This document compares the Indian stock market to other Asian markets. It finds that the Indian market has the highest compound annual growth rate of returns over 5 years and 1 year compared to markets in Hong Kong, Indonesia, Malaysia, Japan and Korea. The Indian market also shows weak correlation to these other markets, indicating it provides diversification benefits for international investors. Overall, the study finds the Indian stock market delivers strong returns with low correlation to other Asian markets, making it an attractive investment option for the Asia Pacific region.

1. COMAPARATIVE STUDY OF
INDIAN STOCK MARKET
WITH OTHER ASIAN
MARKETS
By: Misbah Ul Islam
10-MBA-36

2. Company Profile
• Amrapali Aadya Trading & Investment Pvt. Ltd. offers
dematerialization services as a participant in Central
Depository Services Limited (CDSL), through its Depository
operations.
• Member of both BSE & NSE
• Incorporated as Aadya commodities Pvt. Ltd, the company
later merged with leading developers Amrapli group, thus
forming Amrapali Aadya Trading & Investment Pvt. Ltd.
• Amrapali Aadya is using some of the best brains in trading and
some of the best software and hardware systems to give its
clients maximum profit.

3. • Two basic trading software used are ODIN and NOW
• Services provided:
– Internet Trading
– Electronic Contract Notes
– Risk Management and Surveillance
– Online Banking Gateway
– Online Back Office Integration
– Depository Services
– End To End Trade Solutions
– Exclusive Services for HNI and NRI Clients
– Mutual Fund, IPO’s and Insurance
• Research is carried out daily on the basis of the
current market scenario

4. Trading Software Interface

5. STOCK MARKET
• The term “the stock market” is a concept for the mechanism
that enables the trading of company stocks (collective shares)
and other securities.
• The stocks are listed and traded on stock exchanges
• Stock exchanges are entities specialized in the business of
bringing buyers and sellers of stocks and securities together.
• Total number of stock exchanges in India: 22
– They are in: Ahmedabad, Bangalore, Calcutta, Chennai, Delhi etc.

6. Industry Overview
• India's oldest and first stock exchange: Mumbai
(Bombay) Stock Exchange. Established in 1875. More
than 6,000 stocks listed.
• National Stock Exchange (NSE) is located in Mumbai.
• There is also an Over The Counter Exchange of India
(OTCEI) which allows listing of small and medium sized
companies.
• The regulatory agency which oversees the functioning of
stock markets is the Securities and Exchange Board of
India (SEBI), which is also located in Bombay. SEBI's
website location is at http://www.sebi.gov.in

7. BSE NSE
Main Index: BSE Sensex S & P CNX Nifty
Bombay Stock Exchange National Stock Exchange of
Full Name:
Limited India Limited
Mr. Madhu Kannan (MD & Mr. Ravi Narain (Managing
Key Person:
CEO) Director)
Largest stock exchange in
Oldest stock exchange in India in terms of daily
Claim to fame:
Asia. turnover and number of
trades.
Established in: 1875 1992
Market capitalization of
Rs. 4,670,227 crore Rs. 3,367,350 crore.
listed companies:
Number of members: 951 1,026
Number of listed companies
6000+ 1,810
(June 2010):
Geographical spread: Presence in 417 cities Presence in 1,486 cities
Website: www.bseindia.com www.nseindia.com
Index value (8th August ‘11): 16,990 5,118

8. IMPORTANCE OF STOCK MARKET
• The stock market is one of the most important
sources for companies to raise money.
• This allows businesses to go public, or raise
additional capital for expansion.
• Exchanges also act as the clearinghouse for each
transaction

9. IMPACT OF STOCK EXCHANGES IN
INDIA
• Mobilization of savings
• Increase in rate of return on investment
• Availability of funds for growth of industries
• Diversification of industries
• Increase in employment
• Increase in standard of living
• Increase in GDP

10. CONCEPT OF A DEPOSITORY
SYSTEM
• Depository system essentially aims at eliminating voluminous
and cumbersome paper work involved in the script-based
system.
• Depository system enables conversion of physical securities in
the electronic form through a process of “dematerialization”
(also known as “demat”)

11. DEPOSITORY
• A depository is an organization where securities of
shareholders are held in electronic format.
• A depository is like a bank wherein the deposits are securities.
• Besides holding securities, a depository also provides services
related to transactions in securities.
• This facilitates faster, risk free and low cost settlement.

12. DEPOSITORIES IN INDIA
• NATIONAL SECURITIES DEPOSITORY LIMITED (NSDL)
– an organization promoted by lOBI, UTI and National Stock Exchange of
India Ltd.
• NSDL offers the following benefits:
(a) De-materialization,
(b) Re-materialization,
(c) Electronic settlement trades in stock exchanges connected to NSDL,
(d) Pledging/ hypothecation of dematerialized securities against bank loan,
(e) Electronic credit of securities
• CENTRAL DEPOSITORY SERVICES (INDIA) LTD. (CDSL)
– Bombay Stock Exchange Limited (BSE) promoted CDSL jointly with
leading banks such as State Bank of India, Bank of India, Bank of
Baroda, HDFC Bank etc.
– CDSL was set up with the objective of providing convenient,
dependable and secure depository services at affordable cost to all
market participants.

13. DEPOSITORY PARTICIPANT
• Depository provides its services to investors through its agents
called as depository participant (DPs).
• NSDL is electronically linked to each of these DPs via a
satellite link through Very Small Aperture Terminals (VSATs).
• The investor interacts with the depository through a depository
participant of NSDL. A DP can be a bank, financial institution,
a custodian or a broker.

14. ACTIVITIES OF DEPOSITORY
SERVICES OFFERED
• ACCOUNT OPENING
• DEMATERIALIZATION
• ACCOUNT TRANSFER
• REMATERIALIZATION
• FREEZING / DEFREEZING
• TRADING / SETTLEMENTS
• ACCOUNT CLOSING
• NOMINATION
• TRANSMISSION
• IPO

15. WORKING IN DEPOSITORY
PARTICIPANT
• The main objectives are as follows:
– To understand various activities in E-Broking firm.
(D.P)
– To get familiar with the working of online trading.
– To gain practical knowledge in share trading.
– To get an exposure of the industry.

16. TASK ASSIGNED
• Market observation
– Being aware of the current market issues like market news, market position,
stock watch, global market condition, past trends etc.
• Customer acquisition
– Customers are acquired through tele-calling and references.
• Technical Issues
– Thorough knowledge of the software used is required.
• Administrative tasks
– Completion of account opening form
– Collection of requires documents form existing clients
– To transfer shares
• Customer follow-up
– Trading for offline clients under the relationship manager’s guidance
– To give markets updates to newly acquire as well as existing clients

17. LIMITATIONS
• It was hard to acquire knowledge about this field in such
short span of time
• Share market is very vast & fast sector, it was very
difficult to cope-up with the environment in such short
span of time.
• This field requires very deep fundamental & technical
knowledge.
• Acquiring new clients was a tough task to perform
• High risk involved while trading on behalf of the clients
under the guidance of RM.

18. COMAPARATIVE STUDY OF INDIAN
STOCK MARKET WITH OTHER
ASIAN MARKETS

19. ECONOMIC OVERVIEW
• Since July 1991, in the face of an unprecedented foreign
exchange crisis, Indian economy started experiencing an IMF-
World Bank dictated regime of liberalization. One aspect of
this is financial and stock market liberalization.
• The major growth drivers for brokerage revenue and trading
volume are
– Adoption of technology - screen-based trading, electronic
matching, and paperless securities
– Centralized operations, effective risk management, and control
on large interconnected operations
– Increasing access to capital and the ability to provide margin
finance
– Continuous fall in brokerage fees

20. CHALLENGING LANDSCAPE
• Industry rapidly consolidating
• Share of Top 10 brokers grown by 58.4% since 2003-04
• Customer demands changing from plain vanilla execution to
advice & service
• Multiple relationships across asset classes consolidating into a
single relationship

21. Research Design
• The study done is Empirical in nature. It provides basis
for external validation.
– Empirical study relies on experience or observation alone
i.e. data based research.
• Data Collection and Sample Size
– The weekly closing prices of six major Asian countries
were taken:
• BSE Sensex (Mumbai-India)
• Hang Seng (Hong Kong-China)
• JKSE (Jakarta- Indonesia)
• KLSE ( Kuala Lumpur- Malaysia)
• Nikkie(Japan)
• KS11(Seoul-Korea)

22. Qualitative Analysis
• In this section the various stock exchanges have been
compared on the following parameters:
– Market Capitalization
– Number of listed securities
– Listing agreements
– Circuit filters
– Settlement

23. • Market Capitalization :
– Market capitalization is the measure of corporate size of a
country.
– It shows the current stock price multiplied by the number
of outstanding shares.
– It is commonly referred to as Market cap.
– It is calculated by multiplying the number of common
shares with the current price of those shares.
• Listed Securities:
– Listing in a stock exchange refers to the admission of the
securities of the company for trade dealings in a recognized
stock exchange.

24. • Listing Agreements :
– These are the norms laid down by the securities exchange
boards of different markets for listing the companies.
– Basic criteria are-
• Capitalisation
• Number of share holders
• Age of company
• Number of shareholder applications in the IPO

25. • Circuit filters :
– Stock markets have a reputation of crashing without any warning, thus
resulting in a loss of huge sums of money of the investors.
– A stock market crash is a sudden dramatic decline of stock prices
across a significant cross-section of a market
– Circuit breakers are a counter measure to the instability of the stock
market.
– Circuit breaker is “a point at which a stock market will stop trading for
a period of time in response to substantial drops in value.”
– Different circuit breakers are assigned in different markets

26. • Trading and Settlement Cycle
– This segment takes care of the efficiency issue of the said
stock exchange.
– It basically looks into the speed at which any of the
numerous transactions affected in the market gets settled.

27. Data Analysis and Findings
• Since stock prices are time series data, a check
needs to be done to find the stationarity of
the given time series
• A time series is said to be stationary if its
mean value and its variance do not vary
systematically over time.

28. Correlation of BSE Sensex with other
Asian economies
Hang Seng JKSE KLSE Nikkie KS11
5 yr Correlation
between BSE & -0.146 0.112 0.171 0.171 0.589
other markets
(2005-2009)
1yr Correlation
between BSE & -0.051 -0.004 0.122 0.074 0.533
other markets
(2009)
6 months
Correlation -0.299 -0.180 -0.145 -0.022 0.387
between BSE &
other markets
(July - Dec 2009)

29. Compounded Annual Growth rate of
Stock market returns
BSE Hang Seng JKSE KLSE Nikkie KS11(Korea)
(India) (Hong Kong) (Indonesia) (Malyasia) (Japan)
5 yr
(2005 -2009) 14.228 0.347 -0.272 0.554 -8.512 7.004
1 yr
(2009) 79.504 65.696 -3.466 -0.051 29.821 45.766
6 34.029 29.458 30.039 28.076 0.449 17.699
months
(Jul-Dec 2009)

30. Skewness of Stock Market returns
BSE Hang Seng JKSE KLSE Nikkie KS11(Korea)
(India) (Hong Kong) (Indonesia) (Malyasia) (Japan)
5 yr
(2005 -2009) -0.351 -0.193 -1.013 -0.842 -1.412 -0.592
1 yr
(2009) 0.117 0.119 0.511 -0.168 0.208 -0.808
6 -0.458 -0.008 -0.025 0.731 0.637 -0.276
months
(Jul-Dec 2009)

31. Descriptive statistics of Weekly stock market
returns in the long run
(2005-09)
BSE Sensex Hang Seng JKSE KLSE Nikkie KS11
Mean 0.453 0.231 0.439 0.153 0.028 0.307
Median 0.929 0.491 0.951 0.298 0.246 0.643
Standard 3.993 3.636 3.875 2.140 3.423 3.592
Deviation
Sample 15.941 13.223 15.017 4.578 11.720 12.906
Variance
Kurtosis 1.762 2.622 4.684 2.860 10.262 6.762
Skewness -0.351 -0.193 -1.013 -0.842 -1.412 -0.592
Range 30.032 28.752 33.650 16.135 36.465 39.058
Minimum -15.954 -16.319 -21.365 -9.255 -24.334 -20.490
Maximum 14.078 12.433 12.285 6.879 12.131 18.568

32. Conclusion
• Correlation of stock returns of India with five other
Asian countries is found out with the following results:
– There exists a very weak correlation between the Indian
markets and Hong Kong, Indonesia, Malaysia and Japan.
– Comparatively higher correlation was found between the
Indian and the Korean markets
– Indian markets offer diversification benefits to international
investors looking for investment in the Asia Pacific region.
– Indian markets also delivered the highest compounded
annual growth rate in stock market returns, both in the short
as well as long run

33. Thank You