CHAPTER-I

EXECUTIVE SUMMARY

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In this project we have investigated the relationship between stock prices (NSE Index) and
exchange rates (INR/USD).

CNXNIFTY Index of NSE has been taken to compare the stock market movement with
exchange rate. This Index is a well diversified one, which represents the major industries of
the economy. This study analyses the dynamic relationship between stock market and
exchange rate. As US Dollar is a prominent currency for foreign trade, the exchange rate of
rupee and US Dollar has been taken for the study.

We have considered exchange rates of US dollar in terms of Indian Rupee and Closing price
of Nifty National Stock Exchange Index for period of January 2011 to February 2013 to
conduct the study. The Result shows that there is negative relationship between stock prices
and exchange rates. Outcome shows there is insignificant relationship between stock prices
and exchange rates in the countries. There is no significant cause and effect relationship
between the two variables.

However as the Correlation among the two variables INR/USD exchange rates and NIFTY
index is only -0.10635 for the complete period under study i.e. 1st January 2011– 25th
February 2013 depicting insignificant correlation between the two variables, we can conclude
that the variables do not have significant impact on each other & It indicates that the
movement is in opposite direction. .As the relationship occurred between the variables during
different periods is because of chance factor and not because of cause factor.

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 CHAPTER-II

INTRODUCTION

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This study analysis the inter-relationship between Stock Prices and exchange rate. As US
Dollar is a prominent currency for foreign trade, the exchange rate of rupee and US Dollar
has been taken for the study. Exchange rate is decided by the market driven forces after the
LERMS (Liberalized Exchange Rate Management System). Due to the global crisis, the
rupee dollar exchange rate has depreciated /appreciated clearly.

Exchange rate also affects various macro economic factors like GDP, BOP, Money Supply,
Interest rate and foreign reserves. CNXNIFTY Index of NSE has been taken to compare the
stock market movement with exchange rate. This Index is a well diversified one, which
represents the major industries of the economy.

The Asian crisis of 1997-98 has made a strong pitch for linkage between stock prices and
exchange rates. During the crisis period, the world has noticed that the emerging markets
collapsed due to substantial depreciation of exchange rates (in terms of US$) as well as
dramatic fall in the stock prices.

Globalization and financial sector reforms in India have ushered in a sea change in the
financial architecture of the economy. In the contemporary scenario, the activities in the
financial markets and their relationships with the real sector have assumed significant
importance. Since the inception of the financial sector reforms in the beginning of 1990‟s, the
implementation of various reform measures including a number of structural and institutional
changes in the different segments of the financial markets, particularly since 1997, have
brought in a dramatic change in the functioning of the financial sector of the economy, as a
result of which, the resultant gain of the global integration of domestic and foreign financial
markets has thrown open new opportunities but at the same time exposed the financial system
to significant risks.

The recent emergence of new capital markets, the relaxation of foreign capital controls and
the adoption of more flexible exchange rate regimes have increased the interest of academics
and practitioners in studying the interactions between the stock and foreign exchange
markets. The gradual abolition of foreign exchange controls in emerging economies like
India has opened the possibility of international investment and portfolio diversification. At
the same time, the adoption of more flexible exchange rate regimes by these countries in the

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late 1980‟s and early 1990‟s has increased the volatility of foreign exchange markets and the
risk associated with such investments.

The advent of floating exchange rates, opening up of current account, Liberalization of

capital account, reduction of customs duties, the development of 24-hour screen based global
trading, the increased use of national currencies outside the country of issue and innovations
in internationally traded financial products have led to the cross Country linkages of capital
markets and international integration of domestic economy. Altogether, the whole gamut of
institutional reforms, introduction of new instruments, change in procedures, widening of
network of participants, call for a reexamination of the relationship between the stock market
and the foreign sector of India.

With a large number of foreign funds and foreign institutional investors now actively
participating in the Indian financial, the style of functioning of the market itself has
undergone a lot of change and result of microstructure changes are visible. Today the Indian
FX market, which was insulated from outside impacts, has been getting integrated with the
world markets.

The analysis on stock markets is important as it is considered as the most sensitive segment
of the economy and through this segment the country‟s exposure to the outer world is most
readily felt. The impact of fluctuation in exchange rate on domestic companies, companies
importing or exporting and on multinational corporations with the degree of exposure is
increasing in each case respectively. The movements in exchange rate indirectly affect the
value and hence the stock prices of these companies.

An exchange rate has two effects on stock prices, a direct effect through Multi National Firms
and an indirect effect through domestic firms. In case of Multi National Firms involved in
exports, a change in rate will change the demand of its product in the international market,
which ultimately reflects in its B/S as profit or loss. Once the profit or loss is declared, the
stock price will also change for a domestic firm.

On the other hand, currency devaluation could either raise or decrease a firm‟s stock prices.
This depends on the nature of the firm‟s operations. A domestic firm that exports part of its
output will benefit directly from devaluation due to an increase in demand for its output. As
higher sales result in higher profits, local currency devaluation will cause firm stock price to
rise in general.

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On the other hand, if the firm is a user of imported inputs, currency devaluation will raise
cost and lower profits. Thus, it will decrease the firm‟s stock price

Before going to discuss further about the linkages between the stock and foreign exchange
market, it is better to highlight the evolutions and perspectives that are associated with both
the markets since liberalization in the Indian context. There are two explanations for which
variable cause the other. The flow oriented model approach as described in Dornbusch and
Fischer (1980) research show that currency movements directly affect international
competitiveness. In turn, currency has an effect on the balance of trade within the country. As
a result, it affects the future cash flows or the stock prices of firms.

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 CHAPTER –III

FOREIGN EXCHANGE MARKET

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Foreign Exchange Market:

The foreign exchange market India is regulated by the reserve bank of India through the
Exchange Control Department. At the same time, Foreign Exchange Dealers Association
(voluntary association) also provides some help in regulating the market. The Authorized
Dealers (Authorized by the RBI) and the accredited brokers are eligible to participate in the
foreign Exchange market in India. When the foreign exchange trade is going on between
Authorized Dealers and RBI or between the Authorized Dealers and the overseas banks, the
brokers have no role to play.

Apart from the Authorized Dealers and brokers, there are some others who are provided with
the restricted rights to accept the foreign currency or travelers‟ cheque. Among these, there
are the authorized money changers, travel agents, certain hotels and government shops. The
IDBI and Exim bank are also permitted conditionally to hold foreign currency.

The whole foreign exchange market in India is regulated by the Foreign Exchange
Management Act, 1999 or FEMA. Before this act was introduced, the market was regulated
by the FERA or Foreign Exchange Regulation Act, 1947. After independence, FERA was
introduced as a temporary measure to regulate the inflow of the foreign capital. But with the
economic and industrial development, the need for conservation of foreign currency was felt
and on the recommendation of the Public Accounts Committee, the Indian government
passed the Foreign Exchange Regulation Act, 1973 and gradually, this act became famous as
FEMA.
Foreign Exchange Market in India works under the central government in India and executes
wide powers to control transactions in foreign exchange. Indiaforex.com The Foreign
Exchange Management Act, 1999 or FEMA regulates the whole foreign exchange market in
India. Before this act was introduced, the foreign exchange market in India was regulated by
the reserve bank of India through the Exchange Control Department, by the FERA or Foreign
Exchange Regulation Act, 1947. After independence, FERA was introduced as a temporary
measure to regulate the inflow of the foreign capital. But with the economic and industrial
development, the need for conservation of foreign currency was urgently felt and on the
recommendation of the Public Accounts Committee, the Indian government passed the
Foreign Exchange Regulation Act, 1973 and gradually, this act became famous as FEMA.

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The foreign exchange market exists wherever one currency is traded for another. It is by far
the largest market in the world, in terms of cash value traded, and includes trading between
large banks, central banks, currency speculators, multinational corporations, governments,
and other financial markets and institutions.

The trade happening in the Forex markets across the globe currently exceeds US$1.9
trillion/day (on average). Retail traders (individuals) are currently a very small part of this
market and may only participate indirectly through brokers or banks.

The foreign exchange market provides the physical and institutional structure through which
the money of one country is exchanged for that of another country, the rate of exchange
between currencies is determined, and foreign exchange transactions are physically
completed.

The retail market for foreign exchange deals with transactions involving travelers and tourists
exchanging one currency for another in the form of currency notes or travelers‟ cheques. The
wholesale market often referred to as the interbank market is entirely different and the
participants in this market are commercial banks, corporations and central banks.

Functions of Foreign Exchange Market:

The foreign exchange market is the mechanism by which participants

• Transfer purchasing power between countries,

• Obtain or provide credit for international trade transactions, and

• Minimize exposure to the risks of exchange rate changes

Participants of Foreign Exchange Market:

The foreign exchange market consists of two tiers:

• the interbank or wholesale market and

• The client or retail market.

Within these two tiers the five broad categories of participants which operate are:

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  Bank and nonblank foreign exchange dealers:

Banks and a few nonblank foreign exchange dealers operate in both the interbank and client
markets. They profit from buying foreign exchange at a „bid‟ price and reselling it at a
slightly higher „ask‟ price. Dealers in the foreign exchange departments of large international
banks often function as market makers.

Currency trading is quite profitable for commercial and investment banks. Small to medium
sized banks are likely to participate but not as market makers in the interbank market.

Instead of maintaining significant inventory positions, they buy from and sell to large banks
to offset retail transactions with their own customers.

• Individuals and firms conducting commercial or investment Transactions:

Importers and exporters, international portfolio investors, Multi National Enterprises, tourists,
and others use the foreign exchange market to facilitate execution of commercial or
investment transactions. Some of these participants use the market to „hedge‟ foreign
exchange risk.

• Speculators and arbitragers:

Speculators and arbitragers seek to profit from trading in the market itself. They operate in
their own interest, without a need or obligation to serve clients or to ensure a continuous
market. A large proportion of speculation and arbitrage is conducted on behalf of major
banks by traders employed by those banks. Thus banks act both as exchange dealers and as
speculators and arbitrages.

• Central banks and treasuries:

Central bank and treasuries use the market to acquire or spend their country‟s foreign
exchange reserves as well as to influence the price at which their own currency is traded.

They may act to support the value of their own currency because of policies adopted at the
national level or because of commitments entered into through membership in joint float
agreements.

 Foreign exchange brokers:

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Foreign exchange brokers are agents who facilitate trading between dealers. Brokers charge
small commission for the service provided to dealers. They maintain instant access to
hundreds of dealers worldwide via open telephone lines.

Foreign Exchange Transactions

Transactions within the foreign exchange market are executed either on a spot basis,
requiring settlement two days after the transaction, or on a forward or swap basis, which
requires settlement at some designated future date.

To be successful in the foreign exchange markets, one has to anticipate price changes by
keeping a close eye on world events and currency fluctuations.

The Spot exchange rate refers to the current exchange rate.

The forward exchange rate refers to an exchange rate that is quoted and traded today but for
delivery and payment on a specific future date.

Global Foreign Exchange Market Turnover:

Global foreign exchange has always been one of the biggest markets in the world but its
exponential growth keeps accelerating. The triennial survey by the Bank for International
Settlements shows global foreign exchange market turnover leapt 20 percent to $4 trillion,
compared with $3.3 trillion three years ago.

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The increase in turnover was driven by growth in spot transactions, which represent 37
percent of FX market turnover. Turnover was driven by trading activity by "other financial
institutions" -- a category that includes hedge funds, pension funds and central banks,
extending a trend seen in the past several years where buy side firms are increasingly trading
currencies themselves, via prime brokerage, rather than turning to interbank dealers.

Also notably, emerging market currencies are gradually increasing their share in the
marketplace. Turnover of the Russian rouble has increased its share in total turnover to 0.9
percent of 200 percent (FX is double counted as transaction involves two currencies), up
from 0.7 percent three years ago, while the Brazilian real rose to 0.7 percent from 0.4 percent.
The Indian rupee's share rose to 0.9 percent from 0.7 percent. The dollar keeps its dominance,
although off its 2001 peak, with its share standing at 84.9 percent

According to the Bank for International Settlements, as of April 2010, average daily turnover
in global foreign exchange markets is estimated at $3.98 trillion, a growth of approximately
20% over the $3.21 trillion daily volume as of April 2007. Some firms specializing on
foreign exchange market had put the average daily turnover in excess of US$4 trillion.

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The $3.98 trillion break-down is as follows:

 $1.490 trillion in spot transactions

 $475 billion in outright forwards
 $1.765 trillion in foreign exchange swaps
 $43 billion currency swaps
 $207 billion in options and other products

The Foreign Exchange Market Is Unique Because Of The Following Characteristics:

 Its huge trading volume representing the largest asset class in the world leading to
high liquidity;
 Its geographical dispersion;
 Its continuous operation: 24 hours a day except weekends, i.e., trading from 20:15
GMT on Sunday until 22:00 GMT Friday;
 The variety of factors that affect exchange rates;
 The low margins of relative profit compared with other markets of fixed income; and
 The use of leverage to enhance profit and loss margins and with respect to account
size.
 Trading begins in the Asia-Pacific region followed by the Middle East, Europe, and
America.

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Structure

 Decentralized „interbank‟ market

 Main participants: Central Banks, commercial and investment banks, hedge funds,
corporations & private speculators

 The free-floating currency system arose from the collapse of the Bretton Woods
agreement in 1971

 Online trading began in the mid to late 1990‟s.

Foreign-Exchange Market Trade (Size)

 The Forex market is the largest financial market in the world, trading around $1.5
trillion each day

 The market is open 24 hours a day from 5pm EST on Sunday until 4pm EST Friday.
The reason that the markets are open 24 hours a day is that currencies are in high
demand.

 Currency is also needed around the world for international trade, as well as by central
banks and global businesses.

 At each second of every day, countries' economies are growing and shrinking because
of economic and political instability and infinite other perpetual changes. Central
banks seek to stabilize their country's currency by trading it on the open market and
keeping a relative value compare to other world currencies.

 The Forex market can be split into three main regions: Australasia, Europe and North
America. Within each of these main areas there are several major financial centers.
For example, Europe is comprised of major centers like London, Paris, Frankfurt and
Zurich. Banks, institutions and dealers all conduct Forex trading for themselves and
their clients in each of these markets.

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Major Markets

 The US & UK markets account for just over 50% of turnover

 Major markets: London, New York, Tokyo

 Trading activity is heaviest when major markets overlap

 Nearly two-thirds of NY activity occurs in the morning hours while European markets
are open

Mostly Traded Currencies:

The United States Dollar is the most powerful currency on the market, as it is a part of nearly
90 percent of the transactions that occur daily.

Currency Codes

 USD = US Dollar

 EUR = Euro

 JPY = Japanese Yen

 GBP = British Pound

 CAD = Canadian Dollar

 AUD = Australian Dollar

 NZD = New Zealand Dollar

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Average Daily Turnover by Currency:

N.B. Because two currencies are involved in each transaction, the sum of the percentage
shares of individual currencies totals 200% instead of 100%.

Source: BIS Triennial Survey 2012

Currency Pairs

A currency pair is the quotation of the relative value of a currency unit against the unit of
another currency in the foreign exchange market. The currency that is used as the reference is
called the counter currency or quote currency and the currency that is quoted in relation is
called the base currency or transaction currency.

 Majors: EUR/USD (Euro-Dollar), USD/JPY, GBP/USD - (commonly referred to as

the “Cable”), USD/CHF

 Dollar bloc: USD/CAD, AUD/USD, NZD/USD

 Major crosses: EUR/JPY, EUR/GBP, EUR/CHF

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Average Daily Turnover by Currency Pair:

Source: BIS Triennial Survey 2012

Indian FX Market

The foreign exchange currency trading in India is growing at a really good pace however it is
said that the Forex market is still in the early phase in India. Nevertheless there are already
several big players in the Indian Forex market. Let us find out details on the Forex market
history in India to know more about Indian Forex market.

The history of Forex market in India owes its origin to an important decision taken by the
Reserve Bank of India (RBI) in the year 1978 which allows banks to undertake intra-day
trading in foreign currency exchange. As a result of this step, the agreement of maintaining
„square‟ or „near square‟ position was to be complied with only at the close of business every
day. The history of currency trading in India also clearly shows that during the initial period
when these economic reforms started, the exchange rate of national currency i.e. Indian rupee
used to be determined by the RBI in terms of a weighted basket of currencies of India‟s major
trading partners. Moreover, there were some fairly significant restrictions on the current
account transactions.

Then again during early nineties, more economic reforms were introduced which witnessed
the important two-step downward adjustment in the exchange rate of the Indian rupee in
order to place it at a suitable level in line with the inflation differential so that the
competitiveness in exports could be maintained. With these economic reforms which resulted

in the unification exchange rate of the rupee heralded the commencement of the new era of
market determined Forex currency rate regime of rupee in the Indian Forex history which was
based on the demand and supply principle in the Forex market.
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Another landmark in Forex history of India came with the appointment of an Expert Group
committee on Forex currency in 1994. This committee was made to study the Forex market in
detail so that step can be taken out to develop, deepen and widen the Forex market in India.
The result of this exercise was that banks were significant freedom in many of its market
operations related to like Forex market development and liberalization. The freedom was
granted to banks in term of fixing their trading limits, allowed to borrow and invest funds in
the overseas markets up to specified limits, accorded freedom to make use of derivative
products for asset-liability management purposes.

The corporate were granted the flexibility to book forward cover based on previous turnover
and were given freedom to make use of financial instruments like interest rates and currency
swaps in the international currency exchange market. The other feature of Forex history in
India is that a large sum of foreign exchange in India came through the large Indian
population working in foreign countries. However, the common man was not much interested
in Forex trading. the things are changing now and with the growing economy more and more
people are showing interest in Forex trading and are looking out for hedging currency risks.

National Stock Exchange of India popularly known as NSE was the first recognized
exchange in Indian Forex history to launch Forex currency futures trading in India. These
currency futures are beneficial over overseas Forex trading especially to comparatively small
traders and retail investors. Another important point to know is that before discussing the
history of Forex market in India, it is important to know the central government of India has
the powers to control transactions in foreign exchange and hence Forex transactions in India
are managed by the government authorities.

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 CHAPTER-IV

STOCK MARKET

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Stock Market:

A stock market or equity market is a public entity (a loose network of economic transactions,
not a physical facility or discrete entity) for the trading of company stock (shares) and
derivatives at an agreed price; these are securities listed on a stock exchange as well as those
only traded privately.

The stocks are listed and traded on stock exchanges which are entities of a corporation or
mutual organization specialized in the business of bringing buyers and sellers of the
organizations to a listing of stocks and securities together.

Market participants include individual retail investors, institutional investors such as mutual
funds, banks, insurance companies and hedge funds, and also publicly traded corporations
trading in their own shares. Some studies have suggested that institutional investors and
corporations trading in their own shares generally receive higher risk-adjusted returns than
retail investors.

A stock market is a market for the trading of company stock and derivatives of same; both of
these are securities listed on a stock exchange as well as those only traded privately.

Classification of financial markets

i) Unorganized Markets

In these markets there a number of money lenders, indigenous bankers, traders etc. who lend
money to the public.

ii) Organized Market

In organized markets, there are standardized rules and regulations governing their financial
dealings. There is also a high degree of institutionalization and instrumentalization. These
markets are subject to strict supervision and control by the RBI or other regulatory bodies.

Organized markets can be further divided into Capital market and Money market:

Money Market:

As money became a commodity, the money market became a component of the financial
markets for assets involved in short-term borrowing, lending, buying and selling with original

20
maturities of one year or less. Trading in the money markets is done over the counter, is
wholesale.

Various instruments exist, such as Treasury bills, commercial paper, bankers' acceptances,
deposits, certificates of deposit, bills of exchange, repurchase agreements, federal funds, and
short-lived mortgage-, and asset-backed securities.

It provides liquidity funding for the global financial system. Money markets and capital
markets are parts of financial markets. The instruments bear differing maturities, currencies,
credit risks, and structure. Therefore they may be used to distribute the exposure.

Importance & Functions of Money Market:

1. Financing Trade:

Money Market plays crucial role in financing both internal as well as international trade.
Commercial finance is made available to the traders through bills of exchange, which are
discounted by the bill market. The acceptance houses and discount markets help in
financing foreign trade.

2. Financing Industry:

Money market contributes to the growth of industries in two ways:

(a) Money market helps the industries in securing short-term loans to meet their working
capital requirements through the system of finance bills, commercial papers, etc.

(b) Industries generally need long-term loans, which are provided in the capital market.
However, capital market depends upon the nature of and the conditions in the money
market. The short-term interest rates of the money market influence the long-term interest
rates of the capital market. Thus, money market indirectly helps the industries through its
link with and influence on long-term capital market.

3. Profitable Investment:

Money market enables the commercial banks to use their excess reserves in profitable
investment. The main objective of the commercial banks is to earn income from its
reserves as well as maintain liquidity to meet the uncertain cash demand of the depositors.
In the money market, the excess reserves of the commercial banks are invested in near-
21
 money assets (e.g. short-term bills of exchange) which are highly liquid and can be easily
converted into cash. Thus, the commercial banks earn profits without losing liquidity.

4. Self-Sufficiency of Commercial Bank:

Developed money market helps the commercial banks to become self-sufficient. In the
situation of emergency, when the commercial banks have scarcity of funds, they need not
approach the central bank and borrow at a higher interest rate. On the other hand, they can
meet their requirements by recalling their old short-run loans from the money market.

5. Help to Central Bank:

Though the central bank can function and influence the banking system in the absence of
a money market, the existence of a developed money market smoothens the functioning
and increases the efficiency of the central bank.

Money market helps the central bank in two ways:

(a) The short-run interest rates of the money market serves as an indicator of the
monetary and banking conditions in the country and, in this way, guide the central bank
to adopt an appropriate banking policy,

(b) The sensitive and integrated money market helps the central bank to secure quick and
widespread influence on the sub-markets, and thus achieve effective implementation of its
policy.

Capital Market

Capital markets are financial markets for the buying and selling of long-term debt- or equity-
backed securities. These markets channel the wealth of savers to those who can put it to long-
term productive use, such as companies or governments making long-term
investments.Capital market is a market for financial assets which have a long or definite
maturity.

Capital markets which consist of:

 Stock markets, which provide financing through the issuance of shares or common
stock, and enable the subsequent trading thereof.

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  Bond markets, which provide financing through the issuance of Bonds, and enable the
subsequent trading thereof

Importance of Capital Market:

Absence of capital market serves as a deterrent factor to capital formation and economic
growth. Resources would remain idle if finances are not funneled through capital market.

• It provides incentives to saving and facilitates capital formation by offering suitable

rates of interest as the price of the capital

• It serves as an important source for the productive use of the economy‟s savings.

• It provides avenue for investors to invest in financial assets.

• It facilitates increase in production and productivity in the economy and thus

enhances the economic welfare of the society.

• A healthy market consisting of expert intermediaries promotes stability in the value of

securities representing capital funds.

• It serves as an important source for technological up gradation in the industrial sector

by utilizing the funds invested by the public.

The major stock indices also have a correlation with the currency rates.

Three major forces affect the indices:

1) Corporate earnings, forecast and actual;

2) Interest rate expectations and

3) Global considerations.

Consequently, these factors channel their way through the local currency.

In an increasingly complex scenario of the financial world, it is of paramount importance for

the researchers, practitioners, market players and policy makers to understand the working of
the economic and the financial system and assimilate the mutual interlink ages between the
stock and foreign exchange markets in forming their expectations about the future policy and
financial variables. The analysis of dynamic and strategic interactions between stock and
23
foreign exchange market came to the forefront because these two markets are the most
sensitive segments of the financial system and are considered as the barometers of the
economic growth through which the country‟s exposure towards the outer world is most
readily felt.

The present study is an endeavor in this direction. Before going to discuss further about the
interlink ages between the stock and foreign exchange market, it is better to highlight the
evolutions and perspectives that are associated with both the markets since liberalization in
the Indian context.

In the literature, there is theoretical consensus neither on the existence of relationship

between stock prices and exchange rates nor on the direction of relationship. In theory there
are two approaches to exchange rate determination. They are-

Flow oriented - are considered as the traditional approach and assume that the exchange rate
is determined largely by country‟s current account or trade balance performance. The model
posits that changes in exchange rates affect international competitiveness and trade balance,
thereby influencing real economic variables such as real income and output (Dornbusch and
Fisher, 1980). This model represents a positive relationship between stock prices and
exchange rates with direction of causation running from exchange rates to stock prices.

Stock-oriented - models put much emphasis on the role of financial (formerly capital)
account in the exchange rate determination. These Models can be distinguished as portfolio
balance models and monetary models (Branson and Frankel, 1983). They postulate a negative
relationship between stock prices and exchange rates and come to the conclusion that stock
prices have an impact on exchange rates.

Indian Stock Exchange:

Indian stock exchange may refer to:

 Bombay Stock Exchange

 National Stock Exchange of India
 MCX Stock Exchange Limited (MCX-SX)

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Functions of stock exchanges:

• Continuous and ready market for securities

Stock exchange provides a ready and continuous market for purchase and sale of securities. It
provides ready outlet for buying and selling of securities. Stock exchange also acts as an
outlet/counter for the sale of listed securities.

• Facilitates evaluation of securities

Stock exchange is useful for the evaluation of industrial securities. This enables investors to
know the true worth of their holdings at any time. Comparison of companies in the same
industry is possible through stock exchange quotations (i.e price list).

• Encourages capital formation

Stock exchange accelerates the process of capital formation. It creates the habit of saving,
investing and risk taking among the investing class and converts their savings into profitable
investment. It acts as an instrument of capital formation. In addition, it also acts as a channel
for right (safe and profitable) investment.

• Provides safety and security in dealings

Stock exchange provides safety, security and equity (justice) in dealings as transactions are
conducted as per well defined rules and regulations. The managing body of the exchange
keeps control on the members. Fraudulent practices are also checked effectively. Due to
various rules and regulations, stock exchange functions as the custodian of funds of genuine
investors.

• Regulates company management

Listed companies have to comply with rules and regulations of concerned stock exchange and
work under the vigilance (i.e. supervision) of stock exchange authorities.

• Facilitates public borrowing

Stock exchange serves as a platform for marketing Government securities. It enables

government to raise public debt easily and quickly.

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 • Provides clearing house facility

Stock exchange provides a clearing house facility to members. It settles the transactions
among the members quickly and with ease. The members have to pay or receive only the net
dues (balance amounts) because of the clearing house facility.

• Facilitates healthy speculation

Healthy speculation, keeps the exchange active. Normal speculation is not dangerous but
provides more business to the exchange. However, excessive speculation is undesirable as it
is dangerous to investors & the growth of corporate sector.

• Serves as Economic Barometer

Stock exchange indicates the state of health of companies and the national economy. It acts as
a barometer of the economic situation / conditions.

• Facilitates Bank Lending

Banks easily know the prices of quoted securities. They offer loans to customers against
corporate securities. This gives convenience to the owners of securities.

Most important source for companies to raise money, Provides liquidity to the investors, Acts
as clearing house for transactions, Provides realistic value of company‟s .India has 22 stock
exchanges and the important stock exchanges are Bombay Stock Exchange and National
Stock exchange at Mumbai. Established in 1875 BSE is one of the oldest stock exchanges in
Asia and has seen significant development ever since.

The regulatory agency which oversees the functioning of stock markets is the Securities and
Exchange Board of India (SEBI), which is also located in Bombay.

BSE

Bombay Stock Exchange is the oldest stock exchange in Asia with a rich heritage of over 133
years of existence. What is now popularly known as BSE was established as “The Native
Share & Stock Brokers‟ Association” in 1875.

BSE is the first stock exchange in the country which obtained permanent recognition (in
1956) from the Government of India under the Securities Contracts (Regulation) Act (SCRA)
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1956. BSE‟s pivotal and pre-eminent role in the development of the Indian capital market is
widely recognized. It migrated from the open out-cry system to an online screen-based order
driven trading system in 1995.

Earlier an Association Of Persons (AOP), BSE is now a corporatized and demutualised entity
incorporated under the provisions of the Companies Act, 1956, pursuant to the BSE
(Corporatization and Demutualization) Scheme, 2005 notified by the Securities and
Exchange Board of India (SEBI). With demutualization, BSE has two of world‟s prominent
exchanges, Deutsche Börse and Singapore Exchange, as its strategic partners.

Over the past 133 years, BSE has facilitated the growth of the Indian corporate sector by
providing it with cost and time efficient access to resources. There is perhaps no major
corporate in India which has not sourced BSE‟s services in raising resources from the capital
market.

Today, BSE is the world‟s number 1 exchange in terms of the number of listed companies
and the world‟s 5th in handling of transactions through its electronic trading system. The
companies listed on BSE command a total market capitalization of US Trillion 1.06 as of
July, 2009. BSE reaches to over 400 cities and town nation-wide and has around 4,937 listed
companies, with over 7745 scrips being traded as on 31st July 09.

The BSE Index, SENSEX, is India‟s first and most popular stock market benchmark index.
Sensex is tracked worldwide. It constitutes 30 stocks representing 12 major sectors. The
SENSEX is constructed on a „free-float‟ methodology, and is sensitive to market movements
and market realities.

BSE provides an efficient and transparent market for trading in equity, debt instruments and
derivatives. It has always been at par with the international standards. The systems and
processes are designed to safeguard market integrity and enhance transparency in operations.

MCX Stock Exchange Limited (MCX-SX)

MCX Stock Exchange Limited (MCX-SX), India‟s new stock exchange, commenced
operations in the Currency Derivatives (CD) segment on October 7, 2008 under the
regulatory framework of Securities & Exchange Board of India (SEBI) and Reserve Bank of
India (RBI). The Exchange is recognized by SEBI under Section 4 of Securities Contracts
(Regulation) Act, 1956. In line with global best practices and regulatory requirements,

27
clearing and settlement is conducted through a separate clearing corporation, MCX-SX
Clearing Corporation Ltd. (MCX-SX CCL).

A new generation stock exchange, MCX-SX currently offers a world-class electronic trading
platform in currency futures contracts. MCX-SX has been a market leader in this segment,
witnessing a steady and significant growth in average daily turnover and open interest ever
since its inception. The average daily turnover (ADT) of MCX-SX currency futures stood at
Rs 12,927.83 crore at the end of June 2012, a significant rise from an ADT of Rs 324.78
crore in the first month of operations.

The currency platform of MCX-SX is supported by a strong membership base and witnesses
a nation-wide participation. At the end of June 2012, MCX-SX had 750 members and saw
participation from 707 towns and cities across India. Adhering to its philosophy of
„Systematic Development of Markets through Information, Innovation, Education and
Research,‟ MCX-SX‟s mission has been to promote Financial-literacy-for-Financial
Inclusion, as is envisaged by the Government of India. MCX-SX till date has conducted more
than 1300 investor education programmes across the country, averaging almost one such
programme per working day. MCX-SX has roped in a wide array of partners, including
media, educational institutions, trade bodies and international organizations to jointly conduct
programmes on financial literacy & investor awareness and initiate other developmental
programmes for India‟s financial markets. MCX-SX endeavors‟ to ensure continuous
innovation by introducing various products and services under the extant regulatory
framework.

The Exchange received permissions to deal in Interest Rate Derivatives, Equity, Futures &
Options on Equity and Wholesale Debt Segment, vide SEBI‟s letter dated July 10,
2012.MCX-SX was granted the status of a “recognized stock exchange” by the Ministry of
Corporate Affairs (MCA), Government of India on December 21, 2012. It received
“commencement certificate” from market regulator SEBI for trading in new segments such as
Equity, Futures and Options on Equity, Interest Rate Derivatives and Wholesale Debt Market
on December 19, 2012.

NSE

The National Stock Exchange (NSE) is stock exchange located at Mumbai, India. It is the
11th largest stock exchange in the world by market capitalization and largest in India by daily

28
turnover and number of trades, for both equities and derivative trading. NSE has a market
capitalization of around US$1 trillion and over 1,652 listings as of July 2012. Though a
number of other exchanges exist, NSE and the Bombay Stock Exchange are the two most
significant stock exchanges in India and between them are responsible for the vast majority of
share transactions. The NSE's key index is the S&P CNX Nifty, known as the NSE NIFTY
(National Stock Exchange Fifty), an index of fifty major stocks weighted by market
capitalization.

NSE is mutually owned by a set of leading financial institutions, banks, insurance companies
and other financial intermediaries in India but its ownership and management operate as
separate entities. There are at least 2 foreign investors NYSE Euro next and Goldman Sachs
who have taken a stake in the NSE.As of 2006, the NSE VSAT terminals, 2799 in total, cover
more than 1500 cities across India. In 2011, NSE was the third largest stock exchange in the
world in terms of the number of contracts (1221 million) traded in equity derivatives. It is the
second fastest growing stock exchange in the world with a recorded growth of 16.6%

Objectives of NSE:

1. Establishing nationwide trading facilities for all types of securities.

2. Ensuring equal access to investors all-over the country through an appropriate
communication network.
3. Meeting international benchmarks and standards.
4. Enabling shorter settlement cycles and book entry settlements.

29
 CHAPTER-V

PARAMETER OF THE STUDY

[IN REF. TO EXCHANGE RATE (INR/USD) AND STOCK

MARKET INDEX (NIFTY)]

30
Exchange Rate of Currency [INR/USD]:

The exchange rate (also known as the foreign-exchange rate, Forex rate or FX rate)
between two currencies is the rate at which one currency will be exchanged for another. It is
also regarded as the value of one country‟s currency in terms of another currency.

For example an exchange rate of 54.0767 Indian Rupees (IND, Rs.) to the United States
Dollar (USD, $) means that IND 54.0767 is worth the same as USD 1. The foreign exchange
market is one of the largest markets in the world. By some estimates, about 2 trillion USD
worth of currency changes hands every day.

Exchange Rate Quotation

An exchange rate quotation is given by stating the number of units of a price currency that
can be bought in terms of 1 unit currency (also called base currency). In a quotation that
says the JPN/USD exchange rate is 120 (USD per JPN), the price currency is USD and the
unit currency is JPN.

Currency Quotes

Direct quote is a quote using a country‟s home currency as the price currency (e.g.,
Rs54.0767 = $ 1 in India) and is used by most countries.

Indirect quote is a quote using a country‟s home currency as the unit currency (e.g., $
0.0184923 = Rs. 1 in India) and is used in British newspapers and are also common in
Australia, New Zealand and Canada.

Appreciation of currency:

While using direct quotation, if the home currency is strengthening (i.e., appreciating, or
becoming more valuable) then the exchange rate number decreases

31
Depreciation of currency

Conversely if the foreign currency is strengthening, the exchange rate number increases and
the home currency is depreciating.

Exchange rate regime:

The exchange rate regime is the way a country manages its currency in respect to foreign
currencies and the foreign exchange market. It is closely related to monetary policy and the
two are generally dependent.

A floating exchange rate or a flexible exchange rate is a type of exchange rate regime
wherein a currency‟s value is allowed to fluctuate according to the foreign exchange market.
A currency that uses a floating exchange rate is known as a floating currency.

A pegged float is pegged to some band or value, either fixed or periodically adjusted. Pegged
floats are Crawling bands, Crawling pegs and Pegged with horizontal bands.

A fixed rate is that rate that has direct convertibility towards another currency. Here, the
currency is backed one to one by foreign reserves.

Fluctuations in exchange rates:

A market-based exchange rate will change whenever the values of either of the two
component currencies change.

A currency will tend to become more valuable whenever demand for it is greater than the
available supply. It will become less valuable whenever demand is less than available supply
(this does not mean people no longer want money, it just means they prefer holding their
wealth in some other form, possibly another currency).

32
Increased demand for a currency can be due to either an increased transaction demand for
money or an increased speculative demand for money.

1. Transaction demand is highly correlated to a country's level of business activity,

gross domestic product (GDP), and employment levels. The more people that are
unemployed, the less the public as a whole will spend on goods and services. Central
banks typically have little difficulty adjusting the available money supply to
accommodate changes in the demand for money due to business transactions.

2. Speculative demand is much harder for central banks to accommodate, which they
influence by adjusting interest rates. A speculator may buy a currency if the return
(that is the interest rate) is high enough. In general, the higher a country's interest
rates, the greater will be the demand for that currency. It has been argued that such
speculation can undermine real economic growth, in particular since large currency
speculators may deliberately create downward pressure on a currency by shorting in
order to force that central bank to buy their own currency to keep it stable. (When that
happens, the speculator can buy the currency back after it depreciates, close out their
position, and thereby take a profit.

Factors That Affect Exchange Rates:

Supply and demand for any given currency, and thus its value, are not influenced by any
single element, but rather by several. These elements generally fall into three categories:
economic factors, political conditions and market psychology.

Economic factors

These include: (a) Economic policy, disseminated by government agencies and central banks,
(b) Economic conditions, generally revealed through economic reports, and other economic
indicators.

 Economic policy comprises government fiscal policy (budget/spending practices) and

monetary policy
 Government budget deficits or surpluses: The market usually reacts negatively to
widening government budget deficits, and positively to narrowing budget deficits.
The impact is reflected in the value of a country's currency.

33
  Balance of trade levels and trends: The trade flow between countries illustrates the
demand for goods and services, which in turn indicates demand for a country's
currency to conduct trade. Surpluses and deficits in trade of goods and services reflect
the competitiveness of a nation's economy. For example, trade deficits may have a
negative impact on a nation's currency.
 Inflation levels and trends: Typically a currency will lose value if there is a high level
of inflation in the country or if inflation levels are perceived to be rising. This is
because inflation erodes purchasing power, thus demand, for that particular currency.
However, a currency may sometimes strengthen when inflation rises because of
expectations that the central bank will raise short-term interest rates to combat rising
inflation.
 Economic growth and health: Reports such as GDP, employment levels, retail sales,
capacity utilization and others, detail the levels of a country's economic growth and
health. Generally, the more healthy and robust a country's economy, the better its
currency will perform, and the more demand for it there will be.
 Productivity of an economy: Increasing productivity in an economy should positively
influence the value of its currency. Its effects are more prominent if the increase is in
the traded sector

Political conditions

Internal, regional, and international political conditions and events can have a profound effect
on currency markets.

All exchange rates are susceptible to political instability and anticipations about the new
ruling party. Political upheaval and instability can have a negative impact on a nation's
economy.

Market psychology

Market psychology and trader perceptions influence the foreign exchange market in a variety
of ways:

 Flights to quality: Unsettling international events can lead to a "flight to quality", a

type of capital flight whereby investors move their assets to a perceived "safe haven".
There will be a greater demand, thus a higher price, for currencies perceived as

34
 stronger over their relatively weaker counterparts. The U.S. dollar, Swiss franc and
gold have been traditional safe havens during times of political or economic
uncertainty
 Long-term trends: Currency markets often move in visible long-term trends. Although
currencies do not have an annual growing season like physical commodities, business
cycles do make themselves felt. Cycle analysis looks at longer-term price trends that
may rise from economic or political trends.
 "Buy the rumor, sell the fact": This market truism can apply to many currency
situations. It is the tendency for the price of a currency to reflect the impact of a
particular action before it occurs and, when the anticipated event comes to pass, react
in exactly the opposite direction. This may also be referred to as a market being
"oversold" or "overbought". To buy the rumor or sell the fact can also be an example
of the cognitive bias known as anchoring, when investors focus too much on the
relevance of outside events to currency prices.
 Economic numbers: While economic numbers can certainly reflect economic policy,
some reports and numbers take on a talisman-like effect: the number itself becomes
important to market psychology and may have an immediate impact on short-term
market moves. "What to watch" can change over time. In recent years, for example,
money supply, employment, trade balance figures and inflation numbers have all
taken turns in the spotlight.
 Technical trading considerations: As in other markets, the accumulated price
movements in a currency pair such as EUR/USD can form apparent patterns that
traders may attempt to use. Many traders study price charts in order to identify such
patterns.

35
Fluctuations in USD/INR over the years:

USD/INR Conversion Rate 30 Years:

Stock Market Index:

NIFTY

The National Stock Exchange of India Limited has genesis in the report of the High Powered
Study Group on Establishment of New Stock Exchanges. It recommended promotion of a
National Stock Exchange by financial institutions (FIs) to provide access to investors from all
across the country on an equal footing. Based on the recommendations, NSE was promoted

36
by leading Financial Institutions at the behest of the Government of India and was
incorporated in November 1992 as a tax-paying company unlike other stock exchanges in the
country.

The following years witnessed rapid development of Indian capital market with introduction
of internet trading, Exchange traded funds (ETF), stock derivatives and the first volatility
index - IndiaVIX in April 2008, by NSE.

August 2008 saw introduction of Currency derivatives in India with the launch of Currency
Futures in USD INR by NSE. Interest Rate Futures was introduced for the first time in India
by NSE on 31st August 2009, exactly after one year of the launch of Currency Futures.

With this, now both the retail and institutional investors can participate in equities, equity
derivatives, currency and interest rate derivatives, giving them wide range of products to take
care of their evolving needs.

NSE‟s mission is setting the agenda for change in the securities markets in India. The NSE
was set-up with the main objectives of:

• Establishing a nation-wide trading facility for equities, debt instruments and hybrids,

• Ensuring equal access to investors all over the country through an appropriate
communication network,

• Providing a fair, efficient and transparent securities market to investors using electronic
trading systems,

• Enabling shorter settlement cycles and book entry settlements systems, and

• Meeting the current international standards of securities markets.

The standards set by NSE in terms of market practices and technologies have become
industry benchmarks and are being emulated by other market participants. NSE is more than
a mere market facilitator. It‟s that force which is guiding the industry towards new horizons
and greater opportunities.

37
Constituents of Nifty-

Company Name Industry Symbol

ABB Ltd. ELECTRICAL EQUIPMENT ABB

CEMENT AND CEMENT

ACC Ltd. PRODUCTS ACC

CEMENT AND CEMENT

Ambuja Cements Ltd. PRODUCTS AMBUJACEM

Axis Bank Ltd. BANKS AXISBANK

Bharat Heavy Electricals Ltd. ELECTRICAL EQUIPMENT BHEL

Bharat Petroleum Corporation Ltd. REFINERIES BPCL

TELECOMMUNICATION –
Bharti Airtel Ltd. SERVICES BHARTIARTL

OIL
Cairn India Ltd. EXPLORATION/PRODUCTION CAIRN

Cipla Ltd. PHARMACEUTICALS CIPLA

DLF Ltd. CONSTRUCTION DLF

GAIL (India) Ltd. GAS GAIL

38
 CEMENT AND CEMENT
Grasim Industries Ltd. PRODUCTS GRASIM

HCL Technologies Ltd. COMPUTERS – SOFTWARE HCLTECH

HDFCBAN
HDFC Bank Ltd. BANKS K

AUTOMOBILES – 2 AND 3 HEROHO

Hero Honda Motors Ltd. WHEELERS NDA

HINDALC
Hindalco Industries Ltd. ALUMINIUM O

HINDUNIL
Hindustan Unilever Ltd. DIVERSIFIED VR

Housing Development Finance

Corporation Ltd. FINANCE – HOUSING HDFC

I T C Ltd. CIGARETTES ITC

ICICI Bank Ltd. BANKS ICICIBANK

TELECOMMUNICATION –
Idea Cellular Ltd. SERVICES IDEA

INFOSYST
Infosys Technologies Ltd. COMPUTERS – SOFTWARE CH

Infrastructure Development Finance

Co. Ltd. FINANCIAL INSTITUTION IDFC

JPASSOCI
Jaiprakash Associates Ltd. DIVERSIFIED AT

JINDALST
Jindal Steel & Power Ltd. STEEL AND STEEL PRODUCTS EL

Larsen & Toubro Ltd. ENGINEERING LT

Mahindra & Mahindra Ltd. AUTOMOBILES – 4 WHEELERS M&M

Maruti Suzuki India Ltd. AUTOMOBILES – 4 WHEELERS MARUTI

NTPC Ltd. POWER NTPC

OIL
Oil & Natural Gas Corporation Ltd. EXPLORATION/PRODUCTION ONGC

39
Power Grid Corporation of India Ltd. POWER POWERGRID

Punjab National Bank BANKS PNB

Ranbaxy Laboratories Ltd. PHARMACEUTICALS RANBAXY

RELCAPIT
Reliance Capital Ltd. FINANCE AL

TELECOMMUNICATION –
Reliance Communications Ltd. SERVICES RCOM

Reliance Industries Ltd. REFINERIES RELIANCE

Reliance Infrastructure Ltd. POWER RELINFRA

Reliance Power Ltd. POWER RPOWER

Siemens Ltd. ELECTRICAL EQUIPMENT SIEMENS

State Bank of India BANKS SBIN

Steel Authority of India Ltd. STEEL AND STEEL PRODUCTS SAIL

Sterlite Industries (India) Ltd. METALS STER

SUNPHAR
Sun Pharmaceutical Industries Ltd. PHARMACEUTICALS MA

Suzlon Energy Ltd. ELECTRICAL EQUIPMENT SUZLON

Tata Consultancy Services Ltd. COMPUTERS – SOFTWARE TCS

TATAMOT
Tata Motors Ltd. AUTOMOBILES – 4 WHEELERS ORS

TATAPO
Tata Power Co. Ltd. POWER WER

TATASTEE
Tata Steel Ltd. STEEL AND STEEL PRODUCTS L

Unitech Ltd. CONSTRUCTION UNITECH

Wipro Ltd. COMPUTERS – SOFTWARE WIPRO

40
Exchange Traded Funds on NSE

ETF's launched on NSE Exchange Traded Funds are essentially Index Funds that are listed
and traded on exchanges like stocks. An ETF is a basket of stocks that reflects the
composition of an Index, like S&P CNX Nifty. The ETFs trading value is based on the net
asset value of the underlying stocks that it represents.

In recent times, Exchange-traded funds (ETFs) have gained a wider acceptance as financial
instruments whose unique advantages over mutual funds have caught the eye of many an
investor. These instruments are beneficial for Investors that find it difficult to master the
tricks of the trade of analyzing and picking stocks for their portfolio. Various mutual funds
provide ETF products that attempt to replicate the indices on NSE, so as to provide returns
that closely correspond to the total returns of the securities represented in the index.

S&P CNX Nifty:

S&P CNX Nifty is a well diversified 50 stock index accounting for 22 sectors of the
economy. It is used for a variety of purposes such as benchmarking fund portfolios, index
based derivatives and index funds.

41
S&P CNX Nifty is owned and managed by India Index Services and Products Ltd. (IISL),
which is a joint venture between NSE and CRISIL.

IISL is India‟s first specialized company focused upon the index as a core product. IISL has
Marketing and licensing agreement with standard & poor‟s (S&P), who world leaders are in
index services.

The total traded value for the last six months of all Nifty stocks is approximately 52% of the
traded value of all stocks on the NSE

Nifty stocks represent about 63% of the Free Float Market Capitalization as on Dec 31, 2009.

Impact cost of the S&P CNX Nifty for a portfolio size of Rs.2 crore is 0.10%S&P CNX Nifty
is professionally maintained and is ideal for derivatives trading.

From June 26, 2009, S&P CNX Nifty is computed based on free float methodology.

42
 CHAPTER-VI

RESEARCH METHODOLOGY

43
 Problem Statement:

In the last two decades, globalization, interlink ages of the capital markets, gradual
eradication of capital inflow barriers and the implementation of more flexible exchange rate
mechanism in developed as well as transition economies, created a systematic
interdependency between and within the stock and foreign exchange markets. Thus,
investigating the relationship between stock prices and exchange rates has received
unprecedented attention in the literature. This study explores the evidence of relationship
between exchange rates and stock prices and also lead lag relationship between exchange
rates and stock prices.

Objective of the Study:

The present study is being contemplated with the following specific objectives:

i. To study the concept of stock market with special reference to NSE.

ii. To understand the working of NSE Market & Forex Market.

iii. To study the relationship between NSE Index & INR/USD.

iv. To see whether there is significant relation between the movement of capital market
index & INR/USD.

v. To find out which variable is leading and which variable is lagging.

vi. To study various factors which affects the relationship of Nifty &
INR /USD.

Scope of the Study:

 The study includes one pair of currency i.e. INR/USD which is representing the Forex
Market, while one major Stock Market Index i.e. NSE in India.

 Thus the relation & effect of other currencies are not considered for this study.

44
Literature Review:
In a recent study Bhattacharya and Mukherjee (2003) investigated Indian markets using the
data on stock prices and macroeconomic aggregates in the foreign sector including exchange
rate concluded that there is no significant relationship between stock prices and exchange
rates.
Apte (2001) investigated the relationship between the volatility of the stock market and the
nominal exchange rate of India by using the EGARCH specifications on the daily closing
USD/INR exchange rate, BSE 30 (Sensex) and NIFTY-50 over the period 1991 to 2000. The
study suggests that there appears to be a spillover from the foreign exchange market to the
stock market but not the reverse.

To examine the dynamic linkages between the foreign exchange and stock markets for India,
Nath and Samanta (2003) employed the Granger causality test on daily data during the period
March 1993 to December 2002. The empirical findings of the study suggest that these two
markets did not have any causal relationship. When the study extended its analysis to verify if
liberalization in both the markets brought them together, it found no significant causal
relationship between the exchange rate and stock price movements, except for the years 1993,

2001 and 2002 during when a unidirectional causal influence from stock index return to
return in forex market is detected and a very mild causal influence in the reverse direction is
found in some years such as 1997 and 2002.

Yamini Karmarkar and G Kawadia tried to investigate the relationship between RS/$
exchange rate and Indian stock markets. Five composite indices and five sectoral indices
were studied over the period of one year: 2000. the results indicated that exchange rate has
high correlation with the movement of stock markets.

Hypothesis:

H0: There is no significant relation between stock prices and exchange rates.

H1: There is significant relation between stock prices and exchange rates.

Sources of Data:

Secondary sources- The study is based on the secondary data collected from the official
website of NSE and Exchange Rate data from exchangerate.com.

45
Research Design:

The research design is Exploratory “study of correlation between NSE Index &INR/USD”.
 Exploratory research on the other hand seeks to generate a posterion hypothesis by
examining a data-set and looking for potential relations between variables.

Period of the Study:

Daily closing values of CNX Nifty and exchange rates of Rupee/Dollar are considered for the
period from 01/01/2011 till 25/02/2013.

Limitations:

 Unavailability of intra-day minute to minute data of the markets.

 Only one pair of USD/INR is used.
 Data is Historic.
 The research is Time-bounded.

Statistical Tools used in the study:

 Correlation Between the closing prices of CNX Nifty and Rupee/Dollar Exchange
rates.
Benefits:

The determination of relationship between the foreign exchange market and stock market
would help the students to increase their understanding about the Market. It would also
provide a platform for participants to enhance their views about the relationship between the
two variables.

Methodology and Data:

The data set comprises of daily closing price of Nifty and INR/USD exchange rates obtained
from the respective websites. The series span the period from 1st January 2011 to 25th
February 2013.

46
Correlation Between the two variables is calculated dividing the period into three parts and
then the correlation in totality of the complete sample is calculated.

Period 1st January 2011 – 25th February 2013

Divided as follows:

1st January 2011 - 31st December 2011

1st January 2012 - 31st December 2012

1st January 2013 – 25th February 2013

47
 CHAPTER-VII

DATA ANALYSIS AND INTERPRETATION

48
Correlation:

In statistics, dependence refers to any statistical relationship between two random variables
or two sets of data. Correlation refers to any of a broad class of statistical relationships
involving dependence.

Correlations are useful because they can indicate a predictive relationship that can be
exploited in practice.

Formally, dependence refers to any situation in which random variables do not satisfy a
mathematical condition of probabilistic independence. In loose usage, correlation can refer to
any departure of two or more random variables from independence, but technically it refers to
any of several more specialized types of relationship between mean values. There are several
correlation coefficients, often denoted ρ or r, measuring the degree of correlation.

 The most common of these is the Pearson correlation coefficient, which is sensitive
only to a linear relationship between two variables (which may exist even if one is a
nonlinear function of the other).
 Other correlation coefficients have been developed to be more robust than the Pearson
correlation – that is, more sensitive to nonlinear relationships.

Techniques in Determining Correlation

There are several different correlation techniques. The Survey System's optional Statistics
Module includes the most common type, called the Pearson or product-moment correlation.
The module also includes a variation on this type called partial correlation. The latter is
useful when you want to look at the relationship between two variables while removing the
effect of one or two other variables.

Like all statistical techniques, correlation is only appropriate for certain kinds of data.
Correlation works for quantifiable data in which numbers are meaningful, usually
quantities of some sort. It cannot be used for purely categorical data, such as gender, brands
purchased, or favorite color.

Rating Scales

Rating scales are a controversial middle case. The numbers in rating scales have meaning, but
that meaning isn't very precise. They are not like quantities. With a quantity (such as dollars),
49
the difference between 1 and 2 is exactly the same as between 2 and 3. With a rating scale,
that isn't really the case.

You can be sure that your respondents think a rating of 2 is between a rating of 1 and a rating
of 3, but you cannot be sure they think it is exactly halfway between. This is especially true if
you labeled the mid-points of your scale (you cannot assume "good" is exactly half way
between "excellent" and "fair").

Most statisticians say you cannot use correlations with rating scales, because the mathematics
of the technique assume the differences between numbers are exactly equal. Nevertheless,
many survey researchers do use correlations with rating scales, because the results usually
reflect the real world. Our own position is that you can use correlations with rating scales, but
you should do so with care. When working with quantities, correlations provide precise
measurements. When working with rating scales, correlations provide general indications.

Correlation Coefficient

The main result of a correlation is called the correlation coefficient (or "r"). It ranges from -
1.0 to +1.0. The closer r is to +1 or -1, the more closely the two variables are related.

If r is close to 0, it means there is no relationship between the variables. If r is positive, it

means that as one variable gets larger the other gets larger.

If r is negative it means that as one gets larger, the other gets smaller (often called an
"inverse" correlation).While correlation coefficients are normally reported as r = (a value
between -1 and +1), squaring them makes then easier to understand.

The square of the coefficient (or r square) is equal to the percent of the variation in one
variable that is related to the variation in the other. After squaring r, ignore the decimal point.

An r of .5 means 25% of the variation is related (.5 squared =.25). An r value of .7 means
49% of the variance is related (.7 squared = .49).

A correlation report can also show a second result of each test - statistical significance. In this
case, the significance level will tell you how likely it is that the correlations reported may be
due to chance in the form of random sampling error.

50
If you are working with small sample sizes, choose a report format that includes the
significance level. This format also reports the sample size.

A key thing to remember when working with correlations is never to assume a correlation
means that a change in one variable causes a change in another. Sales of personal computers
and athletic shoes have both risen strongly in the last several years and there is a high
correlation between them, but you cannot assume that buying computers causes people to buy
athletic shoes (or vice versa).

The second caveat is that the Pearson correlation technique works best with linear
relationships: as one variable gets larger, the other gets larger (or smaller) in direct
proportion.

It does not work well with curvilinear relationships (in which the relationship does not follow
a straight line). An example of a curvilinear relationship is age and health care.
They are related, but the relationship doesn't follow a straight line. Young children and older
people both tend to use much more health care than teenagers or young adults. Multiple
regression (also included in the Statistics Module) can be used to examine curvilinear
relationships

Calculating the Correlation

Now we're ready to compute the correlation value. The formula for the correlation is:

We use the symbol r to stand for the correlation. Through the magic of mathematics it turns
out that r will always be between -1.0 and +1.0. if the correlation is negative, we have a
negative relationship; if it's positive, the relationship is positive. You don't need to know how
we came up with this formula unless you want to be a statistician. But you probably will need
to know how the formula relates to real data -- how you can use the formula to compute the

51
correlation. Let's look at the data we need for the formula. Here's the original data with the
other necessary columns:

Self Esteem
Person Height (x) x*y x*x y*y
(y)

1 68 4.1 278.8 4624 16.81

2 71 4.6 326.6 5041 21.16

3 62 3.8 235.6 3844 14.44

4 75 4.4 330 5625 19.36

5 58 3.2 185.6 3364 10.24

6 60 3.1 186 3600 9.61

7 67 3.8 254.6 4489 14.44

8 68 4.1 278.8 4624 16.81

9 71 4.3 305.3 5041 18.49

10 69 3.7 255.3 4761 13.69

11 68 3.5 238 4624 12.25

12 67 3.2 214.4 4489 10.24

13 63 3.7 233.1 3969 13.69

14 62 3.3 204.6 3844 10.89

15 60 3.4 204 3600 11.56

16 63 4 252 3969 16

17 65 4.1 266.5 4225 16.81

18 67 3.8 254.6 4489 14.44

19 63 3.4 214.2 3969 11.56

20 61 3.6 219.6 3721 12.96

52
Sum = 1308 75.1 4937.6 85912 285.45

The first three columns are the same as in the table above. The next three columns are simple
computations based on the height and self esteem data. The bottom row consists of the sum
of each column. This is all the information we need to compute the correlation. Here are the
values from the bottom row of the table (where N is 20 people) as they are related to the
symbols in the formula:

Now, when we plug these values into the formula given above, we get the following (I show
it here tediously, one step at a time):

So, the correlation for our twenty cases is .73, which is a fairly strong positive relationship

53
Significance of Positive, Negative & Zero Correlation

Positive Correlation:
The correlation in the same direction is called positive correlation. If one variable increase
other is also increase and one variable decrease other is also decrease. For example, the
length of an iron bar will increase as the temperature increases.

Negative Correlation:

The correlation in opposite direction is called negative correlation. If one variable increase
other is decrease and vice versa, For example, the volume of gas will decrease as the pressure
increase or the demand of a particular commodity as price of such commodity is decrease.

No correlation or Zero Correlation :

If there is no relationship between the two variables such that the value of one variable
change & the other variable remain constant is called no correlation or zero correlation.

For the purpose of data analysis the period of study i.e. 1st January 2011 – 25th
February 2013 is divided into 3 parts as follows and calculated correlation for each of
them and then correlation for the complete period

Period Correlation

1st January 2011 – 31st December 2011 -0.80331

1st January 2012 – 31st December 2012 0.020993

1st January 2013 – 25th February 2013 -0.04667

1st January 2011 – 25th February 2013 -0.10635

The analysis has been performed using MS-Excel.

54
Graphical Representation of fluctuation in INR/USD Exchange rates and NIFTY
index for the year 1st January 2011 – 31st December 2011

55
Graphical Representation of fluctuation in INR/USD Exchange rates and NIFTY
index for the year 1st January 2012 – 31st December 2012.

56
Graphical Representation of fluctuation in INR/USD Exchange rates and NIFTY
index for the year 1st January 2013 – 25th February 2013.

57
Graphical Representation of fluctuation in INR/USD Exchange rates and NIFTY
index for the year 1st January 2011 – 25th February 2013.

58
CHAPTER-VIII

FINDINGS

59
  From the Above data it is clear that there is negative correlation between INR/USD
Exchange rates and NIFTY index. This implies that the two variables tend to show
opposite behavior.

 The perfect negative correlation means that if one variable moves in one direction the
perfectly negatively correlated variable will move in the opposite direction.

 The Correlation among the two variables INR/USD exchange rates and NIFTY index
is moderate for the period 1st January 2011 – 31st December 2011 as it is only
-0.80331. As the correlation is negative it indicates that the movement is in opposite
direction, which shows, when one is increasing another decreases.

 Whereas the Correlation among the two variables INR/USD exchange rates and
NIFTY index is insignificant for the period 1st January 2012 – 31st December 2012 as
it is 0.020993. As the correlation is positive it indicates that the movement is in same
direction, which shows when one is increasing another is also increasing.

 The Correlation among the two variables INR/USD exchange rates and NIFTY index
is insignificant for the period 1st January 2013 – 25th February 2013 as it is -0.04667.
As the correlation is negative it indicates that the movement is in opposite direction,
which shows, when one is increasing another decreases.

 However as the Correlation among the two variables INR/USD exchange rates and
NIFTY index is only -0.10635 for the complete period under study i.e. 1st January
2011– 25th February 2013 depicting insignificant correlation between the two
variables, we can conclude that the variables do not have significant impact on each
other & It indicates that the movement is in opposite direction.

 As the correlation is -0.10635 that means INR/USD & NIFTY have indirect
relationship though the relation is insignificant .The movement in one variable will
lead to opposite movement of another variable in negligible percentage.

After analyzing the data, we found that in the long run Exchange Rate does not affect the
share prices. The results show that there was no significant relationship between the
INR/USD Exchange Rate and Nifty index.

60
The possible reasons for such behavior could be as follows:

• It can be said that because of using only a single variable, namely exchange rate, the
impact on stock prices was not felt. If more of independent variables like interest
rates, money supply etc. could be added, then possibly a very good relation could
have been established.

• In reality, stock prices and exchange rate are affected by a myriad of factors such as
fiscal and monetary policy, interest rates, inflation, money supply, political factors,
international events, fundamental performance, Forex reserves, BOP, exchange
control, etc.

• The non-existence of relationship may also be because of Indian markets not yet
being highly integrated or sensitive to the new information. Also the Indian
companies comparatively may not be exposed to a lot of Forex exposure, like
companies in developed countries.

• Alternatively Indian managers are highly cautious and hedge to a good extent of their
Forex exposure.

• High volatility introduced in the exchange market due to floating rate regime nurtures
the speculative activities, makes it difficult to pinpoint the precise effect of exchange
rates on stock prices.

• Another very important reason can be that Indian stocks are highly sentiment driven
and stocks of certain companies may start soaring for no reason. There are few
qualitative factors that influence stock prices like speculation and investor confidence
level.

61
CHAPTER-IX

CONCLUSION

62
In this study, using daily data, we have examined the relationship between Nifty Closing
stock prices and INR/USD exchange rates in India.

Our main concerns are to examine whether the movement in one variable affects the
movement of another variable significantly. To know whether the movement is showing
positive or negative trend.

The following conclusions have been derived from our analysis:

• There is no significant cause and effect relationship between the two variables.

• As the correlation is negative it indicates that the movement is in opposite direction,

which shows, when one is increasing another decreases.

• As the relationship occurred between the variables during different periods is because
of chance factor and not because of cause factor.

Hence, we can reject the hypothesis that there is relationship between the exchange rate and
stock indices and the two are affected by various factors in spite of the increasing integration
between the two markets.

In conclusion, in the era of increasing integration in financial markets one should take
sufficient care while implementing exchange rate policies. Furthermore, indications are that
the existence of foreign exchange restrictions does not isolate the domestic capital markets.
The general increase in international trade and the resultant increase in economic integration
have also increased financial integration and reduced the benefit of international
diversification.

63
 CHAPTER-X

BIBLIOGRAPHY

64
Text Books

 Basic Econometrics

Damodar N. Gujarati and S Sangeetha, (Fourth Edition)

 Research Methodology

Donald Cooper and Pamela Schindler , (Eighth Edition)

 Financial markets and services

Gordon and Natrajan, (Second Edition)

Websites

• www.investopedia.com

• www.nseindia.com

• www.sebi.com

• www.bseindia.com

• www.exchangerate.com

• www.moneycontrol.com

• www.wikipedia.com

Reference:

• “Integration between Foreign Exchange and Capital Markets in India: An empirical

exploration" by Golka C Nath and G P Samanta, the ICFAI Journal of Applied
Finance vol. 9 No. 6, Pg. 29 to 40 .

• “Stock Prices and Exchange Rates interlinkages in emerging financial markets: the
Indian perspective” by Alok Kumar Mishra the ICFAI Journal of Applied Finance
vol.11 No.4,Pg. 31 to 48.

• Dickey, D.A., and Fuller, W.A. (1981). Likelihood ratio statistics for autoregressive
time series with a unit root. Econometrica 49, 1057-1072.
65
CHAPTER-XI

ANNEXURE

66
HISTORICAL NIFTY CLOSING AND USD/INR RATES

01.01.2011 TO 28.02.2013

Date Close INR/1 USD

02/25/13 5854.75 53.88409
02/22/13 5850.3 54.24819
02/21/13 5852.25 54.52038
02/20/13 5943.05 54.11791
02/19/13 5939.7 54.26785
02/18/13 5898.2 54.25503
02/15/13 5887.4 54.2829
02/14/13 5896.95 53.94094
02/13/13 5932.95 53.82048
02/12/13 5922.5 53.84591
02/11/13 5897.85 53.89481
02/08/13 5903.5 53.46146
02/07/13 5938.8 53.24218
02/06/13 5959.2 53.12695
02/05/13 5956.9 53.09742
02/04/13 5987.25 53.26989
02/01/13 5998.9 53.19451
01/31/13 6034.75 53.25955
01/30/13 6055.75 53.27675
01/29/13 6049.9 53.72898
01/28/13 6074.8 53.94426
01/25/13 6074.65 53.7663
01/24/13 6019.35 53.71698
01/23/13 6054.3 53.6878
01/22/13 6048.5 53.75466
01/18/13 6064.4 53.79724
01/17/13 6039.2 54.44458
01/16/13 6001.85 54.79463
01/15/13 6056.6 54.60196
01/14/13 6024.05 54.54077
01/11/13 5951.3 54.72488
01/10/13 5968.65 54.58034
01/09/13 5971.5 54.77033
01/08/13 6001.7 55.03699
01/07/13 5988.4 55.2225
01/04/13 6016.15 54.89025
01/03/13 6009.5 54.48952
01/02/13 5993.25 54.30445
12/31/12 5905.1 54.95855
12/28/12 5908.35 54.78966

67
12/27/12 5870.1 54.94858
12/24/12 5855.75 54.95675
12/21/12 5847.7 55.06816
12/20/12 5916.4 54.88863
12/19/12 5929.6 54.55639
12/18/12 5896.8 54.87415
12/17/12 5857.9 54.81424
12/14/12 5879.6 54.49708
12/13/12 5851.5 54.33324
12/12/12 5888 54.24179
12/11/12 5898.8 54.29642
12/10/12 5908.9 54.47956
12/07/12 5907.4 54.37619
12/06/12 5930.9 54.14522
12/05/12 5900.5 54.54672
12/04/12 5889.25 54.70602
12/03/12 5870.95 54.74085
11/30/12 5879.85 54.50977
11/29/12 5825 54.78962
11/27/12 5727.45 55.39296
11/26/12 5635.9 55.66771
11/23/12 5626.6 55.52765
11/22/12 5627.75 55.16595
11/21/12 5614.8 55.15018
11/20/12 5571.55 55.10445
11/19/12 5571.4 55.03577
11/16/12 5574.05 55.17234
11/15/12 5631 54.68758
11/13/12 5666.95 54.89258
11/12/12 5683.7 54.8783
11/09/12 5686.25 54.77279
11/08/12 5738.75 54.29263
11/07/12 5760.1 54.21819
11/06/12 5724.4 54.43151
11/05/12 5704.2 54.60836
11/02/12 5697.7 53.81083
11/01/12 5645.05 53.74142
10/31/12 5619.7 53.88989
10/30/12 5597.9 53.96848
10/29/12 5665.6 54.08009
10/26/12 5664.3 53.62792
10/25/12 5705.3 53.62489
10/23/12 5691.4 53.74536
10/22/12 5717.15 53.29292
10/19/12 5684.25 53.83986
10/18/12 5718.7 53.43284
68
10/17/12 5660.25 52.87327
10/16/12 5648 52.86657
10/15/12 5687.25 53.06902
10/12/12 5676.05 52.8238
10/11/12 5708.05 52.67444
10/10/12 5652.15 53.03815
10/09/12 5704.6 52.73162
10/05/12 5746.95 51.83737
10/04/12 5787.6 51.80341
10/03/12 5731.25 52.26405
10/01/12 5718.8 52.42681
09/28/12 5703.3 52.84347
09/27/12 5649.5 53.09044
09/26/12 5663.45 53.5429
09/25/12 5673.9 53.39828
09/24/12 5669.6 53.46626
09/21/12 5691.15 53.43303
09/20/12 5554.25 54.33369
09/18/12 5600.05 53.98089
09/17/12 5610 53.98981
09/14/12 5577.65 54.30879
09/13/12 5435.35 55.40603
09/12/12 5431 55.23729
09/11/12 5390 55.36306
09/10/12 5363.45 55.4451
09/07/12 5342.1 55.32145
09/06/12 5238.4 55.74113
09/05/12 5225.7 55.90793
09/04/12 5274 55.65385
08/31/12 5258.5 55.58005
08/30/12 5315.05 55.64303
08/29/12 5287.8 55.65905
08/28/12 5334.6 55.70243
08/27/12 5350.25 55.6934
08/24/12 5386.7 55.47002
08/23/12 5415.35 55.24805
08/22/12 5412.85 55.49261
08/21/12 5421 55.48499
08/17/12 5366.3 55.69864
08/16/12 5362.95 55.79684
08/14/12 5380.35 55.65968
08/13/12 5347.9 55.36485
08/10/12 5320.4 55.25359
08/09/12 5322.95 55.29577
08/08/12 5338 55.37675
08/07/12 5336.7 55.18183
69
08/06/12 5282.55 55.5284
08/03/12 5215.7 55.84015
08/02/12 5227.75 55.82517
08/01/12 5240.5 55.4746
07/31/12 5229 55.63171
07/30/12 5199.8 55.53602
07/27/12 5099.85 55.36071
07/26/12 5043 55.54742
07/25/12 5109.6 56.15184
07/24/12 5128.2 56.16437
07/23/12 5117.95 55.95849
07/20/12 5205.1 55.2783
07/19/12 5242.7 55.18908
07/18/12 5216.3 55.43167
07/17/12 5192.85 55.09501
07/16/12 5197.25 55.23774
07/13/12 5227.25 55.26712
07/12/12 5235.25 55.90067
07/11/12 5306.3 55.54408
07/10/12 5345.35 55.40249
07/09/12 5275.15 55.92507
07/06/12 5316.95 55.49002
07/05/12 5327.3 54.98039
07/03/12 5287.95 54.47547
07/02/12 5278.6 55.43819
06/29/12 5278.9 55.81241
06/28/12 5149.15 56.83683
06/27/12 5141.9 57.11315
06/26/12 5120.8 57.00755
06/25/12 5114.65 57.06028
06/22/12 5146.05 57.14849
06/21/12 5165 56.32611
06/20/12 5120.55 56.10885
06/19/12 5103.85 55.94101
06/18/12 5064.25 55.92673
06/15/12 5139.05 55.42
06/14/12 5054.75 55.78582
06/13/12 5121.45 55.68099
06/12/12 5115.9 55.81217
06/11/12 5054.1 55.60759
06/08/12 5068.35 55.4231
06/07/12 5049.65 54.9219
06/06/12 4997.1 55.37783
06/05/12 4863.3 55.61313
06/04/12 4848.15 55.66319
06/01/12 4841.6 55.64397
70
05/31/12 4924.25 56.10735
05/30/12 4950.75 56.20738
05/29/12 4990.1 55.66619
05/25/12 4920.4 55.3833
05/24/12 4921.4 55.78752
05/23/12 4835.65 55.99472
05/22/12 4860.5 55.36845
05/21/12 4906.05 55.01022
05/18/12 4891.45 54.46183
05/17/12 4870.2 54.43881
05/16/12 4858.25 54.44696
05/15/12 4942.8 53.80256
05/14/12 4907.8 53.88349
05/11/12 4928.9 53.61412
05/10/12 4965.7 53.34146
05/09/12 4974.8 53.40216
05/08/12 4999.95 53.03348
05/07/12 5114.15 52.92189
05/04/12 5086.85 53.45664
05/03/12 5188.4 53.35868
05/02/12 5239.15 52.93266
04/30/12 5248.15 52.65835
04/27/12 5190.6 52.55446
04/26/12 5189 52.53674
04/25/12 5202 52.57215
04/24/12 5222.65 52.67766
04/23/12 5200.6 52.42998
04/20/12 5290.85 52.07349
04/19/12 5332.4 52.12653
04/18/12 5300 51.79421
04/17/12 5289.7 51.46329
04/16/12 5226.2 51.65343
04/13/12 5207.45 51.37579
04/12/12 5276.85 51.48326
04/11/12 5226.85 51.46918
04/10/12 5243.6 51.34074
04/09/12 5234.4 51.1267
04/04/12 5322.9 51.11815
04/03/12 5358.5 50.69302
04/02/12 5317.9 50.84291
03/30/12 5295.55 50.88879
03/29/12 5178.85 51.39085
03/28/12 5194.75 50.83184
03/27/12 5243.15 50.69938
03/26/12 5184.25 51.20858
03/23/12 5278.2 51.23332
71
 03/22/12 5228.45 51.0664
03/21/12 5364.95 50.62391
03/20/12 5274.85 50.38402
03/19/12 5257.05 50.20868
03/16/12 5317.9 50.15934
03/15/12 5380.5 50.31311
03/14/12 5463.9 49.96754
03/13/12 5429.5 49.93263
12/03/12 5359.55 49.975
09/03/12 5333.55 49.675
07/03/12 5220.45 50.285
06/03/12 5222.4 50.365
05/03/12 5280.35 49.84
02/03/12 5359.35 49.526
01/03/12 5339.75 49.206
2/29/2012 5385.2 49.011
2/28/2012 5375.5 49.075
2/27/2012 5281.2 49.181
2/24/2012 5429.3 49.016
2/23/2012 5483.3 49.1
2/22/2012 5505.35 49.225
2/21/2012 5607.15 49.31
2/17/2012 5564.3 49.325
2/16/2012 5521.95 49.291
2/15/2012 5531.95 49.291
2/14/2012 5416.05 49.365
2/13/2012 5390.2 49.196
10/02/12 5381.6 49.475
09/02/12 5412.35 49.495
08/02/12 5368.15 49.156
07/02/12 5335.15 49.05
06/02/12 5361.65 49.06
03/02/12 5325.85 48.575
02/02/12 5269.9 49.025
01/02/12 5235.7 49.05
1/31/2012 5199.25 49.525
1/30/2012 5087.3 49.67
1/27/2012 5204.7 49.225
1/25/2012 5158.3 50.025
1/24/2012 5127.35 50.025
1/23/2012 5046.25 49.865
1/20/2012 5048.6 50.225
1/19/2012 5018.4 50.31
1/18/2012 4955.8 50.38

72
1/17/2012 4967.3 50.675
1/16/2012 4873.9 51.385
1/13/2012 4866 51.425
12/01/12 4831.25 51.475
11/01/12 4860.95 51.775
10/01/12 4849.55 51.625
06/01/12 4754.1 52.635
05/01/12 4749.95 52.785
04/01/12 4749.65 52.875
03/01/12 4765.3 53.075
02/01/12 4636.75 53.306
12/30/2011 4624.3 53.015
12/29/2011 4646.25 53.025
12/28/2011 4705.8 52.885
12/27/2011 4750.5 52.875
12/26/2011 4779 52.705
12/23/2011 4714 52.735
12/22/2011 4733.85 52.535
12/21/2011 4693.15 52.401
12/20/2011 4544.2 52.735
12/19/2011 4613.1 52.725
12/16/2011 4651.6 52.525
12/15/2011 4746.35 53.235
12/14/2011 4763.25 53.735
12/13/2011 4800.6 53.125
12/12/11 4764.6 52.675
09/12/11 4866.7 51.915
08/12/11 4943.65 51.725
07/12/11 5062.6 51.625
05/12/11 5039.15 51.225
02/12/11 5050.15 51.075
01/12/11 4936.85 51.325
11/30/2011 4832.05 51.75
11/29/2011 4805.1 51.91
11/28/2011 4851.3 51.95
11/25/2011 4710.05 52.236
11/24/2011 4756.45 52.071
11/23/2011 4706.45 52.266
11/22/2011 4812.35 52.49
11/21/2011 4778.35 52.066
11/18/2011 4905.8 51.236
11/17/2011 4934.75 50.956
11/16/2011 5030.45 50.67
11/15/2011 5068.5 50.63
73
11/14/2011 5148.35 50.376
11/11/11 5168.85 49.805
09/11/11 5221.05 50.075
08/11/11 5289.35 49.35
04/11/11 5284.2 48.975
03/11/11 5265.75 49.045
02/11/11 5258.45 49.111
01/11/11 5257.95 49.266
10/31/2011 5326.6 48.681
10/28/2011 5360.7 48.625
10/26/2011 5201.8 49.385
10/25/2011 5191.6 49.435
10/24/2011 5098.35 49.575
10/21/2011 5049.95 49.725
10/20/2011 5091.9 49.875
10/19/2011 5139.15 49.035
10/18/2011 5037.5 49.265
10/17/2011 5118.25 48.925
10/14/2011 5132.3 48.875
10/13/2011 5077.85 49.225
12/10/11 5099.4 48.93
11/10/11 4974.35 49.245
10/10/11 4979.6 48.821
07/10/11 4888.05 48.98
05/10/11 4751.3 49.175
04/10/11 4772.15 49.31
03/10/11 4849.5 49.125
9/30/2011 4943.25 49.075
9/29/2011 5015.45 48.88
9/28/2011 4945.9 48.775
9/27/2011 4971.25 48.835
9/26/2011 4835.4 49.425
9/23/2011 4867.75 49.35
9/22/2011 4923.65 49.48
9/21/2011 5133.25 48.235
9/20/2011 5140.2 47.935
9/19/2011 5031.95 47.73
9/16/2011 5084.25 47.195
9/15/2011 5075.7 47.525
9/14/2011 5012.55 47.58
9/13/2011 4940.95 47.485
12/09/11 4946.8 47.185
09/09/11 5059.45 46.525
08/09/11 5153.25 46.155
74
 07/09/11 5124.65 46.065
06/09/11 5064.3 46.065
05/09/11 5017.2 45.992
02/09/11 5040 45.735
8/30/2011 5001 45.965
8/29/2011 4919.6 45.875
8/26/2011 4747.8 46.125
8/25/2011 4839.6 46.125
8/24/2011 4888.9 46.125
8/23/2011 4948.9 46.125
8/22/2011 4898.8 46.125
8/19/2011 4845.65 45.625
8/18/2011 4944.15 45.73
8/17/2011 5056.6 45.31
8/16/2011 5035.8 45.261
12/08/11 5072.95 45.401
11/08/11 5138.3 45.321
10/08/11 5161 45.255
09/08/11 5072.85 45.211
08/08/11 5118.5 45.011
05/08/11 5211.25 44.74
04/08/11 5331.8 44.571
03/08/11 5404.8 44.321
02/08/11 5456.55 44.27
01/08/11 5516.8 44.071
7/29/2011 5482 44.085
7/28/2011 5487.75 44.035
7/27/2011 5546.8 44.05
7/26/2011 5574.85 44.075
7/25/2011 5680.3 44.335
7/22/2011 5633.95 44.355
7/21/2011 5541.6 44.325
7/20/2011 5567.05 44.395
7/19/2011 5613.55 44.425
7/18/2011 5567.05 44.525
7/15/2011 5581.1 44.475
7/14/2011 5599.8 44.425
7/13/2011 5585.45 44.475
12/07/11 5526.15 44.585
11/07/11 5616.1 44.375
08/07/11 5660.65 44.325
07/07/11 5728.95 44.355
06/07/11 5625.45 44.355
05/07/11 5632.1 44.365
75
 04/07/11 5650.5 44.425
01/07/11 5627.2 44.495
6/30/2011 5647.4 44.6
6/29/2011 5600.45 44.785
6/28/2011 5545.3 44.96
6/27/2011 5526.6 44.975
6/24/2011 5471.25 44.995
6/23/2011 5320 44.875
6/22/2011 5278.3 44.775
6/21/2011 5275.85 44.775
6/20/2011 5257.9 44.895
6/17/2011 5366.4 44.795
6/16/2011 5396.75 44.806
6/15/2011 5447.5 44.735
6/14/2011 5500.5 44.746
6/13/2011 5482.8 44.825
10/06/11 5485.8 44.725
09/06/11 5521.05 44.625
08/06/11 5526.85 44.675
07/06/11 5556.15 44.63
06/06/11 5532.05 44.695
03/06/11 5516.75 44.775
02/06/11 5550.35 44.775
01/06/11 5592 44.785
5/31/2011 5560.15 44.985
5/30/2011 5473.1 45.09
5/27/2011 5476.1 45.135
5/26/2011 5412.35 45.215
5/25/2011 5348.95 45.255
5/24/2011 5394.85 45.175
5/23/2011 5386.55 45.175
5/20/2011 5486.35 44.875
5/19/2011 5428.1 44.875
5/18/2011 5420.6 44.975
5/17/2011 5438.95 45.025
5/16/2011 5499 44.975
5/13/2011 5544.75 44.825
12/05/11 5486.15 44.725
11/05/11 5565.05 44.605
10/05/11 5541.25 44.625
09/05/11 5551.1 44.625
06/05/11 5551.45 44.575
05/05/11 5459.85 44.725
04/05/11 5537.15 44.345
76
 03/05/11 5565.25 44.425
02/05/11 5701.3 44.245
4/29/2011 5749.5 44.175
4/28/2011 5785.45 44.325
4/27/2011 5833.9 44.345
4/26/2011 5868.4 44.43
4/25/2011 5874.5 44.43
4/21/2011 5884.7 44.275
4/20/2011 5851.65 44.275
4/19/2011 5740.75 44.425
4/18/2011 5729.1 44.375
4/15/2011 5824.55 44.275
4/13/2011 5911.5 44.445
11/04/11 5785.7 44.275
08/04/11 5842 44.071
07/04/11 5885.7 44.125
06/04/11 5891.75 44.075
05/04/11 5910.05 44.325
04/04/11 5908.45 44.325
01/04/11 5826.05 44.43
3/31/2011 5833.75 44.475
3/30/2011 5787.65 44.675
3/29/2011 5736.35 44.675
3/28/2011 5687.25 44.725
3/25/2011 5654.25 44.7
3/24/2011 5522.4 44.625
3/23/2011 5480.25 44.775
3/22/2011 5413.85 44.875
3/21/2011 5364.75 44.93
3/18/2011 5373.7 44.975
3/17/2011 5446.65 45.075
3/16/2011 5511.15 45.045
3/15/2011 5449.65 45.175
3/14/2011 5531.5 44.975
11/03/11 5445.45 45.075
10/03/11 5494.4 45.125
09/03/11 5531 44.895
08/03/11 5520.8 44.925
07/03/11 5463.15 44.995
04/03/11 5538.75 44.845
03/03/11 5536.2 44.875
01/03/11 5522.3 44.855
2/28/2011 5333.25 45.125
2/25/2011 5303.55 45.275
77
2/24/2011 5262.7 45.425
2/23/2011 5437.35 45.075
2/22/2011 5469.2 45.175
2/21/2011 5518.6 44.925
2/18/2011 5458.95 45.075
2/17/2011 5546.45 45.23
2/16/2011 5481.7 45.325
2/15/2011 5481 45.435
2/14/2011 5456 45.375
11/02/11 5310 45.565
10/02/11 5225.8 45.655
09/02/11 5253.55 45.375
08/02/11 5312.55 45.175
07/02/11 5396 45.325
04/02/11 5395.75 45.53
03/02/11 5526.75 45.575
02/02/11 5432 45.475
01/02/11 5417.2 45.425
1/31/2011 5505.9 45.825
1/28/2011 5512.15 45.846
1/27/2011 5604.3 45.696
1/25/2011 5687.4 45.625
1/24/2011 5743.25 45.475
1/21/2011 5696.5 45.475
1/20/2011 5711.6 45.785
1/19/2011 5691.05 45.33
1/18/2011 5724.05 45.345
1/17/2011 5654.75 45.475
1/14/2011 5654.55 45.275
1/13/2011 5751.9 44.98
12/01/11 5863.25 44.93
11/01/11 5754.1 45.105
10/01/11 5762.85 45.33
07/01/11 5904.6 45.175
06/01/11 6048.25 45.195
05/01/11 6079.8 45.23
04/01/11 6146.35 44.92
03/01/11 6157.6 44.63

78