALAM, LAKIDI

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SCHOOL OF MANAGEMENT
Jawaharlal College of Engineering and Technology
DECLARATION
I DEEPAK.K.D, hereby declare that the project report entitled “TREND ANALYSIS OF
SELECTED SECURITIES IN BSE INDEX AT SHORTER TIME HORIZONS” submittedto the University
of Calicut in partial fulfillment ofthe requirements for the award of the degree of the Master
of Business Administration is a recordoforiginal workdone by me during 5th September 2011
to 3rd October 2007 under the guidance ofMiss. Nimmi Somraj Faculty of MBA in Jawaharlal
College of Engineering and Technology,
I also hereby declare that this project report has not been submitted at any time to any
other university or Institute for the award of any degree/ diploma/fellowship or other titles.
Place:
Date: Signature
FORWARDED TO
DIRECTOR PRINCIPAL
(Jawaharlal College ofEngineering andTechnology)

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SCHOOL OF MANAGEMENT STUDIES
JAWAHARLAL COLLEGE OF ENGINEERING AND TECHNOLOGY
MANGALAM, LAKIDI
CERTIFICATE
This is to certify that this Dissertation submittedin partial fulfillment of the requirement of
the degree ofMaster of Business Administration of the University of Calicut is a record of
bona fide project workconductedby Mr.DEEPAK.K.D under my supervision andguidance
and no part of this project report has been submitted earlier for the award of any degree of
any University and this report has not been published in part or full in any other magazine
or journal
Date: Faculty Guide

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Acknowledgement
I take pleasant privilege in expressing my heart full gratitude to all those who were of precious
help in completing this project.
I also express my sincere gratitude and profound thanks to Mr. KPC Nair, Advisor of MBA
Department , for giving me the opportunity to do this project.
I am greatly indebted to Miss Nimmi Somraj, my guide for his valuable suggestions and
encouragement throughout the project work.
I also express my sincere gratitude to management and staffs who gave given me an opportunity
to do my project in their company.
I am happy to express my esteem thanks to Mr.Vinod, Manager of Share wealth Securities and
staffs for their help and cooperation.
I am expressing my sincere gratitude to my parents for their encouragement and blessing that
enabled me to successfully complete the project.

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CONTENTS
Certificates Page number
Declaration
Acknowledgement
List of Tables & Graphs
Chapter I Introduction
1.1 Introduction to the topic
1.2 Introduction to capital market
1.3 Over view of Share wealth securities
1.4 Research problem
1.5 Objectives of the study
1.6 Scope of the study
1.7 Limitations of the study
1.8 Research methodology
Chapter II Review of Literature
Chapter III Industry and company profile
Chapter IV Data Analysis and interpretation
Chapter V Findings and Recommendations
Chapter VI Conclusion
Appendix (price data)
Bibliography

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Number Lists of charts Page number
1 Line chart of State Bank of India
2 Moving average chart of State Bank of India
3 RSI chart of State Bank of India
4 ROC chart of State Bank of India
5 MACD chart of State Bank of India
6 Line chart of ICICI Bank
7 Moving average chart of ICICI Bank
8 RSI chart of ICICI Bank
9 ROC chart of ICICI Bank
10 MACD chart of ICICI Bank
11 Line chart of HDFC Bank
12 Moving average chart of HDFC Bank
13 RSI chart of HDFC Bank
14 ROC chart of HDFC Bank
15 MACD chart of HDFC Bank
16 Line chart of Punjab National Bank
17 Moving average chart of Punjab National Bank
18 RSI chart of Punjab National Bank
19 ROC chart of Punjab National Bank
20 MACD chart of Punjab National Bank
21 Line chart of AXIS Bank
22 Moving average chart of AXIS Bank
23 RSI chart of AXIS Bank
24 ROC chart of AXIS Bank
25 MACD chart of AXIS Bank

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CHAPTER 1
INTRODUCTION AND RESEARCH PROBLEM

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1.1 INTRODUCTION
Investment means sacrifice of money value at present with the expectations to gain in the
future. Financial investments are like exchange of financial claims, like buying of shares,
debentures, purchasing insurance policy, investing money in bank or post office etc. Any rational
investor, before investing his or her investable wealth in the stock, analysis the risk associated
with the particular stock. The actual return he receives from a stock may vary from his excepted
return and the risk is expressed in terms of variability of return. The down side risk may be
caused by several factors, either common to all stocks or specific to a particular stock. Investor in
general would like to analysis the risk factors and a thorough knowledge of the risk, helps him to
plan his portfolio in such a manner so as to minimize the risk associated with the investment. To
a certain extent security analysis helps him or her to identify the risk. Securities analysis involves
fundamental analysis and technical analysis.
The study was conducted in the banking sector in which the securities are listed in BSE
index with reference to share wealth securities limited, Thrissur. The topic selected for study is
‘trend analysis of selected securities in BSE index at shorter time horizons’.
The study is done for the purpose of conducting technical analysis. In the stock market
share price of companies are determined by the demand and supply forces operating in the
market. These demand and supply forces in turn are influenced by a number of fundamental
factors as well as certain psychological or emotional factors. The combined impact of all these
factors is reflected in the share price movement. The price movements of securities follow
systematic and certain consistent patterns. Past movements in the prices of shares help to identify
trends and pattern. It is useful for the prediction of future price movements. The companies
selected from the banking sector for the study are State Bank of India, ICICI Bank, HDFC
Bank, Punjab National Bank & Axis Bank.
The efficiency of the companies conformed by analyzing technical aspects. The technical
analysis includes RSI (Relative Strength Index), ROC (rate of change), Simple Moving Average,
MACD, Line chart. It provides additional strength to the investor in choosing the option of buy,
hold or sell strategies.

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1.2 INTRODUCTION TO CAPITAL MARKET
The market where investment funds like bonds, equities and mortgages are traded is
known as the capital market. The primal role of the capital market is to channelize investments
from investors who have surplus funds to the ones who are running a deficit. The capital market
offers both long term and overnight funds. The financial instruments that have short or medium
term maturity periods are dealt in the money market whereas the financial instruments that have
long maturity periods are dealt in the capital market. The different types of financial instruments
that are traded in the capital markets are equity instruments, credit market instruments, insurance
instruments, foreign exchange instruments, hybrid instruments and derivative instruments.
A capital market is a market for securities (both debt and equity), where business enterprises
(companies) and governments can raise long-term funds. It is defined as a market in which
money is lent for periods longer than a year, as the raising of short-term funds takes place on
other markets (e.g., the money market). The capital market includes the stock market (equity
securities) and the bond market (debt).
Capital markets consist of
1 Primary market
2 Secondary markets
1. Primary market
The primary market is that part of the capital markets that deals with the issuance of new
securities. Companies, governments or public sector institutions can obtain funding through the
sale of a new stock or bond issue. This is typically done through a syndicate of securities dealers.
The process of selling new issues to investors is called underwriting. In the case of a new stock
issue, this sale is an initial public offering (IPO). Dealers earn a commission that is built into the
price of the security offering, though it can be found in the prospectus. The primary markets are
where new stock and bonds issues are sold (via underwriting) to investors.

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Features of primary markets are:
• This is the market for new long term equity capital. The primary market is the market
where the securities are sold for the first time. Therefore it is also called the new issue
market (NIM).
• In a primary issue, the securities are issued by the company directly to investors.
• The company receives the money and issues new security certificates to the investors.
• Primary issues are used by companies for the purpose of setting up new business or for
expanding or modernizing the existing business.
• The primary market performs the crucial function of facilitating capital formation in the
economy.
• The new issue market does not include certain other sources of new long term external
finance, such as loans from financial institutions. Borrowers in the new issue market may
be raising capital for converting private capital into public capital; this is known as
"going public."
• The financial assets sold can only be redeemed by the original holder.
Methods of issuing securities in the primary market are:
1. Initial public offering;
2. Rights issue (for existing companies);
An initial public stock offering (IPO) referred to simply as an "offering" or "flotation," is
when a company issues common stock or shares to the public for the first time. They are often
issued by smaller, younger companies seeking capital to expand, but can also be done by large
privately-owned companies looking to become publicly traded.
A rights issue is offered to all existing shareholders individually and may be rejected,
accepted in full or accepted in part. Rights are often transferable, allowing the holder to sell them
on the open market. A right to a share is generally issued on a ratio basis (e.g. one-for-three
rights issue). Because the company receives shareholders' money in exchange for shares, a rights
issue is a source of capital.

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2. Secondary market
The secondary market, also known as the aftermarket, is the financial market where
previously issued securities and financial instruments such as stock, bonds, options, and futures
are bought and sold. The term "secondary market" is also used to refer to the market for any used
goods or assets, or an alternative use for an existing product or asset where the customer base is
the second market (for example, corn has been traditionally used primarily for food production
and feedstock, but a second- or third- market has developed for use in ethanol production).
Under a secondary market offering or seasoned equity offering of shares to raise money,
a company can opt for a rights issue to raise capital. The rights issue is a special form of shelf
offering or shelf registration. With the issued rights, existing shareholders have the privilege to
buy a specified number of new shares from the firm at a specified price within a specified time.
A rights issue is in contrast to an initial public offering (primary market offering), where shares
are issued to the general public through market exchanges. With primary issuances of securities
or financial instruments, or the primary market, investors purchase these securities directly from
issuers such as corporations issuing shares in an IPO or private placement, or directly from the
federal government in the case of treasuries.
After the initial issuance, investors can purchase from other investors in the secondary
market.The secondary market for a variety of assets can vary from fragmented to centralized, and
from illiquid to very liquid. The major stock exchanges are the most visible example of liquid
secondary markets - in this case, for stocks of publicly traded companies. . Exchanges provide a
centralized, liquid secondary market for the investors who own stocks that trade on those
exchanges. Most bonds and structured products trade “over the counter,” or by phoning the bond
desk of one’s broker-dealer.

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Functions of Secondary market
Secondary marketing is vital to an efficient and modern capital market. In the secondary
market, securities are sold by and transferred from one investor or speculator to another. It is
therefore important that the secondary market be highly liquid (originally, the only way to create
this liquidity was for investors and speculators to meet at a fixed place regularly; this is how
stock exchanges originated, see History of the Stock Exchange). As a general rule, the greater the
number of investors that participate in a given marketplace, and the greater the centralization of
that marketplace, the more liquid the market.
Fundamentally, secondary markets mesh the investor's preference for liquidity (i.e., the
investor's desire not to tie up his or her money for a long period of time, in case the investor
needs it to deal with unforeseen circumstances) with the capital user's preference to be able to
use the capital for an extended period of time.
Stock Exchanges
Stock exchanges are open markets that trade financial assets. Whether associated with a
company or acting as an individual, a stock exchange is the place where stocks are bought and
sold. There are a number of major stock exchanges around the world and each of these plays a
part in determining the overall financial and economic condition of any economy.
Stock exchanges deal with a number of financial instruments such as stocks, bonds and
equities. Both corporate and government bonds are traded in stock exchanges. Equities include
popular investment options, rights issues, bonus issues, and all other forms of shares and stocks.
The actual trading of stocks takes place through mediators such as financial advisors, brokerage
houses, and stockbrokers.

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Functions of Stock Exchanges:
The main function of a stock exchange is to facilitate the transactions associated with
both the buying and selling of securities. Buyers and sellers of shares and stocks can track the
price changes of securities from the stock markets in which they operate. The ups and downs of
stock indexes help the investors to speculate on the return on investment (ROI) of various
investment options.
Stock exchanges also serve as a source of capital formation for listed companies. Business
entities that are listed in a particular stock exchange can issue shares to thepublic and sell those
shares in that market.
To take part in these transactions, listed companies need to abide by the rules and
requirements of that market. The stock exchanges protect the interests of both buyers and sellers
by assuring a timely transfer of money. The participants of a stock market are required to operate
within the specified transaction limits fixed by the regulatory authority of that stock market.
Speed and transparency are vital for all stock market transactions. The companies listed
in a stock exchange need to provide proper guidance regarding business performance and
prospects, mergers and acquisitions, stock prices, dividends and other information at all times.
Investors make their investment decisions based on the information obtained from these
companies, and the comments of analysts who track those companies.

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1.3 OVER VIEW OF SHARE WEALTH SECURITIES
Share wealth Securities Ltd is the first corporate member of National Stock Exchange of
India Ltd, Bombay Stock Exchange Ltd and MCX Stock Exchange Ltd (MCX-SX) from
THRISSUR, the Cultural Capital of Kerala. Share wealth is also a Depository Participant with
CDSL (Central Depository Services (India) Ltd). Share wealth Securities Ltd has two group
companies, Share wealth Commodities Pvt Ltd (Member: MCX, NCDEX, NMCE, ICEX &
NSEL) and Share wealth Financial Services Ltd (AMFI Registered Mutual Fund Distributor).
Share wealth has a group (Overseas Joint Venture) company at Abu Dhabi, Share wealth
Financial Consultancy LLC. Registered & Corporate offices of Share wealth Group of
companies are at Thrissur.
Mission of the company
"To educate growing investing public in a simple & practical way to help them to protect their
hard earned money and to make more money from financial & commodity markets", which
we mean by
"Wealth creation simplified"
Products and Services
Equities
Derivatives
Depository
Commodities
Mutual fund
Initial Public Offer (IPO)
Insurance

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1.4 RESEARCH PROBLEM
‘Trend analysis of selected securities in BSE index at shorter time horizons’.
Problem discussion
In the past, there were many situations in which stock prices fluctuated in an erratic
manner. There are various factors which affect the stock prices. They include human emotions
economic factors, government factors etc. The price of a security represents a consensus. It is the
price at which one person agrees to buy and another agrees to sell. The price at which an investor
is willing to buy or sell depends primarily on his expectations. If he expects the security's price
to rise, he will buy it; if the investor expects the price to fall, he will sell it. These simple
statements are the cause of a major challenge in forecasting security prices, because they refer to
human expectations. Humans are not easily quantifiable or predictable. This fact alone will keep
any mechanical trading system from working consistently.
Technical analysis is the study of price movement and trend in markets in order to
forecast future prices. Investment timing plays a crucial role for trading in stock market. The
investors face difficulty while identifying the opportunities. Prices of securities on the stock
market fluctuate daily on account of buying and selling. Stock prices move in trend and cycles
and are never stable .This study make a critical analysis of the stock price fluctuations and an
alternative approach to study the stock price behavior. The study mainly aims at minimizing this
risk existing in the market using technical analysis indicators and also shows whether these
technical analysis indicators able enough to act as a guide in making effective selling and buying
decisions.

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1.5 OBJECTIVES OF THE STUDY
 To conduct technical analysis of leading banking companies securities in stock market.
 To identify the nature of growth of the selected banking companies in share market.
 To know how technical tools are used to predict the future behavior of the stock.
 To know how an investor can take rational investment decision by the study of market
trends and movements.
 To identify the effectiveness of Technical analysis in predicting the future stock prices

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1.6 SCOPE OF THE STUDY
 The analysis is helpful for the common investors and researchers to find out the
trends in market.
 The research is based upon the prices of five companies, State Bank of India (SBI),
ICICI Bank, HDFC Bank, Punjab National Bank, AXIS Bank.
 The project tries to point out the best avenues that ensure maximum return and
minimum risk where in investment could be made. The performances of the Banking
companies are analyzed in terms of technical analysis. The results are supported by
various techniques in technical analysis. The technical analysis is to predict the future
stock behavior.
 Mathematical indicators, oscillators’ tools are used for the analysis. These oscillators
are fine tools to predict future movements much before such movements takes place ,
and thus leave a sufficient time gap to take decision on the basis of
 MACD (Moving Average Convergence and Divergence)
 ROC (Rate of Change)
 RSI (Relative Strength Index)
 Moving average
 Line chart
 The study is much useful for both the clients and share broking firms. Technical
analysis helps the share holders to choose the best security to invest to make profit.
The share brokers can use these tools to give a good guidance to its clients regarding
the transaction of shares. Since the customer gets added service, they will retain to the
company. It can be used as a method to increase their clients and there by profit. This
study reveals how the share brokers and their clients are helped by technical tools.

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1.7 LIMITATIONS OF THE STUDY
 Analysis involves using of limited technical tools.
 The study is restricted only to five selected stocks of BSE.
 The study depends more on secondary data rather than on primary data.
 This technical analysis can’t be applicable to newly listed companies script.
 If the market is not stable, the findings may mislead us to wrong conclusions.

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1.8 RESEARCH METODOLOGY
The methodologies used for the study are the following
Research design
The research design used in the study is analytical research. In analytical research the researcher
has to use facts or information already available, and analyze these to make a critical evaluation
of material. So the research has to analyze the closing price of shares, which is a historical data
and derive conclusions from it.
Universe
The segment identified for conducting the study is BSE index. Samples are selected from the
banking sectors which are listed in BSE index.
Sampling design
BSE index consist of 12 sectors. From the 12 sectors, banking sector are selected through
convenience sampling. The securities selected for the study are having high market capitalization
in the banking sector.
Samples
Five securities are selected, each from banking sectors. They are:
 State Bank of India
 ICICI Bank
 HDFC Bank
 Punjab National Bank
 AXIS Bank

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CHAPTER II
REVIEW OF LITERATURE

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TECHNICAL ANALYSIS
Technical analysis is a forecasting method of price movements using past prices, volume, and
open interest. Technical analysis includes a variety of forecasting techniques such as chart
analysis, pattern recognition analysis, seasonality and cycle analysis, and computerized technical
trading systems. However, academic research on technical analysis is generally limited to
techniques that can be expressed in mathematical forms, namely technical trading systems,
although some recent studies attempt to test visual chart patterns using pattern recognition
algorithms. A technical trading system consists of a set of trading rules that result from
parameterizations, and each trading rule generates trading signals (long, short, or out of market)
according to their parameter values. Several popular technical trading systems are moving
averages, channels, and momentum oscillators.
Definition
“The technical approach to investment is essentially a reflection of the idea that prices move in
trends that are determined by the changing attitudes of investors toward a variety of economic,
monetary, political, and psychological forces. The art of technical analysis, for it is an art, is to
identify a trend reversal at a relatively early stage and ride on that trend until the weight of the
evidence shows or proves that the trend has reversed.”
Charles H. Dow first introduced the Dow Theory in the late 1800s; technical analysis has been
extensively used among market participants such as brokers, dealers, fund managers, speculators,
and individual investors in the financial industry. Numerous surveys indicate that practitioners
attribute a significant role to technical analysis. Technical analysts may employ models and
trading rules based on price and volume transformations, such as the relative strength index,
moving averages, regressions, inter-market and intra-market price correlations, cycles or,
classically, through recognition of chart patterns. Technical analysis is frequently contrasted with
fundamental analysis, the study of economic factors that influence prices in financial markets.
Technical analysis holds that prices already reflect all such influences before investors are aware
of them, hence the study of price action alone. Some traders use technical or fundamental
analysis exclusively, while others use both types to make trading decisions.

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Premises of Technical Analysis
 Prices follow a particular movement over the period.
 Price movement is influenced by demand and supply.
 Demand and supply are affected by certain rational and irrational factors.
 Every kind of price sensitive information is discounted in to prices, which is the base of
predicting near future price movement.
 Prices follow a particular path continuously, which gets repeated again and again, this
repetition provides a chance to take investment or disinvestment decision.
 Price movement is supported by traded volume.
Tools for Technical analysis
 Line chart
 Rate of change indicator (ROC)
 Relative strength index (RSI)
 Moving average
 Moving Average Convergence and Divergence (MACD)
Line chart
A line chart is a basic type of chart common in many fields. It is an extension of a scatter
graph, and is created by connecting a series of points that represent individual measurements
with line segments. A line chart is often used to visualize a trend in data over intervals of time,
thus the line is often drawn chronologically.

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Rate of change indicator (ROC)
The Rate of Change indicator (ROC) is a way of showing how rapidly the price of a
particular share (or other financial instrument) is moving. Rate of Change or ROC is a technical
indicator that measures the changes between the percentage compared to the most recent price
and the price "n" periods in the past. It is also said that it monitors the momentum of the market.
It estimates the market’s rate of change comparative to the previous trading intervals. In the
highest level, the indicator might say a market is quite overbought. Valleys or troughs also points
out an oversold market situation. It can also stand alone as an essential indicator used by many
technicians interested in market momentum. It has a horizontal median called equilibrium. It is
this median that tells us everything we need to know about this type of rate. A few technicians in
the market often use a very simple approach for the Rate of Change learning
Buying signal
 When ROC is more than one (ROC >1) and moving upward continuously, it indicates
that market is likely to move upward.
 When ROC line is less than one (ROC < 1) and moving upward continuously, it indicates
that market has come out of the red and in the near future it is expected to have a upward
movement.
 When ROC is moving downside but the pace of decline has decreased, it indicates that
market is likely to reach over sold level and after that it will start rising. An opportunist
who can take a risk can buy at this level.
Selling signal
 When ROC line is increasing but the pace of increase has declined it indicates that
market is about to reach the overbought zone, after which it is likely to decline. One
should take precaution or a risk adverse investor can sell at this movement.
 When ROC line has made a peak it is the identification of Over Bought market, and
market is likely to move towards downward direction, one should sell.
 When ROC is more than one (ROC >1) but declining, it indicates that market will enter
in south zone, i.e declining zone, one should sell at this level.

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Relative strength index (RSI)
The Relative Strength Index (RSI) is one of the powerful Oscillators which
indicate market movement much before such movement takes place. Under RSI gains and losses
of the prices over the immediate previous days’ price for a certain period is calculated. With the
help of the formulae RSI value is calculated and plotted on the graph to identify Over Bought
and Over Sold market. Market always moves southward after an overbought situation and it
moves northward after an oversold situation.
The RSI was developed by J. Welles Wilder and published in Commodities magazine (now
called Futures magazine) in June 1978 and in his New Concepts in Technical Trading Systems
the same year.
Relative strength also refers to the strength of a security in relation to its sector or
the overall market.
RSI=100-[100/ (1+RS)]
RS = Average of n periods price gains / Average of n periods price losses
RSI ranges from 0 to 100. An asset is deemed to be overbought once the RSI approaches the 70
level, meaning that it may be getting overvalued and is a good candidate for a pullback.
Likewise, if the RSI approaches 30, it is an indication that the asset may be getting oversold and
therefore likely to become undervalued.
Buying signal
 When RSI is more than fifty and moving upward continuously, it indicates that market is
likely to move upward.
 When RSI lines are less than fifty and moving upward continuously, it indicates that
market has come out of the red and in the near future it is expected to have a upward
movement.
 When RSI is moving downside below the fifty marks but the pace of decline has
decreased, it indicates that market is likely to reach Over Sold level and after that it will
start rising, an opportunist who can buy at this level.

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Selling signal
 When RSI line is increasing above fifty mark but the pace of increase has declined, it
indicates that market is about to reach the overbought zone, after which it is likely to
decline. One should take precaution or a risk adverse investor can sell at this movement.
 When RSI line has made a peak at around 70 levels it is the identification of Over Bought
market, and market is likely to move downward direction, one should sell.
 When RSI is more than 50 but declining, it indicates that market will enter in south zone,
i.e. declining zone, and one should sell at this level.
Moving average
In statistics, a moving average, also called rolling average, rolling mean or running average, is a
type of finite impulse response filter used to analyze a set of data points by creating a series of
averages of different subsets of the full data set. A moving average is not a single number, but it
is a set of numbers, each of which is the average of the corresponding subset of a larger set of
data points. it is used in technical analysis of financial data, like stock prices, returns or trading
volumes.
Moving averages is an indicator frequently used in technical analysis showing the average value
of a security's price over a set period Moving averages are used to emphasize the direction of a
trend and to smooth out price and volume fluctuations, or "noise", that can confuse
interpretation. Typically, upward momentum is confirmed when a short-term average (e.g.15-
day) crosses above a longer-term average (e.g. 50-day). Downward momentum is confirmed
when a short-term average crosses below a long-term average.
Moving Average Convergence & divergence (MACD)
MACD is used to predict movements in the market. An analyst is generally in a dilemma
whether to use long term moving average or short term moving average. The solution for such
dilemma is to use MACD; it is the difference between short term moving average and long term
moving average. This difference helps in identifying, whether prices in the recent past have
moved upward or downward as compared to longer period movement. With the help of MACD
line various signals can be generated.

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MACD = short period moving average – long period moving average
With the help of MACD buy and selling signal can be generated, when MACD is in a positive
zone it indicates buying as share prices are likely to move upward in the future. On the contrary,
when MACD is in negative zone it indicates downward movement of the market in the near
future and one should sell the shares.
Buying signal
 Whenever MACD line is above the moving average line of MACD , it moves towards the
average line but fails to penetrate it, and instead starts rising upward, supported by an
upward movement of the average line, it is a buy signal.
 When MACD line is below the moving average line of MACD, and it penetrates towards
the upside and continues to move upward, supported by an upward movement of the
average line, it is a buying signal.
 When MACD line is above the moving average line of MACD and moving upward
continuously, supported by similar movement of the average line, it is also a buy signal.
Selling signal
 When, MACD line is below the moving average line of MACD, it moves towards the
average line but fails to penetrate it, instead, starts declining, supported by a downward
movement of the average line, it is a sell signal.
 When, MACD line is above the moving average line of MACD, and it penetrates
towards the downside and continues to move downward, supported by a downward
movement of the average line, it is a sell signal.
 When MACD line is below the moving average line of MACD and moving downward
continuously, supported by similar movement of the average line, it is also a sell signal.

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Aniruddha Naha Zaheer Abbas Zaidi
Examination of Yields and Spreads of Indian Debt Securities through Technical Analysis
Tools
The study aims at determining whether the tools and techniques of technical analysis are
applicable to the Indian Debt Market. Technical analysis has predominantly been a domain of the
equity market in India, but with the explosive growth in the debt market resulting in high
volumes of trades and continuous price formations, the concepts of technical analysis can be
extended to debt securities too. This study analyses yields of Government of India Securities to
check whether there is a scope of forecasting security yields and prices through technical
analysis tools. The analysis is done on the yields and the spread that exists between the yields of
Government of India Securities. Yields are taken in place of prices because of the existence of
different securities at different premium levels for the same maturity. The analysis on individual
securities is performed on the 5-Year and 10-Year security yields and the results are taken valid
for any other time period yields. Similarly the spread analysis is done for the 10-Year and 5-year
spreads and the result is taken valid for all other spreads.
Technical Analysis Tools Used
The analysis uses certain technical tools to help in analysing the Debt markets in India. The tools
used are
 Moving Average Convergence Divergence
 Bollinger Bands
 Relative Strength Index
 Exponential Moving Averages
Technical analysis is definitely successful when applied to yields. The analysis on the 5-Year
and 10-Year yields has shown that chart analysis is possible. Technical tools like RSI, EMA,
MACD and Bollinger Bands have given positive results. RSI has been very correct in predicting
the movement of yields about two to four periods prior to actual movement in the yields.

28
The technical tools work quite well with spreads. The RSI and Bollinger bands have given
exceptionally good results and can definitely be used in the analysis of spreads. The EMA can
also be used provided the changes in spreads are a little volatile. The EMA has worked well even
with stable spreads, but the changes in the EMA are minute and difficult to observe. The MACD
is even more difficult as changes in the MACD and crossovers of the MACD with the signal line
take place only in the ten thousandth part of a percent.
P. J. Detry CeReFiM, University of Namur, Belgium
Other evidences of the predictive power of technical analysis: the moving averages rules on
European indexes
Many authors discovered that simple forms of technical analysis possessed significant forecast
power on various market indexes. We show that these results can be replicated on formally
selected European indexes, which almost completely eliminates any influence from data-
snooping. Implications of these results in terms of market efficiency are also discussed.
Technical analysis uses past prices in order to predict future prices. It tries to detect some
predefined "patterns" in price series, and claims it is capable of exploiting the trends that it
discovers. the article of Brock, Lackonishok and Le Baron (BLL thereafter) (1992), showing that
simple forms of technical analysis can significantly predict daily price movements of the Dow-
Jones index, many academics have begun to realize that technical analysis might have some
value. Many other were skeptical, mainly because of the huge potential impact of data-snooping
when working with an index as much studied as the Dow-Jones. Indeed, when hundreds of
researchers try to find predictable patterns on the same sample, they are bound to find one, by
pure chance, even if the series follows a random walk.

29
This study tried to check whether BLL's results could be replicated on a series of formally
selected European indexes. The technical rules we chose to test are the VMA rules presented in
BLL, that seemed to perform particularly well on the Dow-Jones Industrial Average, on the
Footsie 30 and on a variety of Asian indexes. We find that in 13 cases out of 15, the VMA rules
possess some predictive ability in the sense that the returns following buy signals are higher than
returns following sell signals. Only for the indexes from France and Spain is this not the case. In
11 cases this predictive power is statistically significant, and in 10 cases this result is robust to
risk adjustment. As far as the volatility results are concerned, our study tends to confirm BLL's
results, although not as strongly: in 9 cases, technical rules can significantly select less risky
periods (column 6 in table 2). But in four cases, buy signals are followed by technical analysis
may still have some infra marginal value, by detecting some systematic over or underreaction to
information. Riskier periods than sell signals (although this result is statistically significant only
for the Dennish and Greek indexes). Interestingly, we find that break-even transaction costs, i.e.
the level of transaction costs that would just have eliminated all excess profit, are often of the
same magnitude as actual transaction costs encountered by professional traders: in 12 cases out
of 15, one way break even trading costs lie between 0.5 and 4 percent. If these figures are more
or less in accordance to the efficient market hypothesis of Fama (1970), we think they reflect the
infra-marginal contribution of technical analysis to market efficiency: In fact, all happens as if
chartists exploit predictability in stock prices up to the point where trading costs renders this
activity not profitable anymore. This could explain why, in stock prices, we find predictable, but
no profitable patterns. The question that remains is: what is the cause of this predictive ability, of
the tendency of stock prices to behave predictably? Two paths may be explored: the gradual
diffusion of information, or some irrational tendency from the market10 to under or overreact to
information in some systematic manner. In our study, testing technical rules on daily series, we
think the second explanation is the most likely, whereas the first explanation would be more
relevant in intra-day. This is why we believe that the cause of the predictive power of simple
forms of technical analysis has to be found in the area of behavioral finance, market psychology,
and all branches that do not assume the perfect rationality of markets.

30
Gunduz Caginalp, Ph.D. and Donald Balenovich, Ph.D.
Using a dynamical microeconomic model which generalizes the classical theory of
adjustment to include finite asset base and trend-based investment preference, we develop a
foundation for the technical analysis (or charting) of securities. The mathematically complete
system of (deterministic) ordinary differential equations that has provided a quantitative
explanation of the laboratory bubbles experiments generates a broad spectrum of patterns that are
used by practitioners of technical analysis. The origins of many of these patterns are classified as
(i) those that can be generated by the activities of a single group, and (ii) those that can be
generated by the presence of two or more groups with asymmetric information. Examples of (i)
include the head and shoulders, double tops, rising wedge while (ii) includes pennants and
symmetric triangles. The system of differential equations is easily generalized to stochastic
ODE’S. Application is also made to Japanese candlestick analysis
This approach provides a coherent explanation of not only the patterns of technical
analysis but also of the limitations involved in their application. One of the difficulties that afflict
technical analysis is that the rules and conclusions seem somewhat arbitrary and consequently
unscientific. From the perspective of the asset flow model the validity of technical analysis is
contingent upon only two factors: a finite asset base and the influence of trend based investing.
The vast majority of our conclusions would not be altered with a somewhat different approach
(e.g. discrete difference equations or a different form for the flow rate k) that nevertheless
preserves these properties. This (or any similar) methodology elevates technical analysis from a
set of arbitrary assumptions and conclusions to a set of implications that are implied by the
unique solution of the differential equations. Given a set of parameters (trend based coefficient,
etc.) that describe an investor population, one can obtain the implications of a particular
configuration of price development as the unique solution of the equations.

31
In view of the simplicity of assumptions and the limited strategy involved in the
model, it is somewhat surprising that these patterns emerge so naturally. In the symmetric
triangle pattern, for example, one can imagine a complex set of strategies evolving in time as
each local maximum or minimum is attained. The numerical results, however, seem to suggest
the information included in the price trend and the extent of under/over-valuation is a suitable
representation of the average of a wide spectrum of strategies. There are two additional research
problems that arise from this analysis. First, can patterns be detected in a market through
statistical and computer testing, and if so, do they have predictive value? One would need to
define the patterns in an algorithmic way that corresponds to human experts, as done in Kamijo
and Tanigawa (1993) for some patterns. The next step would be the precise identification of the
rules for deciding the trading action. Of course, a related issue is the possibility that these
patterns can be created in a laboratory, perhaps using experienced participants. A second issue is
the problem of deducing fundamental values, say Pa (1) and Pa (2), and assets of each group,
given P(t). This is an inverse problem similar to inverse scattering.
Yufeng Han, Ke Yang, and Guofu Zhou
A New Anomaly: The Cross-Sectional Profitability of Technical Analysis
In this paper, they document that an application of a moving average timing strategy
of technical analysis to portfolios sorted by volatility generates investment timing portfolios that
often outperform the buy-and-hold strategy substantially. For high volatility portfolios, the
abnormal returns, relative to the CAPM and the Fama-French three- factor models, are of great
economic significance, and are greater than those from the well known momentum strategy.
Although both the moving average timing and momentum strategies are trend-following
strategies, their performances are surprisingly uncorrelated and behave differently over the
business cycles. In addition, the abnormal returns cannot be explained by market timing ability,
investor sentiment, default and liquidity risks.

32
This paper provides the first study on the cross-sectional profitability of technical
analysis. Unlike existing studies that apply technical analysis to either market indices or
individual stocks
Technical analysis uses past prices and perhaps other past data to predict future
market movements. In practice, all major brokerage firms publish technical commentary on the
market and many of their advisory services are based on technical analysis. Many top traders and
investors use it partially or exclusively (see, e.g., Schwager, 1993, 1995; Covel, 2005; Lo and
Hasanhodzic, 2009). Whether technical analysis is profitable or not is an issue discussed in
empirical studies going as far back as Cowles (1933) who found inconclusive evidence. Recent
studies, such as Brock, Lakonishok, and LeBaron (1992) and Lo, Mamaysky, and Wang (2000),
however, find strong evidence of profitability when using technical analysis, primarily of using a
moving average scheme, to forecast the market. More recently, Neely, Rapach, Tu and Zhou
(2011) find that the stock market forecasting power of technical analysis is as good as using
economic fundamentals. From a theoretical point of view, Zhu and Zhou (2009) demonstrate that
technical analysis can be a valuable learning tool under uncertainty about market dynamics.
In this paper, we document that a standard moving average of technical analysis, when
applied to portfolios sorted by volatility, can generate investment timing portfolios that
outperform the buy-and-hold strategy greatly, with returns that have negative or little risk
exposures on the market factor and the Fama-French SMB and HML factors. Especially for the
high volatility portfolios, the abnormal returns, relative to the CAPM and the Fama and French
(1993) three-factor models, are high, and higher than those from the momentum strategy. While
the moving average strategy is a trend-following one similar to the momentum strategy, its
performance has little correlation with the momentum strategy, and behaves differently over
business cycles. Furthermore, the abnormal returns are not sensitive to changes in investor
sentiment, default and liquidity risks.

33
Our study provides new a research avenue in several areas. First, our study suggests
that it will be likely fruitful to examine the profitability of technical analysis in various markets
and asset classes by investigating the cross-sectional performance, especially focusing on the
role of volatility. Given the vast literature on technical analysis, potentially many open questions
may be explored and answered along this direction. Second, our study presents an exciting new
anomaly in the finance literature. Given the size of the abnormal returns and the wide use of
technical analysis, explaining the moving average anomaly with new asset pricing models will be
important and desirable. Thirdly, because of its trend-following nature, various investment issues
that have been investigated around the momentum strategy can also be investigated with the
moving average strategy. All of these are interesting topics for future research.
Ben R. Marshall, Sun Qian, Martin Young
Is technical analysis profitable on U.S stock with certain size, liquidity or industry
characteristics?
In this study they consider whether popular moving average and trading range breakout
technical trading rules are profitable on a subset of U.S. stocks with certain size, liquidity, and
industry characteristics. They find these rules are rarely profitable during the period 1990 to
2004, however there is some evidence they are more profitable for smaller, less liquid stocks.
There is no evidence of any industry bias in applying these rules and when a rule does produce
statistically significant profits on a stock, these profits tend to be greater for longer decision
period rules.
Technical analysis is widely used by practitioners even though most academic
research shows that technical trading rules do not produce excess profits after transactions costs
are accounted for. We contribute to the literature by considering the profitability of popular
trading rules on individual NYSE and NASDAQ stocks. This enables us to determine whether
technical analysis is profitable on a small subset of stocks with certain characteristics even
though it is not profitable across all stocks. The data for this study is obtained from the CRSP
database and includes all stocks listed on the NYSE and NASDAQ markets over the period 1990
to 2004.

34
This paper investigates whether the popularity of technical trading rules with
practitioners is due to their profitability on a small subset of stocks with certain size, liquidity,
and industry characteristics. It is possible that some stocks that are not included in market
indices, the focus of previous technical analysis studies, have characteristics that can be
profitability captured by technical trading rules. We consider this using popular moving average
and trading break-out rules on individual U.S. stocks over the 1990-2004 period. We find that
these rules are not profitable when applied to the vast majority of stocks. This result is robust to
different time periods and different markets 17 (NYSE and NASDAQ). There is some evidence
that these trading rules are more profitable on small, illiquid stocks, but this result is not strong.
We do not find any link between a firm’s industry and the profitability of technical analysis.
When a trading rule does produces statistically significant profits on a stock, these profits tend to
be greater for longer decision period rules. Also the profits tend to be considerably larger than
reasonable estimates of transaction costs. This may explain why practitioners continue to use
technical analysis despite it not generating profits on a consistent basis.

35
CHAPTER III
INDUSTRY AND COMPANY PROFILE

36
Industry Profile
The trading on stock exchanges in India used to take place through open outcry
without use of information technology for immediate matching or recording of trades. This was
time consuming and inefficient. This imposed limits on trading volumes and efficiency. In order
to provide efficiency, liquidity and transparency, NSE introduced a nation-wide on-line fully-
automated screen based trading system (SBTS) where a member can punch into the computer
quantities of securities and the prices at which he likes to transact and the transaction is executed
as soon as it finds a matching sale or buy order from a counter party. SBTS electronically
matches orders on a strict price/time priority and hence cuts down on time, cost and risk of error,
as well as on fraud resulting in improved operational efficiency. It allows faster incorporation of
price sensitive information into prevailing prices, thus increasing the informational efficiency of
markets. It enables market participants, irrespective of their geographical locations, to trade with
one another simultaneously, improving the depth and liquidity of the market. It provides full
anonymity by accepting orders, big or small, from members without revealing their identity, thus
providing equal access to everybody. It also provides a perfect audit trail, which helps to resolve
disputes by logging in the trade execution process in entirety. This sucked liquidity from other
exchanges and in the very first year of its operation, NSE became the leading stock exchange in
the country, impacting the fortunes of other exchanges and forcing them to adopt SBTS also.
Today India can boast that almost 100% trading take place through electronic order
matching. Technology was used to carry the trading platform from the trading hall of stock
exchanges to the premises of brokers. NSE carried the trading platform further to the PCs at the
residence of investors through the Internet and to handheld devices through WAP for
convenience of mobile investors. This made a huge difference in terms of equal access to
investors in a geographically vast country like India. NSE has main computer which is connected
through Very Small Aperture Terminal (VSAT) installed at its office. The main computer runs
on a fault tolerant STRATUS mainframe computer at the Exchange. Brokers have terminals
(identified as the PCs in the Figure 1) installed at their premises which are connected through
VSATs/leased lines/modems. An investor informs a broker to place an order on his behalf. The
broker enters the order through his PC, which runs under Windows NT and sends signal to the
Satellite via VSAT/leased line/modem.

37
Indian stock market marks to be one of the oldest stock market in Asia. It dates back to
the close of 18th century when the East India Company used to transact loan securities. In the
1830s, trading on corporate stocks and shares in Bank and Cotton presses took place in Bombay.
Though the trading was broad but the brokers were hardly half dozen during 1840and 1850.In
1860, the exchange flourished with 60 brokers. In fact the 'Share Mania' in India began with the
American Civil War broke and the cotton supply from the US to Europe stopped.
Further, the brokers increased to 250. At the end of the war in 1874, the market found a
place in a street (now called Dalal Street). In 1887, "Native Share and Stock Brokers'
Association" was established. In 1895, the exchange acquired a premise in the street, which was
inaugurated in 1899.
National Stock Exchange (NSE)
The National Stock Exchange of India (NSE) was incorporated in November 1992 as a tax-
paying company. It is recognized under Securities Contracts (Regulation) Act, 1956 in 1993 as a
stock exchange. In June 1994, it commenced operations in the Wholesale Debt Market (WDM).
In November, the same year, the Capital Market (Equities) segment commenced operations and
the Derivatives segment in June 2000.
Bombay Stock Exchange (BSE)
A very common name for all traders in the stock market, BSE, stands for Bombay Stock
Exchange. The oldest market not only in the country, but also in Asia. The early days of BSE was
known as "The Native Share & Stock Brokers Association." It was established in the year 1875
and became the first stock exchange in the country to be recognized by the government. In 1956,
BSE obtained a permanent recognition from the Government of India under the Securities
Contracts (Regulation) Act, 1956.

38
THE MAIN PLAYERS IN THE INDUSTRY
The financials and investment industry is a highly competitive in nature with almost well
established firms diversifying and entering into this industry. As of today there are Over 2000
brokers, 10000 sub brokers and 1 crore investors. It is highly competitive with entry of new
aggressive players. Retail broking is highly fragmented industry with falling brokerages Value
added services and Online trading, the new fad.
INDIABULLS FINANCIAL SERVICES LTD.
Indiabulls is India’s leading Financial Services and Real Estate Company having presence
over 414 locations in more than 124 cities. Indiabulls serves the financial needs of more than
3,00,000 customers with its wide range of financial services and products from securities,
derivatives trading, depositary services, research & advisory services, insurance, consumer
secured & unsecured credit, loan against shares and mortgage & housing finance. The market
capitalization of Indiabulls is around USD 800 million, and the consolidated net worth of the
company is around USD 500 million.
KARVY SECURITIES LTD
KARVY, is a premier integrated financial services provider, and ranked among the top
five in the country in all its business segments, services over 16 million individual investors in
various capacities, and provides investor services to over 300 corporates, comprising the who is
who of Corporate India. The birth of Karvy was on a modest scale in 1981. Karvy Consultants
Limited. Thus over the last 20 years Karvy has traveled the success route, towards building a
reputation as an integrated financial services provider, offering a wide spectrum of services.
INDIAINFOLINE
IndiaInfoline was founded by a group of professionals in 1995, a seemingly distant past
in the Internet age. Their meticulous research was published and distributed in printed form to a
client base comprising the who's who of Indian business including leading MNCs, investment
banks and consulting firms. The quality of research was highly acclaimed and soon became the
industry benchmark. Over the last few years, their research coverage has grown to cover

39
practically all companies, sectors, economy and financial markets. The breadth and depth of their
content is unmatched - stock markets, mutual funds, personal finance, taxation and economy.
SHARE KHAN
Share khan is a pioneer in equity market. Share khan is among the top 3 branded retail service
providers. Largest network of branded broking outlets in the country servicing 100,000 clients.
Sharekhan not only has a strong offline presence but also provides automated online
trading services. To sum up, Sharekhan brings to you a user- friendly online trading facility,
coupled with a wealth of content that will help you stalk the right shares. In fact Sharekhan runs
India's largest chain of share shops with around 250 outlets in 113 cities!

40
COMPANY PROFILE
Promoters of the company
Share wealth is promoted by a group of Financial Market Professionals having more
than 20 years of experience in Financial Markets. Mr.T.B.Ramakrishnan (Ramki)- CEO &
Managing Director is leading the core team of Share wealth, which has a highly competent
diversified Board of Directors. Mr.Ramki is a Stock Market Analyst, Ex. Treasurer & Governing
Council Member of Cochin Stock Exchange Ltd (1998-2000) and former Kerala Regional Head of
Share khan who has got more than 20 years of experience in Financial Markets. Mr.Joseph P
Antony, Mr.T.V.N Girish Kumar, Mr.N.C.Peethambaran (Group Company Director) and Mr.Mani
Paul (Group Company Director) are Working Directors of the company.
Mr.N.C.Chummar,Anchery Ramanathan, Dr.Saifu Kokkat, N.Nandakumar, A.A.Mathew,
Advocate A.Y.Khalid, Mr.A.Unnikrishnan(Group Company Director), Mr.T.S.Rajan(Group
Company Director) ,Mr.Vincent Paliakkara(Group Company Director) are other directors.
Dr.Anil Menon is the Chairman and Mr.C.G.Surendran is the Vice-Chairman of the company.
Products and Services
Equities
The Equities section provides with an insight into the equities segment of NSE & BSE and also
provides real-time quotes and statistics of the equities market. In-depth information regarding
listing of securities, trading systems & processes, clearing and settlement, risk management,
trading statistics etc are available. Share wealth is the registered member of NSE, giving
equities at the most importance.
Derivatives
The term "Derivative" indicates that it has no independent value, i.e. its value is entirely
"derived" from the value of the underlying asset. The underlying asset can be securities,
commodities, bullion, currency, live stock or anything else. In other words, Derivative means a
forward, future, option or any other hybrid contract of pre determined fixed duration, linked
for the purpose of contract fulfillment to the value of a specified real or financial asset or to an

41
index of securities. With Securities Laws (Second Amendment) Act,1999, Derivatives has been
included in the definition of Securities. The term Derivative has been defined in Securities
Contracts (Regulations) Act, as:- A Derivative includes:-
1.a security derived from a debt instrument, share, loan, whether secured or unsecured, risk
instrument or contract for differences or any other form of security;
2. a contract which derives its value from the prices, or index of prices, of underlying securities;
Depository
A depository can be compared to a bank. A depository holds securities like shares,
debentures, bonds, Government Securities, units etc. of investors in electronic form. Besides
holding securities, a depository also provides services related to transactions in securities. At
present two Depositories viz. National Securities Depository Limited (NSDL) and Central
Depository Services (I) Limited (CDSL) are registered with SEBI.
A depository interfaces with the investors through its agents called Depository Participants
(DPs). If an investor wants to avail the services offered by the depository, the investor has to
open an account with a DP. This is similar to opening an account with any branch of a bank in
order to utilize the bank's services. The Depository facilities include, Dematerialization,
Rematerialization, repurchase/redemption of units of mutual funds, electronic settlement of
trades in stock exchanges, receipt of non-cash corporate benefits such as bonus, in electronic
form, transmission of securities, and other facilities like holding debt instruments in the same
account, availing stock lending/borrowing facility, etc. Share wealth provides you all Depository
services.
Commodities
Any product that can be used for commerce or an article of commerce which is traded
on an authorized commodity exchange is known as commodity. The article should be movable
of value, something which is bought or sold and which is produced or used as the subject or

42
barter or sale. In short commodity includes all kinds of goods. Forward Contracts (Regulation)
Act (FCRA), 1952 defines goods as every kind of movable property other than actionable claims,
money and securities.
In current situation, all goods and products of agricultural (including plantation),
mineral and fossil origin are allowed for commodity trading recognized under the FCRA. The
national commodity exchanges, recognized by the Central Government, permits commodities
which include precious (gold and silver) and non-ferrous metals; cereals and pulses; ginned and
un-ginned cotton; oilseeds, oils and oilcakes; raw jute and jute goods; sugar and gur; potatoes
and onions; coffee and tea; rubber and spices.etc.Share wealth is the registered member of
MCX.
Mutual Fund
Mutual fund is a mechanism for pooling the resources by issuing units to the investors
and investing funds in securities in accordance with objectives as disclosed in offer document.
Investments in securities are spread across a wide cross-section of industries and sectors and
thus the risk is reduced. Diversification reduces the risk because all stocks may not move in the
same direction in the same proportion at the same time. Mutual fund issues units to the
investors in accordance with quantum of money invested by them. Investors of mutual funds
are known as unit holders. The profits or losses are shared by the investors in proportion to
their investments. The mutual funds normally come out with a number of schemes with
different investment objectives which are launched from time to time. A mutual fund is
required to be registered with Securities and Exchange Board of India (SEBI) which regulates
securities markets before it can collect funds from the public Share wealth has the AMFI
registration and guides in all types of Mutual Fund.

43
Initial Public Offer
An Initial Public Offer (IPO) is the selling of securities to the public in the primary market.
It is when an unlisted company makes either a fresh issue of securities or an offer for sale of its
existing securities or both for the first time to the public. This paves way for listing and trading
of the issuers securities. The sale of securities can be either through book building or through
normal public issue. IPOs can be a risky investment. For the individual investor, it is tough to
predict what the stock will do on its initial day of trading and in the near future since there is
often little historical data with which to analyze the company. Also, most IPOs are of companies
going through a transitory growth period, and they are therefore subject to additional
uncertainty regarding their future value
Insurance
Life insurance is a contract that pledges payment of an amount to the person assured (or
his nominee) on the happening of the event insured against. The contract is valid for payment
of the insured amount during:
1) The date of maturity, or
2) Specified dates at periodic intervals, or
3) Unfortunate death, if it occurs earlier.

44
CHAPTER IV
DATA ANALYSIS AND INTERPRETATION

45
INTERPRETATION
Line chart is prepared by connecting the closing price of State Bank of India. The closing price
of SBI is 2261.8 on 1st July 2010, after that the price increased up to 3489.55 on 5th November
2010. The lowest price is 2141.05 on 22nd June 2011.
Moving average ofSBI
0
500
1000
1500
2000
2500
3000
3500
4000
Line chart of SBI
closing price
0
500
1000
1500
2000
2500
3000
3500
4000
Close Price
10 days
moving
average

46
INTERPRETATION
From the moving average chart closing price and 10 days moving average are plotted. A short
term moving average is used to predict near future movement and take decision for short time
period.
 During the following period price line is above the moving average line, it indicates the
buying signal for the scrip.
16th August 2010 15th September 2010 4th November 2010
1st December 2010 15th February 2011 30th March 2011
21st April 2011
 During the following period price line is below the moving average line, it indicates the
selling signal for the scrip.
9th August 2010 24th November 2010 10th & 24th February 2011
INTERPRETATION
In most of the cases RSI remained below the 60 mark line which indicates a bearish
market for the scrip. By analysing RSI chart of SBI it is understood that the peak level shows
the period for buying the security. When RSI line crosses the 30 mark line it shows the selling
signal.
0
20
40
60
80
100
120
RSI chart of SBI
RSI

47
Over bought market for the scrip
On 18 nov-10, 14 dec-10, 7 jan-11, 9 feb-11, 9 may-11, 24may-11, 14june-11, the RSI
line crossed the 70 mark line from down wards, it indicates an over bought market for the scrip.
It signifies that soon peak wold be genarated and then market will fall.
Over sold market for the scrip
On 6 aug-10, 9 sep-10, 30 sep-10, 3 nov-10, 28 march-11, 7 june-11, RSI line crossed 30
mark line from upwards indicating oversold market, it indicates very soon market will rise in
future and become bullish.
 During the following periods RSI line moved upward in the 30-70 zone and gave clear sell
signal
5 nov-10 to 11nov-10 2 feb-11 to 7 feb-11 15 feb-11 to 3 march-11
30 mar-11 to 13 april-11 21 april-11 to 4 may-11 8 june-11 to 13 june-11
 During the following periods RSI line moved downwards in the 70-30 zone and give clear
buy signals:
26 oct-10 to 1nov-10 17 jan-11 to 21 jan-11 8 feb-11 to 15 feb-11
13 apr-11 to 25 apr-11 30 may-11 to 3 jun-11

48
INTERPRETATION
The ROC line moves between .8134 and 1.1380 marks, which is the indication of some upward
and downward fluctuation in the prices of the scrip.it can also seen from the chart that the price
line starts from 2261.8 on 1st july 2010 which reaches a peak 3489.55 on 5th november 2010.
ROC is greater than 1 for the long period of 15th july-10 to 25th aug-10 and 8th sep-10 to 14th oct-
10. Also ROC is less than 1 during the month of may 2011.
 On the following instances ROC touched its extreme during whole of the year( peak
formation)
13 aug -10 13 sep-10 5th nov -10 3rd dec-10
24th dec-10 24th jan-1 16th feb-11 29th mar-11
25th apr-11 8th june 29th jun-11
 During the following intervals ROC line declined from its extreme towards one mark line,
which signifies a bearish trend in the market for the scrip:
13-aug-10 to 23 aug-10 13 oct-10 to 20 oct-10 5 nov-10 to 23 nov-10
3 dec-10 to 15 dec-10 16 feb-11 to 7 mar-11 18 mar-11 to 25 may-11
0
0.2
0.4
0.6
0.8
1
1.2
ROC chart of SBI
ROC

49
 During the following intervals ROC line increased from one mark line towards its peak,
which signifies the bullish trend in the market for the scrip:
27 oct-10 to 5th nov -10 14 jan-11 to 24 jan-11 10th feb-11 to 16th
15 aprl-11 to 27 aprl-11.
INTERPRETATION
MACD line refers to the two moving average differences. Whenever MACD line is above the
Zero mark line, it indicates the signal of bullish market and whenever it is below the zero mark
line it shows the signal for bearish market. From the above chart indicates the difference between
5 days and 10 days moving averages. MACD line lies between -85.595 to 112.31.
 During the following periods the MACD line forms a peak giving a signal of trend
reversal, i.e. is conversion of a bullish market into a bearish market:
16th August 2010 14th September 2010 12th October 2010
25th October 2010 5th November 2010 18th November 2010
-100
-50
0
50
100
150
MACD of SBI
MACD

50
2nd December 2010 3rd January 2011 17th February 2011
26th April 2011 12th May 2011
 During the following periods the MACD line formed a through, trend reversal takes place
and bearish market starts converting in to bullish market.
6th September 2010 1st November 2010 25th November 2010
18th January 2011 10th February 2011 3rd & 25th May 2011
INTERPRETATION
Line chart of ICICI bank is drawn by connecting the closing price. On 1st July the share price of
ICICI bank was 841.4, on 5th November 2010 it shows that the share price increased to the
maximum of 1269.7 and the lowest value of the share is 840.1 on 2nd July 2010.
0
200
400
600
800
1000
1200
1400
Line hart of ICICI
__ closing
price

51
MOVING AVERAGE OF ICICI
INTERPERTATION
From the moving average chart closing price and 10 days moving average of ICICI bank are
plotted. A short term moving average is used to predict near future movement and take decision
for short time period.
4th October 2010 2nd& 27th December 2010 24th January 2011
14th February 2011 31st May 2011
27th October 2010 9th December 2010 24th February 2011
18th March 2011 4th & 19th May 2011
0
200
400
600
800
1000
1200
1400
Close Price
10 days moving average

52
INTERPRETATION
During the period RSI line is above 30 mark line most of the time, by analyzing RSI chart the
peak level shows period for buying the security. When RSI line crosses the 30 mark line it shows
the selling signal.
RSI line crossed 70 mark line from downwards On 26th October 2010, 18th November 2010, 4th
January 2011, 4th February 2011, 4th May, 20th May 2011 , 14th June 2011. It indicates an
overbought market for the scrip. It signifies soon peak would be generated and then market will
fall, ie.. it will became bearish.
Oversold market for the scrip
On 29th October 2011 RSI line crossed 30 mark lines from upward and reached 18.5029 on 9th
November, it indicating oversold market for the scrip, it indicates soon the market will rise in
future and became bullish. But the market price increased after that effect and reaches peak on
18th November. Likewise on 29th December RSI line again crossed the 30 mark line after that it
reached the highest RSI vale of 81.969 on 7th January 2011.
0
10
20
30
40
50
60
70
80
90
RSI chart of ICICI
RSI

53
 During the following period RSI line moved downwards in the 70-30 zone and gave
clear sell signals:
15th Oct to 22nd Oct 2010 29th Nov to 2nd Dec 2010 14th Dec 23rd Dec 2010
8th Jan to 21 Jan 2011 9th Feb to 14th Feb 2011 15th April to 25th April
23rd May to 31 May 2011 21st June to 24th June 2011
 During the following periods the RSI line moved upwards in the 30-70 zone and gave
clear Buy signals:
12th Aug to 16th Aug 2010 30th Dec to 3rd Jan 2010 21st Jan to 3rd Feb 2011
22nd Feb to 25th Feb 2011 10th march to 2st March2011 11th Apr to 15th Apr 2011
31st may to 9th June 2011
INTERPRETATION
line starts from 841.4 on 1st july 2010 which reaches a peak 1269.7 on 5th november 2010.
0
0.2
0.4
0.6
0.8
1
1.2
1.4
ROC chart of ICICI
ROC

54
formation)
13 September-10 10th november -10 24th december-10
24th jan-11 22nd february -11 4th April -11
1st June-11 6th June -11
19-aug-10 to 27 aug-10 9 nov-10 to 19 nov-10 22 feb-11 to 7
march-11
4th April to 11 April-11
2nd Sept to 13 Sep-10 27 oct-10 to 5th nov -10 15 Dec-10 to 24 Dec-10
8th Feb to 15th Feb-11

55
INTERPRETATION
line it shows the signal for bearish market. From the MACD chart of ICICI indicates the
difference between 5 days and 10 days moving averages. MACD line lies between -32.845 to
28.085.
23rd august 2010 3rd November 2010 2nd December 2010
31st December 2010 21st January 2011 17th February 2011
28th April 2011 31st May 2011
27th October 2010 26th November 2010 17th January 2011
9th February 2011 22nd March 2011 24th May 2011
-40
-30
-20
-10
0
10
20
30
40
MACD Chart of ICICI
MACD

56
INTERPRETATION
Line chart is prepared by connecting the closing price of HDFC Bank. The closing price of
HDFC Bank is 1907.15 on 1st July 2010, after that the price increased up to 2502.6 on 30th June
2011, which is the last date of the period of the study. The lowest price is 1907.15 on 1st July
2010, which is the first date of the study.
MOVING AVERAGE OF HDFC BANK
0
500
1000
1500
2000
2500
3000
Line chart of HDFC Bank
Close Price
0
500
1000
1500
2000
2500
3000
Close Price
10 Days moving average

57
INTERPERTATION
From the moving average chart closing price and 10 days moving average of HDFC bank are
1st December 2010 3rd January 2011 17th February 2011
25th
October2010 13th
January2011 24th
February2011
11th
April 2011
INTERPRETATION
market for the scrip. By analysing RSI chart of HDFC Bank it is understood that the peak level
shows the period for buying the security. When RSI line crosses the 30 mark line it shows the
selling signal.
0
10
20
30
40
50
60
70
80
90
RSI chart of HDFC Bank
RSI

58
On 13 aug -10, 14th, 19th &26th Oct -10, 15th Dec -10, 14th Jan -11, 7th Feb-11, 21st
March-11, 4th May-11, and 17th june-2011 the RSI line crossed the 70 mark line from down
wards, it indicates an over bought market for the scrip. It signifies that soon peak wold be
genarated and then market will fall.
On 29th July-10, 18th Aug-10, 9th Sep-10, 9th Nov-10, 29th Dec-10, 17th Feb-11, 11 Mar-11,
28th March-11, 31st May-11 and 28th June 2011 RSI line crossed 30 mark line from upwards
indicating oversold market, it indicates very soon market will rise in future and become bullish.
 During the following periods RSI line moved upward in the 30-70 zone and gave clear sell
signal
1st Sep to 8th Sep-10 29th Nov to 2nd De-10 22nd Dec to 28th Dec-10
8th Feb to 16th Feb-11 22nd Mar to 24th Mar-11 3rd May to 18th May-11
20th June to24th June -11
buy signals:
6th Aug to 12th Aug-10 26th Aug to 1st Sep-10 2nd Dec to 8th Dec-
10
3rd Jan to 12th Jan-10 10th March to 17th March-11 9th June to 14th June-
11

59
INTERPRETATION
and downward fluctuation in the prices of the scrip.it can also seen from the table that the price
line starts from 1907.15 on 1st july 2010 which reaches a peak 2502.6 on 30th June 2011.
formation)
20th Auguest 2010, 22nd September 2010 10th November 2010
3rd January 2011 21st February 2011 4th April 2011
21st Sept-to 8th Oct-2010 3rd Jan to 14th Jan 2011 18th Feb to 28th feb 2011
14th march to 18th march 2011 4th April to 18th April 2011.
0
0.2
0.4
0.6
0.8
1
1.2
ROC chart of HDFC Bank
ROC

60
1st Sep to 22nd Sep 2010 28th Oct to 10th Nov 2010 16th Dec-10 to 3rd Jan-11
8th Feb to 21st feb 2011 21st March to $th April 2011
line it shows the signal for bearish market. From the MACD chart of HDFC Bank indicates the
56.425.
20th August 2010 4th October 2010 3rd December 2010
4th January 2011 21st February 2011 26th April 2011
-60
-40
-20
0
20
40
60
80
MACD Chart of HDFC Bank
MACD

61
13th August 2010 8th September 2010 27th October 2010
26th November 2010 24th December 2010 25th February 2011
22nd March 2011 25th May 2011
INTERPRETATION
Line chart is prepared by connecting the closing price of Punjab National Bank. The closing
price of PNB was 1019.95 on 1st July 2010, after that the price increased up to 1384.35 on 9th
November 2010. The lowest price is 986.55 on 10th Feb 2011.
0
200
400
600
800
1000
1200
1400
1600
1-Jan-00
31-Dec-04
31-Dec-09
31-Dec-14
31-Dec-19
31-Dec-24
31-Dec-29
31-Dec-34
31-Dec-39
31-Dec-44
31-Dec-49
31-Dec-54
31-Dec-59
31-Dec-64
31-Dec-69
31-Dec-74
31-Dec-79
31-Dec-84
31-Dec-89
31-Dec-94
31-Dec-99
31-Dec-04
31-Dec-09
Line chart of PNB
Close Price

62
MOVING AVERAGE OF PNB
INTERPERTATION
From the moving average chart closing price and 10 days moving average of Punjab National
Bank are plotted. A short term moving average is used to predict near future movement and take
decision for short time period.
13th October 2010 5th November 2010 2nd December 2010
15th February 2011 30 March 2011 25th April 2011
28th
October2010 26th
November2010 8th
December2010
9th
February2011 19th
May 2011
0
200
400
600
800
1000
1200
1400
1600
1-Jan-00
31-Dec-06
31-Dec-13
31-Dec-20
31-Dec-27
31-Dec-34
31-Dec-41
31-Dec-48
31-Dec-55
31-Dec-62
31-Dec-69
31-Dec-76
31-Dec-83
31-Dec-90
31-Dec-97
31-Dec-04
Close Price
10 Days moving average

63
INTERPRETATION
market for the scrip. By analysing RSI chart of PNB it is understood that the peak level shows
the period for buying the security. When RSI line crosses the 30 mark line it shows the selling
signal.
On 18th November 2010, 6th January 2011, 1st February 2011, 2nd may 2011 15th June
2011, the RSI line crossed the 70 mark line from down wards, it indicates an over bought market
for the scrip. It signifies that soon peak wold be genarated and then market will fall.
On 30th July 2010, 9th September 2010, 4th October 2010, 12th October 2010, 23rd March
2011, 1st June 2011, 29th June 2011, RSI line crossed 30 mark line from upwards indicating
oversold market, also it indicates very soon market will rise in future and become bullish.
0
10
20
30
40
50
60
70
80
90
100 1-Jan-00
31-Dec-03
31-Dec-07
31-Dec-11
31-Dec-15
31-Dec-19
31-Dec-23
31-Dec-27
31-Dec-31
31-Dec-35
31-Dec-39
31-Dec-43
31-Dec-47
31-Dec-51
31-Dec-55
31-Dec-59
31-Dec-63
31-Dec-67
31-Dec-71
31-Dec-75
31-Dec-79
31-Dec-83
31-Dec-87
31-Dec-91
31-Dec-95
31-Dec-99
31-Dec-03
31-Dec-07
RSI Chart of PNB

64
 During the following periods RSI line moved upward in the 30-70 zone and gave clear
sell signal
13th Oct to 16th Nov-10 23rd Dec-10 to 5th Jan-11 21st feb to 3rd march
7 April to 13th April-11 27th April to 2nd may-11 8th June 15th June-11
buy signals.
19th Oct to 25th Oct 2010 27th Oct to 3rd Nov 2010 29th nov to 2nd dec 2010
16th dec to 23rd Dec 2010 10th Feb to 21st Feb 2011 15th April to 25th April 2011
23rd may to 30 may 2011
INTERPRETATION
line starts from 1019.95 on 1st july 2010, which reaches a peak 1384.35 on 9th november 2010.
0
0.2
0.4
0.6
0.8
1
1.2
1-Jan-00
31-Dec-03
31-Dec-07
31-Dec-11
31-Dec-15
31-Dec-19
31-Dec-23
31-Dec-27
31-Dec-31
31-Dec-35
31-Dec-39
31-Dec-43
31-Dec-47
31-Dec-51
31-Dec-55
31-Dec-59
31-Dec-63
31-Dec-67
31-Dec-71
31-Dec-75
31-Dec-79
31-Dec-83
31-Dec-87
31-Dec-91
31-Dec-95
31-Dec-99
31-Dec-03
31-Dec-07
ROC Chart of PNB

65
formation)
25th Augest 2010 15th September 2010 13th October 2010
10th December 2010 23rd February 2011 30th March 2011
2nd June 2011
25th Aug to 31st Aug 2010 13th Oct to 20 th Oct 2010 13th Dec to 20th Dec 2010
3rd Jan to 10 th Jan 2011 8th June to 16th June 2011
26th nov to 3rd Dec 2010 14th Jan to 24th jan 2011 8th Feb to 23rd Feb 2011
22nd Mar to 31st Mar 2011
-50
-40
-30
-20
-10
0
10
20
30
40
50
1-Jan-00
31-Dec-03
31-Dec-07
31-Dec-11
31-Dec-15
31-Dec-19
31-Dec-23
31-Dec-27
31-Dec-31
31-Dec-35
31-Dec-39
31-Dec-43
31-Dec-47
31-Dec-51
31-Dec-55
31-Dec-59
31-Dec-63
31-Dec-67
31-Dec-71
31-Dec-75
31-Dec-79
31-Dec-83
31-Dec-87
31-Dec-91
31-Dec-95
31-Dec-99
31-Dec-03
31-Dec-07
MACD Chart of PNB
MACD

66
line it shows the signal for bearish market. From the MACD chart of Punjab National Bank
indicates the difference between 5 days and 10 days moving averages. MACD line lies between -
41.435 to 36.32.
4th August 2010 13th October 2010 25th October 2010
22nd November 2010 2nd December 2010 2nd February 2011
16th February 2011 28April 2011
19th October 2010 1st November 2010 26th November 2010
8th December 2010 9th February 2011 22nd March 2011
23rd May 2011

67
Line chart of AXIS bank is drawn by connecting the closing price for a particular period of time.
On 1st July the share price of AXIS bank was 1229.55, on 13th October 2010 it shows that the
share price increased to the maximum of 1588.7 and the lowest value of the share is 1159.45 on
9th Feb 2011.
MOVING AVERAGE OF AXIS BANK
INTERPERTATION
From the moving average chart closing price and 10 days moving average of AXIS Bank are
0
200
400
600
800
1000
1200
1400
1600
1800
Line chart ofAXIS bank
Close Price
0
200
400
600
800
1000
1200
1400
1600
1800
Close Price
10 Days moving
average

68
3rd January 2011 17th February 2011 20th April 2011
31st May 2011
1st
September2010 26th
November2010 8th
December2010
14th
January2011 9th
& 24th
February2011 23rd
may 2011
15th
June 2011
INTERPRETATION
During the period RSI line is above 30 mark line most of the time, by analyzing RSI chart the
peak level shows period for buying the security. When RSI line crosses the 30 mark line it shows
the selling signal.
0
20
40
60
80
100
120
RSI chart ofAXIS Bank
RSI

69
RSI line crossed 70 mark line from downwards On 5th August 2010, 15th October 2010, 16th
November 2010, 15th December 2010, 13th January 2011,7th February 2011, and 28th April 2011.
It indicates an overbought market for the scrip. It signifies soon peak would be generated and
then market will fall, i.e. it will became bearish.
Oversold market for the scrip
On 19th August 2010 , 9th September 2010, 2nd November 2010, 31st December 2010, 24th
March 2011, 24th June 2011 , the RSI line crossed 30 mark lines from upward. It indicates that
oversold market for the scrip, it indicates soon the market will rise in future and became bullish.
The highest value of RSI is 98.4375 and the lowest value is 8.7080.
 During the following period RSI line moved downwards in the 70-30 zone and gave
clear sell signals:
11th Aug to 18th Aug 2010 28th Oct to 3rd Nov 2010 14th Dec to 23rd Dec 2010
10th Feb to 22nd Feb 2011 17th Mar to 23rd Mar 2011 14th June to 23rd June 2011
 During the following periods the RSI line moved upwards in the 30-70 zone and gave
clear Buy signals:
27th July to 4th Aug 2010 11th Nov to 15th Nov 2010 3rd Jan to 7th Jan 2011
28th Jan to 4th Feb 2011 20th April to 25th April 2011 28th Jan to 3rd Feb 2011
3rd June to 14th June 2011

70
INTERPRETATION
line starts from 1229.55 on 1st july 2010 which reaches a peak 1588.7 on 13th October 2010.
formation)
20th September 2010 10th November 2010 24th December 2010
3rd January 2011 23rd February 2011 4th April 2011
2nd June 2011
8th Nov to 19th Nov 2010 8th June to 16th June 2011
16th Dec to 24th dec 2010 9th Feb to 16th feb 2011 22nd march to 29th march 2011
0
0.2
0.4
0.6
0.8
1
1.2
ROC Chart ofAXIS Bank
ROC

71
line it shows the signal for bearish market. From the MACD chart of AXIS Bank indicates the
55.545.
9th August 2010 13th September 2010 27th September 2010
27th October 2010 26th November 2010 17th January 2011
9th February 2011 24th February 2011 22nd march 2011
25th May 2011
3rd January 2011 25th April 2011
-60
-40
-20
0
20
40
60
80
MACD Chart ofAXIS bank
MACD

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