Technical analysis of BSE IT sector index and investors perspective

towards IT stocks

Dissertation submitted to the PONDICHERRY UNIVERSITY in partial fulfillment of

the requirement for the award of MASTER DEGREE OF BUSINESS
ADMINISTRATION in Finance

By

Under the Supervision and Guidance of

PONDICHERRY UNIVERSITY
PONDICHERRY

April – 2009

CONTENTS

Chapter No. Topic Page No.

1. EXECUTIVE SUMMARY 1

2. INTRODUCTION 2

3. INDUSTRY And COMPANY PROFILE 8

 4. TECHNICAL ANALYSIS 24

7. Presentation and Analysis of data and

Interpretation 45

6. Findings and Suggestions 73

7. Bibliography 76

8. Annexure 77

LIST OF TABLES

Table No. Particulars Page No.

1. TABLE SHOWING THE DOMESTIC IT GROWTH IN 2007 17

0VER 2006

2 TABLE SHOWING SIMPLE MOVING AVERAGES OF 45

10,50,100 AND 200 DAYS
 3 TABLE SHOWING BSE IT SECTOR INDEX DETAILS 47-55

4 TABLE SHOWING THE SECTOR WHICH INVESTOR’S 70

THINK SAFER FOR INVESTMENT

5 TABLE SHOWING THE THE SECTOR WHICH INVESTOR’S 71

THINK WILL GIVE MORE RETURN

6 TABLE SHOWING THE RANK OF DIFFERENT SECTORS

ACCORDING TO THE INVESTORS PREFERENCE. 72

LIST OF CHARTS

Chart No. Particulars Page No.

1. CHART SHOWING BSE IT SECTOR INDEX MOVEMENT. 45

2. CHART SHOWING MOMENTUM OF IT SECTOR INDEX. 58

3. CHART SHOWING ONE MONTH TREND LINE OF IT 61

INDEX.

4. CHART SHOWING 10 DAY MOVING AVERAGE OF 62

FEBRUARY 2006.

5. CHART SHOWING 50 DAY AND 200 DAY MOVING 63

AVERAGE
 6. CHART SHOWING MOVING AVERAGE 2005 - 2006 64

7. CHART SHOWING MOVING AVERAGE WITH INDEX 65

MOVEMENT FROM 29/7/04 TO 1/3/06

8. CHART SHOWING INVESTOR’S FEELING ABOUT THE 66

RECENT BULLISH TREND

9. CHART SHOWING HOW FAR THE SENSEX WILL GO IN 66

THE NEXT ONE YEAR PERIOD

10. CHART SHOWING INVESTOR’S OPINION ABOUT THE IT 67

INDUSTRY.

Chart No. Particulars Page No.

11. CHART SHOWING INVESTOR’S EVALUATION ABOUT 68

THE IT STOCKS PRICES

12. CHART SHOWING INVESTOR’S PORTION OF 68

INVESTMENT IN IT STOCKS

13. CHART SHOWING HOW MUCH PORTION THE INVESTORS 69

ARE INTENDING TO INVEST IN IT STOCKS THIS YEAR
 EXECUTIVE SUMMARY
Sensex is shining and it crosses the magic figure of 20000. The Sensex which was also
Asia’s best performer in 2007. IT sectors contributions in market capitalization stands at
14.4% only second to that of the oil and gas sector. IT is also the sector to watch out for
the financial year 2008. Indian majors Infosys, TCS, Wipro have all witnessed stunning
growth in sales as well as profitability in financial year 2007. IT sector has been growing
strongly and is poised for advent growth in financial year 2007. Consolidation of IT
vendors has gained momentum globally which is beneficial for IT companies. While the
bigger players have been strengthening their position, there is danger for the small and
midrange IT firms getting wiped out unless they innovate ;and focus on niche areas
which would gave them higher growth rates.

For successful investment of funds, an investor must have adequate knowledge

about the securities market and how the securities traded in the stock market. The
investor must be well aware of the historical performance of the stocks and also the
trends in the market. Well-defined information about the fluctuations of securities traded
in the market helps the investors to invest in the right type of securities at right time.
The main objectives of the study are:
 To analyze the market movement of the IT index by using technical analysis.
 To explore investor’s perspective towards the BSE IT sector stocks.
The research is exploratory in nature. The study focuses on technical analysis
of BSE IT Sector Index for a period of 200 days. The tools used in for analysis are
Momentum, Rate of Change, Trend lines, and Simple Moving Average.

A survey is conducted to know investor’s perspective towards the IT stocks.

The sampling technique here used is convenience sampling. The sample size is 30
selected from the investors trading in Cochin Stock Exchange. The data is collected
with the help of structured questionnaire, which includes open end and close-ended
questions.

INTRODUCTION

Of all the modern service institutions, stock exchange is perhaps the most crucial
agents’ ad facilitators of entrepreneurial progress. After the industrial revolution, the size
of business enterprises grew; it was no longer possible for proprietors or even
partnerships to raise colossal amounts of money required for undertaking large
entrepreneurial ventures. Such huge requirement of capital could only be met by
participation of a very large number of investors; their number running in to hundreds,
thousands and even million, depending on the size of the business venture.
In general, small time proprietors, or partners of a proprietary partnership firm are
likely to find it rather difficult to get out of their business should they for some reason
wish to do so. This is because it is not always possible to find buyers for an entire
businesses or even a part of business, just when one wishes to sell it. Similarly it is not
easy for some one with savings especially with a small amount of savings, to readily find
an appropriate business opportunity or a part thereof, for investment. These problems
would be even more magnified larger proprietorships and partnerships. Nobody would
like to invest in such partnership in the first place, since once invested, their saving would
be very difficult to convert in to cash. And most people do have a lot of reasons, such as
better investment opportunity, marriage, education, death, health and so on, for wanting
to convert their savings in to cash. Clearly then, big enterprises will be able to raise
capital form the public at large, only if there were some mechanism by which the
investors could purchase or sell their share of the businesses and when they wished to do
so. This implies that ownership in business has to be broken up in to a large number of
small units such that each unit may be independently and easily bought and sold without
hampering the business activity as such. Also such breaking up of business ownership
would help mobilize small savings in economy in to entrepreneurial ventures.
This end is achieved in a modern business through the mechanism of shares. A
share represents the smallest recognized fraction of ownership in a publicly held
business. Each such fraction of ownership is represented in the form of a certificate,
known as the share certificate. The breaking up of the total ownership of a business into
small fragments, each fragment represented by a share certificate, enables them to be
easily bought and sold.
The institutions were this buying and selling of shares essentially takes place in the stock
exchange. In the absence of stock exchange, i.e., institutions where small chunks of
businesses could be traded, there would be no modern business in the form of publicly
held companies. Today, owing to the stock exchange we do not have to be electronics
wizards to be owners or part owners in an electronics company; we can be part owners of
one company today and another company tomorrow; we can be part owners in a company
hundreds or thousands of miles away, we can be all of these things, and none of them,
should we for whatever reason decided to convert all our ownership stake in to cash at
short notice. Thus, by enabling the convertibility of ownership in the product market in to
financial assets, namely shares, stock exchanges bring together buyers and sellers (or
their representatives) of fractional ownership of companies, much as buyers and sellers of
vegetable come together in a vegetable market. And for that very reason, activities
relating to stock exchange are appropriately enough; know as Stock market or Security
market. Also just as a vegetable market is distinguished by a specific locality and
characteristics of its own, mostly a stock exchange is also distinguished by a physical
location and characteristics of its own. In fact, according to H.T Parekh, the earliest
location of the Bombay Stock Exchange, which for a long period was known as “The
Native Share and ‘Stock Brokers’ Association”, was probably under a tree around 1870.

Characteristics of Stock exchanges in India

Traditionally, a stock exchange has been as association of individual members
called member brokers (or simply members or brokers) formed for the express purpose of
regulating and facilitating the buying and selling of securities by the public and
institutions at large. A stock exchange in India operates with due recognition from the
government under the Securities and Contract (Regulation) Act, 1956. The member
brokers are essentially the middlemen, who carry out the desired transactions in securities
or on their own behalf. New membership to a stock exchange is through election by the
governing board of that stock exchange.
At present there are 21 stock exchanges in India (excluding NSE and OTCEI) the
largest among them being the Bombay stock exchange (BSE). BSE alone accounts for
over 80% of the total volume of transactions in shares. Typically, a stock exchange is
governed by a board consisting of directors largely elected by the member brokers, and a
few nominated by the government. Government nominees include representation of the
Ministry of Finance, as well as some public representatives, who are expected to
safeguard the public interest in the functioning of the exchanges. A president, who is an
elected member, usually nominated by the government from among the elected members,
heads the board. The Executive Director, who is usually appointed by the stock exchange
with government approval, is the operational chief of the stock exchange. His duty is to
ensure that the day - to - day operations of the stock exchange are carried out in
accordance with the various rules and regulations governing it are functioning. The
overall development and regulation of the securities market has been entrusted to the
Securities and Exchange Board of India (SEBI) by an act of parliament in 1992.
All companies wishing to raise capital from the public are required to list their
securities on at least one stock exchange. Thus, all ordinary shares, preference shares and
debentures of publicly held companies are listed in stock exchanges.
While in the developed countries, brokers have long since graduated to rendering
a whole range of consulting and advisory services to their clients based on their own
research and analysis, unfortunately, the profession of brokers in Indian has remained a
closed club, traditional and primitive. Their function has largely remained limited to carry
out the transaction orders on behalf of their clients (and often at prices far from
satisfactory). In their role as sub-brokers and jobbers (jobber is a broker’s, or one who
specializes in specific securities catering to the needs of other brokers), their activities are
even less organized and regulated.
To be fair though, share broking is not only the Indian Institution in its
primitiveness. It has plenty of company. The good news however is, things are beginning
to look up. Measures are a foot for professionalized the service through various means.
For example, the BSE has set up a full-fledged training college with a view to developing
the professional standards of its members as well as investors. Other institution like the
various Indian Institutes of Management (IIMs), Institute of Chartered Financial Analysts
of India, Unit Trust of India etc. are also beginning to play a useful part in
professionalized the discipline of investment analysis. Also there is an increasing trend to
admit qualified professionals as member of the exchange. Corporate membership to
Stock exchanges has already been introduced. So over a period of time it can reasonably
hope that the service would get increasingly professional.

SECURITIES AND EXCHANGE BOARD OF INDIA

The Government has setup the Securities and Exchange Board of India (SEBI) in
April 1988. For more than three year it had no statutory powers. Its interim functions
during the period were:
(i) To collect information and advise the government on matters relating to Stock
and Capital Markets.
(ii) Licensing and regulation of merchant banks, mutual funds etc.
(iii) To perform any other functions as may be entrusted to it by the government and
The malpractices were noticed in the case of companies, Merchant Bankers in the
capital Market. The need to curb the malpractices and to promote healthy capital market
India was felt.
The government issued an ordinance abolishing the capital issues Control Act,
1947. Accordingly SEBI has been setup under the SEBI Act, 1992.

POWERS AND FUNCTIONS OF SEBI (Section 11)

The board is expected to protect the interests of investors in securities and to
promote the development of, and to regulate the securities market, by such measures as it
think fit. To fulfill these objectives, the following are the powers and functions of the
Board, granted under Section - 11 (3) of the Act: -
1. Regulating the business in Stock exchange and any other securities markets
2. Registering and regulating the working of stockbrokers, sub-brokers, share
transfer agents, bankers to an issue, merchant bankers, underwriters, portfolio managers
etc who may be associated with securities markets in any manner.
3. Registering and regulating the working of collective schemes, including mutual
funds.
4. Promoting and regulating self-regulatory organizations.
5. Prohibiting fraudulent and unfair trade practices relating to securities market.
6. Promoting investor’s education and teaching of intermediaries of securities
market.
7. Prohibiting inside trade in securities.
8. Regulating substantial acquisition of share and take-over of companies.

OTHER MEASURES TAKEN BY SEBI

The Securities and Exchange Board of India, in addition to the guidelines for
disclosure and investor protection has taken a number of other measures for healthy
development and regulation of the capital markets.
1. Guidelines for Merchant Bankers.
2. Guidelines for EURO issues.
3. Guidelines for Mutual Funds and Asset Management Companies.
4. Guidelines for Foreign Institution Investors.
5. Guidelines to development Financial Institutions for disclosure and
investor protection.

SEBI’S ROLE IN STOCK EXCHANGE

Every Stock exchange needs recognition from Central Government. Any stock
exchange, which is desirous of being recognized, may make an application to Central
Government. The application should be accompanied by a company of byelaws of the
stock exchange for the regulation and control of contracts and a copy of the rules
regarding in general to the constitution of the stock exchange. If the Central Government
is satisfied that byelaws of the exchange ensure fair dealing and protect investors, stock
exchange is willing to comply by other conditions which Central Government my impose
and it is in the interest of trade and of the public to grant recognitions, it may recognize
the stock exchange.

SEBI’S POWERS IN RELATION TO STOCK EXCHANGE

The SEBI ordinance has given it the following powers:

1. It may call periodically returns from stock exchange.
2. It has the power to prescribe maintenance of certain documents by the stock exchange.
3. SEBI may call upon the exchange or any mate to furnish explanation or information
relating to the affairs of the stock exchange or any member.
4. It has the power to approve byelaws of the stock exchange for regulation and the
control of contracts.
5. It can amend byelaws of stock exchange.
6. In certain areas it can license the dealers in securities.
 Industry Profile
The Stock Exchange in India was formed only after the Mughals and the East India
Company. The British Government took over India in 1858 after the Indian war of
Independence.
The Bombay stock exchange was formed in 1875.
The Ahemedabad stock exchange in 1894
Calcutta in 1900
Madras in 1920
The Indore Exchange in 1930
The Hyderabad stock exchange in 1943
The Bangalore stock exchange in 1963.

National Stock Exchange (NSE)

The National Stock Exchange (NSE) is India’s leading stock exchange covering various
cities and towns across the country. NSE was set up by leading institutions to provide a
modern, fully automated screen-based trading system with national reach. The Exchange
has brought about unparalleled transparency, speed & efficiency, safety and market
integrity. It has set up facilities that serve as a model for the securities industry in terms
of systems, practices and procedures.

NSE has played a catalytic role in reforming the Indian securities market in terms of
microstructure, market practices and trading volumes. The market today uses state-of-art
information technology to provide an efficient and transparent trading, clearing and
settlement mechanism, and has witnessed several innovations in products & services viz.
demutualization of stock exchange governance, screen based trading, compression of
settlement cycles, dematerialization and electronic transfer of securities, securities
lending and borrowing, professionalisation of trading members, fine-tuned risk
management systems, emergence of clearing corporations to assume counter party risks,
market of debt and derivative instruments and intensive use of information technology.
NSE 5O-Index
The NSE 50 index, commonly known as Nifty is a market capitalization weighted index
like the BSE sensitive index and S&P 500; it was introduced in April 1996, replacing the
earlier NSE –100. The objective of the NSE –50 index are:

• To reflect the market movement more accurately

• To provide fund manager with a bunch mark for measuring portfolio performance.
• To establish a basis for introducing index based derivative product.

Bombay Stock Exchange (BSE)

The Stock Exchange, Mumbai, popularly known as “BSE” was established in 1875 as
“The Native Share and Stock Brokers Association”. It is the oldest one in Asia, even
older than the Tokyo Stock Exchange, which was established in 1878. It is a voluntary
non-profit making Association of Persons (AOP) and is currently engaged in the process
of converting itself into demutualised and corporate entity. It has evolved over the years
into its present status as the premier Stock Exchange in the country. It is the first Stock
Exchange in the Country to have obtained permanent recognition in 1956 from the Govt.
of India under the Securities Contracts (Regulation) Act, 1956.
The Exchange, while providing an efficient and transparent market for trading in
securities, debt and derivatives upholds the interests of the investors and ensures redressal
of their grievances whether against the companies or its own member-brokers. It also
strives to educate and enlighten the investors by conducting investor education
programmes and making available to them necessary informative inputs.
A Governing Board having 20 directors is the apex body, which decides the policies and
regulates the affairs of the Exchange. The Governing Board consists of 9 elected
directors, who are from the broking community (one third of them retire ever year by
rotation), three SEBI nominees, six public representatives and an Executive Director &
Chief Executive Officer and a Chief Operating Officer.
The Executive Director as the Chief Executive Officer is responsible for the day-to-day
administration of the Exchange and he is assisted by the Chief Operating Officer and
other Heads of Departments.

The Exchange has inserted new Rule No.126 A in its Rules, Bye-laws & Regulations
pertaining to constitution of the Executive Committee of the Exchange. Accordingly, an
Executive Committee, consisting of three elected directors, three SEBI nominees or
public representatives, Executive Director & CEO and Chief Operating Officer has been
constituted. The Committee considers judicial & quasi matters in which the Governing
Board has powers as an Appellate Authority, matters regarding annulment of
transactions, admission, continuance and suspension of member-brokers, declaration of a
member-broker as defaulter, norms, procedures and other matters relating to arbitration,
fees, deposits, margins and other monies payable by the member-brokers to the
Exchange, etc.

INDEX

BSE has 5 sectoral indices viz. BSE IT Sector index, BSE FMCG Sector index, BSE
Capital Goods Sector Index, BSE Consumer Durables Sector Index and BSE Healthcare
Sector Index. All these Sectoral indices are calculated and displayed on the BOLT system
on the real time basis.

Bombay Stock Exchange Limited has constructed a new index, christened as BSE-500,
consisting of 500 scrips .The changing pattern of the economy and that of the market
have been kept in mind while constructing this index.

August 23, 2004 BSE launched “Sector Series (90/FF)” indices with the view to provide
the Indian Capital Market with quality sector benchmarks. The “Sector Series (90/FF)”
Indices are a set of indices across 9 significant sectors listed on the BSE. They are
constructed and maintained as per the global best practices.

BSE-500 index represents nearly 93% of the total market capitalization on Bombay Stock
Exchange Limited. This means BSE-500 index ideally represents total market. This index
represents all 20 major industries of the economy. The BSE-500 index had been
calculating on a full market capitalization methodology and effective August 16, 2005
calculation methodology was shifted to a free-float methodology in line with Sensex.

Existing BSE sectoral indices

BSE IT.

BSE FMCG.

BSE Capital Goods.

BSE Consumer Durables.

BSE Healthcare.

BSE BANKEX

BSE Auto.

BSE Metal.

BSE Oil & Gas index.

Scrip selection criteria for BSE Sectoral Indices:

Eligible Universe:
Scrips classified under various sectors that are present constituents of BSE-500 index
would form the eligible universe.

Trading Frequency:
Scrips should have a minimum of 90% trading frequency in preceding six months.

Market Capitalization:
Scrips with a minimum of 90% market capitalization coverage in each sector based on
free-float final rank will form the index.

Buffers:
A buffer of 2% both for inclusion and exclusion in the index is considered so that
movements in and out of the index are minimized. E.g. A company can be included in the
index only if it falls within 88% coverage and an existing index constituent cannot be
excluded unless it falls above 92% coverage. However, the above buffer criterion is
applied only after the minimum 90% market coverage is satisfied.

How is stock market index computed?

The general stock market movement is usually measured by a stock market
index consisting of a sample group of securities that is supposed to reflect the entire
market. The samples of companies are chosen in such a way that major industries in the
economy are represented. Moreover, these securities must have large capital base so as to
be traded regularly in the stock exchange.
The index is computed as: first of all, a base year is chosen and the index value
is taken to be equal to 100. Then the current price of each stock in the index is multiplied
by their corresponding number of equity shares outstanding, so as to obtain the Market
Capitalization.

Then the index will be calculated as follows:

Total Market capitalization of representative securities at present values

Total Market capitalization of representative securities values as in the base year X 100

The index is not an average of share prices but a weighted average to reflect the
price as well as volume of shares. It is assumed that as this index goes up or down, the
market in totality would rise or fall.
The most popular market index is BSE sensitive index also called BSE Sensex,
which is the weighted average of market capitalization of 30 well traded securities.
To broaden the equity base, so as to make representation of many other industries
in a balanced way, another index called BSE National index was introduced, which never
became as popular as the BSE Sensex. There are other indices developed by popular
business newspapers.
Company Profile

Crown Consultant Pvt Ltd (CCPL)

The Crown Consultant has been playing a very vital role in the wealth development of
its costumers in general and striving hard so as to achieve the following goals:

• Providing investors with high level of liquidity whereby the cost and time involved in
the entry and exit from the market becomes the least.
• Bring in high tech solutions and make possible absolute transparency of all
operations.
• Built infrastructure for capital market by turning CSE into a financial super market.
• Spread equity cult and to serve investors of the region.
• Professional stock broking and investment management function.
• Impart capital market knowledge to all intermediaries on a continuous basis.
• Develop a winning team of professionals as employees of CCPL who will play a
crucial role in shaping the future of CSE and its associates

Crown Consultants Pvt Ltd (CCPL)

Our Culture

We have developed new age business culture based on openness & integrity. Our

Culture is based on whole heartedly shared ideas, knowledge & technology trends for

our customers to flourish in the booming ideas economy.

Crown values your trust and is committed to upholding it at all costs. We believe that

no automated system can be a substitute for the human touch.

Crown combines its Research, IT strengths, ethical business practices
and "Customer First Attitude " to provide you end-to-end equity
solutions. We invite you to sample any of our products and services

Our Vision

To be a global player in the thriving environment for wealth creation by

providing highend strategic, technological, intellectual & customer
service solution cost effectively.
Our Mission
To be a leading brokerage & information technology house by
providing and efficiently executing quality investment & software
ideas, thereby building lasting customer relationship based on mutual
trust.

Guiding Principle & Core Values

• Customer interest is paramount

• Ethical and transparent business practices
• Respect for professionals, associates and business partners
• Research based value investing
• Cutting edge technology to ensure world-class customer service
• Personalized investment Strategies
• Complete Client Satisfaction
• Competitive Brokerage

Functional Areas

The Crown Consultants carries on its function through the six main departments

The various functional departments under CROWN GROUP are:

• Crown Consultants (P) Ltd.

Member : National Stock Exchange of India
• Crown Sharebroker (P) Ltd.
Member : Punel Stock Exchange
 • Crown Bullion & Commodities
Member : MCX / NCDEX
• Crown Insurance Services
Life & Non-Life Insurance
• Crown Cybertech (P) Ltd.
Information Systems Auditors
• Shantilal Chandaliya & Co.
Chartered Accountants

Management

Crown management team Comprises of CAs, Lawyers, ICWAs, MBAs

and IT professionals who manage crucial functions, to bring best
products and services to its clients from research based advice to
trade execution & settlements.

At Crown we practice meritocracy and each of the team members is

provided extensive training.
CCPL is a member of the National Stock Exchange of India, Bombay Stock Exchange of
India, Depository Participant with National Securities Depository Limited and Central
Depository Services (I) Limited, and SEBI approved Portfolio Manager.

IT INDUSTRY PROFILE
The December 2005 quarter saw a decent overall performance from the Indian
IT sector, with a strong business flows and favourable currency environment. Going
forward the demand environment is looking robust with strong deal flows. The recent
ABN Amro and G.M deals are testimonials to this fact.

The Indian tech sector is likely to grow at around 32 %( in dollars) in F.Y 06. With the
increasing traction in the global IT environment, the Indian IT sector is well poised to
attain the next level of growth in the coming year. The Indian software sector has moved
beyond the confines of custom application development and maintenance services to
providing software package implementation, testing remote infrastructure management
and IT Enabled Services (ITES). Newer services like testing, package implementation,
re-engineering, consulting and B.P.O have driven the incremental growth in the sector,
and are growing much faster than the overall growth rate of the sector. The top tier IT
companies has seen strong traction in these newer services lines. In particular, Infosys
has experienced a growth in all the lines including package implementation, testing,
consulting and B.P.O services in the last few quarters.

The IT sector continued its trend of Merger and Acquisitions (M&As) with companies
acquiring targets for advantage in terms of customers, domain or geography. Apart from
M&As, tech companies also formed joint ventures (J.V) and alliances to strengthen their
positions in the market place.
Top 10 predictions for IT industry

India will be the fastest growing IT market in the Asia Pacific region with its domestic IT
market set to grow at an estimated 19% in 2008 over 2007, according to IT and telecom
consulting major IDC.

"Year 2008 will be governed by the underlying themes of mobility, convergence and
infrastructure management," said Kapil Dev Singh, country manager, IDC (India) Ltd.
Dynamic IT in the enterprise space and increasing proliferation of digital devices in the
consumer space, will drive the growth of IT market in 2006.

IDC's top 10 predictions for the Indian IT market for 2006 are:

1. India to continue to be the fastest growing domestic IT market in the

Asia-Pacific region, to continue to grow at 19% in 2008, with the other
Asian giant China growing at 12%.

Country Domestic IT market growth

in 2007 over 2006
India 19%

Philippines 14%
 China 12%

Malaysia 8%

Thailand 6%

Table: 2.1

Table showing the Domestic IT Growth in 2007 0ver 2006

The major growth will come in the following areas:

Hardware: WLAN equipment (94%), digicams (70%), IP phones (50%), IP-PBX

systems (43%), Smart handheld devices or SHDs (30%), Inkjet MFDs (21%), and
Notebook PCs (20%)

Software: Application life cycle management software (32%), security software (29%),
content applications (24%), BI software (24%), system management software (20%),
network management software (20%), information and data management software (20%)

IT Services: Application management (32%), software deployment and support services

(29%), network consulting and integration services (24%), IS outsourcing (23%).

2. Servers, the fundamental building blocks of IT infrastructure to cross 100,000

shipments in 2006 in India.

The challenge facing CIOs in 2006 would be to deliver higher IT service-level

performance to meet diverse business needs while lowering the costs of infrastructure - a
tough balance to strike.

Users have realised their IT infrastructure has become quite complex over a period of
time as they continued to add different types of servers, storage, and software.

Servers are among the fundamental building blocks of a solid infrastructure in the
making. The trend towards dynamic IT will necessitate an increasing need for server
consolidation in 2008. After struggling for years to register consistent growth, the server
market in India is now poised for strong gains over the next five years.

For the past 10 consecutive quarters, server shipments in India increased year-on-year in
excess of 20% until 3Q05, while growth in spending was equally impressive.
3. Outsourcing services to outgrow technology product services (standalone) in 2008 and
will contribute largest chunk (24%) to the Indian IT services market.

IDC believes that the Indian market is moving towards an era of outsourcing services in
the domestic space. So far, the domestic market has been dominated by plain vanilla
support services like software and hardware deployment and support, which includes
revenue streams like AMC (annual maintenance service contract) revenues.

With the emergence of end-to-end operators in the services space and with more
confidence on outsourcing service providers, end-users are awarding more contracts with
long-term perspectives in mind.

Deals like IBM-Bharti, HP-Bank of India, Wipro-Sanmar group, TCS-Department of

Company Affairs, etc show a definite change in the mindset of even the
PSU/Government vertical to go for similar deals, where the complete headache of IT
Infrastructure can be taken up by the specialist providers.

IDC estimates that managed services (outsourcing services) would be 24% of the total
domestic IT services market vis-à-vis 22% for technology product services (TPS) in CY
2008.

4. Anytime, anywhere information availability to drive shift towards policy-based

security management and administration in India.

Businesses are rapidly changing with growth and competition, pushing enterprises for
high availability of information to enable better and faster decision-making. Enterprises
are networking with both their downstream and upstream partners in the ecosystem so as
to streamline and optimize their value chain. The need for higher availability coupled
with compliance to regulations will put Identity & Access Management (IAM) solutions
in the mainstream in 2008.

Higher mobility and faster decision-making require information to be made available

anywhere, anytime. This, in turn would enable enterprises to respond to changing market
needs in a shorter time-span.
Therefore, enterprises will need to design a centralized security policy, which takes into
consideration the needs of employees and partners alike. This trend will increasingly set
the boundaries that govern security management and administration policies in
enterprises.

5. 2008, the year of the digital home revolution in India: 100% growth expected in digital
camera shipments and home Internet connections.

Finally the Indian consumer segment is coming into its own. IDC has observed
phenomenal growth in the adoption of digital devices and technologies that clearly
signals the trend towards fructification of the concept of a digital home.

All major indicators, i.e. home PC, broadband, digital camera, high-end television,
satellite radios, MP4 players etc., have shown very healthy growth in the year 2007. IDC
predicts that the next year is going to be even rosier for a host of digital products aimed
for this mass market.

India will see a few products enjoying more than 100% growth with digital cameras and
consumer broadband connections becoming the flag bearers of this triumphant march.

The digital camera market is undergoing a sea change in the country. Indian consumers
are maturing from 'casual clickers' to 'serious buyers', with increased attention towards
higher pixels, zoom and other high-end features.

Low cost Broadband is another market where India is going to see unprecedented growth.
The cost of owing a broadband Internet connection (primarily ADSL) has come down
drastically, thanks to the bundling and offerings available from service providers.

6. Unrestricted IP telephony will boost IP-PBX shipments to over 25% of PBX line
shipments by end-2008, but low PSTN tariffs will constrain VoIP usage in India.

The Indian IP telephony enterprise equipment market is finally emerging out of the
shackles of government-enforced restrictions. The recent announcement further opening
up IP telephony means that IP telephones and equipment will be able to freely
interconnect with normal TDM lines, be it for calling within the user's closed group or
outside, irrespective of whether the called party is outside India or inside India.
And it does not matter whether the receiver is on an IP phone or a normal PSTN phone or
even the now more common mobile phone. IP telephony, unbridled and with full
features, is what 2008 will see becoming a reality.

Given the fast dropping costs of IP phones and IP-PBX equipment, IP telephony will stop
being a tool used for niche applications by early adopters to become a multipurpose
communication medium used by a diverse set of enterprises.

In 2008, it will not only be the BPO’S and software houses who will adopt IP telephony
-- many other organizations such as banks, manufacturers, educational institutions and
government departments would begin adding IP telephones and IP-PBXs to their
networks.

IDC expects that by the end of 2008, a quarter of PBX lines shipped will be IP lines
compared to the 15 per cent today. The biggest drivers for IP telephony among
enterprises would be investment protection and convergence -- businesses would look at
investing on the latest technology that will give them the best return in the long run.

7. Industry-specific solutions to be major driver of corporate IT spending in 2008 and

beyond.

As the Indian economy integrates and aligns more and more with the global economy,
industry segments facing the heat of competition are gearing up to compete
internationally. This is visible across segments as diverse as automotive, banking &
insurance, consumer durables, textiles & garments, oil & gas, pharmaceuticals &
biotechnology, retailing, telecom, et al.

This unprecedented scenario has made Indian companies scout for world-class enterprise
applications/solutions from IT vendors to help them upgrade their legacy
systems/applications in order to meet their goals as well as the expectations of their
customers, business partners and shareholders.

IDC believes that this trend is going to gain traction in 2008. This in turn is forcing IT
vendors/solution providers in India to realign their internal organization structures as well
as their go-to-market strategies in order to be able to adequately address these new
market realities.
According to IDC IT vendors/solution providers will be:

• Re-orienting their internal organization structures to cater to the specific and

emerging needs of their industry vertical focused customers, as against the
traditional horizontal, product category-oriented structures.
• Developing and providing specific, easily customizable and cost-effective (high
ROI/low TCO) solutions to their customers.
• Tying up with industry-specific solution partners who possess deep domain
expertise and have access/proximity to local geographical industry clusters.

High revenue growth would be witnessed in vertical-specific applications across-the-

board, which is expected to provide a positive boost to revenues (2008 over 2007) in such
major product segments as servers (9%), PCs (21%), enterprise storage solutions (13%),
packaged software (20%) and key IT services like application management (32%), ASP
(20%), IT consulting (20%), network consulting & integration (24%), network
management (26%), software deployment & support (29%) as well as enterprise-wide IS
outsourcing services (23%).

8. Application integration, consolidation with business analytics will gain momentum in

2006.

Enterprises in India are growing rapidly and the need has arisen to have better control on
growth and decision-making based on real time enterprise wide data. The business
drivers across industries are different and range from compliance, better service to cost
control.

Enterprises have deployed multiple applications with a mix of standardized packaged and
custom-developed legacy applications. These disparate applications pose challenges like:

2008 will witness enterprises integrating multiple applications running within the
organization. They will also reduce the number of applications wherever possible and
rollout applications from a single location, thus reducing the number of servers deployed.

9. Cost no more the key factor in colour adoption: Colour laser shipments growing by
50% in 2008 over 2007.
IDC believes that adoption of colour printing in the laser space will take off from 2008.
While 2008 will witness an increased adoption of colour lasers in offices; the installed
base will keep on increasing thereafter. Over the past two years there has been a
concerted drive by the industry to develop and enhance the range of colour laser devices
that they offer.

This drive will begin to see results from 2008 onwards. The CAGR for the next five years
is predicted to be about 40%, while 2006 is likely to witness an increase of about 50%
over 2007 shipments.

There are an increasing number of devices that employ technologies that deliver colour
output to businesses, and there is an increasing awareness amongst organizations that
colour can bring great benefits to their businesses.

The factors that will drive the adoption of colour printing are:

• Prices to drop considerably across all products;

• Businesses have a latent need for colour printing and would really begin to look
strategically at what benefits colour could provide;
• Vendors would continue to introduce products that will offer better print speeds,
quality and consistency of print, which would enable a number of businesses to
print many of their colour documents in-house.

To begin with, marketing and sales would drive the use of colour in offices. The
phenomenon is likely to spread to other groups gradually. However there are a few
challenges that both the printer vendors and offices (end-user organizations) themselves
have to overcome. These are:

• Increased costs -- one time cost as well as recurring costs;

• Cost allocation between various departments; and
• Colour printing through networked devices.

IDC expects a few organizations to act as innovators towards adopting colour printing
cost effectively, thereby overcoming the above hurdles successfully. These organisations
will gain an early advantage over their competitors and this would then lead to
widespread adoption of colour in Indian offices.

10. Worldwide IT and business services: Focus on SMEs, global assets, global sourcing
for innovation and industry focused BPO.

In 2008, IT and business services vendors will continue to see major market changes,
including a dramatic shift to more business process outsourcing, an increase in the
number of players, and a reduction in total deal value.
These developments reflect increased competition and expansion in the marketplace and are
continuing to put pressure on traditional outsourcers to alter their business models in order to
successfully compete in the coming years - to include newer service capabilities, involve different
ecosystems of partnerships, target 'non-IT' opportunities, and seek new customers in the SME
and consumer spaces as well as emerging markets.

TECHNICAL ANALYSIS

Technical analysis is the study of price movement in markets in order to forecast future
prices. Technical analysis is primarily, but not exclusively, conducted by studying charts
of past price movement. Many different methods and tools are utilized in technical
analysis, but they all rely on the principle that price patterns and trends exist in markets
that can be identified and exploited.

Technical analysis and its traditional opposite fundamental analysis are the two main
schools of thought in the analysis of security prices. Many investors combine elements
from the two schools. Technical analysis is viewed by many of its practitioners as more
art than science, and there is some disagreement between subscribers to different schools
of thought that is far more extensive than in most scientific subjects.

Traditionally two methods: Fundamental analysis and Technical analysis.

Difference between fundamental and technical analysis are as follows:

 1) Technical analysts seeks to forecast short-term, medium and long term security
prices (and also short term movement of the market) rather than long run values
of the securities, unlike the fundamentalists.
2) Technical analysts also try to forecast short- term shifts in supply and demand
that will affect the market price of one or more securities and ignore any firm-
related, industry- related, or economy related information as fundamentalists do.
3) Technical analysis is useful for only short-term investors, while fundamental
analysis is useful for long term investors.
4) A fundamentalist believes that long-term security values can be gauged by
studying the main factors related to the firm, the industry and the economy. A
technical analysts work on the premise that short-term price movements can be
predicted on the basis of price-volume study, chart pattern of individual stocks,
and other technical market indicators.
5) Even, if you have the price data, technical analysis is equally complicated as
much as fundamental analysis.

Rationale of technical analysis.

Technical analysts believe that it is possible to forecast the future price of a share
by looking at the past price movement. Their main assumptions are:
1) The market price of a security is determined solely by supply and demand. Any
shift in the supply –demand relationship, can be detected sooner or later in the
action of the market.
2) Supply and demand are governed by numerous factors both rational and
irrational, which include factors relied up on by fundamentalists, as well as
opinions, moods, guesses and blind necessities. The market weighs these factors
continually and automatically.
3) Disregarding minor price fluctuations, stock prices tend to move in trends that
persist for an applicable length of time.
4) Some chart patterns tend to recur and their recurring prices can be used to
forecast the price movement.
 In a nutshell, Technical Analysts believes in the maxim, “History repeats itself”
without giving an in-depth explanation.

History

The premises of technical analysis were derived from empirical observations of financial
markets over hundreds of years. Perhaps the oldest branch of technical analysis is the use
of candlestick techniques by Japanese traders at least as early as the 18th century, and
still very popular today.

Technical analysis actually was the brainchild of Dow Jones, editor of the Wall Street
Journal, at the turn of the 20th century. While recording price movement of various
securities for predicting future price, he observed that most stocks move in tandem with
the market, going up when the market goes up and vice versa.
In order to interpret market behavior, Dow therefore, constructed two indices,
currently called Dow Jones Industrial Average (DJIA) and Dow Jones Transportation
Average (DJTA).Dow Theory, a theory based on the collected writings of Dow Jones co-
founder and editor Charles Dow, inspired the increasingly widespread use and
development of technical analysis from the end of the 19th century. His theory later on
was interpreted, expanded and refined by technical analysts Hamilton and Rhea.New
tools and theories have been produced and existing tools have been enhanced at a rapid
rate in recent decades, with an increasing emphasis on computer-assisted techniques.

Theory

Technical analysis is less concerned with why a price is moving (e.g. poor earnings,
difficult business environment, poor management, or other fundamentals) than it is with
the fact that the price is moving in a particular direction or in a particular chart pattern.
To a technical analyst, profits can be made in any market by positioning oneself in the
direction of the price trend. If the price trend is up, then look for opportunities to buy; if
the price trend is down, then look for opportunities to sell. Additionally, technical
analysts look for various price patterns to form on a price chart and will take positions in
anticipation of the expected move following that pattern.
Technical analysis is occasionally at odds with fundamental analysis. Essentially,
fundamental analysis maintains that it is possible that markets misprice a security and,
through various methods of fundamental analysis, the "right" price can be calculated.
Profits can be generated by buying or selling the mispriced security and then waiting for
the market to recognize its "mistake" and reprice the security. A technical analyst,
contrastingly, is not so much interested in a security's "correct" price; he or she is only
interested in the price action. The analyst looks at how the price action unfolds on a chart
and on other price studies and invests accordingly. A cliche among technical analysts is,
"Forget the fundamentals and follow the money." As a simple example, suppose
Vodafone stock was trading at 124.25 pence on the London Stock Exchange. Suppose
further that the consensus fundamental analysis view of Vodafone stock was that it was
worth 120.00 pence. If Vodafone stock were to move to 125.00 pence, then to 126.00
pence, and then to 127.00 pence, a technical analyst would be more inclined, in this
simple example, to buy this stock because its price is steadily increasing. It is "trending"
(see below). Contrastingly, a fundamental analyst would possibly look to sell Vodafone
stock as it is moving away from what the fundamental analyst believes is the "right"
price.

Three Beliefs of Technical Analysis

1)Price action in the market discounts everything.

Technical analysis holds that because every possible bit of information is immediately
included in the price of a security, it is not necessary to explicitly analyze the
fundamental, economic, political, etc. factors that might influence that price. Because all
available information influences the price movement, only a study of the price movement
is required.

2)Prices move in trends.

While it is not explicitly provable that prices must trend, technical analysis relies on
empirical evidence and simple common sense to assert that prices do trend. In most
traded markets, it is a simple matter to show statistically that prices trend on many time
scales, although this tendency is generally quite a modest one.
For example, if homeowners believed that interest rate increases will erode the value of
their homes, they will be inclined to sell. If there were three similar homes in a
neighborhood up for sale, the first house could be sold for $100,000, the second could be
sold for $97,500 and perhaps the third could sell for $95,000. Rather than immediately
drop down to some formulaic price based on interest rates and other inputs, prices will
move consistently over time in one direction. (In a large market like global equities with
many participants, prices will move in a zig-zag fashion in one direction.) Prices will
continue to decline until there is a balance between buyers and sellers. This gradual (but
sometimes quick) directional movement in prices (the trend) is what technical analysis
attempts to identify and exploit. If a technical analyst could enter this market, he or she
would likely sell short a house because the price trend is downward.

A person who does not believe that prices move in trends will find little use of technical
analysis. The idea that prices trend is probably the most important concept in technical
analysis. Moreover, a person who disagrees with Dow Theory will also likely find fault
with technical analysis.

3)History tends to repeat itself

Technical analysis believes that investors en masse display much of the same behavior as
the investors that preceded them. "Everyone wants in on the next Microsoft," "If this
stock ever gets to $50 again, I will buy it," "This company's technology will revolutionize
its industry, therefore this stock will skyrocket,"--these are all examples of investors'
attitudes repeating. To a technical analyst, the human characteristics of the market might
be irrational but nonetheless they exist. Because investors' attitudes often repeat,
investors' actions in the marketplace often repeat as well. I.e., patterns of price movement
will develop on a chart that a technical analyst believes have predictive qualities.

Technical analysis is not limited to charting. Technical analysis is always primarily

concerned with price trends. Anything that can influence the price trend is of interest to a
technical analyst. As an example, many technical analysts monitor surveys of investor
enthusiasm. These surveys attempt to gauge the general attitude of the investment
community to determine whether investors are bearish or bullish. Technical analysts use
these surveys to help determine whether a trend will reverse or whether a new trend will
develop. A technical analyst would be alerted that a trend might change when these
surveys report extreme investor reactions. When surveys are overly bullish, for example,
a technical analyst will look for evidence that an uptrend will reverse. The logic being
that if most investors are bullish, then they would have already bought the market
(anticipating that the market will move higher). But because most investors are bulllish
and have invested, it is safe to assume that there are few buyers remaining in the market.
With most investors long, there are more potential sellers in the market than buyers
despite the fact that the overall attitude of investors is bullish. This implies that the
market is set to trend down and is an example of a technical analysis concept called
contrarian trading.

Criticism of Technical Analysis

1)The question of documented evidence

Although chartists believe that their techniques provide excess returns over time, not all
research agrees with this conclusion. Some academics and fundamentalist market
participants believe that technical analysis has no predictive power. According to some
studies, after trading costs are factored in, the returns generated by many technical
analysis strategies may underperform a simple buy and hold strategy.

On the other hand, many market participants, especially active traders, defend the
practice and believe (and in some cases demonstrate) that it can be profitable. There is
extensive research demonstrating that some technical analysis methods are effective, with
at least 59 studies showing that particular technical analysis methods have provided
statistically significant positive returns. Furthermore, technical analysts counterclaim that
buy and hold strategies do not always work either, and that opportunites to make money
in markets always exist even if the market overall does not move.

Critics of technical analysis include very well known investors. Warren Buffett once
exclaimed, "If past history was all there was to the game, the richest people would be
librarians." Most economists do not use technical analysis, but rather rely on analyzing
such fundamental factors as production, distribution, supply and demand, capital,
competition, and resource allocation.
2)Inconsistencies with Other Market Hypotheses

The Efficient Market Hypothesis:

The efficient market hypothesis concludes that technical analysis cannot be effective.
According to this hypothesis, all relevant information is quickly reflected in a security's
price through the actions of traders who have that information. Thus, it is impossible to
"beat the market," and technical analysis cannot work. News events and new fundamental
developments which influence prices occur randomly and are unknowable in advance.
Advocates of EMH have produced many studies that reject the efficacy of technical
analysis.

Proponents of technical analysis counter that technical analysis does not completely
contradict the efficient market hypothesis. Technicians agree with EMH in that they
believe that all available information is reflected within a security's price; that is why
technicians say a study of the price movement is necessary. Technicians argue that EMH
ignores the realities of the market place, namely that many investors base their future
expectations on past earnings, track records, etc. Because future stock prices can be
strongly influenced by investor expectations, technicians claim it only follows that past
prices can influence future prices.

Technicians point to the new field of behavioral finance. Behavioral finance essentially
says that people are not the rational participants EMH makes them out to be. Market
participants can and do act irrationally. Technicians have long held that irrational human
behavior influences stock prices and claim to have ways of predicting probable outcomes
based on this behavior.

The Random Walk Hypothesis:

The random walk hypothesis is also at odds with technical analysis and charting.
Essentially, the hypothesis claims that stock price moments are a Brownian Motion with
either independent or uncorrelated increments. In this model, future stock prices are not
dependent on past stock prices, so trends cannot exist and technical analysis has no basis.
Again, proponents of this theory have generated substantial research in support of the
hypothesis.
Technical analysts maintain that trends are identifiable in the market and that it is
impractical to believe that market prices move in a random fashion. To a technician, over
time prices will trend in a direction until supply equals demand. Therefore, there cannot
be any pure random price movement. As stated earlier, one of the cornerstones of
technical analysis is that prices trend. If one does not believe this concept, one will not
agree with technical analysis.

Proponents of Technical Analysis

To many traders, trading in the direction of the trend is the most effective means to be
profitable in financial or commodities markets. John Henry, Larry Hite, Ed Seykota,
Richard Dennis, Bruce Kovner, and Michael Marcus (some of the so-called Market
Wizards in the popular book of the same name by Jack D. Schwager) have each amassed
massive fortunes through the use of technical analysis and its concepts. George Lane, a
technical analyst, coined one of the most popular phrases on Wall Street, "The trend is
your friend!"

Many non-arbitrage algorithmic trading systems rely on the idea of trend-following, as do

many hedge funds. A relatively recent trend, both in research and industrial practice, has
been the development of increasingly sophisticated automated trading strategies. These
often rely on underlying technical analysis principles (see algorithmic trading article for
an overview).

Charting terms and indicators

Many different techniques and indicators can be used to follow and predict trends in
markets. Some of the most widely known include:

• Accumulation/distribution index
• Average true range - averaged daily trading range
• Bollinger bands - a range of price volatility
• Breakout - when a price passes through and stays above an area of support or
resistance
• Commodity Channel Index
• Hikkake Pattern - pattern for identifying reversals and continuations
 • MACD - moving average convergence/divergence
• Momentum - the rate of price change
• Money Flow - the amount of stock traded on days the price went up
• Moving average
• On balance volume - the momentum of buying and selling stocks
• PAC charts - two-dimensional method for charting volume by price level
• Parabolic SAR - Wilder's trailing stop based on prices tending to stay within a
parabolic curve during a strong trend
• Point and figure charts - charts based on price without time
• Relative Strength Index
• Resistance - an area that brings on increased selling
• Stochastic oscillator, close position within recent trading range
• Stop loss
• Support - an area that brings on increased buying
• Trend line - a sloping line of support or resistance

Moving average (finance)

A moving average, in finance and especially in technical analysis, is one of a family of

similar statistical techniques used to analyse time series data.

A moving average series can be calculated for any time series, but is most often applied
to stock prices, returns or trading volumes. Moving averages are used to smooth out
short-term fluctuations, thus highlighting longer-term trends or cycles. The threshold
between short-term and long-term depends on the application, and the parameters of the
moving average will be set accordingly.

Mathematically, each of these moving averages is an example of a convolution. These

averages are also similar to the low-pass filters used in signal processing.

Simple moving average:

A simple moving average is the unweighted mean of the previous n data points. For
example, a 10-day simple moving average of closing price is the mean of the previous 10
days' closing prices. If those prices are p1 to pn then the formula is
When calculating successive values, a new value comes into the sum and an old value
drops out, meaning a full summation each time is unnecessary,

In technical analysis there are various popular values for n, like 10 days, 40 days, or 200
days. The period selected depends on the kind of movement one is concentrating on, such
as short, intermediate, or long term. In any case moving average levels are interpreted as
support in a rising market, or resistance in a falling market.

In all cases a moving average lags behind the latest price action, simply from the nature
of its smoothing. An SMA can lag to an undesirable extent, and can be influenced too
much by old prices dropping out of the average.

Weighted moving average

A weighted average is any average that has multiplying factors to give different weights
to different data points. But in technical analysis a weighted moving average (WMA)
has the specific meaning of weights which decrease arithmetically. In an n-day WMA the
latest day has weight n, the second latest n-1, etc, down to zero.

When calculating the WMA across successive values, it can be noted an amount p2 to pn +
1 drops out of the numerator each day. The WMA can thus be calculated starting with the
above formula but then stepping successively with just additions and subtractions, not a
full set of multiplications,

Totaltoday = Totalyesterday + p1 − pn + 1
Numeratortoday = Numeratoryesterday + np1 − Totalyesterday
Momentum
Momentum is the rate of acceleration of a security's price or volume.
Once a momentum trader sees an acceleration in a stock's price, earnings, or revenues,
the trader will often take a long or short position in the stock with the hope that its
momentum will continue in either an upwards or downwards direction. This strategy
relies more on short-term movements in price rather then fundamental particulars of
companies, and is not recommended for novices.
Momentum = Close today – Close N days ago.
Momentum is positive if today's price is higher than the price of X days ago, negative if
today's price is lower, and at zero if today's price is the same. Using the momentum
figure that he or she calculates, the trader will then plot a slope for the line connecting
calculated momentum values for each day, thereby illustrating in linear fashion whether
momentum is
rising or falling.

Price Rate of Change – ROC

ROC does stand alone as an important indicator used by many technicians interested in
market momentum.
A technical indicator that measures the percentage change between the most recent price
and the price "N" periods in the past. It is calculated by using the following formula:

(ClosingPriceToday-ClosingPrice"N"PeriodsAgo)
ClosingPrice"N"PeriodsAgo

ROC is classed as a price momentum indicator or a velocity indicator because it

measures the rate of change or the strength of momentum of change.

Many traders use a value greater than zero to indicate an increase in upward momentum
and a value less than zero to indicate an increase in selling pressure. However, some of
the most valuable signals are generated when the price of the asset and the ROC are
heading in opposite directions (known as divergence).
Rate of change (ROC) does stand alone as an important indicator used by many
technicians interested in market momentum.

Similarly, the rate of change divides the latest price by a closing price X days hence. If
both values are equal, ROC is 1. If today's price is higher, then ROC is greater than 1.
And, if today's price is lower, then ROC is less than 1. The slope of the line that connects
the daily ROC values graphically illustrates whether rate of change is rising or falling.

STATEMENT OF PROBLEM

Technical Analysis of BSE IT sector index and exploring investors’ perspective towards
IT stocks

SCOPE OF THE STUDY

My dissertation work titled “Technical Analysis of BSE IT sector index and exploring
investors’ perspective towards IT stocks” deals with the technical analysis of IT index
movements and to predict the trends prevailing in the market. The study also explore the
investors perspective towards IT stocks.

OBJECTIVES OF THE STUDY

1) To analyze the market movement of the IT stocks by using technical analysis.

2) To explore investor’s perspective towards the BSE IT sector stocks.
 REVIEW OF LITERATURE

This chapter deals with the various theoretical backgrounds necessary to carryout
this dissertation. This chapter has been divided into basic theory of its use, calculation
formulae of various statistical measures, which are used to know the price volatility such
as Beta, Alpha and Coefficient Correlation. The chapter deals with various theoretical
backgrounds necessary to carryout this project. Every project or study needs some
amount of theoretical background and existing published literature is one of major
sources for that. Several books, research papers are available giving information about
customer perception. Internet is also a useful way to information about the study. The
articles in various magazines and journals, various reports on the related same topic or
industry, information from World Wide Web etc provides an extensive knowledge on
research.

PURPOSE
Literature review is one of the prime parts of dissertation. The very basic purpose
of the literature review is to gain insight on the theoretical background of the research
problem. It helps the researcher to gain strong theoretical basis of the problem under
study and also helps to explore whether any one has done research on the related issue.
That’s why literature review helps one to find out the path of problem solving.

To get the information on this dissertation, various Textbooks, Magazines,

Journals and News papers.

DEFINITIONS OF FUNDAMENTAL TERMS USED

 Technical analysis: Technical analysis is the process of analyzing a security’s historical
prices in an effort to determine probable future prices.

Simple Moving Average: A simple moving average is the unweighted mean of the
previous n data points

Momentum: The rate of acceleration of a security's price or volume.

Rate of Change: A technical indicator that measures the percentage change between the
most recent price and the price "n" periods in the past

Trend: Trend in price of a financial security is intuitively the general direction of its
movement

METHODOLOGY
The researcher has a wide variety of methods to consider, either singly or in
combination. They can be grouped to as:
 Primary sources of data.
 Secondary sources of data.

For this dissertation the data was collected only from the secondary sources.
Secondary data includes textbooks, Internet.

Textbooks:

 Security Analysis and Portfolio Management by Donald E. Fischer and

Ronald J. Jordan (Sixth Edition).
 Technical Analysis from A to Z by Steven B Achelis (Second Edition). .
 Stock Market Book (Second Edition).
 Financial Management by I.M. Pandey (Eight Edition).
 Investment Management by Preeti Singh (Thirteenth Edition).
 Research Methodology Methods and Techniques (Second Edition).

Magazines:

 Business Today
 Business World
  The Week

Journals:

 Newspapers
 Economic Times
 Business Line
 Dalal Street Journal

Websites:
 www.investopedia.com
 www.wikipedia.com
 www.stockcharts.com
 www.bseindia.com
 www.economictimes.com
 www.crownsex.com
 RESEARCH METHODOLOGY

Questionnaire method is used for the survey to know the

investor’s perspective towards IT sector stocks. The questionnaire method is quite
effective in getting information.

The term ‘questionnaire’ refers to a self administered

process where by the respondent himself/herself reads the questions and records his/her
answers with out assistance of an interviewer. A questionnaire is more structured and
standardized than the interview schedule. Another advantage of questionnaire is the
respondent has full freedom to apply his/her own judgement and answer the questions as
he/she thinks right. Major disadvantages of questionnaire method are it lacks flexibility in
working and sequencing the questions and hence in answering the questions.

DESIGNING THE QUESTIONNAIRE

While proceeding to design a questionnaire, two key assumptions to be followed are:

1) The researcher assumes that the respondent is able and willing to communicate
the desired data either verbally to an interviewer or in writing on a questionnaire
form.

2) The researcher must assure that the information he/she obtains from the interview
and the questionnaire is essentially about the respondents verbal or written
behaviour.

While constructing a questionnaire or schedule, we must keep in mind two things

1) Objectives of the research project.

2) The respondent’s point of view.

Questionnaire or schedule designing consist of five steps as follows

1) Specifying data requirements.

 2) Determining the type of questions to be asked.

3) Deciding the number and sequence of questions.

4) Preparing the preliminary draft of questions.

5) Revising and pre-testing the questions.

These five steps are the guidelines for designing a questionnaire and
are generally applicable to both forms of questions asking instruments (questionnaire &
schedule). With the help of these steps, a careful planning of the questionnaire design can
be carried out in order to avoid various costly mistakes. Besides these five guidelines, a
researcher must have his own judgement while designing a questionnaire so that
necessary adjustment according to the project situations can be made.

ADVANTAGES OF QUESTIONNAIRE

1) In so far the questionnaire is usually mailed to the respondents and contains

specific, clear cut directions, the persons charges with collection of data need
not exert themselves on offering additional explanations or instructions. It is
obvious that the questionnaire technique does not call for any specific skills or
training on the part of the investigators in the field.

2) Since the questionnaire approach makes it possible to cover, at the same time, a
large territory, it is decidedly more economical in terms of money, time and
energy. Other methods do not afford such a facility.

3) The questionnaire by its very nature is an impersonal technique. Uniformity

from one measurement situation to another is provided by virtue of its
standardized sequence of questions and fixed or standardized instruction for
recording responses.

4) Yet another typical merit of the questionnaire is that it ensures anonymity. The
respondents have a greater confidence that they will not be identified as
holding a particular view or opinion.
 5) The questionnaire places less pressure on the respondents for immediate
response. The subject given ample time can consider each point carefully
before actually putting his reply in writing.

DISADVANTAGES OF QUESTIONNAIRE

1) One of the major limitations of the questionnaire is that it can be administered

only on subject with a considerable amount of education. Complex
questionnaire requiring elaborate written replies can be used indeed on a very
small percentage of population. It is seen that even the highly educated persons
have little facility for writing and even granting this, very few have the
motivation and patience to write as much as they speak out. Thus questionnaire
are hardly appropriate for a larger section of population.

2) In a mailed questionnaire, the proportion of returns is usually low; it may

sometimes be as 10%. Among the factors that may affect the returns are the
sponsoring agency, the attractiveness of the questionnaire, its length, nature of
the accompanying appeal, the case of filling out the questionnaire is sent etc.
Even under the best of circumstances, a considerable proportion does not return
the questionnaire.

3) In a questionnaire, if the respondent mis-interprets a question or writes his

reply unintelligibly, there is very little chance to correct this. In this approach
there is no facility for repeating questions, explaining them or seeking
clarification of a particular response. In a questionnaire approach, the validity
of respondents reports can hardly be appraised.

4) The usefulness of the questionnaire is restricted to issue on which the

respondents have more or less crystallized views that can be simply expressed
in wards.

5) The success of the questionnaire approach depends upon the sense of

responsibility among the subjects. A serious attempt at filling out the
 questionnaire – format presupposes, among other things, the awareness on the
part of the subjects of their responsibility to the larger institution of science.

QUESTIONNAIRE CONSTRUCTION

The entire process of questionnaire construction can be divided into

following aspects.

1) Information to be sought.

2) Type of questionnaire to be used.

3) Writing a first draft.

4) Re-examining and revising questions.

5) Pre-testing and editing the questionnaire.

6) Specifying procedure for its use.

CHOICE OF QUESTIONS

1) The researcher should include only such questions as have a direct bearing on
the problem itself or on the evaluation of the methodology adopted for the
study.

2) Questionnaire whose answers can be secured more accurately, easily and

effectively from other sources may be excluded.

3) The selection of questions should be done with an eye on the subsequent

tabulation plan.

4) In drawing up the schedule or questionnaire, other studies or surveys on

comparable material should be kept in mind. As far as feasible identical items,
terms, definitions and quantitative units of measurement should be employed.

5) Care should be taken while asking personal questions on those which may
embarrass the respondent,
 6) Only such factual questions, answers to which most of the informant can
reasonably be expected to know, should be avoided.

7) Questions that are likely to yield inaccurate responses should be avoided.

8) Questions which invoice too much mental effort on the part of the informant
should be avoided.

SAMPLING

The sampling method used for the study is convenience sample.

Convenience sampling

Convenience sampling is a type of non-probability sampling.

A convenience sampling is obtained by selecting convenience population units. The

method of convenience sampling is also called the chunk. A chunk refers to that fraction
of the population being investigated which is selected neither by probability nor by
judgement but by convenience.

Convenience samples are prone to bias by their very nature selecting population elements
which are convenient to choose almost always make them special or different from the
best of the elements in the population in some way.

The result obtained by following convenience sampling method can hardly be

representative of the population they are generally biased and unsatisfactory. However,
convenience sampling is often used for making pilot studies. Questions may be tested and
preliminary information may be obtained by the chunk before the final sampling design is
decided.

SAMPLE SIZE

The number of samples used to know the investor’s perception is thirty (30) and it
is collected from the investors who are trading at Cochin Stock Exchange.

INSTRUMENTATION TECHNIQUE
 This dissertation is basically focused on technical analysis of shares in BSE IT
sector Index. To get the data, the secondary data source was used. In this study the data
was collected from newspapers especially from Economic Times and Business Line. The
information related to the IT Index movement is collected from the Cochin Stock
Exchange.

OTHER SOFTWARE TOOLS USED FOE DATA ANALYSIS

Basically whole data analysis has been performed using spreadsheet in Excel by
using different statistical functions inbuilt in Excel. The following statistical functions
have been employed during the data analysis.

 Average: Calculates the average of a given data.

 The Simple Moving Averages of different days are calculated i.e. 10,50.100 and
200 days

LIMITATIONS

 Lack of time
 Complex method of calculation.
 Difficulty in forecasting market trend.
 Technical analysis is a terrific tool, but it is much more effective when
combined with fundamental analysis.
 DATA ANALYSIS AND INTERPRETATION

BSE IT Sector Index movement

fig: 5.1

Analysis and interpretation: The above figure shows the index movements of BSE IT
sector index from May to April for the year 2008. This graph shows the high, low, open
and close for each particular day. In the month of January the stock price is fluctuating
and the index gain 4.72 points. The BSE IT sectoral index open this year trading
(January) at 3444.48 and the month of January (January) was closed at 3749.2. The
highest closing point for the month of April is 4826.43 and the lowest point is 3350.73.

In the month of February the index open at 3749.32(February). The index was closed at
3706.3 by the end of February. In the month of February the stock price is fluctuating and
the index loses 43.02 points.

The highest closing point for the month of February is 3728.1 and the lowest point is
3626.07. The last price available in this chart is of 1st March. The opening was at 3702.89
and the day closed at 3811.11. The intra day trading shows an increase of 108.22 points.
 Table 5.1: Simple Moving Averages of 10, 50,100 and 200 days

month 10 Day moving 50 Day moving 100 day moving 200 day moving
avg avg avg avg
march 3689.564 3695.8516 3508.8997 3184.91775
feb 3671.06 3693.6682 3503.3716 3178.31775
3665.956 3692.4342 3498.092 3172.37815
3664.806 3689.9872 3492.0619 3166.3119
3672.753 3689.8044 3486.7559 3160.6833
3676.164 3687.9242 3480.6049 3154.955
3680.212 3685.8668 3474.6407 3148.9602
3681.757 3682.3526 3468.6807 3142.79335
3677.991 3678.685 3461.7185 3136.44705
3682.076 3675.0482 3455.1901 3130.0803
3690.435 3671.109 3449.7419 3123.8364
3702.748 3668.4542 3444.7301 3117.48185
3710.141 3664.4042 3438.9159 3111.11815
3712.682 3657.4386 3432.5157 3104.46355
3707.047 3651.711 3426.0139 3097.9608
3699.937 3646.14 3419.2842 3091.662
3687.174 3640.2844 3412.6733 3085.36615
3683.038 3634.7712 3406.0514 3078.8119
3686.079 3629.5288 3399.8019 3072.40375
3672.634 3623.0852 3393.1753 3065.7102
jan 3657.358 3615.264 3385.8293 3059.13845
3641.624 3607.0444 3378.1229 3052.5648
3634.03 3600.0364 3370.8747 3046.8922
3625.754 3592.5348 3363.7315 3041.18125
3631.014 3586.7732 3356.9184 3035.63885
3643.441 3580.0542 3349.9174 3030.4768
3665.619 3575.0222 3342.7998 3025.94365
3680.437 3567.394 3335.0223 3021.21
3696.3 3559.0368 3326.9281 3016.33305
3718.503 3553.7552 3319.7944 3012.13295
3734.025 3547.4234 3312.7962 3007.9008
3539.449 3305.9646 3003.44825
3529.0222 3298.3455 2998.2081
3518.1396 3290.7346 2992.9185
3503.719 3282.6466 2987.43835
3489.7042 3273.3907 2981.5437
3476.3116 3263.9113 2975.57485
3463.3434 3254.8878 2969.93565
3449.1742 3245.7475 2964.33345
3436.9082 3236.3536 2958.8977
Table 5.2: BSE IT Index Table from 3/1/2007 –1/3/2008

Date Open High Low Close

2008/03/01 3702.89 3823.5 3678.81 3811.11
2008/02/28 3739.91 3757.51 3683.87 3706.3
2008/02/27 3646.21 3733.93 3646.21 3728.1
2008/02/24 3691.4 3694.03 3643.26 3647.25
2008/02/23 3685.65 3699.12 3675.63 3688.79
2008/02/22 3684.12 3690.34 3657.71 3676.48
2008/02/21 3690.99 3700.7 3670.41 3683.8
2008/02/20 3633.76 3681.23 3604.87 3675.05
2008/02/17 3649.87 3673.46 3634.69 3644.33
2008/02/16 3635.82 3677.04 3628.65 3634.43
2008/02/15 3684.62 3688.68 3606.55 3626.07
2008/02/14 3715.52 3715.63 3651.46 3655.26
2008/02/13 3731.4 3745.08 3712.04 3716.6
2008/02/10 3735.56 3757.61 3702.41 3726.72
2008/02/08 3717.09 3730.47 3680.19 3722.9
2008/02/07 3705.87 3740.27 3703.33 3716.96
2008/02/06 3635.44 3710.07 3632.83 3699.25
2008/02/03 3686.17 3686.17 3632.54 3637.39
2008/02/02 3722.6 3745.62 3677.13 3685.18
2008/02/01 3749.32 3766.57 3703.81 3718.02
2008/01/31 3738.33 3760.3 3733.8 3749.2
2008/01/30 3745.19 3765.49 3712.27 3729.19
2008/01/27 3700.46 3748.37 3700.46 3742.01
2008/01/25 3660.62 3697.77 3659.52 3670.37
2008/01/24 3609.31 3660.52 3609.31 3651.8
2008/01/23 3636.78 3636.78 3581.09 3589.33
2008/01/20 3696.11 3719.88 3644.11 3657.89
2008/01/19 3570.4 3674.83 3570.4 3667.8
2008/01/18 3558.5 3586.31 3527.06 3550.73
2008/01/17 3592.45 3634.19 3555.46 3565.26
2008/01/16 3656.61 3660.5 3583.59 3591.86
2008/01/13 3690.84 3690.84 3642.92 3653.25
2008/01/12 3568.54 3671.81 3566.39 3659.25
2008/01/10 3774.51 3786.3 3714.65 3722.97
2008/01/09 3821.63 3836.2 3761.93 3776.07
2008/01/06 3809.42 3817.82 3771.44 3811.11
2008/01/05 3824.6 3837.26 3794.78 3806.07
2008/01/04 3700.13 3834.27 3700.13 3826.43
Date Open High Low Close
2008/01/03 3719.56 3778.56 3719.56 3772.76
2008/01/02 3744.48 3750.62 3714.69 3720.48
2007/12/30 3722.27 3755.57 3710.49 3742.74
2007/12/29 3712.86 3741.7 3706.11 3722.58
20075/12/28 3704.99 3727.67 3678.11 3708.44
200/12/27 3633.07 3719.66 3623.86 3715.11
2007/12/26 3694.88 3698.27 3635.5 3644.38
2007/12/23 3729.68 3751.82 3685.1 3693.36
2007/12/22 3724.07 3724.66 3692.28 3709.93
2007/12/21 3698.56 3736.5 3664.69 3693.51
2007/12/20 3752.85 3752.85 3686.91 3696.7
2007/12/19 3695.07 3757.35 3690.45 3752.01
2007/12/16 3661.38 3712.79 3626.1 3701.94
2007/12/15 3608.32 3660.76 3608.32 3644.6
2007/12/14 3628.42 3638.49 3589.15 3605.75
2007/12/13 3600.54 3644.97 3583.55 3638.11
2007/12/12 3592.94 3606.03 3552.11 3594.78
2007/12/09 3506.21 3584.17 3502.6 3573.61
2007/12/08 3499.92 3526.54 3479.47 3508.09
2007/12/07 3468 3508.47 3457.19 3491.67
2007/12/06 3436.09 3502.14 3425.51 3462.49
2007/12/05 3498.45 3506.78 3429.49 3437.47
2007/12/02 3487.82 3541.5 3480.58 3493.33
2007/12/01 3370.04 3463.55 3358.09 3452.76
2007/11/30 3452.14 3461.65 3359.94 3368.32
2007/11/29 3424.23 3445.9 3395.71 3440.34
2007/11/28 3425.76 3459.54 3425.76 3444.35
2007/11/26 3423.69 3437.96 3415.92 3424.18
2007/11/25 3378.2 3433.2 3378.2 3423.59
2007/11/24 3365.83 3401.07 3365.68 3375.27
2007/11/23 3328.42 3370.42 3324.7 3363
2007/11/22 3333.36 3380.3 3318.08 3326.96
2007/11/21 3380.23 3389.33 3326.58 3338.22
2007/11/18 3386.4 3409.51 3364.41 3378.79
2007/11/17 3387.8 3388.92 3340.59 3366.93
2007/11/16 3322.71 3387.2 3320.61 3382.29
2007/11/14 3343.58 3361.77 3292.54 3315.85
2007/11/11 3294.29 3342.98 3294.29 3337.73
2007/11/10 3256.9 3286.41 3241.77 3276.48
2007/11/09 3288.35 3301.69 3233.54 3249.94
Date Open High Low Close
2007/11/08 3254.46 3296.65 3248.09 3286.65
2007/11/07 3197.36 3259.48 3188.37 3248.67
2007/11/02 3145.54 3204.3 3089.43 3193.14
2007/11/01 3145.74 3160.14 3119.15 3131.91
2007/10/31 3023.46 3120.24 3023.46 3115.12
2007/10/28 3064.41 3064.41 2985.14 3001.94
2007/10/27 3150.28 3150.28 3062.35 3075.33
2007/10/26 3158.99 3173.71 3136.74 3141.48
2007/10/25 3148.63 3187.04 3126.36 3157.66
2007/10/24 3179.75 3186.06 3104.72 3117.97
2007/10/21 3122.19 3172.38 3118.91 3159.46
2007/10/20 3125.25 3170.74 3083.7 3126.23
2007/10/19 3093.61 3111.12 3055.19 3076.36
2007/10/18 3176.62 3209.62 3090.08 3108.45
2007/10/17 3185.51 3202.24 3155.05 3164.59
2007/10/14 3221.04 3234.12 3167.35 3175.82
2007/10/13 3275.33 3281.01 3199.73 3217.26
2007/10/11 3302.21 3317.59 3227.5 3287.99
2007/10/10 3195.17 3259.67 3195.17 3234.27
2007/10/07 3211.52 3242.38 3167.64 3186.65
2007/10/06 3245.35 3269.19 3199.59 3213.27
2007/10/05 3264.89 3275.17 3223.75 3260.33
2007/10/04 3176.82 3263.4 3170.76 3258.3
2007/10/03 3141.45 3182.82 3136.18 3178.34
2007/09/30 3127.3 3143.43 3095.53 3125.09
2007/09/29 3081.21 3139.14 3081.21 3116.65
2007/09/28 3076.01 3078.16 3029.63 3073.69
2007/09/27 3092.41 3119.02 3062 3080.06
2007/09/26 3006.11 3092.21 2994.27 3087.8
2007/09/23 3007.88 3030.62 2964.98 2978.83
2007/09/22 3083.05 3083.05 2978.46 2991.49
2007/09/21 3127.33 3138.3 3037.11 3089.61
2007/09/20 3038.9 3144.47 3038.16 3124.89
2007/09/19 3082.49 3084.17 3068.74 3073.84
2007/09/16 3085.04 3090.79 3062.35 3076.58
2007/09/15 3051.02 3080.78 3049.08 3076.54
2007/09/14 3059.8 3084.87 3023.14 3049.93
2007/09/13 3037.43 3060.39 3030.8 3055.87
20075/09/12 3017.58 3045.36 3017.58 3037.06
200/09/09 3023.57 3033.58 2994.42 3012.44
Date Open High Low Close
2007/09/08 2986.46 3025.65 2986.46 3022.52
2007/09/06 2983.79 3000.31 2963.89 2983.42
2007/09/05 3003.51 3032.39 2973.55 2978.56
2007/09/02 3037.07 3054.67 2992.46 3004.37
2007/09/01 3017.48 3055.26 3017.48 3027.69
2007/08/31 2948.02 2994.83 2936.32 2989.06
2007/08/30 2898.74 2955.34 2894.21 2951.7
2007/08/29 2880.17 2886.9 2839.23 2877.57
2007/08/26 2870.94 2904.42 2856.03 2880.14
2007/08/25 2871.78 2871.78 2838.4 2858.38
2007/08/24 2866.92 2868.44 2820.37 2837.36
2007/08/23 2913 2920.47 2861.16 2865.44
2007/08/22 2918.73 2935.96 2896.49 2908.7
2007/08/19 2900.05 2918.04 2886.61 2891.34
2007/08/18 2924.95 2929.65 2890.23 2898.16
2007/08/17 2841.16 2921.15 2837.52 2914.17
2007/08/16 2872.33 2875.32 2836.25 2850.48
2007/08/12 2910.67 2918.38 2856.49 2863.17
2007/08/11 2922.66 2927.35 2887.75 2903.72
2007/08/10 2838.75 2922.02 2838.75 2912.4
2007/08/09 2848.95 2868.77 2815.79 2833.37
2007/08/08 2868.73 2868.73 2829 2840.74
2007/08/05 2914.39 2914.39 2871.61 2875.02
2007/08/04 2959.22 2959.48 2887.85 2907.93
2007/08/03 2889.96 2947.86 2889.96 2935.04
2007/08/02 2813.01 2877.2 2813.01 2870.75
2007/08/01 2812.67 2824.3 2787.22 2810.86
2007/07/29 2813.21 2860.61 2812.33 2833.63
2007/07/27 2797.39 2832.13 2797.39 2828.15
2007/07/26 2804.11 2811.71 2783.84 2799.64
2007/07/25 2832.53 2846.02 2799.27 2804.66
2007/07/22 2783.84 2834.98 2760.01 2828.7
2007/07/21 2806.07 2823.53 2777.08 2789.56
2005/07/20 2821.43 2825.99 2798.9 2801.67
2007/07/19 2808.62 2834.88 2802.98 2811.52
2007/07/18 2773.66 2825.11 2770.74 2817.42
2007/07/15 2686.99 2740.45 2684.34 2732.6
2007/07/14 2757.87 2765.49 2664.34 2673.61
2007/07/13 2765.51 2794.47 2744.05 2747.68
2007/07/12 2810.33 2822.6 2744.46 2770.5
Date Open High Low Close
2007/07/11 2863.51 2886.54 2840.18 2848.47
2007/07/08 2837.63 2871.31 2828.18 2852.03
2007/07/07 2873.08 2891.09 2816.74 2824.88
2007/07/06 2853.38 2879.12 2848.38 2870.16
2007/07/05 2920.96 2930.55 2843.32 2851.47
2007/07/04 2851.52 2927.73 2851.52 2923.78
2007/07/01 2864.78 2900.34 2864.78 2888.19
2007/06/30 2861.82 2913.17 2861.82 2897.35
2007/06/29 2825.62 2856.22 2822.35 2849.96
2007/06/28 2858.28 2867.09 2810.1 2813.7
2007/06/27 2845.21 2880.27 2843.52 2856.89
2007/06/24 2866.12 2880.38 2835.31 2852.58
2007/06/23 2915.3 2917.25 2869.83 2874.38
2007/06/22 2895.83 2934.03 2893.07 2917.16
2007/06/21 2878.92 2910.05 2850.49 2902.9
2007/06/20 2805.69 2888.31 2805.69 2881.58
2007/06/17 2793.58 2805.7 2776.45 2796.5
2007/06/16 2781.35 2803.66 2770.03 2790.54
2007/06/15 2748.74 2779.07 2741.61 2775.78
2007/06/14 2745.8 2753.19 2733.46 2741.08
2007/06/13 2728.67 2748.96 2715.63 2734.18
2007/06/10 2753.64 2765.36 2714.25 2719.9
2007/06/09 2791.15 2791.15 2728.95 2737.9
2007/06/08 2702.4 2800.42 2702.4 2792.71
2007/06/07 2716.73 2742.13 2716.73 2735.28
2007/06/06 2732.96 2757.77 2706.05 2719.03
2007/06/04 2733.32 2747.66 2729.67 2744.08
2007/06/03 2685.96 2768.95 2681.03 2752.67
2007/06/02 2723.48 2729.53 2682 2688.56
2007/06/01 2749.29 2750.51 2711.47 2718.82
2007/05/31 2713.97 2749.91 2704.06 2745.95
2007/05/30 2715.61 2734.62 2693.59 2713.54
2007/05/27 2721.73 2750.54 2712.15 2724.33
2007/05/26 2659.4 2714.15 2658.52 2697.72
2007/05/25 2638.09 2683.05 2612 2662.09
2007/05/24 2642.32 2658.54 2618.58 2639.71
2007/05/23 2599.34 2637.35 2588.33 2623.81
2007/05/20 2550.17 2600.3 2532.84 2593.24
2007/05/19 2527.21 2568.3 2527.21 2557.22
2007/05/18 2519.16 2519.16 2467.43 2508.2
Date Open High Low Close
2007/05/17 2546.8 2563.17 2512.26 2522.11
2007/05/16 2493.62 2540.19 2493.62 2534.74
2007/05/13 2505.98 2505.98 2483.93 2491.11
2007/05/12 2510.27 2523.86 2500.28 2518.38
2007/05/11 2504.33 2522.56 2485.41 2514.85
2007/05/10 2545.41 2552.62 2514.21 2521.53
2007/05/09 2476.17 2547.96 2476.17 2543.13
2007/05/06 2457.13 2484.47 2446.82 2477.52
2007/05/05 2422.92 2463.38 2422.92 2450.43
2007/05/04 2373.93 2410.61 2373.56 2405.79
2007/05/03 2391.31 2394.5 2368.18 2370.98
2007/05/02 2386.94 2396.55 2359.72 2385.65
2007/04/29 2390.48 2394.17 2344.4 2355.16
2007/04/28 2373.08 2391.11 2366.7 2382.52
2007/04/27 2384.13 2402.69 2355.16 2385.68
2007/04/26 2446.77 2453.13 2422.06 2426.17
2007/04/25 2471.38 2471.38 2448.13 2463.14
2007/04/22 2425.09 2466.07 2425.09 2457.79
2007/04/21 2361.69 2394.21 2335.96 2388.4
2007/04/20 2344.93 2363.19 2304.67 2355.76
2007/04/19 2419.29 2460.45 2331.58 2346.47
2007/04/18 2416.51 2435.57 2384.22 2403.67
2007/04/15 2456.26 2473.24 2428.32 2434.47
2007/04/13 2593.62 2622.68 2578.37 2594.67
2007/04/12 2566.5 2606.75 2565.25 2599.82
2007/04/11 2601.58 2601.58 2555.73 2561.89
2007/04/08 2674.73 2675.88 2612.36 2619.39
2007/04/07 2715.83 2730.19 2672.35 2682.7
2007/04/06 2697.43 2718.75 2687.51 2711.16
2007/04/05 2709.32 2726.44 2685.42 2692.41
2007/04/04 2722.28 2746.69 2690.87 2710.71
2007/04/01 2701.51 2723.83 2657.68 2718.83
2007/03/31 2622.63 2728.86 2622.63 2701.35
2007/03/30 2592.33 2614.32 2579.98 2605.22
2007/03/29 2626.7 2626.7 2583.76 2601.33
2007/03/28 2607.62 2658.88 2606.35 2626.94
2007/03/24 2605.51 2639.03 2588.29 2597.14
2007/03/23 2673.75 2679.22 2607.92 2617.34
2007/03/22 2701.93 2710.96 2671.04 2678.23
2007/03/21 2690.56 2718.25 2685.55 2705.99
Date Open High Low Close
2007/03/18 2668.2 2688.86 2629.66 2685.61
2007/03/17 2673.35 2698.69 2663.81 2669.6
2007/03/16 2678.01 2708.61 2666.22 2679.45
2007/03/15 2716.22 2719.49 2682.52 2688.54
2007/03/14 2706.23 2734.8 2683.3 2713.94
2007/03/11 2715.89 2730.61 2696.03 2702.63
2007/03/10 2713.39 2720.5 2683.7 2714.27
2007/03/09 2736.83 2753.02 2703.18 2730.1
2007/03/08 2720.11 2758.89 2710.56 2739.63
2007/03/07 2711.48 2728.08 2695.19 2720.35
2007/03/04 2679.61 2713.37 2679.61 2702.03
2007/03/03 2643.88 2689.11 2635.6 2679.27
2007/03/02 2636.09 2655.42 2610.73 2635.88
2007/03/01 2699.01 2699.01 2624.27 2629.94
2007/02/28 2650.22 2704.37 2608.49 2699.27
2007/02/25 2628.93 2652.12 2623.45 2636.91
2007/02/24 2622.64 2647.19 2616.69 2626.03
2007/02/23 2633.24 2633.57 2608.61 2614.62
2007/02/22 2615.92 2646.37 2600.76 2635.05
2007/02/21 2646.18 2646.18 2605.08 2617.23
2007/02/18 2653.25 2669.9 2637.23 2646.54
2007/02/17 2653.88 2662.71 2625.98 2657.32
2007/02/16 2684.19 2701 2653.75 2665.16
2007/02/15 2687.35 2690.92 2650.96 2678.8
2007/02/14 2664.08 2694.74 2651.91 2685.31
2007/02/11 2570.98 2618.29 2570.98 2615.94
2007/02/10 2554.65 2565.08 2542.29 2553.1
2007/02/09 2553.31 2575.7 2553.31 2561.01
2007/02/08 2546.54 2558.46 2534.85 2550.57
2007/02/07 2600.71 2600.8 2533.26 2540.11
2007/02/04 2600.04 2614.18 2575.84 2583.07
2007/02/03 2570.38 2603.35 2557.91 2594.43
2007/02/02 2574.3 2602.93 2552.67 2558.65
2007/02/01 2578.98 2588.65 2549.97 2564.7
2007/01/31 2539.35 2591.18 2534.82 2570.09
2007/01/28 2456.14 2536.55 2453.22 2530.22
2007/01/27 2415.09 2452.96 2415.09 2446.69
2007/01/25 2366.94 2406.1 2362.1 2400.63
2007/01/24 2415.59 2428.2 2367.39 2378.77
2007/01/20 2428.48 2433.28 2393.92 2424.96
Date Open High Low Close
2007/01/19 2459.63 2466.12 2424.13 2430.66
2007/01/18 2467.82 2488.6 2434.3 2444.99
2007/01/17 2451.3 2466.83 2391.83 2449.56
2007/01/14 2455.65 2474.7 2433.16 2446.05
2007/01/13 2427.67 2466.13 2427.67 2449.47
2007/01/12 2500.79 2515.45 2372.39 2390.56
2007/01/11 2497.02 2514.18 2451.94 2465.4
2007/01/10 2566.83 2582.87 2479.49 2491.92
2007/01/07 2530.04 2568.57 2503.41 2556.31
2007/01/06 2561.9 2592.31 2496.94 2536
2007/01/05 2610.97 2610.97 2509.11 2563.14
2007/01/04 2657.91 2657.91 2626.12 2630.1
2007/01/03 2632.56 2656.52 2630.82 2654.22
Momentum

Momentum refers to trend. When the momentum is positive it indicates an uptrend and
when the momentum is negative it indicates a downward trend.

The formula for calculating momentum is:

Momentum = Close today – Close N days ago

Calculation of Momentum

N = 200 days

Close today= 3811.11, Close 200 days ago= 2534.74

Momentum = 3811.1- 2534.74=1276.37

N = 100 days

Close today = 3811.11, Close 100 days ago= 3260.33

Momentum = 3811.11-3260.33= 550.78

N = 50 days

Close today = 3811.11, Close 50 days ago = 3752.01

Momentum = 3811.11-3752.01 = 59.1

N = 30 days

Close today = 3811.11, Close 30 days ago = 3565.26

Momentum = 3811.11-3565.26 = 245.85

N = 20 days
Close today = 3811.11, Close 20 days ago = 3718.02

Momentum = 3811.11-3718.02 = 93.09

N = 10 days

Close today = 3811.11, Close 10 days ago = 3634.43

Momentum = 3811.11-3634.43 = 176.68

N = 1 day
Close today = 3811.11, Close 1 day ago = 3706.30
Momentum = 3811.11-3706.30 = 104.81

Momentum Chart

1500
1250
Momentum

1000
750
500
250
0
10 20 30 50 100 200
Number of Days

fig: 5.2

Analysis and interpretation: Here momentum of different days is calculated. The

closing prices of past N days are taken for calculation. Mainly the momentum of 200
days, 100 days, 50 days, 30 days, 20 days, 10 days and one day ago are calculated. All
these show a positive momentum. When analyzing the momentum chart the 200 days
closing shows an increase of 1276.37 point, the 100 days closing shows a difference of
550. 78 point, and the 50 days closing shows a difference of 59.1 i.e. an upward
momentum. The index shows an upward trend during the period between the 50 days
closing and 200 days closing. The days between 10 to 50 are moves both sides up and
down.

We can interpret that the BSE IT sectoral indices are

showing an upward trend. it’s a good sign for the traders i.e. Once a momentum trader
sees an acceleration in a stock's price, earnings, or revenues, the trader will often take a
long or short position in the stock with the hope that its momentum will continue in either
an upwards or downwards direction.

Rate of Change (ROC)

Rate of change is a technical indicator that measures the percentage change between the
most recent price and the price "N" periods in the past.

ROC is a simple yet effective momentum indicator that compares the price today with the
price N periods ago.

Rate of Change = Close today – Close N days ago

Close N days ago

Calculation of Rate of Change

N = 10 days ago
R = 3811.11 – 3634.43 = 176.68 = 0.0486 = 4.86%
3634.43 3634.43

N = 20 days ago
R = 3811.11 – 3718.02 = 93.09 = 0.0250 = 2.5%
3718.02 3718.02

N = 30 days ago
R = 3811.11 – 3565.26 = 254.85 = 0.06895 = 6.89%
3565.26 3565.26
N = 50 days ago
R = 3811.11 – 3752.01 = 59.1 = 0.0157 = 1.57%
3752.01 3752.01

N = 100 days ago

R = 3811.11 – 3260.33 = 550.78 = 0.1689 = 16.89%
3260.33 3260.33

N = 200 days ago

R = 3811.11 – 2534.74 = 1276.37 = 0.5035 = 50.35%
2534.74 2534.74

Analysis and Interpretation: Here Rate of Change (ROC) of different days is

calculated. The closing prices of past N days are taken for calculating ROC. Mainly the
ROC of 10 days, 20 days, 30 days, 50 days, 100 days, and 200 days ago are calculated.
All these show a positive percentage change. . When analyzing the ROC calculation of
200 days it shows an increase of 50.35%, the 100 days ROC shows a +16.89%, and the
50 days ROC shows a +1.57%.i.e. an upward momentum. The index shows an upward
trend during the period between the 50 days closing and 200 days closing. The ROC
between 10 to 50 days is also positive.

We can interpret that the BSE IT sectoral indices are showing an

upward trend. While we analyzing the past performance there was a +50% change in
index. When the ROC is showing positive i.e. a value greater than zero, it indicates
acceleration in the prices and there is no selling pressure for the trader. Therefore we can
state here that the ROC is rising, it gives a short-term bullish signal.

Trend line

Trend in price of a financial security is intuitively the general direction of its movement.
Trend analysis is specific to the time frame – based on price ranges.
 ONE MONTH TREND LINE

fig: 5.3

Analysis and Interpretation: The above figure shows the one month trend line i.e. of
February. In the month of February the index open at 3718.02(February). The one month
trend line indicates that the IT sector stocks are moving both directions. The index drops
first then it starts rising and the trend continues up to February, then again start
decreasing for 3 trading days. Again the index starts rising and it continue for the 4
trading days after that the trend moves continuously up and down.

From this one month trend line we cannot able to clearly predict where the index is
heading. The trend line shows both types of movements upward and downward.

Simple Moving Average

Moving Average is the most popular and easy to use tools available to the technical
analyst. By using an average of prices, moving averages smooth a data series and make it
easier to spot trends. Moving Average is used as an indicator frequently used in technical
analysis showing the average value of a security's price over a set period.

10 day moving average of APRIL

 fig: 5.4

Analysis and Interpretation: The above figure shows the 10 day moving average of the
IT sector index for the month of February. This is a short term moving average and we
can see both types of movement i.e. upward and downward swings. In the beginning of
the month there exist an upward trend and the 10 day moving average reaches a peak of
3712.682 and after that the moving average go for a downward swing for a period of 5
days again it show an upward trend. But after that it again moves downward direction.
Later by last week of this month the moving average shows an upward trend.

From this figure we can’t able to clearly predict where the index is heading, most of the
days the index is showing a downward trend. But we can state an upward trend at the
end of the month.

MOVING AVERAGE ONE MONTH AND SIX MONTH

 fig: 5.5

Analysis and Interpretation: The above figure shows the 50day and 200 day moving
average of the IT sector index for 2008 i.e. from January 2 to March 1. The 50 day
moving average is considered as a short term moving average, while the 200 day moving
average is considered as the long term moving average. Here we can see that the 50 day
moving average lie above the 200 day moving average. The gap between these two
averages also remains same for the two months.
7
From these we can interpret that there exist an upward trend i.e. indication of a bull
9
market.
S
E
A
R
C
H
 M

C
E

H
T

M
H

E
O

T
H
D

O
O

D
Moving Average- 2007 to 2008
L

O
L
O

O
4500
G

G
Y
4300
Y
10 day 4100
50 day 3900
100 day
200 day 3700
3500

3300

3100

fig: 5.6

Analysis and Interpretation: The above figure shows the10 day, 50 day, 100 day and
200 day moving average of the IT sector index from 2005 January to 1st March of 2006.
The 10 day moving average and 50 day moving average is considered as a short term
moving average, while the 100 day and 200 day moving average is considered as the long
term moving average. The short term moving average lines lie well above the long term
lines; this is an indicator that the index is climbing up. The gap between the short term
and the long term moving average line remains same through out the period. The two
short term lines are moving close to each other and by the middle of February (17/2/06)
the 50 day moving average crosses over the 10 day moving average; this may be an
indicator for a downward fall.

By analyzing the long term moving average and the short term moving
average we can predict an upward momentum in the market. There exists a bull market
for a period of last one year.

Moving Average Chart With Index Movement From 29/7/04 to 1/3/06

 fig: 5.7

Analysis and Interpretation: This chart shows the BSE IT index movement and also the
moving average.
The Chart shows the IT index movement from 29/7/2004 to 1/3/2006.
Here the green line showing the movement of the IT index, the green line is
climbing indicating an increase in the points. The red line indicates the 14 days
moving average
In the beginning of the chart (29/7/04) the index is below 2200 points and by the
end of the chart (1/3/06) the index reached above 3700 points. By analyzing this
long time index movement we can interpret that the index climbed more than1500
points, indicating an upward trend.

To explore investor’s perspective towards IT sector stocks.

1) Investor’s feeling about the recent bullish trend in the Indian share market.

Investors feel the recent bullish trend in the share market is good.
50% of the respondents feel it is very good and 40% feel it is good and 10% feel it is
ok.
 ok

ok
very good
good
good very good o.k
bad

fig: 5.8

2) How far the Sensex will go in the next one year period?
The investors have an optimistic look on the Sensex for this year.
70% of the respondents predict that the Sensex will lie between 12000 – 15000 points,
while 20% predict that it will stand between 10000 – 12000 points. 6.7% of the
respondents predict that the Sensex will go above 15000 mark and a 3.3% predict it goes
below the 10000 mark.

70
60
50
40
30
SENSEX
20
10
0
below 8000- 10,000 - 12,000 - Above
8000 10000 12,000 15,000 15000

fig: 5.9

3) Do investor’s analyze the trends in the market before going for investment in
stocks?

For this question 83.3% said yes and 16.7% said no. This is a good
sign i.e. above 80% of the respondents analyzing the trends in the market.
4) Do investor’s analyze the historical data or past performance of stocks before
going for investment?

Out of the 30 respondents 29 said yes i.e. 96.7% analyze the

historical data before going for investment and one said no i.e. 3.3%

5) Investor’s opinion about the IT industry.

A 43.3% of respondents said IT industry is booming, 26.7% said
that the industry is growing but at a slow pace and 30% have the opinion that it is ok. In
short investors have a good opinion about the IT industry. No one has the opinion that the
IT industry is declining.

booming
30%
growing at a slow
43.3% pace
ok

26.7% declining

fig: 5.10

7) Investor’s evaluation about the IT stocks prices

 Majority of the respondents said that the IT stock prices are
reasonable i.e. about 66.7% and the remaining 33.3% have the opinion that its
prices are over valued. None of the respondents said that its prices are under
valued.

over valued
33.3%
66.7%

reasonable under
valued

fig: 5.11

7) Investor’s portion of investment in IT stocks.

• 10% of the respondent invest their 3/4th of money in IT stocks.

• 13.3% of the respondent invests ½ of their money in IT stocks.

 • 50% of the respondent invests 1/4th of their money in IT stocks.

• The remaining 26.7% not invested any portion in IT stocks.

10%

26.7%
13.3% none
1/4th
half
3/4th
50%

fig: 5.12

2) How investors forecast the IT stock performance in 2006?

Investors are predicting a good performance of IT stocks for the

year 2006.

• 20% predicts an excellent performance

• 63.3% predicts a good performance.

• 10% predicts ok

• The remaining 6.7% predicts a bad performance of IT stocks for this year.

3) How much portion the investors are intending to invest in IT stocks this
year?

Majority of the investors are willing to invest in the IT stocks.

About 80% of the respondents are intending to invest a portion of their investment in IT
stocks this year.
 • 20% of the investors are intending to invest ½ of their investment into IT
stocks.

• 60% are intending to invest 1/4th of their investment in IT stocks.

• The remaining 20% are not interested to invest any portion of their money
in stocks this year.

20% 20%
none
1/4th
half
60% 3/4th

fig: 5.13

4) Which sector investor think is safer for investment?

Sectors Automobile Banking FMCG IT Oil and Gas Pharma Others

Points 10 10 11 7 9 11 4
Table: 5.3
Table Showing The Sector Which Investor’s Think Safer For Investment

By analyzing the investors’ response, the pharma sector stocks and FMCG
get more preference. These two sectors got more points. The increased income of
rural population and benefit from low-cost material helps the FMCG sector. The
pharma sector is also performing well. The recent global agreements under the
W.T.O will fuel Indian companies’ expansion plan. Then the next preference is for
 Automobile sector and Banking sector, both are showing good potential. The third
preference for safer investment according to the investor is Oil and Gas sector.
Foreign investors are keen on oil PSU and ONGC, which they feel are
undervalued. The fourth preference is for IT sector stocks where the IT stocks like
TCS, Infosys etc are performing well. The last preference is for other sectors
category.

Here we can interpret that the investors are not much preferred in investing in IT
stocks as a safer investment. They are giving more importance to the FMCG and
the Pharma sector stocks for safer investment. Also the Automobile, Banking, Oil
and Gas sector stocks get more preference as a safer investment than IT sector
stocks.

5) Which sector investor think will give more return?

Sectors Automobile Banking FMCG IT Oil and Gas Pharma Others

Points 10 2 10 13 5 11 4

Table: 5.4
Table Showing The Sector Which Investor’s Think Will Give More
Return

According to the investors response the IT sector is preferred as the

best sector for giving more return to the investors. Next preference is for the
Pharma sector, the third preference is for the Automobile and the FMCG sectors.
 The oil and gas sector stands fourth according to the investors’ preference. The
fifth preference is for other sectors category (steel, cement etc) for more return and
the last choice is Banking sector.

Here we can interpret that IT sector stocks are considered by the investors for
getting more returns. Since they are considered as the stocks that are giving more
returns the investors are also aware of the risk factors.

From the above table: Table 5.1 we can understand that investors preferred IT
sector stocks least for a safer investment.

6) Rank of different sectors according to the investors preference.

Sectors Rank 1 Rank 2 Rank 3 Rank 4 Rank 5 Rank 6 Rank 7

Automobile 20% 20% 30% 20% 3.3% 6.7% 0%
Banking 3.3% 6.7% 26.7% 20% 20% 20% 3.3%
FMCG 20% 16.7% 10% 13.3% 20% 20% 0%
IT 20% 13.3% 16.7% 10% 20% 10% 10%
Oil and Gas 6.7% 30% 6.7% 6.7% 23.3% 16.7% 10%
Pharma
16.7% 13.3% 10% 30% 13.3% 16.7% 0%
Others 13.3% 0% 0% 0% 0% 10% 76.7%

Table: 5.5
Table Showing The Rank Of Different Sectors According To The Investors
Preference.

Here the Automobile, FMCG and IT sector stocks get more preference as their
first choice sectors. By combining the first three rank choices Automobile sector is found
to be the hot sector for the investors (70%).
The second choice is for the IT sector stocks (50%). The third preference is for the
FMCG sector stocks (46.7%). The fourth rank goes for the Oil and Gas sector (43.4%).

Thus by analyzing the Investors responses we can conclude that the investors have a very
good interest in investing in the IT sector stocks. Above 80% of the respondents are
invested in IT sector stocks and are also intending to invest in this sector. The investors
considered IT as the sector which will give more returns. Also investors give their second
preference for IT sector for investment; they are positioned just behind of the Automobile
sector.

Findings and Conclusion

• Momentum of different days is calculated and BSE IT sectoral indices are

showing an upward trend. There is acceleration in prices and it’s a good sign for
the traders.
• Rate of Change (ROC) of different days is calculated. The ROC is showing
positive i.e. a value greater than zero, it indicates acceleration in the prices and
there is no selling pressure for the trader.

• The one month trend line moves continuously up and down. The closing prices
are analyzed and from this one month trend line we cannot able to clearly predict
where the index is heading.

• When comparing the simple moving average line of short term (10 days, 50 days)
with the long term (100 days, 200 days) moving average:

 They indicate an upward trend in the index.

 Sign of a bull market.

• Investor’s perspective towards IT sector stocks:

 Above 80% of the investors analyze the trends and the past
performance of the stocks in the market.
 Majority of the respondents said that the IT stock prices are
reasonable i.e. about 66.7%.
 About 73.3% of the respondents invested in IT stocks.

 About 80% of the respondents are intending to invest a portion of

their investment in IT stocks this year.
 Investors are predicting a good performance of IT stocks for the
year 2008.

(20% of investors predict an excellent performance and 63.3% predicts a

good performance)

 The investors are not much preferred in investing in IT stocks as a safer

investment. They are giving more importance to the FMCG and the Pharma sector
 stocks for safer investment. Also the Automobile, Banking, Oil and Gas sector
stocks get more preference as a safer investment than IT sector stocks.

 IT sector stocks are considered as the best sector by the investors for getting
more returns.

 The rank given by the investors according to their preference:

Automobile sector is found to be the hot sector for the investors (70%).

The second choice is for the IT sector stocks (50%).

The third preference is for the FMCG sector stocks (46.7%).

The fourth rank goes for the Oil and Gas sector (43.4%).

CONCLUSION
The prime objective of the study is to analyze the market movement of the BSE IT
sector index by using technical analysis.
For technical analysis of the index different tools are used they are the Momentum,
Rate of Change, Trend line and Simple Moving Average. These technical tools help
in analyzing the market movement and also they can use these tools to predict the
trends in the market. Investors main objective in the share market is to get profit by
buying and selling of the securities. Technical analysis helps in predicting the price
and it helps the investor to gain benefits. Also the technical analysis provides
indicators of different stocks i.e. where the stocks are heading or there exist a bull,
bear or stag in the market etc. These indicators help the investors in reducing the risk
and to gain better return.

Another objective of the study is to explore investor’s perspective towards the IT

stocks. The investors feel good about the sensex new heights and they are optimistic
about the trend in the market. Most of the investor’s analyze the market trends and the
past performance of the stocks before them going to invest. The investors are willing
to invest in the IT stocks and the majority thinks IT sector stocks will give more
returns than other sectors. The investors also rank the IT sector stocks as their second
best preference after the Automobile Sector stocks. But majority of the investors are
not considering IT as their safer investment option.
Finally we can conclude that the Sensex and other Sectoral Indices will continue their
good performance and hope it will boost up the Indian economy to make India a
super power in the near future.

SUGGESTIONS
 The investors should watch the trends in the market and also they analyze the past
performance of different indices and the index.

 Newspapers, business journals and different television channels give valuable

information about the happenings of the market. Investors must keep in touch
with this information.

 The market information plays a vital role in the investment. If the investors are
not familiar with the technical terms and analysis the intermediaries should
provide them proper training and make them efficient in trading securities.

 The timing is crucial as far as buying and selling is concerned. Technical analyst
should use the technical analyze software for additional benefits.

BIBLIOGRAPHY
Textbooks:

 Security Analysis and Portfolio Management by Donald E. Fischer and

Ronald J. Jordan (Sixth Edition) Published by Prentice – Hall India.
 Technical Analysis from A to Z by Steven B Achelis (Second Edition)
Published by Mc Graw - Hill Publications.
  Stock Market Book (Second Edition) Published by Dalal Street Investment
Journal.
 Financial Management by I.M. Pandey (Eight Edition) Published by Vikas
Publications.
 Investment Management by Preeti Singh (Thirteenth Edition) Published by
Himalaya Publishing House.
 Research Methodology Methods and Techniques (Second Edition) Published
by Wishwa Prakashan.

Magazines:

 Business Today
 Business World
 The Week

Journals:

 Newspapers
 Economic Times
 Business Line
 Dalal Street Journal

Websites:
 www.crownsec.com
 www.wikipedia.com
 www.stockcharts.com
 www.bseindia.com
 www.economictimes.com

ANNEXURE

Questionnaire

[Questionnaire to explore investors perspective towards IT sector stocks (BSE)]

{Put tick marks on appropriate boxes}

1) Name:

2) Age:

3) Sex: male female

4) For how many years you have been in share trading : Years

5) What do you feel about the recent bullish trend in the Indian share market ?
a. Very good b) good
c) Ok d) bad e) Very bad

5) Do you believe that the economic growth (G.D.P) play a major role in stock
market?
a) Yes b) No

6) How far the sensex will go in the next one year period:

a) Above 20000 b) Above 15000

c) 12000 – 15000 d) 10000 -12000
e) 8000 - 10000 f) Below 8000

7) Do you analyse the trends in the market (technical analysis) before going for
investment in stocks:

a) Yes b) No

8) Do you analyse the historical data or past performance of the stocks:

a) Yes b) No

9) What is your opinion about the IT industry:

a. Booming b) growing at a slow pace
c) Ok d) declining

10) How do you evaluate the IT stocks prices at present:

a. Overvalued b) Under valued

c) Reasonable(at par)

11) What is your portion of investment in IT stocks?

a) Full b) About 3/4
c) About 1/2 d) About 1/4 e) None
 12) How you forecast the IT stocks performance in 2006
a. Excellent b) good
c) Ok d) bad e) Very bad

13) How much portion of investment you intend to invest in IT stocks in 2006:

a) Full b) About 3/4

c) About 1/2 d) About 1/4 e) None

14) Which of the following sector would you think is more safer for investment:

a) Automobile sector b) Banking sector

c) FMCG sector d) IT sector
e) Oil and Gas Sector f) Pharma sector g) Others

15) Which of the following sector would you think will give you more return:

a) Automobile sector b) Banking sector

c) FMCG sector d) IT sector
e) Oil and Gas Sector f) Pharma sector g) Others

16) Rank the following sector for investment according to your preference:
a) Automobile sector b) Banking sector
c) FMCG sector d) IT sector
e) Oil and Gas Sector f) Pharma sector g) Others

17) Any comments towards investing in BSE IT sector index stocks:

………………………………………………………………………………………

……………………………………………………………………………………….

Indices Highlights

This data was last updated on Thursday, June 01, 2007

52 Week Market Capitalisation

INDICES
% to Total
Close High Low (Rs. crores)
Mkt Cap
SENSEX 15671.42 16,612.38 13,655.56 621,020.14 22.60
DOLLEX-30 1,783.95 2,304.64 1,248.68 -- --

BSE-100 5,210.33 6,554.71 3,579.67 840,582.74 30.59

DOLLEX-100 1,162.90 1,509.20 846.25 -- --

BSE-200 1,247.92 1,569.36 881.99 957,517.31 34.84

DOLLEX-200 448.25 581.53 335.56 -- --

BSE-500 4,025.29 5,049.49 2,808.88 1,117,035.09 40.65

BSEMIDCAP 9,911.18 10,033.30 5,269.86 210,371.64 7.66
BSESMLCAP 6,142.37 7,812.84 4,317.68 59,146.37 2.15
BSE TECk 2,371.95 2,852.67 1,745.62 175,320.94 6.38
BSE PSU 5,087.14 6,569.11 4,263.43 622,793.20 22.66
BSE AUTO 4,581.13 5,782.98 2,826.24 86,988.08 3.17
BANKEX 4,729.81 5,809.33 3,769.98 125,338.61 4.56
BSE CG 7,096.29 9,032.65 3,589.79 78,355.57 2.85
BSE CD 2,973.31 3,680.79 1,881.05 5,420.70 0.20
BSE FMCG 1,824.79 2,361.89 1,191.39 87,185.53 3.17
BSE HC 3,297.29 4,098.65 2,658.02 61,439.47 2.24
BSE IT 4,534.64 4,584.92 3,673.61 130,850.28 4.76
BSE METAL 8,183.47 11,239.27 5,279.17 59,499.33 2.17
BSE
4,909.85 6,394.15 3,083.61 123,668.80 4.50
OIL&GAS
Total 2,747,959.48 --

CONTENTS

Chapter No. Topic Page No.

1. EXECUTIVE SUMMARY 1

2. INTRODUCTION 2
 3. INDUSTRY And COMPANY PROFILE 8

4. TECHNICAL ANALYSIS 24

7. Presentation and Analysis of data and

Interpretation 45

6. Findings and Suggestions 73

7. Bibliography 76

8. Annexure 77

LIST OF TABLES

Table No. Particulars Page No.

1. TABLE SHOWING THE DOMESTIC IT GROWTH IN 2007 17

0VER 2006
 2 TABLE SHOWING SIMPLE MOVING AVERAGES OF 45
10,50,100 AND 200 DAYS

3 TABLE SHOWING BSE IT SECTOR INDEX DETAILS 47-55

4 TABLE SHOWING THE SECTOR WHICH INVESTOR’S 70

THINK SAFER FOR INVESTMENT

5 TABLE SHOWING THE THE SECTOR WHICH INVESTOR’S 71

THINK WILL GIVE MORE RETURN

6 TABLE SHOWING THE RANK OF DIFFERENT SECTORS

ACCORDING TO THE INVESTORS PREFERENCE. 72

LIST OF CHARTS

Chart No. Particulars Page No.

1. CHART SHOWING BSE IT SECTOR INDEX MOVEMENT. 45

2. CHART SHOWING MOMENTUM OF IT SECTOR INDEX. 58

3. CHART SHOWING ONE MONTH TREND LINE OF IT 61

INDEX.

4. CHART SHOWING 10 DAY MOVING AVERAGE OF 62

FEBRUARY 2006.
 5. CHART SHOWING 50 DAY AND 200 DAY MOVING 63

AVERAGE

6. CHART SHOWING MOVING AVERAGE 2005 - 2006 64

7. CHART SHOWING MOVING AVERAGE WITH INDEX 65

MOVEMENT FROM 29/7/04 TO 1/3/06

8. CHART SHOWING INVESTOR’S FEELING ABOUT THE 66

RECENT BULLISH TREND

9. CHART SHOWING HOW FAR THE SENSEX WILL GO IN 66

THE NEXT ONE YEAR PERIOD

10. CHART SHOWING INVESTOR’S OPINION ABOUT THE IT 67

INDUSTRY.

Chart No. Particulars Page No.

11. CHART SHOWING INVESTOR’S EVALUATION ABOUT 68

THE IT STOCKS PRICES

12. CHART SHOWING INVESTOR’S PORTION OF 68

INVESTMENT IN IT STOCKS
13. CHART SHOWING HOW MUCH PORTION THE INVESTORS 69
ARE INTENDING TO INVEST IN IT STOCKS THIS YEAR

EXECUTIVE SUMMARY
Sensex is shining and it crosses the magic figure of 20000. The Sensex which was also
Asia’s best performer in 2007. IT sectors contributions in market capitalization stands at
14.4% only second to that of the oil and gas sector. IT is also the sector to watch out for
the financial year 2008. Indian majors Infosys, TCS, Wipro have all witnessed stunning
growth in sales as well as profitability in financial year 2007. IT sector has been growing
strongly and is poised for advent growth in financial year 2007. Consolidation of IT
vendors has gained momentum globally which is beneficial for IT companies. While the
bigger players have been strengthening their position, there is danger for the small and
midrange IT firms getting wiped out unless they innovate ;and focus on niche areas
which would gave them higher growth rates.

For successful investment of funds, an investor must have adequate knowledge

about the securities market and how the securities traded in the stock market. The
investor must be well aware of the historical performance of the stocks and also the
trends in the market. Well-defined information about the fluctuations of securities traded
in the market helps the investors to invest in the right type of securities at right time.
The main objectives of the study are:
 To analyze the market movement of the IT index by using technical analysis.
 To explore investor’s perspective towards the BSE IT sector stocks.
The research is exploratory in nature. The study focuses on technical analysis
of BSE IT Sector Index for a period of 200 days. The tools used in for analysis are
Momentum, Rate of Change, Trend lines, and Simple Moving Average.

A survey is conducted to know investor’s perspective towards the IT stocks.

The sampling technique here used is convenience sampling. The sample size is 30
selected from the investors trading in Cochin Stock Exchange. The data is collected
with the help of structured questionnaire, which includes open end and close-ended
questions.
 INTRODUCTION

Of all the modern service institutions, stock exchange is perhaps the most crucial
agents’ ad facilitators of entrepreneurial progress. After the industrial revolution, the size
of business enterprises grew; it was no longer possible for proprietors or even
partnerships to raise colossal amounts of money required for undertaking large
entrepreneurial ventures. Such huge requirement of capital could only be met by
participation of a very large number of investors; their number running in to hundreds,
thousands and even million, depending on the size of the business venture.
In general, small time proprietors, or partners of a proprietary partnership firm are
likely to find it rather difficult to get out of their business should they for some reason
wish to do so. This is because it is not always possible to find buyers for an entire
businesses or even a part of business, just when one wishes to sell it. Similarly it is not
easy for some one with savings especially with a small amount of savings, to readily find
an appropriate business opportunity or a part thereof, for investment. These problems
would be even more magnified larger proprietorships and partnerships. Nobody would
like to invest in such partnership in the first place, since once invested, their saving would
be very difficult to convert in to cash. And most people do have a lot of reasons, such as
better investment opportunity, marriage, education, death, health and so on, for wanting
to convert their savings in to cash. Clearly then, big enterprises will be able to raise
capital form the public at large, only if there were some mechanism by which the
investors could purchase or sell their share of the businesses and when they wished to do
so. This implies that ownership in business has to be broken up in to a large number of
small units such that each unit may be independently and easily bought and sold without
hampering the business activity as such. Also such breaking up of business ownership
would help mobilize small savings in economy in to entrepreneurial ventures.
This end is achieved in a modern business through the mechanism of shares. A
share represents the smallest recognized fraction of ownership in a publicly held business. Each

such fraction of ownership is represented in the form of a certificate, known as the share
certificate. The breaking up of the total ownership of a business into small fragments,
each fragment represented by a share certificate, enables them to be easily bought and
sold.
The institutions were this buying and selling of shares essentially takes place in the stock
exchange. In the absence of stock exchange, i.e., institutions where small chunks of
businesses could be traded, there would be no modern business in the form of publicly
held companies. Today, owing to the stock exchange we do not have to be electronics
wizards to be owners or part owners in an electronics company; we can be part owners of
one company today and another company tomorrow; we can be part owners in a company
hundreds or thousands of miles away, we can be all of these things, and none of them,
should we for whatever reason decided to convert all our ownership stake in to cash at
short notice. Thus, by enabling the convertibility of ownership in the product market in to
financial assets, namely shares, stock exchanges bring together buyers and sellers (or
their representatives) of fractional ownership of companies, much as buyers and sellers of
vegetable come together in a vegetable market. And for that very reason, activities
relating to stock exchange are appropriately enough; know as Stock market or Security
market. Also just as a vegetable market is distinguished by a specific locality and
characteristics of its own, mostly a stock exchange is also distinguished by a physical
location and characteristics of its own. In fact, according to H.T Parekh, the earliest
location of the Bombay Stock Exchange, which for a long period was known as “The
Native Share and ‘Stock Brokers’ Association”, was probably under a tree around 1870.

Characteristics of Stock exchanges in India

Traditionally, a stock exchange has been as association of individual members
called member brokers (or simply members or brokers) formed for the express purpose of
regulating and facilitating the buying and selling of securities by the public and
institutions at large. A stock exchange in India operates with due recognition from the
government under the Securities and Contract (Regulation) Act, 1956. The member
brokers are essentially the middlemen, who carry out the desired transactions in securities
or on their own behalf. New membership to a stock exchange is through election by the
governing board of that stock exchange.
 At present there are 21 stock exchanges in India (excluding NSE and OTCEI) the
largest among them being the Bombay stock exchange (BSE). BSE alone accounts for
over 80% of the total volume of transactions in shares. Typically, a stock exchange is
governed by a board consisting of directors largely elected by the member brokers, and a
few nominated by the government. Government nominees include representation of the
Ministry of Finance, as well as some public representatives, who are expected to
safeguard the public interest in the functioning of the exchanges. A president, who is an
elected member, usually nominated by the government from among the elected members,
heads the board. The Executive Director, who is usually appointed by the stock exchange
with government approval, is the operational chief of the stock exchange. His duty is to
ensure that the day - to - day operations of the stock exchange are carried out in
accordance with the various rules and regulations governing it are functioning. The
overall development and regulation of the securities market has been entrusted to the
Securities and Exchange Board of India (SEBI) by an act of parliament in 1992.
All companies wishing to raise capital from the public are required to list their
securities on at least one stock exchange. Thus, all ordinary shares, preference shares and
debentures of publicly held companies are listed in stock exchanges.
While in the developed countries, brokers have long since graduated to rendering
a whole range of consulting and advisory services to their clients based on their own
research and analysis, unfortunately, the profession of brokers in Indian has remained a
closed club, traditional and primitive. Their function has largely remained limited to carry
out the transaction orders on behalf of their clients (and often at prices far from
satisfactory). In their role as sub-brokers and jobbers (jobber is a broker’s, or one who
specializes in specific securities catering to the needs of other brokers), their activities are
even less organized and regulated.
To be fair though, share broking is not only the Indian Institution in its
primitiveness. It has plenty of company. The good news however is, things are beginning
to look up. Measures are a foot for professionalized the service through various means.
For example, the BSE has set up a full-fledged training college with a view to developing
the professional standards of its members as well as investors. Other institution like the
various Indian Institutes of Management (IIMs), Institute of Chartered Financial Analysts
of India, Unit Trust of India etc. are also beginning to play a useful part in
professionalized the discipline of investment analysis. Also there is an increasing trend to
admit qualified professionals as member of the exchange. Corporate membership to
Stock exchanges has already been introduced. So over a period of time it can reasonably
hope that the service would get increasingly professional.

SECURITIES AND EXCHANGE BOARD OF INDIA

The Government has setup the Securities and Exchange Board of India (SEBI) in
April 1988. For more than three year it had no statutory powers. Its interim functions
during the period were:
(i) To collect information and advise the government on matters relating to Stock
and Capital Markets.
(ii) Licensing and regulation of merchant banks, mutual funds etc.
(iii) To perform any other functions as may be entrusted to it by the government and
The malpractices were noticed in the case of companies, Merchant Bankers in the
capital Market. The need to curb the malpractices and to promote healthy capital market
India was felt.
The government issued an ordinance abolishing the capital issues Control Act,
1947. Accordingly SEBI has been setup under the SEBI Act, 1992.

POWERS AND FUNCTIONS OF SEBI (Section 11)

The board is expected to protect the interests of investors in securities and to
promote the development of, and to regulate the securities market, by such measures as it
think fit. To fulfill these objectives, the following are the powers and functions of the
Board, granted under Section - 11 (3) of the Act: -
1. Regulating the business in Stock exchange and any other securities markets
2. Registering and regulating the working of stockbrokers, sub-brokers, share
transfer agents, bankers to an issue, merchant bankers, underwriters, portfolio managers
etc who may be associated with securities markets in any manner.
3. Registering and regulating the working of collective schemes, including mutual
funds.
4. Promoting and regulating self-regulatory organizations.
5. Prohibiting fraudulent and unfair trade practices relating to securities market.
6. Promoting investor’s education and teaching of intermediaries of securities
market.
7. Prohibiting inside trade in securities.
8. Regulating substantial acquisition of share and take-over of companies.

OTHER MEASURES TAKEN BY SEBI

The Securities and Exchange Board of India, in addition to the guidelines for
disclosure and investor protection has taken a number of other measures for healthy
development and regulation of the capital markets.
1. Guidelines for Merchant Bankers.
2. Guidelines for EURO issues.
3. Guidelines for Mutual Funds and Asset Management Companies.
6. Guidelines for Foreign Institution Investors.
7. Guidelines to development Financial Institutions for disclosure and
investor protection.

SEBI’S ROLE IN STOCK EXCHANGE

Every Stock exchange needs recognition from Central Government. Any stock
exchange, which is desirous of being recognized, may make an application to Central
Government. The application should be accompanied by a company of byelaws of the
stock exchange for the regulation and control of contracts and a copy of the rules
regarding in general to the constitution of the stock exchange. If the Central Government
is satisfied that byelaws of the exchange ensure fair dealing and protect investors, stock
exchange is willing to comply by other conditions which Central Government my impose
and it is in the interest of trade and of the public to grant recognitions, it may recognize
the stock exchange.
SEBI’S POWERS IN RELATION TO STOCK EXCHANGE

The SEBI ordinance has given it the following powers:

1. It may call periodically returns from stock exchange.
2. It has the power to prescribe maintenance of certain documents by the stock exchange.
3. SEBI may call upon the exchange or any mate to furnish explanation or information
relating to the affairs of the stock exchange or any member.
4. It has the power to approve byelaws of the stock exchange for regulation and the
control of contracts.
5. It can amend byelaws of stock exchange.
6. In certain areas it can license the dealers in securities.
 Industry Profile
The Stock Exchange in India was formed only after the Mughals and the East India
Company. The British Government took over India in 1858 after the Indian war of
Independence.
The Bombay stock exchange was formed in 1875.
The Ahemedabad stock exchange in 1894
Calcutta in 1900
Madras in 1920
The Indore Exchange in 1930
The Hyderabad stock exchange in 1943
The Bangalore stock exchange in 1963.

National Stock Exchange (NSE)

The National Stock Exchange (NSE) is India’s leading stock exchange covering various
cities and towns across the country. NSE was set up by leading institutions to provide a
modern, fully automated screen-based trading system with national reach. The Exchange
has brought about unparalleled transparency, speed & efficiency, safety and market
integrity. It has set up facilities that serve as a model for the securities industry in terms
of systems, practices and procedures.

NSE has played a catalytic role in reforming the Indian securities market in terms of
microstructure, market practices and trading volumes. The market today uses state-of-art
information technology to provide an efficient and transparent trading, clearing and
settlement mechanism, and has witnessed several innovations in products & services viz.
demutualization of stock exchange governance, screen based trading, compression of
settlement cycles, dematerialization and electronic transfer of securities, securities
lending and borrowing, professionalisation of trading members, fine-tuned risk
management systems, emergence of clearing corporations to assume counter party risks,
market of debt and derivative instruments and intensive use of information technology.
NSE 5O-Index
The NSE 50 index, commonly known as Nifty is a market capitalization weighted index
like the BSE sensitive index and S&P 500; it was introduced in April 1996, replacing the
earlier NSE –100. The objective of the NSE –50 index are:

• To reflect the market movement more accurately

• To provide fund manager with a bunch mark for measuring portfolio performance.
• To establish a basis for introducing index based derivative product.

Bombay Stock Exchange (BSE)

The Stock Exchange, Mumbai, popularly known as “BSE” was established in 1875 as
“The Native Share and Stock Brokers Association”. It is the oldest one in Asia, even
older than the Tokyo Stock Exchange, which was established in 1878. It is a voluntary
non-profit making Association of Persons (AOP) and is currently engaged in the process
of converting itself into demutualised and corporate entity. It has evolved over the years
into its present status as the premier Stock Exchange in the country. It is the first Stock
Exchange in the Country to have obtained permanent recognition in 1956 from the Govt.
of India under the Securities Contracts (Regulation) Act, 1956.
The Exchange, while providing an efficient and transparent market for trading in
securities, debt and derivatives upholds the interests of the investors and ensures redressal
of their grievances whether against the companies or its own member-brokers. It also
strives to educate and enlighten the investors by conducting investor education
programmes and making available to them necessary informative inputs.
A Governing Board having 20 directors is the apex body, which decides the policies and
regulates the affairs of the Exchange. The Governing Board consists of 9 elected
directors, who are from the broking community (one third of them retire ever year by
rotation), three SEBI nominees, six public representatives and an Executive Director &
Chief Executive Officer and a Chief Operating Officer.
The Executive Director as the Chief Executive Officer is responsible for the day-to-day
administration of the Exchange and he is assisted by the Chief Operating Officer and
other Heads of Departments.

The Exchange has inserted new Rule No.126 A in its Rules, Bye-laws & Regulations
pertaining to constitution of the Executive Committee of the Exchange. Accordingly, an
Executive Committee, consisting of three elected directors, three SEBI nominees or
public representatives, Executive Director & CEO and Chief Operating Officer has been
constituted. The Committee considers judicial & quasi matters in which the Governing
Board has powers as an Appellate Authority, matters regarding annulment of
transactions, admission, continuance and suspension of member-brokers, declaration of a
member-broker as defaulter, norms, procedures and other matters relating to arbitration,
fees, deposits, margins and other monies payable by the member-brokers to the
Exchange, etc.

INDEX

BSE has 5 sectoral indices viz. BSE IT Sector index, BSE FMCG Sector index, BSE
Capital Goods Sector Index, BSE Consumer Durables Sector Index and BSE Healthcare
Sector Index. All these Sectoral indices are calculated and displayed on the BOLT system
on the real time basis.

Bombay Stock Exchange Limited has constructed a new index, christened as BSE-500,
consisting of 500 scrips .The changing pattern of the economy and that of the market
have been kept in mind while constructing this index.

August 23, 2004 BSE launched “Sector Series (90/FF)” indices with the view to provide
the Indian Capital Market with quality sector benchmarks. The “Sector Series (90/FF)”
Indices are a set of indices across 9 significant sectors listed on the BSE. They are
constructed and maintained as per the global best practices.

BSE-500 index represents nearly 93% of the total market capitalization on Bombay Stock
Exchange Limited. This means BSE-500 index ideally represents total market. This index
represents all 20 major industries of the economy. The BSE-500 index had been
calculating on a full market capitalization methodology and effective August 16, 2005
calculation methodology was shifted to a free-float methodology in line with Sensex.

Existing BSE sectoral indices

BSE IT.

BSE FMCG.

BSE Capital Goods.

BSE Consumer Durables.

BSE Healthcare.

BSE BANKEX

BSE Auto.

BSE Metal.

BSE Oil & Gas index.

Scrip selection criteria for BSE Sectoral Indices:

Eligible Universe:
Scrips classified under various sectors that are present constituents of BSE-500 index
would form the eligible universe.

Trading Frequency:
Scrips should have a minimum of 90% trading frequency in preceding six months.

Market Capitalization:
Scrips with a minimum of 90% market capitalization coverage in each sector based on
free-float final rank will form the index.

Buffers:
A buffer of 2% both for inclusion and exclusion in the index is considered so that
movements in and out of the index are minimized. E.g. A company can be included in the
index only if it falls within 88% coverage and an existing index constituent cannot be
excluded unless it falls above 92% coverage. However, the above buffer criterion is
applied only after the minimum 90% market coverage is satisfied.

How is stock market index computed?

The general stock market movement is usually measured by a stock market
index consisting of a sample group of securities that is supposed to reflect the entire
market. The samples of companies are chosen in such a way that major industries in the
economy are represented. Moreover, these securities must have large capital base so as to
be traded regularly in the stock exchange.
The index is computed as: first of all, a base year is chosen and the index value
is taken to be equal to 100. Then the current price of each stock in the index is multiplied
by their corresponding number of equity shares outstanding, so as to obtain the Market
Capitalization.

Then the index will be calculated as follows:

Total Market capitalization of representative securities at present values

Total Market capitalization of representative securities values as in the base year X 100

The index is not an average of share prices but a weighted average to reflect the
price as well as volume of shares. It is assumed that as this index goes up or down, the
market in totality would rise or fall.
The most popular market index is BSE sensitive index also called BSE Sensex,
which is the weighted average of market capitalization of 30 well traded securities.
To broaden the equity base, so as to make representation of many other industries
in a balanced way, another index called BSE National index was introduced, which never
became as popular as the BSE Sensex. There are other indices developed by popular
business newspapers.
Company Profile

Crown Consultant Pvt Ltd (CCPL)

The Crown Consultant has been playing a very vital role in the wealth development of
its costumers in general and striving hard so as to achieve the following goals:

• Providing investors with high level of liquidity whereby the cost and time involved in
the entry and exit from the market becomes the least.
• Bring in high tech solutions and make possible absolute transparency of all
operations.
• Built infrastructure for capital market by turning CSE into a financial super market.
• Spread equity cult and to serve investors of the region.
• Professional stock broking and investment management function.
• Impart capital market knowledge to all intermediaries on a continuous basis.
• Develop a winning team of professionals as employees of CCPL who will play a
crucial role in shaping the future of CSE and its associates

Crown Consultants Pvt Ltd (CCPL)

Our Culture

We have developed new age business culture based on openness & integrity. Our

Culture is based on whole heartedly shared ideas, knowledge & technology trends for

our customers to flourish in the booming ideas economy.

Crown values your trust and is committed to upholding it at all costs. We believe that

no automated system can be a substitute for the human touch.

Crown combines its Research, IT strengths, ethical business practices
and "Customer First Attitude " to provide you end-to-end equity
solutions. We invite you to sample any of our products and services

Our Vision

To be a global player in the thriving environment for wealth creation by

providing highend strategic, technological, intellectual & customer
service solution cost effectively.
Our Mission
To be a leading brokerage & information technology house by
providing and efficiently executing quality investment & software
ideas, thereby building lasting customer relationship based on mutual
trust.

Guiding Principle & Core Values

• Customer interest is paramount

• Ethical and transparent business practices
• Respect for professionals, associates and business partners
• Research based value investing
• Cutting edge technology to ensure world-class customer service
• Personalized investment Strategies
• Complete Client Satisfaction
• Competitive Brokerage

Functional Areas

The Crown Consultants carries on its function through the six main departments

The various functional departments under CROWN GROUP are:

• Crown Consultants (P) Ltd.

Member : National Stock Exchange of India
• Crown Sharebroker (P) Ltd.
Member : Punel Stock Exchange
 • Crown Bullion & Commodities
Member : MCX / NCDEX
• Crown Insurance Services
Life & Non-Life Insurance
• Crown Cybertech (P) Ltd.
Information Systems Auditors
• Shantilal Chandaliya & Co.
Chartered Accountants

Management

Crown management team Comprises of CAs, Lawyers, ICWAs, MBAs

and IT professionals who manage crucial functions, to bring best
products and services to its clients from research based advice to
trade execution & settlements.

At Crown we practice meritocracy and each of the team members is

provided extensive training.
CCPL is a member of the National Stock Exchange of India, Bombay Stock Exchange of
India, Depository Participant with National Securities Depository Limited and Central
Depository Services (I) Limited, and SEBI approved Portfolio Manager.

IT INDUSTRY PROFILE
The December 2005 quarter saw a decent overall performance from the Indian
IT sector, with a strong business flows and favourable currency environment. Going
forward the demand environment is looking robust with strong deal flows. The recent
ABN Amro and G.M deals are testimonials to this fact.

The Indian tech sector is likely to grow at around 32 %( in dollars) in F.Y 06. With the
increasing traction in the global IT environment, the Indian IT sector is well poised to
attain the next level of growth in the coming year. The Indian software sector has moved
beyond the confines of custom application development and maintenance services to
providing software package implementation, testing remote infrastructure management
and IT Enabled Services (ITES). Newer services like testing, package implementation,
re-engineering, consulting and B.P.O have driven the incremental growth in the sector,
and are growing much faster than the overall growth rate of the sector. The top tier IT
companies has seen strong traction in these newer services lines. In particular, Infosys
has experienced a growth in all the lines including package implementation, testing,
consulting and B.P.O services in the last few quarters.

The IT sector continued its trend of Merger and Acquisitions (M&As) with companies
acquiring targets for advantage in terms of customers, domain or geography. Apart from
M&As, tech companies also formed joint ventures (J.V) and alliances to strengthen their
positions in the market place.
Top 10 predictions for IT industry

India will be the fastest growing IT market in the Asia Pacific region with its domestic IT
market set to grow at an estimated 19% in 2008 over 2007, according to IT and telecom
consulting major IDC.

"Year 2008 will be governed by the underlying themes of mobility, convergence and
infrastructure management," said Kapil Dev Singh, country manager, IDC (India) Ltd.
Dynamic IT in the enterprise space and increasing proliferation of digital devices in the
consumer space, will drive the growth of IT market in 2006.

IDC's top 10 predictions for the Indian IT market for 2006 are:

2. India to continue to be the fastest growing domestic IT market in the

Asia-Pacific region, to continue to grow at 19% in 2008, with the other
Asian giant China growing at 12%.

Country Domestic IT market growth

in 2007 over 2006
India 19%

Philippines 14%
 China 12%

Malaysia 8%

Thailand 6%

Table: 2.1

Table showing the Domestic IT Growth in 2007 0ver 2006

The major growth will come in the following areas:

Hardware: WLAN equipment (94%), digicams (70%), IP phones (50%), IP-PBX

systems (43%), Smart handheld devices or SHDs (30%), Inkjet MFDs (21%), and
Notebook PCs (20%)

Software: Application life cycle management software (32%), security software (29%),
content applications (24%), BI software (24%), system management software (20%),
network management software (20%), information and data management software (20%)

IT Services: Application management (32%), software deployment and support services

(29%), network consulting and integration services (24%), IS outsourcing (23%).

2. Servers, the fundamental building blocks of IT infrastructure to cross 100,000

shipments in 2006 in India.

The challenge facing CIOs in 2006 would be to deliver higher IT service-level

performance to meet diverse business needs while lowering the costs of infrastructure - a
tough balance to strike.

Users have realised their IT infrastructure has become quite complex over a period of
time as they continued to add different types of servers, storage, and software.

Servers are among the fundamental building blocks of a solid infrastructure in the
making. The trend towards dynamic IT will necessitate an increasing need for server
consolidation in 2008. After struggling for years to register consistent growth, the server
market in India is now poised for strong gains over the next five years.

For the past 10 consecutive quarters, server shipments in India increased year-on-year in
excess of 20% until 3Q05, while growth in spending was equally impressive.
3. Outsourcing services to outgrow technology product services (standalone) in 2008 and
will contribute largest chunk (24%) to the Indian IT services market.

IDC believes that the Indian market is moving towards an era of outsourcing services in
the domestic space. So far, the domestic market has been dominated by plain vanilla
support services like software and hardware deployment and support, which includes
revenue streams like AMC (annual maintenance service contract) revenues.

With the emergence of end-to-end operators in the services space and with more
confidence on outsourcing service providers, end-users are awarding more contracts with
long-term perspectives in mind.

Deals like IBM-Bharti, HP-Bank of India, Wipro-Sanmar group, TCS-Department of

Company Affairs, etc show a definite change in the mindset of even the
PSU/Government vertical to go for similar deals, where the complete headache of IT
Infrastructure can be taken up by the specialist providers.

IDC estimates that managed services (outsourcing services) would be 24% of the total
domestic IT services market vis-à-vis 22% for technology product services (TPS) in CY
2008.

4. Anytime, anywhere information availability to drive shift towards policy-based

security management and administration in India.

Businesses are rapidly changing with growth and competition, pushing enterprises for
high availability of information to enable better and faster decision-making. Enterprises
are networking with both their downstream and upstream partners in the ecosystem so as
to streamline and optimize their value chain. The need for higher availability coupled
with compliance to regulations will put Identity & Access Management (IAM) solutions
in the mainstream in 2008.

Higher mobility and faster decision-making require information to be made available

anywhere, anytime. This, in turn would enable enterprises to respond to changing market
needs in a shorter time-span.
Therefore, enterprises will need to design a centralized security policy, which takes into
consideration the needs of employees and partners alike. This trend will increasingly set
the boundaries that govern security management and administration policies in
enterprises.

5. 2008, the year of the digital home revolution in India: 100% growth expected in digital
camera shipments and home Internet connections.

Finally the Indian consumer segment is coming into its own. IDC has observed
phenomenal growth in the adoption of digital devices and technologies that clearly
signals the trend towards fructification of the concept of a digital home.

All major indicators, i.e. home PC, broadband, digital camera, high-end television,
satellite radios, MP4 players etc., have shown very healthy growth in the year 2007. IDC
predicts that the next year is going to be even rosier for a host of digital products aimed
for this mass market.

India will see a few products enjoying more than 100% growth with digital cameras and
consumer broadband connections becoming the flag bearers of this triumphant march.

The digital camera market is undergoing a sea change in the country. Indian consumers
are maturing from 'casual clickers' to 'serious buyers', with increased attention towards
higher pixels, zoom and other high-end features.

Low cost Broadband is another market where India is going to see unprecedented growth.
The cost of owing a broadband Internet connection (primarily ADSL) has come down
drastically, thanks to the bundling and offerings available from service providers.

6. Unrestricted IP telephony will boost IP-PBX shipments to over 25% of PBX line
shipments by end-2008, but low PSTN tariffs will constrain VoIP usage in India.

The Indian IP telephony enterprise equipment market is finally emerging out of the
shackles of government-enforced restrictions. The recent announcement further opening
up IP telephony means that IP telephones and equipment will be able to freely
interconnect with normal TDM lines, be it for calling within the user's closed group or
outside, irrespective of whether the called party is outside India or inside India.
And it does not matter whether the receiver is on an IP phone or a normal PSTN phone or
even the now more common mobile phone. IP telephony, unbridled and with full
features, is what 2008 will see becoming a reality.

Given the fast dropping costs of IP phones and IP-PBX equipment, IP telephony will stop
being a tool used for niche applications by early adopters to become a multipurpose
communication medium used by a diverse set of enterprises.

In 2008, it will not only be the BPO’S and software houses who will adopt IP telephony
-- many other organizations such as banks, manufacturers, educational institutions and
government departments would begin adding IP telephones and IP-PBXs to their
networks.

IDC expects that by the end of 2008, a quarter of PBX lines shipped will be IP lines
compared to the 15 per cent today. The biggest drivers for IP telephony among
enterprises would be investment protection and convergence -- businesses would look at
investing on the latest technology that will give them the best return in the long run.

7. Industry-specific solutions to be major driver of corporate IT spending in 2008 and

beyond.

As the Indian economy integrates and aligns more and more with the global economy,
industry segments facing the heat of competition are gearing up to compete
internationally. This is visible across segments as diverse as automotive, banking &
insurance, consumer durables, textiles & garments, oil & gas, pharmaceuticals &
biotechnology, retailing, telecom, et al.

This unprecedented scenario has made Indian companies scout for world-class enterprise
applications/solutions from IT vendors to help them upgrade their legacy
systems/applications in order to meet their goals as well as the expectations of their
customers, business partners and shareholders.

IDC believes that this trend is going to gain traction in 2008. This in turn is forcing IT
vendors/solution providers in India to realign their internal organization structures as well
as their go-to-market strategies in order to be able to adequately address these new
market realities.
According to IDC IT vendors/solution providers will be:

• Re-orienting their internal organization structures to cater to the specific and

emerging needs of their industry vertical focused customers, as against the
traditional horizontal, product category-oriented structures.
• Developing and providing specific, easily customizable and cost-effective (high
ROI/low TCO) solutions to their customers.
• Tying up with industry-specific solution partners who possess deep domain
expertise and have access/proximity to local geographical industry clusters.

High revenue growth would be witnessed in vertical-specific applications across-the-

board, which is expected to provide a positive boost to revenues (2008 over 2007) in such
major product segments as servers (9%), PCs (21%), enterprise storage solutions (13%),
packaged software (20%) and key IT services like application management (32%), ASP
(20%), IT consulting (20%), network consulting & integration (24%), network
management (26%), software deployment & support (29%) as well as enterprise-wide IS
outsourcing services (23%).

8. Application integration, consolidation with business analytics will gain momentum in

2006.

Enterprises in India are growing rapidly and the need has arisen to have better control on
growth and decision-making based on real time enterprise wide data. The business
drivers across industries are different and range from compliance, better service to cost
control.

Enterprises have deployed multiple applications with a mix of standardized packaged and
custom-developed legacy applications. These disparate applications pose challenges like:

2008 will witness enterprises integrating multiple applications running within the
organization. They will also reduce the number of applications wherever possible and
rollout applications from a single location, thus reducing the number of servers deployed.

9. Cost no more the key factor in colour adoption: Colour laser shipments growing by
50% in 2008 over 2007.
IDC believes that adoption of colour printing in the laser space will take off from 2008.
While 2008 will witness an increased adoption of colour lasers in offices; the installed
base will keep on increasing thereafter. Over the past two years there has been a
concerted drive by the industry to develop and enhance the range of colour laser devices
that they offer.

This drive will begin to see results from 2008 onwards. The CAGR for the next five years
is predicted to be about 40%, while 2006 is likely to witness an increase of about 50%
over 2007 shipments.

There are an increasing number of devices that employ technologies that deliver colour
output to businesses, and there is an increasing awareness amongst organizations that
colour can bring great benefits to their businesses.

The factors that will drive the adoption of colour printing are:

• Prices to drop considerably across all products;

• Businesses have a latent need for colour printing and would really begin to look
strategically at what benefits colour could provide;
• Vendors would continue to introduce products that will offer better print speeds,
quality and consistency of print, which would enable a number of businesses to
print many of their colour documents in-house.

To begin with, marketing and sales would drive the use of colour in offices. The
phenomenon is likely to spread to other groups gradually. However there are a few
challenges that both the printer vendors and offices (end-user organizations) themselves
have to overcome. These are:

• Increased costs -- one time cost as well as recurring costs;

• Cost allocation between various departments; and
• Colour printing through networked devices.

IDC expects a few organizations to act as innovators towards adopting colour printing
cost effectively, thereby overcoming the above hurdles successfully. These organisations
will gain an early advantage over their competitors and this would then lead to
widespread adoption of colour in Indian offices.

10. Worldwide IT and business services: Focus on SMEs, global assets, global sourcing
for innovation and industry focused BPO.

In 2008, IT and business services vendors will continue to see major market changes,
including a dramatic shift to more business process outsourcing, an increase in the
number of players, and a reduction in total deal value.
These developments reflect increased competition and expansion in the marketplace and are
continuing to put pressure on traditional outsourcers to alter their business models in order to
successfully compete in the coming years - to include newer service capabilities, involve different
ecosystems of partnerships, target 'non-IT' opportunities, and seek new customers in the SME
and consumer spaces as well as emerging markets.

TECHNICAL ANALYSIS

Technical analysis is the study of price movement in markets in order to forecast future
prices. Technical analysis is primarily, but not exclusively, conducted by studying charts
of past price movement. Many different methods and tools are utilized in technical
analysis, but they all rely on the principle that price patterns and trends exist in markets
that can be identified and exploited.

Technical analysis and its traditional opposite fundamental analysis are the two main
schools of thought in the analysis of security prices. Many investors combine elements
from the two schools. Technical analysis is viewed by many of its practitioners as more
art than science, and there is some disagreement between subscribers to different schools
of thought that is far more extensive than in most scientific subjects.

Traditionally two methods: Fundamental analysis and Technical analysis.

Difference between fundamental and technical analysis are as follows:

 6) Technical analysts seeks to forecast short-term, medium and long term security
prices (and also short term movement of the market) rather than long run values
of the securities, unlike the fundamentalists.
7) Technical analysts also try to forecast short- term shifts in supply and demand
that will affect the market price of one or more securities and ignore any firm-
related, industry- related, or economy related information as fundamentalists do.
8) Technical analysis is useful for only short-term investors, while fundamental
analysis is useful for long term investors.
9) A fundamentalist believes that long-term security values can be gauged by
studying the main factors related to the firm, the industry and the economy. A
technical analysts work on the premise that short-term price movements can be
predicted on the basis of price-volume study, chart pattern of individual stocks,
and other technical market indicators.
10) Even, if you have the price data, technical analysis is equally complicated as
much as fundamental analysis.

Rationale of technical analysis.

Technical analysts believe that it is possible to forecast the future price of a share
by looking at the past price movement. Their main assumptions are:
5) The market price of a security is determined solely by supply and demand. Any
shift in the supply –demand relationship, can be detected sooner or later in the
action of the market.
6) Supply and demand are governed by numerous factors both rational and
irrational, which include factors relied up on by fundamentalists, as well as
opinions, moods, guesses and blind necessities. The market weighs these factors
continually and automatically.
7) Disregarding minor price fluctuations, stock prices tend to move in trends that
persist for an applicable length of time.
8) Some chart patterns tend to recur and their recurring prices can be used to
forecast the price movement.
 In a nutshell, Technical Analysts believes in the maxim, “History repeats itself”
without giving an in-depth explanation.

History

The premises of technical analysis were derived from empirical observations of financial
markets over hundreds of years. Perhaps the oldest branch of technical analysis is the use
of candlestick techniques by Japanese traders at least as early as the 18th century, and
still very popular today.

Technical analysis actually was the brainchild of Dow Jones, editor of the Wall Street
Journal, at the turn of the 20th century. While recording price movement of various
securities for predicting future price, he observed that most stocks move in tandem with
the market, going up when the market goes up and vice versa.
In order to interpret market behavior, Dow therefore, constructed two indices,
currently called Dow Jones Industrial Average (DJIA) and Dow Jones Transportation
Average (DJTA).Dow Theory, a theory based on the collected writings of Dow Jones co-
founder and editor Charles Dow, inspired the increasingly widespread use and
development of technical analysis from the end of the 19th century. His theory later on
was interpreted, expanded and refined by technical analysts Hamilton and Rhea.New
tools and theories have been produced and existing tools have been enhanced at a rapid
rate in recent decades, with an increasing emphasis on computer-assisted techniques.

Theory

Technical analysis is less concerned with why a price is moving (e.g. poor earnings,
difficult business environment, poor management, or other fundamentals) than it is with
the fact that the price is moving in a particular direction or in a particular chart pattern.
To a technical analyst, profits can be made in any market by positioning oneself in the
direction of the price trend. If the price trend is up, then look for opportunities to buy; if
the price trend is down, then look for opportunities to sell. Additionally, technical
analysts look for various price patterns to form on a price chart and will take positions in
anticipation of the expected move following that pattern.
Technical analysis is occasionally at odds with fundamental analysis. Essentially,
fundamental analysis maintains that it is possible that markets misprice a security and,
through various methods of fundamental analysis, the "right" price can be calculated.
Profits can be generated by buying or selling the mispriced security and then waiting for
the market to recognize its "mistake" and reprice the security. A technical analyst,
contrastingly, is not so much interested in a security's "correct" price; he or she is only
interested in the price action. The analyst looks at how the price action unfolds on a chart
and on other price studies and invests accordingly. A cliche among technical analysts is,
"Forget the fundamentals and follow the money." As a simple example, suppose
Vodafone stock was trading at 124.25 pence on the London Stock Exchange. Suppose
further that the consensus fundamental analysis view of Vodafone stock was that it was
worth 120.00 pence. If Vodafone stock were to move to 125.00 pence, then to 126.00
pence, and then to 127.00 pence, a technical analyst would be more inclined, in this
simple example, to buy this stock because its price is steadily increasing. It is "trending"
(see below). Contrastingly, a fundamental analyst would possibly look to sell Vodafone
stock as it is moving away from what the fundamental analyst believes is the "right"
price.

Three Beliefs of Technical Analysis

1)Price action in the market discounts everything.

Technical analysis holds that because every possible bit of information is immediately
included in the price of a security, it is not necessary to explicitly analyze the
fundamental, economic, political, etc. factors that might influence that price. Because all
available information influences the price movement, only a study of the price movement
is required.

2)Prices move in trends.

While it is not explicitly provable that prices must trend, technical analysis relies on
empirical evidence and simple common sense to assert that prices do trend. In most
traded markets, it is a simple matter to show statistically that prices trend on many time
scales, although this tendency is generally quite a modest one.
For example, if homeowners believed that interest rate increases will erode the value of
their homes, they will be inclined to sell. If there were three similar homes in a
neighborhood up for sale, the first house could be sold for $100,000, the second could be
sold for $97,500 and perhaps the third could sell for $95,000. Rather than immediately
drop down to some formulaic price based on interest rates and other inputs, prices will
move consistently over time in one direction. (In a large market like global equities with
many participants, prices will move in a zig-zag fashion in one direction.) Prices will
continue to decline until there is a balance between buyers and sellers. This gradual (but
sometimes quick) directional movement in prices (the trend) is what technical analysis
attempts to identify and exploit. If a technical analyst could enter this market, he or she
would likely sell short a house because the price trend is downward.

A person who does not believe that prices move in trends will find little use of technical
analysis. The idea that prices trend is probably the most important concept in technical
analysis. Moreover, a person who disagrees with Dow Theory will also likely find fault
with technical analysis.

3)History tends to repeat itself

Technical analysis believes that investors en masse display much of the same behavior as
the investors that preceded them. "Everyone wants in on the next Microsoft," "If this
stock ever gets to $50 again, I will buy it," "This company's technology will revolutionize
its industry, therefore this stock will skyrocket,"--these are all examples of investors'
attitudes repeating. To a technical analyst, the human characteristics of the market might
be irrational but nonetheless they exist. Because investors' attitudes often repeat,
investors' actions in the marketplace often repeat as well. I.e., patterns of price movement
will develop on a chart that a technical analyst believes have predictive qualities.

Technical analysis is not limited to charting. Technical analysis is always primarily

concerned with price trends. Anything that can influence the price trend is of interest to a
technical analyst. As an example, many technical analysts monitor surveys of investor
enthusiasm. These surveys attempt to gauge the general attitude of the investment
community to determine whether investors are bearish or bullish. Technical analysts use
these surveys to help determine whether a trend will reverse or whether a new trend will
develop. A technical analyst would be alerted that a trend might change when these
surveys report extreme investor reactions. When surveys are overly bullish, for example,
a technical analyst will look for evidence that an uptrend will reverse. The logic being
that if most investors are bullish, then they would have already bought the market
(anticipating that the market will move higher). But because most investors are bulllish
and have invested, it is safe to assume that there are few buyers remaining in the market.
With most investors long, there are more potential sellers in the market than buyers
despite the fact that the overall attitude of investors is bullish. This implies that the
market is set to trend down and is an example of a technical analysis concept called
contrarian trading.

Criticism of Technical Analysis

1)The question of documented evidence

Although chartists believe that their techniques provide excess returns over time, not all
research agrees with this conclusion. Some academics and fundamentalist market
participants believe that technical analysis has no predictive power. According to some
studies, after trading costs are factored in, the returns generated by many technical
analysis strategies may underperform a simple buy and hold strategy.

On the other hand, many market participants, especially active traders, defend the
practice and believe (and in some cases demonstrate) that it can be profitable. There is
extensive research demonstrating that some technical analysis methods are effective, with
at least 59 studies showing that particular technical analysis methods have provided
statistically significant positive returns. Furthermore, technical analysts counterclaim that
buy and hold strategies do not always work either, and that opportunites to make money
in markets always exist even if the market overall does not move.

Critics of technical analysis include very well known investors. Warren Buffett once
exclaimed, "If past history was all there was to the game, the richest people would be
librarians." Most economists do not use technical analysis, but rather rely on analyzing
such fundamental factors as production, distribution, supply and demand, capital,
competition, and resource allocation.
2)Inconsistencies with Other Market Hypotheses

The Efficient Market Hypothesis:

The efficient market hypothesis concludes that technical analysis cannot be effective.
According to this hypothesis, all relevant information is quickly reflected in a security's
price through the actions of traders who have that information. Thus, it is impossible to
"beat the market," and technical analysis cannot work. News events and new fundamental
developments which influence prices occur randomly and are unknowable in advance.
Advocates of EMH have produced many studies that reject the efficacy of technical
analysis.

Proponents of technical analysis counter that technical analysis does not completely
contradict the efficient market hypothesis. Technicians agree with EMH in that they
believe that all available information is reflected within a security's price; that is why
technicians say a study of the price movement is necessary. Technicians argue that EMH
ignores the realities of the market place, namely that many investors base their future
expectations on past earnings, track records, etc. Because future stock prices can be
strongly influenced by investor expectations, technicians claim it only follows that past
prices can influence future prices.

Technicians point to the new field of behavioral finance. Behavioral finance essentially
says that people are not the rational participants EMH makes them out to be. Market
participants can and do act irrationally. Technicians have long held that irrational human
behavior influences stock prices and claim to have ways of predicting probable outcomes
based on this behavior.

The Random Walk Hypothesis:

The random walk hypothesis is also at odds with technical analysis and charting.
Essentially, the hypothesis claims that stock price moments are a Brownian Motion with
either independent or uncorrelated increments. In this model, future stock prices are not
dependent on past stock prices, so trends cannot exist and technical analysis has no basis.
Again, proponents of this theory have generated substantial research in support of the
hypothesis.
Technical analysts maintain that trends are identifiable in the market and that it is
impractical to believe that market prices move in a random fashion. To a technician, over
time prices will trend in a direction until supply equals demand. Therefore, there cannot
be any pure random price movement. As stated earlier, one of the cornerstones of
technical analysis is that prices trend. If one does not believe this concept, one will not
agree with technical analysis.

Proponents of Technical Analysis

To many traders, trading in the direction of the trend is the most effective means to be
profitable in financial or commodities markets. John Henry, Larry Hite, Ed Seykota,
Richard Dennis, Bruce Kovner, and Michael Marcus (some of the so-called Market
Wizards in the popular book of the same name by Jack D. Schwager) have each amassed
massive fortunes through the use of technical analysis and its concepts. George Lane, a
technical analyst, coined one of the most popular phrases on Wall Street, "The trend is
your friend!"

Many non-arbitrage algorithmic trading systems rely on the idea of trend-following, as do

many hedge funds. A relatively recent trend, both in research and industrial practice, has
been the development of increasingly sophisticated automated trading strategies. These
often rely on underlying technical analysis principles (see algorithmic trading article for
an overview).

Charting terms and indicators

Many different techniques and indicators can be used to follow and predict trends in
markets. Some of the most widely known include:

• Accumulation/distribution index
• Average true range - averaged daily trading range
• Bollinger bands - a range of price volatility
• Breakout - when a price passes through and stays above an area of support or
resistance
• Commodity Channel Index
• Hikkake Pattern - pattern for identifying reversals and continuations
 • MACD - moving average convergence/divergence
• Momentum - the rate of price change
• Money Flow - the amount of stock traded on days the price went up
• Moving average
• On balance volume - the momentum of buying and selling stocks
• PAC charts - two-dimensional method for charting volume by price level
• Parabolic SAR - Wilder's trailing stop based on prices tending to stay within a
parabolic curve during a strong trend
• Point and figure charts - charts based on price without time
• Relative Strength Index
• Resistance - an area that brings on increased selling
• Stochastic oscillator, close position within recent trading range
• Stop loss
• Support - an area that brings on increased buying
• Trend line - a sloping line of support or resistance

Moving average (finance)

A moving average, in finance and especially in technical analysis, is one of a family of

similar statistical techniques used to analyse time series data.

A moving average series can be calculated for any time series, but is most often applied
to stock prices, returns or trading volumes. Moving averages are used to smooth out
short-term fluctuations, thus highlighting longer-term trends or cycles. The threshold
between short-term and long-term depends on the application, and the parameters of the
moving average will be set accordingly.

Mathematically, each of these moving averages is an example of a convolution. These

averages are also similar to the low-pass filters used in signal processing.

Simple moving average:

A simple moving average is the unweighted mean of the previous n data points. For
example, a 10-day simple moving average of closing price is the mean of the previous 10
days' closing prices. If those prices are p1 to pn then the formula is
When calculating successive values, a new value comes into the sum and an old value
drops out, meaning a full summation each time is unnecessary,

In technical analysis there are various popular values for n, like 10 days, 40 days, or 200
days. The period selected depends on the kind of movement one is concentrating on, such
as short, intermediate, or long term. In any case moving average levels are interpreted as
support in a rising market, or resistance in a falling market.

In all cases a moving average lags behind the latest price action, simply from the nature
of its smoothing. An SMA can lag to an undesirable extent, and can be influenced too
much by old prices dropping out of the average.

Weighted moving average

A weighted average is any average that has multiplying factors to give different weights
to different data points. But in technical analysis a weighted moving average (WMA)
has the specific meaning of weights which decrease arithmetically. In an n-day WMA the
latest day has weight n, the second latest n-1, etc, down to zero.

When calculating the WMA across successive values, it can be noted an amount p2 to pn +
1 drops out of the numerator each day. The WMA can thus be calculated starting with the
above formula but then stepping successively with just additions and subtractions, not a
full set of multiplications,

Totaltoday = Totalyesterday + p1 − pn + 1
Numeratortoday = Numeratoryesterday + np1 − Totalyesterday
Momentum
Momentum is the rate of acceleration of a security's price or volume.
Once a momentum trader sees an acceleration in a stock's price, earnings, or revenues,
the trader will often take a long or short position in the stock with the hope that its
momentum will continue in either an upwards or downwards direction. This strategy
relies more on short-term movements in price rather then fundamental particulars of
companies, and is not recommended for novices.
Momentum = Close today – Close N days ago.
Momentum is positive if today's price is higher than the price of X days ago, negative if
today's price is lower, and at zero if today's price is the same. Using the momentum
figure that he or she calculates, the trader will then plot a slope for the line connecting
calculated momentum values for each day, thereby illustrating in linear fashion whether
momentum is
rising or falling.

Price Rate of Change – ROC

ROC does stand alone as an important indicator used by many technicians interested in
market momentum.
A technical indicator that measures the percentage change between the most recent price
and the price "N" periods in the past. It is calculated by using the following formula:

(ClosingPriceToday-ClosingPrice"N"PeriodsAgo)
ClosingPrice"N"PeriodsAgo

ROC is classed as a price momentum indicator or a velocity indicator because it

measures the rate of change or the strength of momentum of change.

Many traders use a value greater than zero to indicate an increase in upward momentum
and a value less than zero to indicate an increase in selling pressure. However, some of
the most valuable signals are generated when the price of the asset and the ROC are
heading in opposite directions (known as divergence).
Rate of change (ROC) does stand alone as an important indicator used by many
technicians interested in market momentum.

Similarly, the rate of change divides the latest price by a closing price X days hence. If
both values are equal, ROC is 1. If today's price is higher, then ROC is greater than 1.
And, if today's price is lower, then ROC is less than 1. The slope of the line that connects
the daily ROC values graphically illustrates whether rate of change is rising or falling.

STATEMENT OF PROBLEM

Technical Analysis of BSE IT sector index and exploring investors’ perspective towards
IT stocks

SCOPE OF THE STUDY

My dissertation work titled “Technical Analysis of BSE IT sector index and exploring
investors’ perspective towards IT stocks” deals with the technical analysis of IT index
movements and to predict the trends prevailing in the market. The study also explore the
investors perspective towards IT stocks.

OBJECTIVES OF THE STUDY

1) To analyze the market movement of the IT stocks by using technical analysis.

2) To explore investor’s perspective towards the BSE IT sector stocks.
 REVIEW OF LITERATURE

This chapter deals with the various theoretical backgrounds necessary to carryout
this dissertation. This chapter has been divided into basic theory of its use, calculation
formulae of various statistical measures, which are used to know the price volatility such
as Beta, Alpha and Coefficient Correlation. The chapter deals with various theoretical
backgrounds necessary to carryout this project. Every project or study needs some
amount of theoretical background and existing published literature is one of major
sources for that. Several books, research papers are available giving information about
customer perception. Internet is also a useful way to information about the study. The
articles in various magazines and journals, various reports on the related same topic or
industry, information from World Wide Web etc provides an extensive knowledge on
research.

PURPOSE
Literature review is one of the prime parts of dissertation. The very basic purpose
of the literature review is to gain insight on the theoretical background of the research
problem. It helps the researcher to gain strong theoretical basis of the problem under
study and also helps to explore whether any one has done research on the related issue.
That’s why literature review helps one to find out the path of problem solving.

To get the information on this dissertation, various Textbooks, Magazines,

Journals and News papers.

DEFINITIONS OF FUNDAMENTAL TERMS USED

 Technical analysis: Technical analysis is the process of analyzing a security’s historical
prices in an effort to determine probable future prices.

Simple Moving Average: A simple moving average is the unweighted mean of the
previous n data points

Momentum: The rate of acceleration of a security's price or volume.

Rate of Change: A technical indicator that measures the percentage change between the
most recent price and the price "n" periods in the past

Trend: Trend in price of a financial security is intuitively the general direction of its
movement

METHODOLOGY
The researcher has a wide variety of methods to consider, either singly or in
combination. They can be grouped to as:
 Primary sources of data.
 Secondary sources of data.

For this dissertation the data was collected only from the secondary sources.
Secondary data includes textbooks, Internet.

Textbooks:

 Security Analysis and Portfolio Management by Donald E. Fischer and

Ronald J. Jordan (Sixth Edition).
 Technical Analysis from A to Z by Steven B Achelis (Second Edition). .
 Stock Market Book (Second Edition).
 Financial Management by I.M. Pandey (Eight Edition).
 Investment Management by Preeti Singh (Thirteenth Edition).
 Research Methodology Methods and Techniques (Second Edition).

Magazines:

 Business Today
 Business World
  The Week

Journals:

 Newspapers
 Economic Times
 Business Line
 Dalal Street Journal

Websites:
 www.investopedia.com
 www.wikipedia.com
 www.stockcharts.com
 www.bseindia.com
 www.economictimes.com
 www.crownsex.com
 RESEARCH METHODOLOGY

Questionnaire method is used for the survey to know the

investor’s perspective towards IT sector stocks. The questionnaire method is quite
effective in getting information.

The term ‘questionnaire’ refers to a self administered

process where by the respondent himself/herself reads the questions and records his/her
answers with out assistance of an interviewer. A questionnaire is more structured and
standardized than the interview schedule. Another advantage of questionnaire is the
respondent has full freedom to apply his/her own judgement and answer the questions as
he/she thinks right. Major disadvantages of questionnaire method are it lacks flexibility in
working and sequencing the questions and hence in answering the questions.

DESIGNING THE QUESTIONNAIRE

While proceeding to design a questionnaire, two key assumptions to be followed are:

3) The researcher assumes that the respondent is able and willing to communicate
the desired data either verbally to an interviewer or in writing on a questionnaire
form.

4) The researcher must assure that the information he/she obtains from the interview
and the questionnaire is essentially about the respondents verbal or written
behaviour.

While constructing a questionnaire or schedule, we must keep in mind two things

3) Objectives of the research project.

4) The respondent’s point of view.

Questionnaire or schedule designing consist of five steps as follows

6) Specifying data requirements.

 7) Determining the type of questions to be asked.

8) Deciding the number and sequence of questions.

9) Preparing the preliminary draft of questions.

10) Revising and pre-testing the questions.

These five steps are the guidelines for designing a questionnaire and
are generally applicable to both forms of questions asking instruments (questionnaire &
schedule). With the help of these steps, a careful planning of the questionnaire design can
be carried out in order to avoid various costly mistakes. Besides these five guidelines, a
researcher must have his own judgement while designing a questionnaire so that
necessary adjustment according to the project situations can be made.

ADVANTAGES OF QUESTIONNAIRE

6) In so far the questionnaire is usually mailed to the respondents and contains

specific, clear cut directions, the persons charges with collection of data need
not exert themselves on offering additional explanations or instructions. It is
obvious that the questionnaire technique does not call for any specific skills or
training on the part of the investigators in the field.

7) Since the questionnaire approach makes it possible to cover, at the same time, a
large territory, it is decidedly more economical in terms of money, time and
energy. Other methods do not afford such a facility.

8) The questionnaire by its very nature is an impersonal technique. Uniformity

from one measurement situation to another is provided by virtue of its
standardized sequence of questions and fixed or standardized instruction for
recording responses.

9) Yet another typical merit of the questionnaire is that it ensures anonymity. The
respondents have a greater confidence that they will not be identified as
holding a particular view or opinion.
 10) The questionnaire places less pressure on the respondents for immediate
response. The subject given ample time can consider each point carefully
before actually putting his reply in writing.

DISADVANTAGES OF QUESTIONNAIRE

6) One of the major limitations of the questionnaire is that it can be administered

only on subject with a considerable amount of education. Complex
questionnaire requiring elaborate written replies can be used indeed on a very
small percentage of population. It is seen that even the highly educated persons
have little facility for writing and even granting this, very few have the
motivation and patience to write as much as they speak out. Thus questionnaire
are hardly appropriate for a larger section of population.

7) In a mailed questionnaire, the proportion of returns is usually low; it may

sometimes be as 10%. Among the factors that may affect the returns are the
sponsoring agency, the attractiveness of the questionnaire, its length, nature of
the accompanying appeal, the case of filling out the questionnaire is sent etc.
Even under the best of circumstances, a considerable proportion does not return
the questionnaire.

8) In a questionnaire, if the respondent mis-interprets a question or writes his

reply unintelligibly, there is very little chance to correct this. In this approach
there is no facility for repeating questions, explaining them or seeking
clarification of a particular response. In a questionnaire approach, the validity
of respondents reports can hardly be appraised.

9) The usefulness of the questionnaire is restricted to issue on which the

respondents have more or less crystallized views that can be simply expressed
in wards.

10) The success of the questionnaire approach depends upon the sense of
responsibility among the subjects. A serious attempt at filling out the
 questionnaire – format presupposes, among other things, the awareness on the
part of the subjects of their responsibility to the larger institution of science.

QUESTIONNAIRE CONSTRUCTION

The entire process of questionnaire construction can be divided into

following aspects.

7) Information to be sought.

8) Type of questionnaire to be used.

9) Writing a first draft.

10) Re-examining and revising questions.

11) Pre-testing and editing the questionnaire.

12) Specifying procedure for its use.

CHOICE OF QUESTIONS

9) The researcher should include only such questions as have a direct bearing on
the problem itself or on the evaluation of the methodology adopted for the
study.

10) Questionnaire whose answers can be secured more accurately, easily and
effectively from other sources may be excluded.

11) The selection of questions should be done with an eye on the subsequent
tabulation plan.

12) In drawing up the schedule or questionnaire, other studies or surveys on

comparable material should be kept in mind. As far as feasible identical items,
terms, definitions and quantitative units of measurement should be employed.

13) Care should be taken while asking personal questions on those which may
embarrass the respondent,
 14) Only such factual questions, answers to which most of the informant can
reasonably be expected to know, should be avoided.

15) Questions that are likely to yield inaccurate responses should be avoided.

16) Questions which invoice too much mental effort on the part of the informant
should be avoided.

SAMPLING

The sampling method used for the study is convenience sample.

Convenience sampling

Convenience sampling is a type of non-probability sampling.

A convenience sampling is obtained by selecting convenience population units. The

method of convenience sampling is also called the chunk. A chunk refers to that fraction
of the population being investigated which is selected neither by probability nor by
judgement but by convenience.

Convenience samples are prone to bias by their very nature selecting population elements
which are convenient to choose almost always make them special or different from the
best of the elements in the population in some way.

The result obtained by following convenience sampling method can hardly be

representative of the population they are generally biased and unsatisfactory. However,
convenience sampling is often used for making pilot studies. Questions may be tested and
preliminary information may be obtained by the chunk before the final sampling design is
decided.

SAMPLE SIZE

The number of samples used to know the investor’s perception is thirty (30) and it
is collected from the investors who are trading at Cochin Stock Exchange.

INSTRUMENTATION TECHNIQUE
 This dissertation is basically focused on technical analysis of shares in BSE IT
sector Index. To get the data, the secondary data source was used. In this study the data
was collected from newspapers especially from Economic Times and Business Line. The
information related to the IT Index movement is collected from the Cochin Stock
Exchange.

OTHER SOFTWARE TOOLS USED FOE DATA ANALYSIS

Basically whole data analysis has been performed using spreadsheet in Excel by
using different statistical functions inbuilt in Excel. The following statistical functions
have been employed during the data analysis.

 Average: Calculates the average of a given data.

 The Simple Moving Averages of different days are calculated i.e. 10,50.100 and
200 days

LIMITATIONS

 Lack of time
 Complex method of calculation.
 Difficulty in forecasting market trend.
 Technical analysis is a terrific tool, but it is much more effective when
combined with fundamental analysis.
 DATA ANALYSIS AND INTERPRETATION

BSE IT Sector Index movement

fig: 5.1

Analysis and interpretation: The above figure shows the index movements of BSE IT
sector index from May to April for the year 2008. This graph shows the high, low, open
and close for each particular day. In the month of January the stock price is fluctuating
and the index gain 4.72 points. The BSE IT sectoral index open this year trading
(January) at 3444.48 and the month of January (January) was closed at 3749.2. The
highest closing point for the month of April is 4826.43 and the lowest point is 3350.73.

In the month of February the index open at 3749.32(February). The index was closed at
3706.3 by the end of February. In the month of February the stock price is fluctuating and
the index loses 43.02 points.

The highest closing point for the month of February is 3728.1 and the lowest point is
3626.07. The last price available in this chart is of 1st March. The opening was at 3702.89
and the day closed at 3811.11. The intra day trading shows an increase of 108.22 points.
 Table 5.1: Simple Moving Averages of 10, 50,100 and 200 days

month 10 Day moving 50 Day moving 100 day moving 200 day moving
avg avg avg avg
march 3689.564 3695.8516 3508.8997 3184.91775
feb 3671.06 3693.6682 3503.3716 3178.31775
3665.956 3692.4342 3498.092 3172.37815
3664.806 3689.9872 3492.0619 3166.3119
3672.753 3689.8044 3486.7559 3160.6833
3676.164 3687.9242 3480.6049 3154.955
3680.212 3685.8668 3474.6407 3148.9602
3681.757 3682.3526 3468.6807 3142.79335
3677.991 3678.685 3461.7185 3136.44705
3682.076 3675.0482 3455.1901 3130.0803
3690.435 3671.109 3449.7419 3123.8364
3702.748 3668.4542 3444.7301 3117.48185
3710.141 3664.4042 3438.9159 3111.11815
3712.682 3657.4386 3432.5157 3104.46355
3707.047 3651.711 3426.0139 3097.9608
3699.937 3646.14 3419.2842 3091.662
3687.174 3640.2844 3412.6733 3085.36615
3683.038 3634.7712 3406.0514 3078.8119
3686.079 3629.5288 3399.8019 3072.40375
3672.634 3623.0852 3393.1753 3065.7102
jan 3657.358 3615.264 3385.8293 3059.13845
3641.624 3607.0444 3378.1229 3052.5648
3634.03 3600.0364 3370.8747 3046.8922
3625.754 3592.5348 3363.7315 3041.18125
3631.014 3586.7732 3356.9184 3035.63885
3643.441 3580.0542 3349.9174 3030.4768
3665.619 3575.0222 3342.7998 3025.94365
3680.437 3567.394 3335.0223 3021.21
3696.3 3559.0368 3326.9281 3016.33305
3718.503 3553.7552 3319.7944 3012.13295
3734.025 3547.4234 3312.7962 3007.9008
3539.449 3305.9646 3003.44825
3529.0222 3298.3455 2998.2081
3518.1396 3290.7346 2992.9185
3503.719 3282.6466 2987.43835
3489.7042 3273.3907 2981.5437
3476.3116 3263.9113 2975.57485
3463.3434 3254.8878 2969.93565
3449.1742 3245.7475 2964.33345
3436.9082 3236.3536 2958.8977
Table 5.2: BSE IT Index Table from 3/1/2007 –1/3/2008

Date Open High Low Close

2008/03/01 3702.89 3823.5 3678.81 3811.11
2008/02/28 3739.91 3757.51 3683.87 3706.3
2008/02/27 3646.21 3733.93 3646.21 3728.1
2008/02/24 3691.4 3694.03 3643.26 3647.25
2008/02/23 3685.65 3699.12 3675.63 3688.79
2008/02/22 3684.12 3690.34 3657.71 3676.48
2008/02/21 3690.99 3700.7 3670.41 3683.8
2008/02/20 3633.76 3681.23 3604.87 3675.05
2008/02/17 3649.87 3673.46 3634.69 3644.33
2008/02/16 3635.82 3677.04 3628.65 3634.43
2008/02/15 3684.62 3688.68 3606.55 3626.07
2008/02/14 3715.52 3715.63 3651.46 3655.26
2008/02/13 3731.4 3745.08 3712.04 3716.6
2008/02/10 3735.56 3757.61 3702.41 3726.72
2008/02/08 3717.09 3730.47 3680.19 3722.9
2008/02/07 3705.87 3740.27 3703.33 3716.96
2008/02/06 3635.44 3710.07 3632.83 3699.25
2008/02/03 3686.17 3686.17 3632.54 3637.39
2008/02/02 3722.6 3745.62 3677.13 3685.18
2008/02/01 3749.32 3766.57 3703.81 3718.02
2008/01/31 3738.33 3760.3 3733.8 3749.2
2008/01/30 3745.19 3765.49 3712.27 3729.19
2008/01/27 3700.46 3748.37 3700.46 3742.01
2008/01/25 3660.62 3697.77 3659.52 3670.37
2008/01/24 3609.31 3660.52 3609.31 3651.8
2008/01/23 3636.78 3636.78 3581.09 3589.33
2008/01/20 3696.11 3719.88 3644.11 3657.89
2008/01/19 3570.4 3674.83 3570.4 3667.8
2008/01/18 3558.5 3586.31 3527.06 3550.73
2008/01/17 3592.45 3634.19 3555.46 3565.26
2008/01/16 3656.61 3660.5 3583.59 3591.86
2008/01/13 3690.84 3690.84 3642.92 3653.25
2008/01/12 3568.54 3671.81 3566.39 3659.25
2008/01/10 3774.51 3786.3 3714.65 3722.97
2008/01/09 3821.63 3836.2 3761.93 3776.07
2008/01/06 3809.42 3817.82 3771.44 3811.11
2008/01/05 3824.6 3837.26 3794.78 3806.07
2008/01/04 3700.13 3834.27 3700.13 3826.43
Date Open High Low Close
2008/01/03 3719.56 3778.56 3719.56 3772.76
2008/01/02 3744.48 3750.62 3714.69 3720.48
2007/12/30 3722.27 3755.57 3710.49 3742.74
2007/12/29 3712.86 3741.7 3706.11 3722.58
20075/12/28 3704.99 3727.67 3678.11 3708.44
200/12/27 3633.07 3719.66 3623.86 3715.11
2007/12/26 3694.88 3698.27 3635.5 3644.38
2007/12/23 3729.68 3751.82 3685.1 3693.36
2007/12/22 3724.07 3724.66 3692.28 3709.93
2007/12/21 3698.56 3736.5 3664.69 3693.51
2007/12/20 3752.85 3752.85 3686.91 3696.7
2007/12/19 3695.07 3757.35 3690.45 3752.01
2007/12/16 3661.38 3712.79 3626.1 3701.94
2007/12/15 3608.32 3660.76 3608.32 3644.6
2007/12/14 3628.42 3638.49 3589.15 3605.75
2007/12/13 3600.54 3644.97 3583.55 3638.11
2007/12/12 3592.94 3606.03 3552.11 3594.78
2007/12/09 3506.21 3584.17 3502.6 3573.61
2007/12/08 3499.92 3526.54 3479.47 3508.09
2007/12/07 3468 3508.47 3457.19 3491.67
2007/12/06 3436.09 3502.14 3425.51 3462.49
2007/12/05 3498.45 3506.78 3429.49 3437.47
2007/12/02 3487.82 3541.5 3480.58 3493.33
2007/12/01 3370.04 3463.55 3358.09 3452.76
2007/11/30 3452.14 3461.65 3359.94 3368.32
2007/11/29 3424.23 3445.9 3395.71 3440.34
2007/11/28 3425.76 3459.54 3425.76 3444.35
2007/11/26 3423.69 3437.96 3415.92 3424.18
2007/11/25 3378.2 3433.2 3378.2 3423.59
2007/11/24 3365.83 3401.07 3365.68 3375.27
2007/11/23 3328.42 3370.42 3324.7 3363
2007/11/22 3333.36 3380.3 3318.08 3326.96
2007/11/21 3380.23 3389.33 3326.58 3338.22
2007/11/18 3386.4 3409.51 3364.41 3378.79
2007/11/17 3387.8 3388.92 3340.59 3366.93
2007/11/16 3322.71 3387.2 3320.61 3382.29
2007/11/14 3343.58 3361.77 3292.54 3315.85
2007/11/11 3294.29 3342.98 3294.29 3337.73
2007/11/10 3256.9 3286.41 3241.77 3276.48
2007/11/09 3288.35 3301.69 3233.54 3249.94
Date Open High Low Close
2007/11/08 3254.46 3296.65 3248.09 3286.65
2007/11/07 3197.36 3259.48 3188.37 3248.67
2007/11/02 3145.54 3204.3 3089.43 3193.14
2007/11/01 3145.74 3160.14 3119.15 3131.91
2007/10/31 3023.46 3120.24 3023.46 3115.12
2007/10/28 3064.41 3064.41 2985.14 3001.94
2007/10/27 3150.28 3150.28 3062.35 3075.33
2007/10/26 3158.99 3173.71 3136.74 3141.48
2007/10/25 3148.63 3187.04 3126.36 3157.66
2007/10/24 3179.75 3186.06 3104.72 3117.97
2007/10/21 3122.19 3172.38 3118.91 3159.46
2007/10/20 3125.25 3170.74 3083.7 3126.23
2007/10/19 3093.61 3111.12 3055.19 3076.36
2007/10/18 3176.62 3209.62 3090.08 3108.45
2007/10/17 3185.51 3202.24 3155.05 3164.59
2007/10/14 3221.04 3234.12 3167.35 3175.82
2007/10/13 3275.33 3281.01 3199.73 3217.26
2007/10/11 3302.21 3317.59 3227.5 3287.99
2007/10/10 3195.17 3259.67 3195.17 3234.27
2007/10/07 3211.52 3242.38 3167.64 3186.65
2007/10/06 3245.35 3269.19 3199.59 3213.27
2007/10/05 3264.89 3275.17 3223.75 3260.33
2007/10/04 3176.82 3263.4 3170.76 3258.3
2007/10/03 3141.45 3182.82 3136.18 3178.34
2007/09/30 3127.3 3143.43 3095.53 3125.09
2007/09/29 3081.21 3139.14 3081.21 3116.65
2007/09/28 3076.01 3078.16 3029.63 3073.69
2007/09/27 3092.41 3119.02 3062 3080.06
2007/09/26 3006.11 3092.21 2994.27 3087.8
2007/09/23 3007.88 3030.62 2964.98 2978.83
2007/09/22 3083.05 3083.05 2978.46 2991.49
2007/09/21 3127.33 3138.3 3037.11 3089.61
2007/09/20 3038.9 3144.47 3038.16 3124.89
2007/09/19 3082.49 3084.17 3068.74 3073.84
2007/09/16 3085.04 3090.79 3062.35 3076.58
2007/09/15 3051.02 3080.78 3049.08 3076.54
2007/09/14 3059.8 3084.87 3023.14 3049.93
2007/09/13 3037.43 3060.39 3030.8 3055.87
20075/09/12 3017.58 3045.36 3017.58 3037.06
200/09/09 3023.57 3033.58 2994.42 3012.44
Date Open High Low Close
2007/09/08 2986.46 3025.65 2986.46 3022.52
2007/09/06 2983.79 3000.31 2963.89 2983.42
2007/09/05 3003.51 3032.39 2973.55 2978.56
2007/09/02 3037.07 3054.67 2992.46 3004.37
2007/09/01 3017.48 3055.26 3017.48 3027.69
2007/08/31 2948.02 2994.83 2936.32 2989.06
2007/08/30 2898.74 2955.34 2894.21 2951.7
2007/08/29 2880.17 2886.9 2839.23 2877.57
2007/08/26 2870.94 2904.42 2856.03 2880.14
2007/08/25 2871.78 2871.78 2838.4 2858.38
2007/08/24 2866.92 2868.44 2820.37 2837.36
2007/08/23 2913 2920.47 2861.16 2865.44
2007/08/22 2918.73 2935.96 2896.49 2908.7
2007/08/19 2900.05 2918.04 2886.61 2891.34
2007/08/18 2924.95 2929.65 2890.23 2898.16
2007/08/17 2841.16 2921.15 2837.52 2914.17
2007/08/16 2872.33 2875.32 2836.25 2850.48
2007/08/12 2910.67 2918.38 2856.49 2863.17
2007/08/11 2922.66 2927.35 2887.75 2903.72
2007/08/10 2838.75 2922.02 2838.75 2912.4
2007/08/09 2848.95 2868.77 2815.79 2833.37
2007/08/08 2868.73 2868.73 2829 2840.74
2007/08/05 2914.39 2914.39 2871.61 2875.02
2007/08/04 2959.22 2959.48 2887.85 2907.93
2007/08/03 2889.96 2947.86 2889.96 2935.04
2007/08/02 2813.01 2877.2 2813.01 2870.75
2007/08/01 2812.67 2824.3 2787.22 2810.86
2007/07/29 2813.21 2860.61 2812.33 2833.63
2007/07/27 2797.39 2832.13 2797.39 2828.15
2007/07/26 2804.11 2811.71 2783.84 2799.64
2007/07/25 2832.53 2846.02 2799.27 2804.66
2007/07/22 2783.84 2834.98 2760.01 2828.7
2007/07/21 2806.07 2823.53 2777.08 2789.56
2005/07/20 2821.43 2825.99 2798.9 2801.67
2007/07/19 2808.62 2834.88 2802.98 2811.52
2007/07/18 2773.66 2825.11 2770.74 2817.42
2007/07/15 2686.99 2740.45 2684.34 2732.6
2007/07/14 2757.87 2765.49 2664.34 2673.61
2007/07/13 2765.51 2794.47 2744.05 2747.68
2007/07/12 2810.33 2822.6 2744.46 2770.5
Date Open High Low Close
2007/07/11 2863.51 2886.54 2840.18 2848.47
2007/07/08 2837.63 2871.31 2828.18 2852.03
2007/07/07 2873.08 2891.09 2816.74 2824.88
2007/07/06 2853.38 2879.12 2848.38 2870.16
2007/07/05 2920.96 2930.55 2843.32 2851.47
2007/07/04 2851.52 2927.73 2851.52 2923.78
2007/07/01 2864.78 2900.34 2864.78 2888.19
2007/06/30 2861.82 2913.17 2861.82 2897.35
2007/06/29 2825.62 2856.22 2822.35 2849.96
2007/06/28 2858.28 2867.09 2810.1 2813.7
2007/06/27 2845.21 2880.27 2843.52 2856.89
2007/06/24 2866.12 2880.38 2835.31 2852.58
2007/06/23 2915.3 2917.25 2869.83 2874.38
2007/06/22 2895.83 2934.03 2893.07 2917.16
2007/06/21 2878.92 2910.05 2850.49 2902.9
2007/06/20 2805.69 2888.31 2805.69 2881.58
2007/06/17 2793.58 2805.7 2776.45 2796.5
2007/06/16 2781.35 2803.66 2770.03 2790.54
2007/06/15 2748.74 2779.07 2741.61 2775.78
2007/06/14 2745.8 2753.19 2733.46 2741.08
2007/06/13 2728.67 2748.96 2715.63 2734.18
2007/06/10 2753.64 2765.36 2714.25 2719.9
2007/06/09 2791.15 2791.15 2728.95 2737.9
2007/06/08 2702.4 2800.42 2702.4 2792.71
2007/06/07 2716.73 2742.13 2716.73 2735.28
2007/06/06 2732.96 2757.77 2706.05 2719.03
2007/06/04 2733.32 2747.66 2729.67 2744.08
2007/06/03 2685.96 2768.95 2681.03 2752.67
2007/06/02 2723.48 2729.53 2682 2688.56
2007/06/01 2749.29 2750.51 2711.47 2718.82
2007/05/31 2713.97 2749.91 2704.06 2745.95
2007/05/30 2715.61 2734.62 2693.59 2713.54
2007/05/27 2721.73 2750.54 2712.15 2724.33
2007/05/26 2659.4 2714.15 2658.52 2697.72
2007/05/25 2638.09 2683.05 2612 2662.09
2007/05/24 2642.32 2658.54 2618.58 2639.71
2007/05/23 2599.34 2637.35 2588.33 2623.81
2007/05/20 2550.17 2600.3 2532.84 2593.24
2007/05/19 2527.21 2568.3 2527.21 2557.22
2007/05/18 2519.16 2519.16 2467.43 2508.2
Date Open High Low Close
2007/05/17 2546.8 2563.17 2512.26 2522.11
2007/05/16 2493.62 2540.19 2493.62 2534.74
2007/05/13 2505.98 2505.98 2483.93 2491.11
2007/05/12 2510.27 2523.86 2500.28 2518.38
2007/05/11 2504.33 2522.56 2485.41 2514.85
2007/05/10 2545.41 2552.62 2514.21 2521.53
2007/05/09 2476.17 2547.96 2476.17 2543.13
2007/05/06 2457.13 2484.47 2446.82 2477.52
2007/05/05 2422.92 2463.38 2422.92 2450.43
2007/05/04 2373.93 2410.61 2373.56 2405.79
2007/05/03 2391.31 2394.5 2368.18 2370.98
2007/05/02 2386.94 2396.55 2359.72 2385.65
2007/04/29 2390.48 2394.17 2344.4 2355.16
2007/04/28 2373.08 2391.11 2366.7 2382.52
2007/04/27 2384.13 2402.69 2355.16 2385.68
2007/04/26 2446.77 2453.13 2422.06 2426.17
2007/04/25 2471.38 2471.38 2448.13 2463.14
2007/04/22 2425.09 2466.07 2425.09 2457.79
2007/04/21 2361.69 2394.21 2335.96 2388.4
2007/04/20 2344.93 2363.19 2304.67 2355.76
2007/04/19 2419.29 2460.45 2331.58 2346.47
2007/04/18 2416.51 2435.57 2384.22 2403.67
2007/04/15 2456.26 2473.24 2428.32 2434.47
2007/04/13 2593.62 2622.68 2578.37 2594.67
2007/04/12 2566.5 2606.75 2565.25 2599.82
2007/04/11 2601.58 2601.58 2555.73 2561.89
2007/04/08 2674.73 2675.88 2612.36 2619.39
2007/04/07 2715.83 2730.19 2672.35 2682.7
2007/04/06 2697.43 2718.75 2687.51 2711.16
2007/04/05 2709.32 2726.44 2685.42 2692.41
2007/04/04 2722.28 2746.69 2690.87 2710.71
2007/04/01 2701.51 2723.83 2657.68 2718.83
2007/03/31 2622.63 2728.86 2622.63 2701.35
2007/03/30 2592.33 2614.32 2579.98 2605.22
2007/03/29 2626.7 2626.7 2583.76 2601.33
2007/03/28 2607.62 2658.88 2606.35 2626.94
2007/03/24 2605.51 2639.03 2588.29 2597.14
2007/03/23 2673.75 2679.22 2607.92 2617.34
2007/03/22 2701.93 2710.96 2671.04 2678.23
2007/03/21 2690.56 2718.25 2685.55 2705.99
Date Open High Low Close
2007/03/18 2668.2 2688.86 2629.66 2685.61
2007/03/17 2673.35 2698.69 2663.81 2669.6
2007/03/16 2678.01 2708.61 2666.22 2679.45
2007/03/15 2716.22 2719.49 2682.52 2688.54
2007/03/14 2706.23 2734.8 2683.3 2713.94
2007/03/11 2715.89 2730.61 2696.03 2702.63
2007/03/10 2713.39 2720.5 2683.7 2714.27
2007/03/09 2736.83 2753.02 2703.18 2730.1
2007/03/08 2720.11 2758.89 2710.56 2739.63
2007/03/07 2711.48 2728.08 2695.19 2720.35
2007/03/04 2679.61 2713.37 2679.61 2702.03
2007/03/03 2643.88 2689.11 2635.6 2679.27
2007/03/02 2636.09 2655.42 2610.73 2635.88
2007/03/01 2699.01 2699.01 2624.27 2629.94
2007/02/28 2650.22 2704.37 2608.49 2699.27
2007/02/25 2628.93 2652.12 2623.45 2636.91
2007/02/24 2622.64 2647.19 2616.69 2626.03
2007/02/23 2633.24 2633.57 2608.61 2614.62
2007/02/22 2615.92 2646.37 2600.76 2635.05
2007/02/21 2646.18 2646.18 2605.08 2617.23
2007/02/18 2653.25 2669.9 2637.23 2646.54
2007/02/17 2653.88 2662.71 2625.98 2657.32
2007/02/16 2684.19 2701 2653.75 2665.16
2007/02/15 2687.35 2690.92 2650.96 2678.8
2007/02/14 2664.08 2694.74 2651.91 2685.31
2007/02/11 2570.98 2618.29 2570.98 2615.94
2007/02/10 2554.65 2565.08 2542.29 2553.1
2007/02/09 2553.31 2575.7 2553.31 2561.01
2007/02/08 2546.54 2558.46 2534.85 2550.57
2007/02/07 2600.71 2600.8 2533.26 2540.11
2007/02/04 2600.04 2614.18 2575.84 2583.07
2007/02/03 2570.38 2603.35 2557.91 2594.43
2007/02/02 2574.3 2602.93 2552.67 2558.65
2007/02/01 2578.98 2588.65 2549.97 2564.7
2007/01/31 2539.35 2591.18 2534.82 2570.09
2007/01/28 2456.14 2536.55 2453.22 2530.22
2007/01/27 2415.09 2452.96 2415.09 2446.69
2007/01/25 2366.94 2406.1 2362.1 2400.63
2007/01/24 2415.59 2428.2 2367.39 2378.77
2007/01/20 2428.48 2433.28 2393.92 2424.96
Date Open High Low Close
2007/01/19 2459.63 2466.12 2424.13 2430.66
2007/01/18 2467.82 2488.6 2434.3 2444.99
2007/01/17 2451.3 2466.83 2391.83 2449.56
2007/01/14 2455.65 2474.7 2433.16 2446.05
2007/01/13 2427.67 2466.13 2427.67 2449.47
2007/01/12 2500.79 2515.45 2372.39 2390.56
2007/01/11 2497.02 2514.18 2451.94 2465.4
2007/01/10 2566.83 2582.87 2479.49 2491.92
2007/01/07 2530.04 2568.57 2503.41 2556.31
2007/01/06 2561.9 2592.31 2496.94 2536
2007/01/05 2610.97 2610.97 2509.11 2563.14
2007/01/04 2657.91 2657.91 2626.12 2630.1
2007/01/03 2632.56 2656.52 2630.82 2654.22
Momentum

Momentum refers to trend. When the momentum is positive it indicates an uptrend and
when the momentum is negative it indicates a downward trend.

The formula for calculating momentum is:

Momentum = Close today – Close N days ago

Calculation of Momentum

N = 200 days

Close today= 3811.11, Close 200 days ago= 2534.74

Momentum = 3811.1- 2534.74=1276.37

N = 100 days

Close today = 3811.11, Close 100 days ago= 3260.33

Momentum = 3811.11-3260.33= 550.78

N = 50 days

Close today = 3811.11, Close 50 days ago = 3752.01

Momentum = 3811.11-3752.01 = 59.1

N = 30 days

Close today = 3811.11, Close 30 days ago = 3565.26

Momentum = 3811.11-3565.26 = 245.85

N = 20 days
Close today = 3811.11, Close 20 days ago = 3718.02

Momentum = 3811.11-3718.02 = 93.09

N = 10 days

Close today = 3811.11, Close 10 days ago = 3634.43

Momentum = 3811.11-3634.43 = 176.68

N = 1 day
Close today = 3811.11, Close 1 day ago = 3706.30
Momentum = 3811.11-3706.30 = 104.81

Momentum Chart

1500
1250
Momentum

1000
750
500
250
0
10 20 30 50 100 200
Number of Days

fig: 5.2

Analysis and interpretation: Here momentum of different days is calculated. The

closing prices of past N days are taken for calculation. Mainly the momentum of 200
days, 100 days, 50 days, 30 days, 20 days, 10 days and one day ago are calculated. All
these show a positive momentum. When analyzing the momentum chart the 200 days
closing shows an increase of 1276.37 point, the 100 days closing shows a difference of
550. 78 point, and the 50 days closing shows a difference of 59.1 i.e. an upward
momentum. The index shows an upward trend during the period between the 50 days
closing and 200 days closing. The days between 10 to 50 are moves both sides up and
down.

We can interpret that the BSE IT sectoral indices are

showing an upward trend. it’s a good sign for the traders i.e. Once a momentum trader
sees an acceleration in a stock's price, earnings, or revenues, the trader will often take a
long or short position in the stock with the hope that its momentum will continue in either
an upwards or downwards direction.

Rate of Change (ROC)

Rate of change is a technical indicator that measures the percentage change between the
most recent price and the price "N" periods in the past.

ROC is a simple yet effective momentum indicator that compares the price today with the
price N periods ago.

Rate of Change = Close today – Close N days ago

Close N days ago

Calculation of Rate of Change

N = 10 days ago
R = 3811.11 – 3634.43 = 176.68 = 0.0486 = 4.86%
3634.43 3634.43

N = 20 days ago
R = 3811.11 – 3718.02 = 93.09 = 0.0250 = 2.5%
3718.02 3718.02

N = 30 days ago
R = 3811.11 – 3565.26 = 254.85 = 0.06895 = 6.89%
3565.26 3565.26
N = 50 days ago
R = 3811.11 – 3752.01 = 59.1 = 0.0157 = 1.57%
3752.01 3752.01

N = 100 days ago

R = 3811.11 – 3260.33 = 550.78 = 0.1689 = 16.89%
3260.33 3260.33

N = 200 days ago

R = 3811.11 – 2534.74 = 1276.37 = 0.5035 = 50.35%
2534.74 2534.74

Analysis and Interpretation: Here Rate of Change (ROC) of different days is

calculated. The closing prices of past N days are taken for calculating ROC. Mainly the
ROC of 10 days, 20 days, 30 days, 50 days, 100 days, and 200 days ago are calculated.
All these show a positive percentage change. . When analyzing the ROC calculation of
200 days it shows an increase of 50.35%, the 100 days ROC shows a +16.89%, and the
50 days ROC shows a +1.57%.i.e. an upward momentum. The index shows an upward
trend during the period between the 50 days closing and 200 days closing. The ROC
between 10 to 50 days is also positive.

We can interpret that the BSE IT sectoral indices are showing an

upward trend. While we analyzing the past performance there was a +50% change in
index. When the ROC is showing positive i.e. a value greater than zero, it indicates
acceleration in the prices and there is no selling pressure for the trader. Therefore we can
state here that the ROC is rising, it gives a short-term bullish signal.

Trend line

Trend in price of a financial security is intuitively the general direction of its movement.
Trend analysis is specific to the time frame – based on price ranges.
 ONE MONTH TREND LINE

fig: 5.3

Analysis and Interpretation: The above figure shows the one month trend line i.e. of
February. In the month of February the index open at 3718.02(February). The one month
trend line indicates that the IT sector stocks are moving both directions. The index drops
first then it starts rising and the trend continues up to February, then again start
decreasing for 3 trading days. Again the index starts rising and it continue for the 4
trading days after that the trend moves continuously up and down.

From this one month trend line we cannot able to clearly predict where the index is
heading. The trend line shows both types of movements upward and downward.

Simple Moving Average

Moving Average is the most popular and easy to use tools available to the technical
analyst. By using an average of prices, moving averages smooth a data series and make it
easier to spot trends. Moving Average is used as an indicator frequently used in technical
analysis showing the average value of a security's price over a set period.

10 day moving average of APRIL

 fig: 5.4

Analysis and Interpretation: The above figure shows the 10 day moving average of the
IT sector index for the month of February. This is a short term moving average and we
can see both types of movement i.e. upward and downward swings. In the beginning of
the month there exist an upward trend and the 10 day moving average reaches a peak of
3712.682 and after that the moving average go for a downward swing for a period of 5
days again it show an upward trend. But after that it again moves downward direction.
Later by last week of this month the moving average shows an upward trend.

From this figure we can’t able to clearly predict where the index is heading, most of the
days the index is showing a downward trend. But we can state an upward trend at the
end of the month.

MOVING AVERAGE ONE MONTH AND SIX MONTH

 fig: 5.5

Analysis and Interpretation: The above figure shows the 50day and 200 day moving
average of the IT sector index for 2008 i.e. from January 2 to March 1. The 50 day
moving average is considered as a short term moving average, while the 200 day moving
average is considered as the long term moving average. Here we can see that the 50 day
moving average lie above the 200 day moving average. The gap between these two
averages also remains same for the two months.
7
From these we can interpret that there exist an upward trend i.e. indication of a bull
9
market.
S
E
A
R
C
H
 M

C
E

H
T

M
H

E
O

T
H
D

O
O

D
Moving Average- 2007 to 2008
L

O
L
O

O
4500
G

G
Y
4300
Y
10 day 4100
50 day 3900
100 day
200 day 3700
3500

3300

3100

fig: 5.6

Analysis and Interpretation: The above figure shows the10 day, 50 day, 100 day and
200 day moving average of the IT sector index from 2005 January to 1st March of 2006.
The 10 day moving average and 50 day moving average is considered as a short term
moving average, while the 100 day and 200 day moving average is considered as the long
term moving average. The short term moving average lines lie well above the long term
lines; this is an indicator that the index is climbing up. The gap between the short term
and the long term moving average line remains same through out the period. The two
short term lines are moving close to each other and by the middle of February (17/2/06)
the 50 day moving average crosses over the 10 day moving average; this may be an
indicator for a downward fall.

By analyzing the long term moving average and the short term moving
average we can predict an upward momentum in the market. There exists a bull market
for a period of last one year.

Moving Average Chart With Index Movement From 29/7/04 to 1/3/06

 fig: 5.7

Analysis and Interpretation: This chart shows the BSE IT index movement and also the
moving average.
The Chart shows the IT index movement from 29/7/2004 to 1/3/2006.
Here the green line showing the movement of the IT index, the green line is
climbing indicating an increase in the points. The red line indicates the 14 days
moving average
In the beginning of the chart (29/7/04) the index is below 2200 points and by the
end of the chart (1/3/06) the index reached above 3700 points. By analyzing this
long time index movement we can interpret that the index climbed more than1500
points, indicating an upward trend.

To explore investor’s perspective towards IT sector stocks.

2) Investor’s feeling about the recent bullish trend in the Indian share market.

Investors feel the recent bullish trend in the share market is good.
50% of the respondents feel it is very good and 40% feel it is good and 10% feel it is
ok.
 ok

ok
very good
good
good very good o.k
bad

fig: 5.8

2) How far the Sensex will go in the next one year period?
The investors have an optimistic look on the Sensex for this year.
70% of the respondents predict that the Sensex will lie between 12000 – 15000 points,
while 20% predict that it will stand between 10000 – 12000 points. 6.7% of the
respondents predict that the Sensex will go above 15000 mark and a 3.3% predict it goes
below the 10000 mark.

70
60
50
40
30
SENSEX
20
10
0
below 8000- 10,000 - 12,000 - Above
8000 10000 12,000 15,000 15000

fig: 5.9

3) Do investor’s analyze the trends in the market before going for investment in
stocks?

For this question 83.3% said yes and 16.7% said no. This is a good
sign i.e. above 80% of the respondents analyzing the trends in the market.
4) Do investor’s analyze the historical data or past performance of stocks before
going for investment?

Out of the 30 respondents 29 said yes i.e. 96.7% analyze the

historical data before going for investment and one said no i.e. 3.3%

5) Investor’s opinion about the IT industry.

A 43.3% of respondents said IT industry is booming, 26.7% said
that the industry is growing but at a slow pace and 30% have the opinion that it is ok. In
short investors have a good opinion about the IT industry. No one has the opinion that the
IT industry is declining.

booming
30%
growing at a slow
43.3% pace
ok

26.7% declining

fig: 5.10

7) Investor’s evaluation about the IT stocks prices

 Majority of the respondents said that the IT stock prices are
reasonable i.e. about 66.7% and the remaining 33.3% have the opinion that its
prices are over valued. None of the respondents said that its prices are under
valued.

over valued
33.3%
66.7%

reasonable under
valued

fig: 5.11

13) Investor’s portion of investment in IT stocks.

• 10% of the respondent invest their 3/4th of money in IT stocks.

• 13.3% of the respondent invests ½ of their money in IT stocks.

 • 50% of the respondent invests 1/4th of their money in IT stocks.

• The remaining 26.7% not invested any portion in IT stocks.

10%

26.7%
13.3% none
1/4th
half
3/4th
50%

fig: 5.12

14) How investors forecast the IT stock performance in 2006?

Investors are predicting a good performance of IT stocks for the

year 2006.

• 20% predicts an excellent performance

• 63.3% predicts a good performance.

• 10% predicts ok

• The remaining 6.7% predicts a bad performance of IT stocks for this year.

15) How much portion the investors are intending to invest in IT stocks this
year?

Majority of the investors are willing to invest in the IT stocks.

About 80% of the respondents are intending to invest a portion of their investment in IT
stocks this year.
 • 20% of the investors are intending to invest ½ of their investment into IT
stocks.

• 60% are intending to invest 1/4th of their investment in IT stocks.

• The remaining 20% are not interested to invest any portion of their money
in stocks this year.

20% 20%
none
1/4th
half
60% 3/4th

fig: 5.13

16) Which sector investor think is safer for investment?

Sectors Automobile Banking FMCG IT Oil and Gas Pharma Others

Points 10 10 11 7 9 11 4
Table: 5.3
Table Showing The Sector Which Investor’s Think Safer For Investment

By analyzing the investors’ response, the pharma sector stocks and FMCG
get more preference. These two sectors got more points. The increased income of
rural population and benefit from low-cost material helps the FMCG sector. The
pharma sector is also performing well. The recent global agreements under the
W.T.O will fuel Indian companies’ expansion plan. Then the next preference is for
 Automobile sector and Banking sector, both are showing good potential. The third
preference for safer investment according to the investor is Oil and Gas sector.
Foreign investors are keen on oil PSU and ONGC, which they feel are
undervalued. The fourth preference is for IT sector stocks where the IT stocks like
TCS, Infosys etc are performing well. The last preference is for other sectors
category.

Here we can interpret that the investors are not much preferred in investing in IT
stocks as a safer investment. They are giving more importance to the FMCG and
the Pharma sector stocks for safer investment. Also the Automobile, Banking, Oil
and Gas sector stocks get more preference as a safer investment than IT sector
stocks.

17) Which sector investor think will give more return?

Sectors Automobile Banking FMCG IT Oil and Gas Pharma Others

Points 10 2 10 13 5 11 4

Table: 5.4
Table Showing The Sector Which Investor’s Think Will Give More
Return

According to the investors response the IT sector is preferred as the

best sector for giving more return to the investors. Next preference is for the
Pharma sector, the third preference is for the Automobile and the FMCG sectors.
 The oil and gas sector stands fourth according to the investors’ preference. The
fifth preference is for other sectors category (steel, cement etc) for more return and
the last choice is Banking sector.

Here we can interpret that IT sector stocks are considered by the investors for
getting more returns. Since they are considered as the stocks that are giving more
returns the investors are also aware of the risk factors.

From the above table: Table 5.1 we can understand that investors preferred IT
sector stocks least for a safer investment.

18) Rank of different sectors according to the investors preference.

Sectors Rank 1 Rank 2 Rank 3 Rank 4 Rank 5 Rank 6 Rank 7

Automobile 20% 20% 30% 20% 3.3% 6.7% 0%
Banking 3.3% 6.7% 26.7% 20% 20% 20% 3.3%
FMCG 20% 16.7% 10% 13.3% 20% 20% 0%
IT 20% 13.3% 16.7% 10% 20% 10% 10%
Oil and Gas 6.7% 30% 6.7% 6.7% 23.3% 16.7% 10%
Pharma
16.7% 13.3% 10% 30% 13.3% 16.7% 0%
Others 13.3% 0% 0% 0% 0% 10% 76.7%

Table: 5.5
Table Showing The Rank Of Different Sectors According To The Investors
Preference.

Here the Automobile, FMCG and IT sector stocks get more preference as their
first choice sectors. By combining the first three rank choices Automobile sector is found
to be the hot sector for the investors (70%).
The second choice is for the IT sector stocks (50%). The third preference is for the
FMCG sector stocks (46.7%). The fourth rank goes for the Oil and Gas sector (43.4%).

Thus by analyzing the Investors responses we can conclude that the investors have a very
good interest in investing in the IT sector stocks. Above 80% of the respondents are
invested in IT sector stocks and are also intending to invest in this sector. The investors
considered IT as the sector which will give more returns. Also investors give their second
preference for IT sector for investment; they are positioned just behind of the Automobile
sector.

Findings and Conclusion

• Momentum of different days is calculated and BSE IT sectoral indices are

showing an upward trend. There is acceleration in prices and it’s a good sign for
the traders.
• Rate of Change (ROC) of different days is calculated. The ROC is showing
positive i.e. a value greater than zero, it indicates acceleration in the prices and
there is no selling pressure for the trader.

• The one month trend line moves continuously up and down. The closing prices
are analyzed and from this one month trend line we cannot able to clearly predict
where the index is heading.

• When comparing the simple moving average line of short term (10 days, 50 days)
with the long term (100 days, 200 days) moving average:

 They indicate an upward trend in the index.

 Sign of a bull market.

• Investor’s perspective towards IT sector stocks:

 Above 80% of the investors analyze the trends and the past
performance of the stocks in the market.
 Majority of the respondents said that the IT stock prices are
reasonable i.e. about 66.7%.
 About 73.3% of the respondents invested in IT stocks.

 About 80% of the respondents are intending to invest a portion of

their investment in IT stocks this year.
 Investors are predicting a good performance of IT stocks for the
year 2008.

(20% of investors predict an excellent performance and 63.3% predicts a

good performance)

 The investors are not much preferred in investing in IT stocks as a safer

investment. They are giving more importance to the FMCG and the Pharma sector
 stocks for safer investment. Also the Automobile, Banking, Oil and Gas sector
stocks get more preference as a safer investment than IT sector stocks.

 IT sector stocks are considered as the best sector by the investors for getting
more returns.

 The rank given by the investors according to their preference:

Automobile sector is found to be the hot sector for the investors (70%).

The second choice is for the IT sector stocks (50%).

The third preference is for the FMCG sector stocks (46.7%).

The fourth rank goes for the Oil and Gas sector (43.4%).

CONCLUSION
The prime objective of the study is to analyze the market movement of the BSE IT
sector index by using technical analysis.
For technical analysis of the index different tools are used they are the Momentum,
Rate of Change, Trend line and Simple Moving Average. These technical tools help
in analyzing the market movement and also they can use these tools to predict the
trends in the market. Investors main objective in the share market is to get profit by
buying and selling of the securities. Technical analysis helps in predicting the price
and it helps the investor to gain benefits. Also the technical analysis provides
indicators of different stocks i.e. where the stocks are heading or there exist a bull,
bear or stag in the market etc. These indicators help the investors in reducing the risk
and to gain better return.

Another objective of the study is to explore investor’s perspective towards the IT

stocks. The investors feel good about the sensex new heights and they are optimistic
about the trend in the market. Most of the investor’s analyze the market trends and the
past performance of the stocks before them going to invest. The investors are willing
to invest in the IT stocks and the majority thinks IT sector stocks will give more
returns than other sectors. The investors also rank the IT sector stocks as their second
best preference after the Automobile Sector stocks. But majority of the investors are
not considering IT as their safer investment option.
Finally we can conclude that the Sensex and other Sectoral Indices will continue their
good performance and hope it will boost up the Indian economy to make India a
super power in the near future.

SUGGESTIONS
 The investors should watch the trends in the market and also they analyze the past
performance of different indices and the index.

 Newspapers, business journals and different television channels give valuable

information about the happenings of the market. Investors must keep in touch
with this information.

 The market information plays a vital role in the investment. If the investors are
not familiar with the technical terms and analysis the intermediaries should
provide them proper training and make them efficient in trading securities.

 The timing is crucial as far as buying and selling is concerned. Technical analyst
should use the technical analyze software for additional benefits.

BIBLIOGRAPHY
Textbooks:

 Security Analysis and Portfolio Management by Donald E. Fischer and

Ronald J. Jordan (Sixth Edition) Published by Prentice – Hall India.
 Technical Analysis from A to Z by Steven B Achelis (Second Edition)
Published by Mc Graw - Hill Publications.
  Stock Market Book (Second Edition) Published by Dalal Street Investment
Journal.
 Financial Management by I.M. Pandey (Eight Edition) Published by Vikas
Publications.
 Investment Management by Preeti Singh (Thirteenth Edition) Published by
Himalaya Publishing House.
 Research Methodology Methods and Techniques (Second Edition) Published
by Wishwa Prakashan.

Magazines:

 Business Today
 Business World
 The Week

Journals:

 Newspapers
 Economic Times
 Business Line
 Dalal Street Journal

Websites:
 www.crownsec.com
 www.wikipedia.com
 www.stockcharts.com
 www.bseindia.com
 www.economictimes.com

ANNEXURE

Questionnaire

[Questionnaire to explore investors perspective towards IT sector stocks (BSE)]

{Put tick marks on appropriate boxes}

3) Name:

4) Age:

3) Sex: male female

18) For how many years you have been in share trading : Years

19) What do you feel about the recent bullish trend in the Indian share market ?
a. Very good b) good
c) Ok d) bad e) Very bad

20) Do you believe that the economic growth (G.D.P) play a major role in stock
market?
a) Yes b) No

21) How far the sensex will go in the next one year period:

a) Above 20000 b) Above 15000

c) 12000 – 15000 d) 10000 -12000
e) 8000 - 10000 f) Below 8000

22) Do you analyse the trends in the market (technical analysis) before going for
investment in stocks:

a) Yes b) No

23) Do you analyse the historical data or past performance of the stocks:

a) Yes b) No

24) What is your opinion about the IT industry:

a. Booming b) growing at a slow pace
c) Ok d) declining

25) How do you evaluate the IT stocks prices at present:

a. Overvalued b) Under valued

c) Reasonable(at par)

26) What is your portion of investment in IT stocks?

a) Full b) About 3/4
c) About 1/2 d) About 1/4 e) None
 27) How you forecast the IT stocks performance in 2006
a. Excellent b) good
c) Ok d) bad e) Very bad

28) How much portion of investment you intend to invest in IT stocks in 2006:

a) Full b) About 3/4

c) About 1/2 d) About 1/4 e) None

29) Which of the following sector would you think is more safer for investment:

a) Automobile sector b) Banking sector

c) FMCG sector d) IT sector
e) Oil and Gas Sector f) Pharma sector g) Others

30) Which of the following sector would you think will give you more return:

a) Automobile sector b) Banking sector

c) FMCG sector d) IT sector
e) Oil and Gas Sector f) Pharma sector g) Others

31) Rank the following sector for investment according to your preference:
a) Automobile sector b) Banking sector
c) FMCG sector d) IT sector
e) Oil and Gas Sector f) Pharma sector g) Others

32) Any comments towards investing in BSE IT sector index stocks:

………………………………………………………………………………………

……………………………………………………………………………………….

Indices Highlights

This data was last updated on Thursday, June 01, 2007

52 Week Market Capitalisation

INDICES
% to Total
Close High Low (Rs. crores)
Mkt Cap
SENSEX 15671.42 16,612.38 13,655.56 621,020.14 22.60
DOLLEX-30 1,783.95 2,304.64 1,248.68 -- --

BSE-100 5,210.33 6,554.71 3,579.67 840,582.74 30.59

DOLLEX-100 1,162.90 1,509.20 846.25 -- --

BSE-200 1,247.92 1,569.36 881.99 957,517.31 34.84

DOLLEX-200 448.25 581.53 335.56 -- --

BSE-500 4,025.29 5,049.49 2,808.88 1,117,035.09 40.65

BSEMIDCAP 9,911.18 10,033.30 5,269.86 210,371.64 7.66
BSESMLCAP 6,142.37 7,812.84 4,317.68 59,146.37 2.15
BSE TECk 2,371.95 2,852.67 1,745.62 175,320.94 6.38
BSE PSU 5,087.14 6,569.11 4,263.43 622,793.20 22.66
BSE AUTO 4,581.13 5,782.98 2,826.24 86,988.08 3.17
BANKEX 4,729.81 5,809.33 3,769.98 125,338.61 4.56
BSE CG 7,096.29 9,032.65 3,589.79 78,355.57 2.85
BSE CD 2,973.31 3,680.79 1,881.05 5,420.70 0.20
BSE FMCG 1,824.79 2,361.89 1,191.39 87,185.53 3.17
BSE HC 3,297.29 4,098.65 2,658.02 61,439.47 2.24
BSE IT 4,534.64 4,584.92 3,673.61 130,850.28 4.76
BSE METAL 8,183.47 11,239.27 5,279.17 59,499.33 2.17
BSE
4,909.85 6,394.15 3,083.61 123,668.80 4.50
OIL&GAS
Total 2,747,959.48 --