INDIAN STOCK MARKET:

AN OVERVIEW


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Stock Market

Primary Market Secondary Market
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PRIMARY MARKET
IPO vs Seasoned Issues
Pricing of issues
Fixed pricing
Book building
Public offer vs Private placement
Demat issues
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PRICING OF ISSUES

Companies eligible to make public issue can freely
price their equity shares or any security.

Fixed Price
Book Building
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FIXED PRICE
In the fixed-price issue method, the issuer
fixes the issue price well before the actual
issue. For this very reason, it is cautious
and conservative in pricing the issue so that
the issue is fully subscribed. Underwriters
also do not like the issue to devolve on them
and hence favour conservative pricing of the
issue. For these practical reasons, the issue
price in the case of traditional fixed price
method generally errs on the lower side
and, therefore, in the investors favour.
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BOOK BUILDING
Book-building is a process of price discovery used
in public offers. The issuer sets a floor price and a
band within which the investor is allowed to bid for
shares.
The upper price of the band can be a maximum of
1.2 times the floor price.
The investor had to bid for a quantity of shares he
wished to subscribe to within this band.
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BOOK BUILDING
Bids to remain open for at least 5 days
Only electronic bidding is permitted
Bidding demand is displayed at the end of every
day.
The lead manager analyses the demand generated
and determines the issue price or cut-off price in
consultation with the issuer.
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CUT-OFF PRICE
The cut-off price is the price discovered by
the market. It is the price at which the
shares are issued to the investors.
Investors bidding at a price below the cut-off
price are ignored.
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Lets say a company wants to issue
10,00,000 shares. The floor price for one
share of face value, Rs10, is Rs48 and the
band is between Rs48 and Rs55.
At Rs55, on the basis of bids received, the
investors are ready to buy 2,00,000 shares.
So the cut-off price can not be set at Rs55
as only 2 lacs shares will be sold.
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So as a next step, the price is lowered to
Rs54. At Rs54, investors are ready to buy 4
lacs shares. So if the cut-off price is set at
Rs54, 6 lacs shares will be sold. This still
leaves 4 lacs shares to be sold.
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The price is now lowered to Rs53. At Rs53,
investors are ready to buy 4 lacs shares.
Now if the cut-off price is set at Rs53, all ten
lacs shares will be sold.
Investors who had applied for shares at
Rs55 and Rs54 will also be issued shares at
Rs53.
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FIXED PRICE VS. BOOK BUILDING
Fixed Price Book Building
1. The price is known in advance
to investor and the demand is
known at close of the issue.
2. Conservative pricing (Low
price)
3. Generally oversubscribed

4. It favours the investors

1. Demand can be known at the
end of every day but price is
known at the close of issue.
2. Aggressive pricing (High
Price)
3. No pressure of unsatisfied
demand in the market.
4. It favours the issuers.
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BOOK BUILDING
Objective is efficient price discovery.
Asymmetric information between promoter and
investors.
Investors always remain in dark.
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PRIVATE PLACEMENT
It involves issues of securities to a limited number of
subscribers, such as banks, FIs, MFs and high net worth
individual.
It is arranged through a merchant banker, an agent of issuers,
who brings together the issuers and investor(s).
Securities offered are exempt from public disclosers
regulations and registration requirements of the regulatory
body.
This market is preferred by small and medium size firms,
particularly new entrants who do not have track record of
performance.
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PRIVATE PLACEMENT VS PUBLIC ISSUES
Private Placement Public Issues
1. Issues are offered to mature
and sophisticated institutional
investors.
2. No discloser requirements.
3. Issues are not screened and
this increases the risk.

1. Issues are primarily offered to
retail investors.

2. Discloser requirement is
there.
3. All issues are screened.
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DEMATERIALISATION OF SHARES:

Trading in the shares of the Company is
compulsory in dematerialized form for all investors.
The Company has, therefore, enlisted its shares
with both the depositories, viz, National Securities
Depository Limited (NSDL) and Central Depository
Services India Limited (CDSL).

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WHAT IS DEMATERIALISATION?
Dematerialisation is a process by which the
physical share certificates of an investor are
taken back by the Company and an
equivalent number of securities are credited
in electronic form at the request of the
investor.
An investor will have to first open an
account with a Depository Participant so
that the dematerialised holdings can be
credited into that account.
This is very similar to opening a Bank
Account.
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WHAT IS A DEPOSITORY?
A Depository (NSDL & CDSL) is an organisation
like a Central Bank where the securities of a
shareholder are held in the electronic form at the
request of the shareholder through the medium of a
Depository Participant.
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WHO IS A DEPOSITORY PARTICIPANT?
A Depository Participant (DP) is your
representative (agent) in the depository
system providing the link between the
Company and you through the Depository.
While the Depository can be compared to a
Bank, DP is like a branch of your bank with
whom you can have an account.
According to SEBI guidelines, Financial
Institutions like banks, stockbrokers etc. can
become participants in the depository.

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HOW DOES THE DEPOSITORY SYSTEM
OPERATE?
The Depository System functions very much
like the banking system.
A bank holds funds in accounts whereas a
Depository holds securities in accounts for
its clients.
A Bank transfers funds between accounts
whereas a Depository transfers securities
between accounts.
In both systems, the transfer of funds or
securities happens without the actual
handling of funds or securities.
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SECONDARY MARKET
Trading
Clearing &Settlement
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TRADING
Cash Trading
Spot Trading
Forward, future (derivative trading)
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TRADING
The NSE trading system called 'National Exchange
for Automated Trading' (NEAT) is a fully automated
screen based trading system.
It is on line and nationwide trading system.
It adopts the principle of an order driven market.
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TRADING MECHANISM
In this system a member can punch into the
computer quantities of securities and prices at
which he likes to transact.
The transaction is executed as soon as it finds a
matching sale or buy order from a counter party.
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TRADING MECHANISM
A single consolidated order book for each
stock displays, on a real time basis, buy and
sell orders originating from all over the
country.
The book stores only limit orders, which are
orders to buy or sell shares at a stated
quantity and stated price.
The limit orders are executed only if the
price quantity conditions match.

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THE LIMIT ORDER BOOK FOR TITAN ON THE
NSE (ON 12 APRIL, 2005, AT 11.00 A.M.)
Buy Qty Buy Price Sell Price Sell Qty
95
25
100
10
150

237.25
237.20
237.15
237.10
237.00
237.70
237.90
238.00
238.20
238.25
129
72
827
50
10
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One can buy a share by paying Rs237.7 and sell a
share at Rs 237.25.
The difference is the bid-ask spread.
There is one potential complication to this simple
scenario.
The prices of Rs237.25 and Rs237.7 actually
represent commitments to trade up to a specified
number of shares.
If somebody wants to buy 150 shares, what will
happen?
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LIMIT ORDERS
Investors may also place limit orders, whereby they
specify prices at which they are willing to buy or sell
a security.
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LIMIT ORDERS
Condition

Action
Price below
the limit
Price above
the limit
Buy Limit-buy
Order
Stop-Buy
Order
Sell Stop-Loss
Order
Limit-Sell
Order
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Limit-buy Order and Limit-Sale order
Limit-buy Order
If the stock falls below the limit on a limit-buy order then
the trade is to be executed.
See the price list of Titan: Somebody has placed a buy
order for 25 shares of Titan at Rs237.2 per share.
If price falls to Rs237.2 (from its current level of
Rs237.25), then this buy order will be executed.
Limit-Sale order?
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What happens if a limit order is placed between the
quoted bid and ask prices?
Suppose you have instructed your broker to buy
Titan at a price of Rs237.4 or better.

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TRADING MECHANISM
The trading system provides tremendous flexibility
to the issuers in terms of kinds of orders that can be
placed on the system.
Several time related (Good-till-Cancelled, Good-till-
Day, Immediate-or-Cancel), and
Price-related (buy/sell limit and stop-loss orders)
conditions can be easily built into an order.
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STOP-LOSS ORDERS
It is an order placed with a broker to sell once the
stock reaches a certain price.
A stop-loss is designed to limit an investor's loss on
a security position.
Setting a stop-loss order for 10% below the price at
which you bought the stock will limit your loss to
10%.
For example, let's say you just purchased ACC at
Rs50 per share. Right after buying the stock you
enter a stop-loss order for Rs45. This means that if
the stock falls below Rs45, your shares will then be
sold at the prevailing market price.
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MARKET TIMINGS
Trading on the equities segment takes place
on all days of the week (except Saturdays
and Sundays and holidays declared by the
Exchange in advance). The market timings
of the equities segment are:

Normal Market Open : 09:55 hours
Normal Market Close : 15:30 hours



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CLEARING AND SETTLEMENT PROCESS AT NSE

NSE

1

DEPOSITORIES 8 NSCCL 9 CLEARING
BANK
6 7
10 5 2 3 4 11

CUSTODIAN / DP
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CLEARING AND SETTLEMENT PROCESS
1. Trade details from Exchange to NSCCL
2. NSCCL notifies the consummated trade details to
custodians who
affirm back. Based on the affirmation, NSCCL determines
obligations.
3. Download of obligation and pay-in advice of funds/
securities.
4. Instructions to clearing banks to make funds available by
pay-in-
time.
5. Instructions to depositories to make securities available by
pay-in-
time.

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CLEARING AND SETTLEMENT PROCESS
6. pay-in of securities (NSCCL advises depository to debit
pool
account of custodians and credit its account and depository
does
it).
7. pay-in of funds (NSCCL advises Clearing Banks to debit
account
of custodians and credit its account and clearing bank does
it).
8. Pay-out of securities (NSCCL advises depository to credit
pool
account of custodians and debit its account and depository
does
it).
9. Pay-out of funds (NSCCL advises Clearing Banks to credit
account of custodians and debit its account and Clearing
Banks
does it).
10. Depository informs custodians
11. Clearing Banks inform custodians



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CLEARING AND SETTLEMENT PROCESS
Custodians ( for A who is buyer and for B who is seller)
Clearing bank records the following entries:
(for 7) Custodian ( for A) A/C Dr
To NSCCL A/C
(for 9) NSCCL A/C ..Dr
To Custodian (for B) A/C

Depositories record the following entries (shares):
(for 6) Custodian ( for B) A/C Dr
To NSCCL A/C
(for 8) NSCCL A/C ..Dr
To Custodian (for A) A/C



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SETTLEMENT CYCLE
ROLLING SETTLEMENT
At NSE and BSE, trades in rolling
settlement are settled on a T+2 basis i.e. on
the 2nd working day.
For arriving at the settlement day all
intervening holidays, which include bank
holidays, NSE holidays, Saturdays and
Sundays are excluded.
Typically trades taking place on Monday are
settled on Wednesday, Tuesday's trades
settled on Thursday and so on.

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A TABULAR REPRESENTATION OF THE SETTLEMENT CYCLE FOR ROLLING
SETTLEMENT
Activity Day
Trading Rolling Settlement
Trading
T
Clearing Custodial
Confirmation
T+1 working days
Settlement Securities and Funds
pay in

Securities and Funds
pay out

T+2 working days


T+2 working days
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INDEX-BASED MARKET-WIDE CIRCUIT BREAKERS
(W.E. FROM JULY 2001)
The index-based market-wide circuit
breaker system applies at 3 stages of the
index movement, either way viz. at 10%,
15% and 20%.
These circuit breakers when triggered, bring
about a coordinated trading halt in all equity
and equity derivative markets nationwide.
The market-wide circuit breakers are
triggered by movement of either the BSE
Sensex or the NSE S&P CNX Nifty,
whichever is breached earlier.
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DURATION OF TRADING HALT (IN MINUTES)
% movement
in either
indices in
either
direction
Before 1 p.m. 1 p.m. to 2
p.m.
2 p.m. to 2.30
p.m.
After 2.30
p.m.
10 60 30 30 No halt
15 120 60 Trading halt
for the
remainder of
the day
Trading halt
for the
remainder of
the day

20 Trading halt
for the
remainder of
the day

Trading halt
for the
remainder of
the day

Trading halt
for the
remainder of
the day

Trading halt
for the
remainder of
the day

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RISK MANAGEMENT
MARGIN MONEY
Categorisation of stocks for imposition of margins

The Stocks which have traded atleast 80% of the
days for the previous six months shall constitute the
Group I and Group II.
Out of the scrips identified above, the scrips having
mean impact cost of less than or equal to 1% shall
be categorized under Group I and the scrips where
the impact cost is more than 1, shall be categorized
under Group II.
The remaining stocks shall be classified into Group
III.

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The impact cost shall be calculated on the
15th of each month on a rolling basis
considering the order book snapshots of the
previous six months. On the basis of the
impact cost so calculated, the scrips shall
move from one group to another group from
the 1st of the next month.

For securities listed for < 6 months, the
trading frequency and the impact cost shall
be computed using the entire trading history
of the security.

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WHAT IS IMPACT COST?


What is impact cost? It is the cost of executing a
transaction on the stock exchanges.

Suppose you want to buy 150 shares of Titan.
You would be able to buy the first 129 shares at a price of
Rs237.7 per share. However, to buy the remaining 21
shares, you have to pay Rs237.9 per share. The higher
the number of shares that you want to buy will have an
impact on the price of the stock.
This is measured by what is known as the impact cost of
the trade.
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The average buy price for 150 shares=
(Rs237.7x129 + Rs237.9x21)/150 = Rs237.728
The average of the best bid and ask price is given
by Rs 237.475.
You should ideally expect to buy or sell shares of
Titan at this price.
The impact cost of the order is therefore given by:
Impact cost = (237.728 237.475)/237.475
= 0.106%
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What does impact cost signify?
It means you incurred a cost of 0.106% to buy 150
shares because of the liquidity conditions in that
stock. The more liquid a stock is the lower its
impact cost.
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VALUE AT RISK MARGIN


Security VaR Margin
Group I The scrip wise daily volatility calculated using the
exponentially weighted moving average (EWMA)
method on daily return.
The scrip wise daily VaR margin would be 3.5
times the volatility so calculated subject to a
minimum of 7.5%.

Group II The VaR margin shall be higher of scrip VaR (3.5
sigma) or the index VaR (3 sigma), and it shall
be scaled up by square root of 3.

Group III

The VaR margin = 5 x the index VaR x 3.
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INDEX VAR
The index VaR would be the higher of the
daily Index VaR based on S&P CNX NIFTY or
BSE SENSEX. The index VaR would be
subject to a minimum of 5%.

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COMPUTATION VAR
Calculate the daily logarithmic return of share
R
i
= In (P
i
/ P
i-1
)
Compute the initial volatility by calculating the
standard deviation of returns for the one year
period using the formula
SD =
0
= [ 1/n {R
i
E(R
i
)}
2
]

n
i 1
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Calculate the daily volatility for he subsequent days
using EWMA mothod.
For day 1, the volatility will be

1
= [ (
0
)
2
+ (1 ) R
1
2
]

For day 2, the volatility will be

2
= [ (
1
)
2
+ (1 ) R
2
2
]

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Daily VaR for individual scrip = 3.5 sigma
Daily Var for index = 3 sigma
A higher SD level is used for the script because the
script is expected to have higher volatility as
compared to the index, which is a portfolio. The
volaility estimate at 3 sigma level represents 99%
VaR.
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BUYING ON MARGIN
SEBI approved margin trading in January 2004 and
it was introduced in February 2004 in India.
If you have a margin account with kotakstreet.com
and your margin account balance is Rs10,000, then
you can buy shares up to Rs40,000.
Effectively kotakstreet.com provides you with a loan
of Rs30,000 to complete your transaction.
The margin in the account is the portion of the
purchase price contributed by the investor; the
reminder is borrowed from the broker.
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PERCENTAGE MARGIN
Suppose that the investor initially pays Rs6,000 toward the
purchase of Rs10,000 worth of stock (100 shares of Rs100
each), borrowing the remaining Rs4,000 from the broker.
The initial balance sheet looks like this:
Assets Liabilities and Owners
Equity
Value of stock Rs10,000 Loan from broker Rs4,000
Equity 6,000

The initial percentage of margin is
Margin = Equity/value of stock = 6000/10,000 = 0.60
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If the stocks price declines to Rs70 per share, the account
balance becomes:
Assets Liabilities and Owners
Equity
Value of stock Rs7,000 Loan from broker Rs4,000
Equity 3,000

The percentage of margin is now
Margin = Equity/value of stock = 3000/7,000 = 0.43 or 43%


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MAINTENANCE MARGIN
Suppose the maintenance margin is 30%. How far could the
stock price fall before the investor would get a margin call?

Let P be the price of the stock. The value of the investors 100
shares is then 100P, and the equity in his or her account is
100P-Rs4,000.
Thus we can say
(100P-4000) / 100P = 0.3
Or P = Rs57.14
If the price of the stock were to fall below Rs57.14 per share,
the investor would get a margin call.
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SHORT SELLING
Short selling is generally defined as the practice of
selling borrowed securities.
Suppose, A feels current market price of a share is
Rs.50 and it will reduce Rs.25. He takes loan of a
share.
Sell Rs.50
Buy Rs.25 and return the share
Profit Rs.25
Maximum profit is 50 if price is zero, but, maximum
loss is unlimited.
Dividend: If dividend is Rs.5, profit Rs.25 5 = 20.
Then dividend is to be paid by the short seller to the
lender of the share.

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USES OF SHORT SELLING:
Investors short sell for one of two reasons:
1. To seek speculative profit when the price of a
security is expected to drop.
2. To protect a profit and defer taxes by Hedging
their position.

All shorts are executed on
margin.

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SHORTING OR MARGIN:
The investor has to deposit only margin
money.
Return on Invested Capital from Short Sale
= (Proceeds from Sales Purchase Cost of Share Dividend)/Equity
Deposit

Suppose margin is 60% ( initial margin),
Current market price of a share is Rs.100,
and it is expected to reduce to Rs80.
Dividend is Rs.5
Return = (100 80 5)/60 = 15/60 = 25%

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SPECULATING WITH SHORT
SALE:
Short Sale Initiated: 300 Equity Share @ Rs50 =
Rs15000
Short Sale Covered: 300 x Rs30 =
9000
Profit = 6000
Dividend @ Rs.5 =
1500
N/Profit =
4500
Equity Deposit @ 50% =
7500

Return
= (4500/7500) x 100 = 60%

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MARGIN CALLS ON SHORT POSITIONS
Suppose that you are bearish on ACC stock
and that its current market price is Rs100
per share. You tell your broker to sell short 1
share. The broker borrows 1 share either
from another customers account or from
another broker.
Suppose the broker has a 50% margin
requirement on short sales. This means that
you must have either cash or security in
your account worth Rs50 that can serve as
margin on the short sale.
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Like investors who purchase stock on margin, a
short-seller must be concerned about margin call. If
the stock price rises, the margin in the account will
fall; if margin falls to the maintenance level, the
short-seller will receive a margin call.
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Suppose that the broker has a maintenance margin
of 30% on short sales. This means that the equity in
your account must be at least 30% of the value of
your short position at all times. How far can the
price of ACC go up before you get a margin call?


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Suppose price has increased to P (where P>100).
The loss on short sales is P 100.
Then the margin money has reduced to 50 (P -
100).
This reduced margin money is 30% of P.
Thus, 50 (P -100) = .3 P
Or 150 P = .3P
Or 1.3 P = 150
Or P 115.38.
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If ACC stock should rise above Rs115.38,
you would get a margin call, and you will
either have to put up additional cash or
cover your short position.

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STOP-BUY ORDER
You have sold ACC on short for Rs100.
If the share price falls, you will profit from short
sale.
On the other hand, if the share price rises, lets say
Rs130, you will lose Rs30 per share.
But suppose that when you initiate the short sale,
you also enter a stop-buy order at Rs120.
The stop-buy order will be executed if the share
price surpasses Rs120, thereby limiting your losses
to Rs20 per share.
The stop-buy order thus provides protection to the
short-seller if the share price moves up.
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SHORT SALES TO PROTECT A PROFIT AND
DEFER TAXES BY HEDGING THEIR POSITION:
01.01.2005
Bought 100 Shares of X Company @ Rs.20 Cost
Rs.2000
Now Price Rs.50 Value
Rs.5000

Net Profit
Rs.3000

To protect Net Profit, he will now short sales of 100 shares @
Rs.50.

He has two positions one short and one long of equity shares.

Note that although this short sales is executed with borrowed
securities, it is not necessary to deposit margin money,
because his current holding of the stock serves this purpose.

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SHORT SALES TO PROTECT A PROFIT AND
DEFER TAXES BY HEDGING THEIR POSITION:
Price Rs.80 Price
Rs.30
Value of the Stock 8000
3000
Original Cost 2000
2000
___________
____________
Profit 6000
1000
Less Loss on short sales
(Add profit on Short Sales)
Short Sales Initiated 5000 5000
Short Sales Covered 8000 3000

________ ________
(-)3000
+2000
________
_______
NET PROFIT 3,000
3,000

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SHORT-SALES MAY BE
REINTRODUCED
Why SEBI is planning to reintroduce Short-sales?
When it was banned?
How does short- sale help the market?
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Indian Security Market
A profile

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GROWTH AND DEVELOPMENT OF INDIAN
STOCK MARKET (BSE)

AVERAGE DAILY TURNOVER


0
500
1000
1500
2000
2500
3000
3500
4000
4500
95 96 97 98 99 00 01 02 03 04
Year
A
v
e
r
a
g
e

D
a
i
l
y

V
o
l
.

o
f

T
u
r
n
o
v
e
r
(
R
s
.

c
r
)
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NO. OF COS LISTED
5300
5400
5500
5600
5700
5800
5900
6000
98 99 00 01 02 03 04
Year
N
o
.

o
f

L
i
s
t
e
d

C
o
m
p
a
n
i
e
s
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MARKET CAPITALIZATION
0
200000
400000
600000
800000
1000000
1200000
1400000
95 96 97 98 99 00 01 02 03 04
Year
M
a
r
k
e
t

C
a
p
i
t
a
l
i
z
a
t
i
o
n

(
R
s

c
r
)
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INTERNATIONAL SCENARIO AT END DECEMBER 2001
(SOURCE: S&P EMERGING STOCK MARKET FACT BOOK, 2002)
Particulars USA UK Japan Germany Singapor
e
Hong
kong
China India
No. of listed Cos. 6,355 1,923 2,471 988 386 857 1,160 5,795
Market capitalisation
($ Bn.)
13,810 2,217 2,252 1,072 117 506 524 110
Turnover ($ Mn.)

29,041

1,872

1,826

1,420

63

196

449

249

Turnover ratio (%)

201.3

78.4

67.9

124.7 46.9

34.8 81.3 191.4

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MARKET CAPITALIZATION AND TURNOVER OF MAJOR MARKETS (US $
MILLION)
(SOURCE: S&P EMERGING STOCK MARKET FACT BOOK, 2002)
Country/Region MC
1990
MC
2000
MC
2001
TO
1990
TO
2000
TO
2001
Developed
Markets
Australia
Japan
UK
USA

8,795,239
108,879
2,917,679
848,866
3,059,434

29,614,264
372,794
3,157,222
2,576,992
15,104,037

25,246,554
374,269
2,251,814
2,217,324
13,810,429

4,616,473
40,113
1,602,388
278,740
1,751,252

43,912,999
226,325
2,693,856
1,835,278
31,862,485

39,676,018
240,667
1,826,230
1,871,894
29,040739
All Emerging
Markets
China
India
Indonesia
Korea
Malaysia
Philippines
Taiwan

604,420
-
38,567
8,081
110,594
48,611
5,927
1,00,710

2,608,486
580,991
148,064
26,834
148,649
116,935
51,554
247,602


2,572,064
523,952
110,396
23,006
220,046
120,007
41,523
292,621

898,233
-
21,918
3,992
75,949
10,871
1,216
715,005

3,956,869
721,538
509,812
14,311
1,067,669
58,500
8,196
983,491

2,400,844
448,928
249,298
9,667
703,960
20,772
3,148
544,808
World Total
US as % of
World
India as % of
World
9,399,659
32.55

0.41
32,222,750
46.87

0.46

27,818,618
49.64

0.40
5,514,706
31.76

0.40
47,869,867
66.56

1.06
42,076,862
69.02

0.59
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SAVINGS OF HOUSEHOLD SECTOR IN FINANCIAL
ASSETS
According to RBI data, household sector accounted
for 89% of gross domestic savings during 2000-01,
53% of their savings were in financial assets.
They invested
44% of financial savings in deposits
34% in insurance/PFs
12 % on small savings


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SAVINGS OF HOUSEHOLD SECTOR IN FINANCIAL ASSETS
(SOURCE:RBI)
Financial Assets 1990-91 1992-93 1994-95 1996-97 1998-99 2000-01
Currency
Fixed income securities
Deposits
Insurance/PF
Small savings
Securities Market
MFs
Govt. Securities
Other Securities

10.6
74.9
33.3
28.4
13.2
14.4
9.1
0.2
5.1
8.2
74.6
42.5
27.2
4.9
17.2
8.6
0
8.6
10.9
77.0
45.5
22.5
9.0
12.1
3.8
0.1
8.2
8.6
84.5
48.1
29.4
7.0
6.9
2.7
0.4
3.8
10.4
85.3
39.2
33.3
12.8
4.2
1.9
0.6
1.7
6.4
89.4
44.3
33.5
11.6
4.3
1.3
1.6
1.4
Total 100 100 100 100 100 100
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STOCK MARKET INDEX
All India All Industries Share Price Index combined
and published by the Economic Times on daily
basis.
S&P CNX Nifty combined and published by NSE
India on daily basis.
BSE Sensex combined and published by BSE on
daily basis.

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COMBINED MARKET INDEX AND RETURN OF ECONOMIC TIMES
AND NIFTY FROM MAY 1961 TO JUNE 2005
0
500
1000
1500
2000
2500
Market Index
-.2
-.1
.0
.1
.2
Market Return
65 02
68 72
76 80 84 89 94 98 92
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ECONOMIC TIMES DAILY PRICES AND RETURNS FROM MAY 1961 TO JUNE
1990
0
100
200
300
400
500
600
Economic Times Price
-.08
-.04
.00
.04
.08
Economic Times Return
61 65 68 72
76 80
84 89
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NIFTY PRICES AND RETURNS FROM JULY 1990 TO JUNE 2005
0
500
1000
1500
2000
2500
1992 1994 1996 1998 2000 2002 2004
Nifty Price
-.2
-.1
.0
.1
.2
Nifty Return
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CONDITIONAL STANDARD DEVIATION OF THE COMBINED INDICES OF THE
ECONOMIC TIMES AND S&P CNX NIFTY (MAY 1961 TO JUNE 2005)
ESTIMATED ON THE CONDITIONAL VARIANCE EQUATION OF TGARCH (1,1)
.00
.01
.02
.03
.04
.05
.06
.07
.08
Conditional standard deviation
65 70 75 80 90 92 02 85 97
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