RESEARCH PROJECT REPORT

On

“Comparative Analysis of Indian Stock Market with

International Markets”
Towards partial fulfillment of
Master of Business Administration (MBA)
(BBD University, Lucknow)

Guided By: Submitted by:

Dr. Shweta Singh KERTIKA SINGH
Assistant Professor Roll No. 1210672127
(SOM, BBDU LUCKNOW) MBA 4th Semester

Session 2022-2023
School of Management
Babu Banarasi Das University
Sector I, Dr. Akhilesh Das Nagar, Faizabad Road, Lucknow (U.P.) India
PLAGIARISM CERTIFICATE
 DECLARATION

This is to declare that I, KERTIKA SINGH (University Roll No. 1210672127)

student of MBA, have personally worked on the project entitled “Comparative

Analysis of Indian Stock Market with International Markets”. The data

mentioned in this report were obtained during genuine work done and collected by

me. The data or information obtained from primary (first-hand sources) and any other

alternative sources are absolutely acknowledged. The result and analysis embodied

during this project has not been submitted to the other University or Institute for the

award of any degree.

KERTIKA SINGH
ROLL NO. 1210672127
MBA 4th Semester
BBD UNIVERSITY, LUCKNOW
 ACKNOWLEDGEMENT

First and foremost am indebted to the Almighty. It provides Pine Tree State immense

pleasure to position on record my feeling and reverence to my guide and supervising

faculty Dr. Shweta Singh from Babu Banarasi Das University, Lucknow for all the

timely help and support rendered. But for her constant motivation, encouragement and

adept guidance during the entire course of research, my endeavor would not have

culminated in fruition. The sincerity and dedication put in by her for the sake of my

Research Report is remarkable. I would like to thank her for the opportunity I was

given to conduct my Research and further my Research Report under his guidance. I

am grateful to Prof. (Dr.) Sushil Pande, the Dean/Incharge -SOM of Babu Banarasi

Das University, Lucknow for sparing his valuable time for me on different

occasions. I really appreciate all the bank employees who provided the requisite data

for my research work. It was their cooperation and input that made this research

possible. I express my gratitude to all the library staff of Babu Banarasi Das

University, Lucknow. Close to my heart is the support of my dear Colleagues, family

and friends. They were always there for me with their wise counsel and sympathetic

ear. I could not have done any of this without you all. Thank you once again.

KERTIKA SINGH
ROLL NO. 1210672127
MBA 4th Semester
BBD UNIVERSITY, LUCKNOW
                                                           
 PREFACE

It was a privilege for me to work in a reputed organization. This has given us an

opportunity to work in a truly professional environment where team work score over

individual effort, where there is a helpful atmosphere. A well planned, properly

executed and evaluated training helps a lot in inoculating good work culture. The

project on “Comparative Analysis of Indian Stock Market with International

Markets” has been made to facilitate effective understanding about the marketing

aspects. The project research has provided me an opportunity to gain practical

experience, which has helped me to increase my sphere of knowledge to a greater

extent. I have tried to summarize all our experience and knowledge acquired up till

now, in this report. This project is a keen effort to obtain the expected results and

fulfill all the information required. At the end annexure and bibliography are given for

effective understanding
 EXECUTIVE SUMMARY

This project report is prepared as the partial fulfillment of two year degree programme

of MBA curriculum of Babu Banarasi Das University, Lucknow. This Research

project is a compulsory part of the academics. This research is done in the fourth

semester of the MBA program.

Today employees expect quality of work life, more than financial benefits from the

organization. With the advent of new technologies, factors related to mental health in

Tata Motors Limited are taken into consideration more than ever. Studies have

revealed that one of the factors affecting the productivity of employees in an

organization is quality of work life. Another influential factor is job satisfaction which

is important in the improvement of work environment conditions and organizational

efficiency. Quality of work life is an experience which an employee feels about the

job and work place in organization. The purpose of this paper is to identify the

relationship between two variables like, quality of work life and job satisfaction. The

study is an attempt to explore the better understanding of quality of work life and

employee job satisfaction in Tata Motors Limited. Findings of the study will help the

management and employees of Tata Motors Limited to understand the level of quality

of work life of Tata Motors Limited employees.

The project is followed by 8 Chapters.

Chapter 1: Definition & concept of Employees Satisfaction and Quality of Work

Life at Tata Motors Limited

Chapter 2: Literature Review and Company Profile

Chapter 3: Research methodology, objective of research.

Chapter 4: Analysis & interpretation of collect data’s.

Chapter 5: Findings
Chapter 6: Suggestions & conclusions

Chapter 7: References

Chapter 8: Annexure

This report is an honest work towards the topic. There can be many short comings in

it because of the lack of the time, unavailability of data and other constraints.
 TABLE OF CONTENT

S. No Particular Page No.

1 Bona-fide Certificate of Dean -School of Management i

2 Plagiarism Certificate ii

3 Declaration iii

4 Acknowledgment iv

5 Executive Summary v

6 Introduction 1

7 Company Profile 12

8 Literature Review 27

9 Objective of the Study 37

10 Research Methodology 39

11 Data Analysis and Interpretation 43

12 Findings 64

13 Limitations of The Study 66

14 Suggestions and Recommendations 68

15 Conclusion 70

16 Bibliography 73

17 Annexure 76
CHAPTER - I
INTRODUCTION

1
 Chapter – I
INTRODUCTION

INTRODUCTION

The Indian stock exchanges hold a place of prominence not only in Asia but also at

the global stage. The Bombay Stock Exchange (BSE) is one of the oldest exchanges

across the world, while the National Stock Exchange (NSE) is among the best in

terms of sophistication and advancement of technology. The Indian stock market

scene really picked up after the opening up of the economy in the early nineties. The

whole of nineties were used to experiment and fine tune an efficient and effective

system. The ‘badla’ system was stopped to control unnecessary volatility while the

derivatives segment started as late as 2000. The corporate governance rules were

gradually put in place which initiated the process of bringing the listed companies at a

uniform level. On the global scale, the economic environment started taking paradigm

shift with the ‘dot com bubble burst’, 9/11, and soaring oil prices. The slowdown in

the US economy and interest rate tightening made the equation more complex.

However after 2000 riding on a robust growth and a maturing economy and relaxed

regulations, outside investors- institutional and others got more scope to operate. This

opening up of the system led to increased integration with heightened cross-border

flow of capital, with India emerging as an investment ‘hot spot’ resulting in our stock

exchanges being impacted by global cues like never before. The study pertains to

comparative analysis of the Indian Stock Market with respect to various international

counterparts. Exchanges are now crossing national boundaries to extend their service

areas and this has led to cross-border integration. Also, exchanges have begun to offer

2
cross-border trading to facilitate overseas investment options for investors. This not

only increased the appeal of the exchange for investors but also attracts more volume.

Exchanges regularly solicit companies outside their home territory and encourage

them to list on their exchange and global competition has put pressure on corporations

to seek capital outside their home country. The Indian stock market is the world third

largest stock market on the basis of investor base and has a collective pool of about 20

million investors. There are over 9,000 companies listed on the stock exchanges of the

country. The Bombay Stock Exchange, established in 1875, is the oldest in Asia.

National Stock Exchange, a more recent establishment which came into existence in

1992, is the largest and most advanced stock market in India is also the third biggest

stock exchange in Asia in terms of transactions. It is among the 5 biggest stock

exchanges in the world in terms of transactions volume. The origin of the New York

Stock Exchange (NYSE) is dated back to May 17, 1792, when the Buttonwood

Agreement was signed by twenty-four stock brokers outside of 68 Wall Street in New

York under a buttonwood tree. Also called the “Big Board”, it is the largest stock

exchange in the world in terms of dollar volume and second largest in terms of

number of companies listed. The Tokyo stock exchange was established on May 15,

1878 and trading began on June 1, 1878. In 1943, the exchange was combined with

ten other stock exchanges in major Japanese cities to form a single Japanese Stock

Exchange. It is the second largest stock exchange market in terms of monetary

volume and currently has 2302 listed companies. The Hong Kong stock exchange is

the 8th largest stock exchange in the world in terms of Market capitalization. The

Hang Sang Index (HIS), was started on November 24, 1969. The Russian stock

exchange was established in 1995 by consolidating the separate regional stock

exchanges into one uniformly regulated trading floor. The Korea stock exchange was

3
created by the integration of the three existing of the Korean Spots and Futures

exchanges (Korean stock exchange, Korean futures exchange & KOSDAQ) under the

Korea Stock and Futures Exchange Act.3.5. In this paper, the names of the countries

and the names of the indices of those countries have been used interchangeably. Thus,

the names of the countries represent the indices for the purpose of analysis and they

need to be interpreted that way. Again, all the analyses have been done with the

closing prices. The following table gives the country and the exchange with the name

of its indices.

Country Stock exchange name Indices name

India National Stock Exchange S & P Nifty

India Bombay Stock Exchange Sensex

Hong Kong Hong Kong Stock Exchange Hang Seng

USA New York Stock Exchange NYSE

Korea Korean Stock Exchange KRX 100

Russian Russian Stock Exchange RTS Index

PAST STUDIES

Poshakwale, Sunil (2002) examined the random walk hypothesis in the emerging

Indian stock market by testing for the nonlinear dependence using a large

disaggregated daily data from the Indian stock market. The sample used was 38

actively traded stocks in the BSE National Index. He found that the daily returns from

the Indian market do not conform to a random walk. Daily returns from most

individual stocks and the equally weighted portfolio exhibit significant non-linear

dependence. This is largely consistent with previous research that has shown evidence

of non-linear dependence in returns from the stock market indexes and individual

stocks in the US and the UK. Noor, Azuddin Yakob, Diana Beal and Delpachitra,

4
Sarath (2006) studied the stock market seasonality in terms of day-of-the-week,

month-of-theyear, monthly and holiday effects in ten Asian stock markets, namely,

Australia, China, Hong Kong, Japan, India, Indonesia, Malaysia, Singapore, South

Korea and Taiwan. He concluded that the existence of seasonality in stock markets

and also suggested that this is a global phenomenon.

LINKAGE PATTERNS:

Masih, M.M. Abul and Masih, Rumi (1997) examined the dynamic linkage patterns

among national stock exchange prices of four Asian newly industrializing countries -

Taiwan, South Korea, Singapore and Hong Kong. The sample used comprised end-of-

the-month closing share price indices of the four NIC stock markets from January

1982 to June 1994. They concluded that the study of these markets are not mutually

exclusive of each other and significant shortrun linkages appear to run among them.

Lau, S T and Diltz, J.D. (1994) studied the transfer of information among Tokyo and

New York stock exchanges. Agarwal, R N (2000) examined the financial integration

of capital markets in developing nations gave insight with regards to the methodology

and the area of study followed. In a similar study by Bae, K, Cha, B, and Cheung, Y

(1999) the researchers tried to show the information transmission mechanism that

operates for stocks which are dually listed. This has helped in understanding the

channel of transmission of information that makes the exchanges dependant on each

other.

PROBLEM

Presently, the fluctuations in the Indian market are attributed heavily to cross border

capital flows in the form of FDI, FII and to reaction of Indian market to global market

cues. In this context, understanding the relationship and influence of various

exchanges on each other is very important. This study that compares global exchanges

5
which are from different geopolitico-socio-economic areas. With the cross border

movements of capital like never before in the form of FDI and FII, coupled with the

easing of restrictions bringing various stock exchanges at par in terms of system and

regulations, it can be assumed reasonably that a particular stock exchange will have

some impact on other exchanges.

MARKET CAPITALIZATION

Market capitalization is the measure of corporate size of a country. It shows the

current stock price multiplied by the number of outstanding shares. It is commonly

referred to as Market cap. It is calculated by multiplying the number of common

shares with the current price of those shares. This term is often confused with

capitalization, which is the total amount of funds used to finance a firm's balance

sheet and is calculated as market capitalization plus debt (book or market value) plus

preferred stock. While there are no strong definitions for market cap categorizations, a

few terms are frequently used to group companies based on its capitalization. The

table below shows the market capitalization of various stock markets in the world.

LISTED SECURITIES

Listing in a stock exchange refers to the admission of the securities of the company

for trade dealings in a recognized stock exchange. The securities may be of any public

limited company, Central or State Government, quasi-governmental and other

financial institutions/corporations, municipalities, etc. Securities of any company are

listed in a stock exchange to provide liquidity to the securities, to mobilize savings

and to protect the interests of the investors. India has the highest number of

companies listed in the stock market. Out of this, about 75 % of the companies are

listed with the Bombay Stock Exchange. After India, United States has the highest

number of companies listed.

6
CIRCUIT FILTERS

Stock Markets have the dubious reputation of crashing without a warning taking with

the savings of numerous investors. A stock market crash is a sudden dramatic decline

of stock prices across a significant cross-section of a market. Crashes are driven by

panic as much as by underlying economic factors. They often follow speculative stock

market bubbles such as the dot-com bubble. The study is restricted to the performance

of the Indian Stock market, Japan, Hong Kong, Korean, Russian and the New York

Stock exchanges. Hence we will be concentrating on the Asian Financial Crisis, Dot-

Com Bubble, and the Russian Financial Crisis etc. As a counter measure to the

instability of the stock market, various measures were introduced by to avoid huge

losses. One such solution is circuit breakers. Circuit Breakers are “a point at which a

stock market will stop trading for a period of time in response to substantial drops in

value.”(11) They are also referred to as trading curb is certain stock markets like

DJIA and NYSE. This was first introduced after Black Monday. Black Monday is the

name given to Monday, October 19, 1987, when the Dow Jones Industrial Average

(DJIA) fell 22.6%.(12). This was done with an aim to avert panic in the market and to

avoid panic selling. The Circuit Filters operate according to the rules and

requirements of the stock Market in question.

7
PRICE RELATIONSHIP

Correlation is a numerical summary measure that indicates the strength of

relationships between the pairs of variables. A correlation is very useful but it has its

limitations. That is, it can only measure the strength of a linear relationship. The

numerator of the above formula is also a measure of association between two

variables X and Y which is called the covariance between X and Y. Similar to

correlation, a covariance is a single number that measures the strength of the linear

relationship between the two variables. It is by looking at the sign of the correlation or

the covariance, i.e. positive or negative, that we can tell whether the two variables are

positively or negatively related. Therefore the correlation is better because, unlike the

covariance, the correlations are not affected by the units in which the variables are

measured. All the correlations are between +1 and -1, inclusive. The sign determines

whether the relationship is positive or negative. The strength of the relationship is

measured by the absolute value or the magnitude of the correlation. The closer it is to

+1 the stronger the relationship is and the closer to zero indicates that there is

practically no linear relationship. At the extreme a correlation equal to1 -1 or +1

occurs only when the linear relationship is perfect. In this part the price data of the

various exchanges are collected and subjected to a correlation test in order to find out

the influence that they have on each other. In other words, an effort has been made to

gain insight into how far the price movements of the exchanges are related with one

another.

8
BSE- BOMBAY STOCK EXCHANGE

Established in 1875, BSE Ltd. (formerly known as Bombay Stock Exchange Ltd.),

isAsia’s first Stock Exchange and one of India’s leading exchange groups. Over the

past137 years, BSE has facilitated the growth of the Indian corporate sector by

providing it anefficient capital-raising platform. BSE’s popular equity index – the

S&P BSE SENSEX –is India’s most widely tracked stock market benchmark

index. More than 5000companies are listed on BSE making it world’s No. 1

exchange in terms of listedmembers. The companies listed on BSE Ltd command a

total market capitalization ofUSD 1.32 Trillion as of January 2013. It is also one of

the world’s leading exchanges (3rdlargest in December 2012) for Index options

trading (source: world federation ofexchange). BSE also provides a host of

other services to capital market participantsincluding risk management, clearing,

settlement, market data services and education. Ithas a global reach with customers

around the world and a nation-wide presence. BSEsystems and processes are designed

to safeguard market integrity, drive the growth of theIndian capital market and

stimulate innovation and competition across all marketsegments. BSE is the first

exchange in India and second in the world to obtain an ISO9001:2000

certification.The Bombay Stock Exchange is the oldest exchange in India. It traces its

history to 1855,when four Gujarati and one Parsi stockbroker would gather under

banyan trees in front ofMumbai’s Town Hall. The location of these meetings

changed many times, as thenumber of brokers constantly increased. The group

eventually moved to Dalal Street in1874 and in 1875 became an official organization

known as ‘The Native Share & StockBrokers Association’. In 1958, the BSE became

the first stock exchange to be recognizedby the Indian Government under the

Securities Contracts Regulation Act. In 1980 theexchange moved to the Phiroze

9
Jeejeebhoy Towers at Dalal Street, Fort area. In 1986 itdeveloped the BSE SENSEX

index, giving the BSE a means to measure overall Performance of the exchange. In

2000 the BSE used this index to open its derivativesmarket, trading SENSEX futures

contracts. The development of SENSEX options alongwith equity derivatives

followed in 2001 and 2002, expanding the BSE’s tradingplatform. Historically

an open outcry floor trading exchange, the Bombay StockExchange

switched to an electronic trading system in 1995. It took the exchange onlyfifty days

to make this transition. This automated, screen-based trading platform calledBSE On-

line trading (BOLT) had a capacity of 8 million orders per day.

NSE – NATIONAL STOCK EXCHANGE

The National Stock Exchange (NSE) is the leading stock exchange in India

and thefourth largest in the world by equity trading volume in 2015, according

to WorldFederation of Exchanges (WFE).It began operations in 1994 and is ranked

as the largeststock exchange in India in terms of total and average daily turnover for

equity sharesevery year since 1995, based on annual reports of SEBI.NSE launched

electronic screen-based trading in 1994, derivatives trading (in the form ofindex

futures) and internet trading in 2000, which were each the first of its kind in

India.NSE has a fully-integrated business model comprising our exchange listings,

tradingservices, clearing and settlement services, indices, market data feeds,

technologysolutions and financial education offerings. NSE also oversees compliance

by trading andclearing members and listed companies with the rules and regulations

of the exchange.NSE is a pioneer in technology and ensures the reliability and

performance of its systemsthrough a culture of innovation and investment in

technology. NSE believes that the scaleand breadth of its products and services,

sustained leadership positions across multipleasset classes in India and globally

10
enable it to be highly reactive to market demands andchanges and deliver innovation

in both trading and non-trading businesses to providehigh-quality data and services to

market participants and clients.Mr. Ashok Chawla is the Chairman of the Board of

Directors of NSE and Mr. VikramLimaye is the Managing Director and CEO of NSE.

HONG KONG STOCK EXCHANGE

Hang Seng Indices Company Limited (Hang Seng Index), a wholly –owned

subsidiary ofHang Seng Bank, was established in 1984 and is Hong Kong’s leading

index compilercovering Hong Kong and mainland China markets. Hang Seng Index’s

calculates andmanages the Hang Seng Family of Indexes. Starting in 1969 with

the creation of theHang Seng Index, now widely recognized as the barometer of

the Hong Kong stockmarket, Hang Seng Index has been at the forefront of the market,

developing numerousmarket measures to help investors make their investment

decisions. Indexes in the HangSeng Family of Indexes are grouped into five

categories – Flagship Indexes, BenchmarkIndexes, Thematic Indexes, Strategy

Indexes and Bond Indexes – then classified asHong Kong-listed, Cross-market or

Mainland-listed according to where theirconstituents are listed. Currently, the Hang

Seng Family of Indexes comprises over 300real-time and daily indexes. Going

forward, Hang Seng Indexes will continue tobroaden its index series to meet the

widening spectrum of investor demand for indexinvestment solutions.The Hong Kong

stock exchange is the 8th largest stock exchange in the world in terms ofMarket

capitalization. The Hang Sang Index (HIS), was started on November 24, 1969.The

Russian stock exchange was established in 1995 by consolidating the

separateregional stock exchanges into one uniformly regulated trading floor.

11
The trading day consists of.

 Pre-opening auction session from 9:00 am to 9:30 am. The opening price of

asecurity is reported shortly after 9:20 am.

 A morning continuous trading session from 09:30 am to 12:00 pm

 An extended morning session from 12:00 noon to 1:00 pm, also referred to as

thelunch break. Continuous trading proceeds in specifically-designated

securities(currently two ETFs, 4362 and 4363). Trading in other securities is not

possible.However, previously-placed orders in any securities can be cancelled

from 1:00pm onwards

 An afternoon continuous trading session from 1:00 pm to 4:00 pm.

The history of the securities exchange began formally in the late 19th century with

thefirst establishment in 1891, though informal securities exchanges are known to

have beenin existence since 1861. The exchange has predominantly been the main

exchange forHong Kong despite co-existing with other exchanges at different points

in time. After aseries of complex mergers and acquisitions, in the twenty first century,

HKSE remainsthe core. From 1947 to 1969 the exchange 7monopolized the Hong

Kong market.

12
NEW YORK STOCK EXCHANGE- NYSE

The origin of the New York Stock Exchange (NYSE) is dated back to May 17,

1792,when the Buttonwood Agreement was signed by twenty-four stock brokers

outside of 68Wall Street in New York under a buttonwood tree. Also called the “Big

Board”, it is the largest stock exchange in the world in terms of dollar volume and

second largest in terms of number of companies listed. The New York Stock

Exchange (NYSE), sometimes known as the “Big Board” is a stock exchange located

at 11 Wall Street, Lower Manhattan, New York City, New York, United States. It is

by far the world’s largest stock exchange by market capitalization of its listed

companies at US$16.613 trillion as of May 2013. Average daily trading value was

approximately US$153 billion in 2008.The NYSE trading floor is located at 11 Wall

Street and is composed of four rooms used for the facilitation of trading. A fifth

trading room, located at 30 Broad Street, was closed in February 2007. The main

building, located at 18 Broad Street, between the corners of Wall Street and Exchange

Place, was designated a National Historic Landmark in 1978, as was the 11 Wall

Street building. The NYSE is operated by NYSE Euronext (NYSE: NYX), which

was formed by the NYSE’s 2007 merger with the fully electronic stock exchange

Euro next. In December2012, it was announced that the company would be sold to

Intercontinental Exchange(ICE), a futures exchange headquartered in Atlanta,

Georgia, The United States, for $8 Billion, a figure that is significantly less than

the $11 billion bid for the company tendered in 2011.

13
TOKYO STOCK EXCHANGE

The TSE is incorporated as a kabushiki gaisha with nine directors, four auditors and

eight executive officers. Its headquarters are located at 2-1 Nihonbashi-

Kabutochō Chūō, Tokyo, or “Kabuto-chō”, which is the largest financial district in

Japan. Its operating hours are from 8:00 to 11:30 a.m., and from 12:30 to 5:00 p.m.

From April 24, 2006, the afternoon trading session started at its usual time of 12:30

p.m. Stocks listed on the TSE are separated into the First Section for large

companies, the Second Section for mid-sized companies, and the Mothers

(Market of the high-growth and emerging stocks) section for high-growth startup

companies. As of October31, 2010, there are 1,675 First Section companies, 437

Second Section companies and182 Mothers companies. The main indices tracking

the TSE are the Nikkei 225 index of companies selected by the Nihon

Keizai Shimbun (Japan’s largest business newspaper), the TOPIX index based on the

share prices of First Section companies, and the J30 index of large industrial

companies maintained by Japan’s major broadsheet newspapers.

Ninety-four domestic and 10 foreign securities companies participate in TSE

trading. Other TSE-related institutions include:

 The exchange’s press club, called the Kabuto Club which meets on the third floor

ofthe TSE building. Most Kabuto Club members are affiliated with the Nihon

KeizaiShimbun, Kyodo News , Jiji Press , or business television

broadcasters suchas Bloomberg LP and CNBC. The Kabuto Club is generally

busiest during April andMay, when public companies release their annual

accounts.

On 15 June 2007, the TSE paid $303 million to acquire a 4.99% stake in

SingaporeExchange Ltd.

14
KOREA STOCK EXCHANGE

It was created by the integration of the three existing of the Korean Spots and Future

sex changes (Korean stock exchange, Korean futures exchange & KOSDAQ) under

the Korea Stock and Futures Exchange Act.3.5.The Korea Exchange was created

through the integration of Korea Stock Exchange, Korea Futures Exchange and

KOSDAQ Stock Market under the Korea Stock & Futures Exchange Act. The

securities and derivatives markets of former exchanges are now business

divisions of Korea Exchange: the Stock Market Division, KOSDAQ Market Division

and Derivatives Market Division. As of January 2015, Korea Exchange had2,030

listed companies with a combined market capitalization of $1.2 trillion. Sustainable

Stock Exchanges the exchange has normal trading sessions from 09:00 am to 03:30

pm on all days of the week except Saturdays, Sundays and holidays declared

by the Exchange in advance. On 22 May 2015, The Korea Exchange joined the

United Nations Sustainable Stock Exchanges initiative in an event with the UN-SG

Ban Ki-moon in attendance, as well as senior officials from UN Global Compact

and UNCTAD. The names of the countries and the names of the indices of those

countries have been used interchangeably. Thus, the names of the countries

represent the indices for the purpose of analysis and they need to be interpreted

that way. Again, all the analyses have been done with the closing prices. The

following table gives the country and the exchange with the name of its indices.

15
The stock market refers to the collection of markets and exchanges where regular

activities of buying, selling, and issuance of shares of publicly-held companies take

place. Such financial activities are conducted through institutionalized formal

exchanges or over-thecounter (OTC) marketplaces which operate under a defined set

of regulations. There can be multiple stock trading venues in a country or a region

which allow transactions in stocks and other forms of securities. The stock market or

equity market and is primarily known for trading stocks/equities, other financial

securities - like exchange traded funds (ETF), corporate bonds and derivatives based

on stocks, commodities, currencies, and bonds - are also traded in the stock markets.

While both terms - stock market and stock exchange - are used interchangeably, the

latter term is generally a subset of the former. If one says that she trades in the stock

market, it means that she buys and sells shares/equities on one (or more) of the stock

exchange(s) that are part of the overall stock market. The leading stock exchanges in

the U.S. include the New York Stock Exchange (NYSE), Nasdaq, and the Chicago

Board Options Exchange (CBOE). These leading national exchanges, along with

several other exchanges operating in the country, form the stock market of the U.S.

Stock market is a place where people buy/sell shares of publicly listed companies. It

offers a platform to facilitate seamless exchange of shares. In simple terms, if A wants

to sell shares of Reliance Industries, the stock market will help him to meet the seller

who is willing to buy Reliance Industries. However, it is important to note that a

person can trade in the stock market only through a registered intermediary known as

a stock broker. The buying and selling of shares take place through electronic

medium. We will discuss more about the stock brokers at a later point. There are two

main stock exchanges in India where majority of the trades take place - Bombay

Stock Exchange (BSE) and the National Stock Exchange (NSE). Apart from these

16
two exchanges, there are some other regional stock exchanges like Bangalore Stock

Exchange, Madras Stock Exchange etc but these exchanges do not play a meaningful

role anymore. In recent years, globalization and information technology revolution

has a tremendous impact on the structure of financial markets with quick discount of

information and the substantial deregulation and harmonization which led to

increasing free flow of capital across markets that has fostered integration. The

linkages between the stock markets of the world are increasing over the years due the

effect of globalization. The speed of Global integration and the intensification of

international economic linkages among nations are high and are bound to increase in

the coming years. Internationalization of trade and finance, interdependence among

countries and policy changes among nations to suit the world order is the norm of the

day. The process of internationalization results in a greater stock of foreign factors of

production within countries inviting more foreign investment, technology and

technology experts. The financial markets around the world have expanded beyond

boundaries with money moving from one country to another in form of loans, FDI

(Foreign Direct Investment), FPI (Foreign Portfolio Investments) etc. The

international linkage of national money and capital markets has also grown rapidly

with the removal or relaxation of restrictions on financial flows across national

borders, deregulation of financial institutions and international financial innovations.

Technological growth has made a great impact on the growth and development of the

markets, where an investor can view the prices of currencies and stock prices twenty

four hours a day. Tremendous changes have taken place in the way companies operate

due to pressures from global competition. Companies worldwide are consolidating

their operations, moving to other countries to find and tap new markets, or to achieve

economies of scale. Since the 1980s, emerging stock markets have been widely seen

17
as the most exciting and promising area for investment, especially because they are

expected to generate high returns and to offer good portfolio diversification

opportunities. Consequently, these markets are having a considerable expansion.

Indeed, financial liberalization has been largely implemented in several emerging

countries through on-going structural adjustment programs. As a prerequisite to the

financial liberalization processes, stabilization policies have been designed to ensure

macroeconomic stability, low inflation and reduced budget deficits. The economic

growth rate and the export growth rate of the developing economies have been

significantly higher than those of the developed economies and this trend is expected

to continue in the future. It is expected that the global economic share of the

developing countries will increase and they will play an increasingly important role in

international business. A number of developing countries are now among major

exporter of the world. Some developing countries, including India, also have large

foreign exchange reserve. The increasing attractiveness of the developing countries

capital market is also reflected in their faster market capitalization. All these indicate

the growing importance of developing countries in the globalizing world economy.

STOCK MARKET COINTEGRATION

The present study examines the cointegration of the emerging RIC (Russia, India and

China) stock markets and selected Developed Stock Markets (US, UK, Japan and

Singapore). The study of the existence of stock market interlinkages among

international capital markets has serious implications on determining the extent of

portfolio diversification as well as macroeconomic policies of individual countries.

Investors prefer to hold securities from a variety of firms because such diversification

reduces portfolio risk, similarly, investors who buy shares in foreign as well as

domestic companies seek to avoid some market risk and earn returns through global

18
diversification. Diversification is rewarding since stock indices of different countries

are affected by different factors and hence need not always move in the same

direction, or be perfectly correlated. In the recent years we can see that capital

markets in Asia have become the main destination for many investors to invest their

money. International capital market relationships, not only have implications for

portfolio diversification, but also have important implications on how economic

policy changes can be initiated at the national level for different countries which will

have a bearing on foreign trade and there by the foreign exchanges balances of a

country. In a country like India, where the stock market is undergoing significant

transformation with the liberalization measures from the past decades, there are also

concerns regarding its exposure to risk in case of a global/ regional crisis, i.e. a need

to know how far a depression or crisis in another market can affect the Indian stock

market in a more and more globally integrated environment. Hence, the analysis of

the nature of co-movements or long term dependencies with other developed and

regional emerging markets would not only give an idea of the of possible gains out of

portfolio diversification to be reaped from the Indian market but also may give some

indication of the vulnerability of the country‘s stock market in case of a regional

crisis. The liberalization of Indian capital market has led to more integration of Indian

markets with other stock markets of the world. We see money moving in and out of

our markets through various options like FII‘s, ADR‘s and GDR‘s. The present study

tries to determine the degree to which there is integration between the new regional

trade bloc RIC (Russia, Indian & China) stock market and selected developed stock

markets across the world and also special emphasis is also laid on the factor such as to

which stock market Indian stock market reacts or co integrates much. Since Indian

capital market is one among the emerging stock markets of the world, there is enough

19
curiosity among researchers to identify the extent of its cointegration with other

leading stock markets of the world. Investments through the FII route is a key

integrating factor for markets as the flow of funds into the market depends on the

foreign institutional investors‘ perception about the domestic stock market and about

alternative markets, at different points of time. It is shifting of funds between foreign

markets that lead to a kind of long term relationship among markets.

INTRODUCTION TO EMERGING MARKETS

The development of emerging markets as a distinctive investment category is

relatively recent (Fifield et al; 1998). For example, in the early 1970‘s, Robert

McNamara, President of the World Bank, established the International Finance

Corporation (IFC) in order to promote the establishment of financial markets

particularly in developing countries. The major focus of the IFC was to channel

resources more efficiently into companies listed on the exchanges of developing

countries. Because of this IFC focus, interest in developing countries among

institutional investors increased in the late 1980‘s (Mobius, 1994).

NATIONAL STOCK EXCHANGE (NSE)

NSE is the leading stock exchange in India where one can buy/sell shares of publicly

listed companies. It was established in the year 1992 and is located in Mumbai. NSE

has a flagship index named as NIFTY50. The index comprises of the top 50

companies based on its trading volume and market capitalisation. This index is widely

used by investors in India as well as globally as the barometer of the Indian capital oil

markets. The term ‗emerging market‘ initially appeared in the literature around 1981.

The first listed fund in this category was the Templeton Emerging Markets fund

which was established in 1987 and was managed by Mark Mobius. Mobius (1994)

reported that until 1987, although the term ‗emerging market‘ existed, there was no

20
precise definition that was used to classify markets as emerging. The first

development in this regard was the IFC definition which classified countries

according to their income status, based on the World Bank‘s classification of low-,

middle- and high-income economies. According to the IFC definition, stock markets

in countries with low and middle income per capita were considered to be ‗emerging‘

(Mobius, 1994). The first problem with this definition was that exceptions arose. For

example, the high income oil-producing countries of Kuwait, Saudi Arabia and the

United Arab Emirates were excluded from the developing market grouping. These

countries had relatively high per capita income, but this income was concentrated in

the hands of a few individuals. Hence, the living standards of the general masses were

not the same as those in the developed countries of the world such as the UK and the

US. Second, the capital markets in these oil-rich countries were not very developed;

trading volumes were low, liquidity was poor and security dealing was slow with little

or no technology employed in the process (Al-Abdulqader, 2007). Third, many of

these high-income under-developed countries placed restrictions on the inflow and

outflow of capital to and from their stock markets. In addition, their taxation policies

sometimes treated foreigners less favourably than domestic investors (Mobius, 1994).

As a result, Mobius (1994) put forward his own definition of an emerging market. In

particular, he defined a market to be ‗emerging‘ if it was not located in North

America or the EAFE (Europe, Australia, and the Far East Countries). Furthermore,

he argued that the emerging market should have the following characteristics: (i) a

wellfunctioning stock exchange; (ii) a supply of securities available for foreign

investors; and (iii) no restrictions on the flow of capital to and from the country.

According to Errunza (1983) the term emerging markets subsumes three categories of

financial markets. The first category is that of the old established markets, including

21
the Argentina, Brazil, Chile, Greece, India, Mexico, Spain, Portugal and Zimbabwe

(formally Rhodesia); exchanges date back more than a century but only played a

minor role in raising equity capital for corporate investment. The second category of

emerging markets was those established due to special situations. For example, the

stock market in Jordan was established to absorb the OPEC money due to turmoil in

the Middle Eastern markets. The third category of emerging markets included the new

markets of Korea and the Philippines, which were organised to speed up economic

growth in these countries. Although this classification provides no distinct definition

of an emerging market, it provides a guide as to the financial markets that the term

‗emerging markets‘ may embrace (Fifield et al., 1998). Divecha et al. (1992) adopted

an alternative definition of an emerging market from the practitioner perspective that

was employed by Mobius (1994). They considered an emerging market as one where:

(i) there is a market for the trading of securities; (ii) the country in which it is located

is not developed according to the Morgan Stanley Capital International Indices

(MSCI) list or Financial Times Indices; (iii) the market is accessible for investment by

foreign investors; and (iv) the market has a reliable source of data. This definition

therefore adopts both an academic and a practitioner‘s perspective on what constitutes

an emerging market; the academic component, which focuses on the stage of

development of the country, is tempered by the practical consideration of whether

investment is possible.

22
CONSTRUCTIVE CHANGES AND BASIC IMPROVEMENTS IN

EMERGING MARKETS:

Emerging markets have experienced some fundamental improvements and policy

changes that are responsible for their improved economic performance in recent years.

Some of these include:

RISING PRODUCTIVITY LEVELS:

A number of emerging markets have introduced and continued the economic reforms

of liberalization, privatization and globalization (LPG) that have brought about a high

degree of labour efficiency and productivity. There is a distinct improvement in

industrial capabilities in these countries and coupled with availability of low cost

labour, emerging economies have shown increased productivity levels. Several global

companies have also established themselves in emerging economy countries on

account of low-cost labour advantage. Standard wages in emerging economies is

seven times lower than wages in developed economies. The entry of foreign players in

these economies has further increased the level of competition in domestic markets

thereby forcing the domestic player‘s to improve their performance & efficiency.

POPULATION DEMOGRAPHICS:

Around 85% of world's population resides in emerging market nations. Therefore,

there is no shortage of labour in these economies. For instance we can take the

emerging countries like India and China, which regarded as world‘s highest populous

countries which are currently reaping the advantage of skilled labour force in fueling

their economic growth. Besides, the high population coupled with rising income

levels constitute substantial current and future demand for goods and services

produced in these economies giving boost to their economic growth.

23
TRADE SURPLUS AND FALLING INTEREST RATES

During 1997-98 many emerging market economies witnessed high levels of

indebtedness and the trade balance had swung to nearly $80 billion deficit in the

context of Asian Financial Crisis. Today these economies have experienced a trend

reversal with similar amount of trade surplus. The improved trade surplus has further

reduced the short-term interest rates in emerging economies. Most of the emerging

Asian and Eastern European companies have already moved to or are moving towards

adopting international accounting standards (IAS). This has attracted greater attention

of global investors on account of improved transparencies.

INDIAN ECONOMY

India is set to become the world‘s fastest-growing major economy by 2016 ahead of

China, the International Monetary Fund (IMF) said in its recent latest forecast. India

is expected to grow at 6.3 per cent in 2015, and 6.5 per cent in 2016 by when it is

likely to cross China's projected growth rate, the IMF said in the latest update of its

World Economic Outlook. India's macro-economic prospects have strengthened and

the country is best positioned among emerging market economies, gaining global

investor's attention, says a report by ICICI Bank. The improvement in India‘s

economic fundamentals has accelerated in FY2015 with the combined impact of a

strong Government mandate, RBI's inflation focus supported by compassionate global

commodity prices. The Economy of India is the tenth largest in the world by nominal

GDP and the fourth largest by purchasing power parity (PPP). Following strong

economic reforms from the post-independence socialist economy, the country's

economic growth progressed at a rapid pace, as free market principles were initiated

in 1991 for international competition and foreign investment. Social democratic

policies governed India's economy from 1947 to 1991. The economy was

24
characterised by extensive regulation, protectionism, public ownership, pervasive

corruption and slow growth. Since 1991, continuing economic liberalisation has

moved the country towards a market-based economy. A revival of economic reforms

and better economic policy in first decade of the 21st century accelerated India's

economic growth rate. In recent years, Indian cities have continued to liberalise

business regulations. By 2008, India had established itself as the world's second-

fastest growing major economy. However, as a result of the financial crisis of 2007–

2010, coupled with a poor monsoon, India's gross domestic product (GDP) growth

rate significantly slowed to 6.7% in 2008–09, but subsequently recovered to 7.2% in

2009–10 and at present the growth is around 7% (2013-14). India's consumer price

inflation has ranged between 8.9 to 12% over the 2009-2013 periods. The

government, engineering an economic rebound with a slew of reforms, has unveiled a

new statistical method to calculate the national income with a broader framework that

turned up a pleasant surprise: GDP in the past year 2013-14 grew 6.9 per cent instead

of the earlier 4.7 per cent. The revision in base year of India's national accounts will

increase the size of the economy to Rs 111.7 trillion (US$ 1.8 trillion) in FY14,

according to India Ratings. The size of the Indian economy was at about Rs 93.89

trillion (US$ 1.51 trillion) in 2012-13.Also, Capital Economics (CE), an independent

macro-economic research company, released its India Watch research report recently,

cataloguing its interpretation and expectations on the upcoming Budget 2015. It sees

Indian economy expanding by 5.5 per cent in 2015, owing to the fall in crude oil

prices and interest rates.

25
CHAPTER - II
COMPANY
PROFILE

26
 Chapter – 2

COMPANY PROFILE

COMPANY PROFILE

27
CHAPTER - III
LITERATURE
REVIEW

28
 Chapter – 3

LITERATURE REVIEW

LITERATURE REVIEW

This chapter deals about review of various studies related to comparison of

differentstock market studies. The research gap of this study was found out by

conducting adetailed literature review of studies in different countries during the

recent years.

DEBJBAN MUKHARJEE, T.A. PAI MANAGEMENT INSTITUTE

MANIPAL INDIA.

He found that the popular belief that the markets in general and Indian market

inparticular is more integrated with other global exchanges from 2002-03 onwards.

Thiscan very well be seen since the South Asian crisis of the mid- late nineties barely

affectedus particularly because we were insulated due to government policies

and was justmaking the transition. However, in the later time periods, the influence

of other stockmarkets increased on our BSE or NSE, but at a very low almost

insignificant level.

DR. VIJAY AGARWAL, ASSOCIATE PROFESSOR, BIT MESRA

They found that the correlation of stock returns of India with five other Asian

countries.There exists a very weak correlation between the Indian markets and

Hong Kong,Indonesia, Malaysia and Japan. Comparatively higher correlation was

found between theIndian and the Korean markets, which seemed to have weakened in

the short run. Henceit can be said that the Indian markets offer diversification

benefits to internationalinvestors looking for investment in the Asia Pacific

29
region. . Indian markets alsodelivered the highest compounded annual growth rate

in stock market returns, both in theshort as well as long run.

Poshakwale, Sunil examined the random walk hypothesis in the emerging Indian

stockmarket by testing for the nonlinear dependence using a large disaggregated daily

datafrom the Indian stock market. The sample used was 38 actively traded stocks in

the BSENational Index. He found that the daily returns from the Indian market do not

conform toa random walk. Daily returns from most individual stocks and the

equally weightedportfolio exhibit significant non-linear dependence. This is largely

consistent with Previous research that has shown evidence of non-linear dependence

in returns from thestock market indexes and individual stocks in the US and the UK.

Noor, Azuddin Yakob,Diana Beal and Delpachitra,

Sarath studied the stock

market seasonality in
terms of day-of-the-
week, month-of-the
year, monthly and
holiday effects in ten
Asian stock markets,
namely, Australia, China,
30
Hong Kong, Japan, India,
Indonesia, Malaysia,
Singapore, South Korea
and Taiwan. He
concluded that the
existence of seasonality
in stock markets and also
suggested that this is
a global phenomenon.
Sarath studied the stock market seasonality in terms of day-of-the-week, month-of-

theyear, monthly and holiday effects in ten Asian stock markets, namely, Australia,

China,Hong Kong, Japan, India, Indonesia, Malaysia, Singapore, South Korea and

Taiwan. Heconcluded that the existence of seasonality in stock markets and also

suggested that this isa global phenomenon.

Pandey and Kumar found co movement of Indian markets with eight other key

stockexchanges in Asia for the period from 2000 to 2008.They found that the period

wasmarked with high volatility among all markets under study.

Raju and Ghosh found that skewness and kurtosis is less in Indian market stock

returnsas compared to other countries. They also said that there was a need for a

31
study onvolatility in Indian stock markets after 2000 to see whether changes in

marketmicrostructure have resulted in changes in volatility pattern and facilitating

internationalcomparison of volatility.

Hiard (1997) and

Asimakopoulos
investigated the
interrelationship
between daily
returns generated by
major stock exchanges.
Evidence found that
strong interdependence
exists between the daily
returns generated by
United States and other
selected major
32
world indices.
Hiard (1997) and Asimakopoulos investigated the interrelationship between

dailyreturns generated by major stock exchanges. Evidence found that strong

interdependenceexists between the daily returns generated by United States and

other selected majorworld indices.

Cohen, Ness, Okuda, Schwartz and Whitcomb worked on The Determinants

ofCommon Stock Returns Volatility: An International Comparison” They studied the

issueof thinness is of interest for a number of reasons. They found that the most

obvious rechanges in the fundamental determinants of share price and of a firms

business andfinancial risk. They attempted to account for this by distinguishing

between randomtraders included demand shifts and demand shifts induced by the

receipt of new andgenerally available information concerning a stock’s value. They

also studied the Differences in trading arrangements might explain some of the

volatility differencesespecially internationally.

Varma Venkiteswaran explored the relationship of the Indian stock markets as

reflectedby the Bombay Stock Exchange Index, vis-a-vis other prominent

international stockmarkets. Twenty three international stock indices are used over the

period 1983-87. Heconcluded that there was practically no meaningful relationship

between the BSE indexand other international stock market indices, though the British

and South Korean indicesare inversely related to BSE.

Mayya made an overview of the Indian capital market. He examined various aspects

ofIndian Capital Market. The study emphasized the need for modernization

andcomputerization for providing liquid and efficient market. His study reveals that

33
thoughIndian stock market has attained a remarkable degree of growth in last one

decade, buthas still to go a long way.

Venkateshwar explored the relationships of the Indian stock markets as reflected by

theBombay Stock Exchange Index, vis-a-vis other prominent international stock

markets. 23international Stock indices are used over the period.

Raghunathan and Varma point out that any comparison of the Indian stock market

withthat elsewhere must be carried out on a common currency base. They find that in

dollarterms, the SENSEX return over the 1960-92 period is only about 0.5%, while

during thesame period the returns in the U.S. (based on the S & P Index) and the

Japanese (basedon the NIKEI index) are 6.1% and 11.4% per year respectively. Over

the twelve yearperiod 1980-92, the dollar returns for SENSEX, S & P and NIKEI

indices turn out to be6.5%, 10.65% and 13.6% respectively. For a shorter span of

seven years, namely 1985-92, the returns for the three indices turn out to be quite

comparable at 15%, 13% and 14%respectively.

Gupta in his book concluded that an Indian stock market is highly speculative.

Indianinvestors are dissatisfied with the service provided to them by the brokers.

Margins leviedby the stock exchanges are inadequate and liquidity in a large number

of stocks in Indianmarkets is very low. While evidently a careful work, the conclusion

except about margin System by the stock exchanges are adequate and other two

options built on wrong orquestionable arguments. Concluded that, a) Indian stock

market is highly speculative; b)Indian investors are dissatisfied with the service

provided to them by the brokers; c)margins levied by the stock exchanges are

inadequate and d) liquidity in a large numberof stocks in the Indian markets is very

low. While evidently a painstaking work, theconclusions except ‘c’ above seem to be

built on wrong or questionable arguments.

34
35
Chaplin sky and Hansen suggest that the indifferent stock market reaction is partly

onaccount of market expectation of debt issues. They find significant negative stock

pricereaction to debt issue announcement after controlling for market expectations.

However,the fall in price in case of debt issue announcements has been found to be

lower than thatof fall in the case of stock issue offerings.

McLaughlin, Safieddine and Vasudevan analyze the operating performance

ofseasoned equity offerings of a large sample of 1,296 firms listed on the New York

StockExchange (NYSE), American Stock Exchange (AMEX), and NASDAQ

that raisedcapital through subsequent offerings during the period 1980 - 1991. They

also analyzedthe determinants of subsequent performance and the factors influencing

the decision toissue equity. The study revealed that the SEO firms had a

significant increase inoperating performance prior to the issue and that they register

a considerable decline inprofitability in post-offering period. This research is the

examination of the long-runoperating performance of a large sample of straight-

debt issuing firms, whichcomplements previous large-sample studies of firms

making seasoned equity offerings(SEOs). Moreover they compared the information

effects for debt and equity issuers aftercontrolling for other factors associated with

changes in issuer operating performance.

Masih and Masih examined the dynamic linkage patterns among national

stockexchange prices of four Asian newly industrializing countries - Taiwan, South

Korea,Singapore and Hong Kong. The sample used comprised end-of-the month

closing shareprice indices of the four NIC stock markets from January 1982 to

June 1994. Theyconcluded that the study of these markets is not mutually exclusive of

each other andsignificant short run linkages appear to run among them. The

patterns of dynamiclinkages are examined among national stock prices of four Asian

36
Newly Industrializing Countries stock markets - Taiwan, South Korea, Singapore and

Hong Kong - in modelsincorporating the established markets of Japan, USA, UK and

Germany had been studied.

Shamsuddin and Kim researched on Integration and interdependence of stock

andforeign exchange markets: an Australian perspective. They studied the integration

of theAustralian stock market with its two leading trading partners, the US and

Japan. Ininvestigating the extent of integration, the study considered the

interdependence betweenforeign exchange rates and stock prices, since exchange

rates influence internationalcompetitiveness of firms, and, via interest rates, the cost

of capital. The results indicatedthat there was a stable long-run relationship among

the Australian, US and Japanesemarkets prior to the Asian crisis but that this

relationship disappeared in the post-Asiancrisis period.

Yakob, Beal and Delpachitra examined seasonal effects in ten Asian

Pacific stockmarkets, including the Indian stock market, for the period January 2000

to March 2005.They state that this is a period of stability and is therefore ideal for

examining seasonalityas it was not influenced by the Asian financial crisis of the late

nineties. Yakob, et al.,concluded that the Indian stock market exhibited a month-

of-the-year effect in thatstatistically significant negative returns were found in

March and April whereasstatistically significant positive returns were found in May,

November and December.

Somaiya researched on Scientific Management of Small Investors Protection in the

NewMillennium with Reference to India; Challenges and Opportunities (1991-2011).

He hasdone a tremendous work in the field of Indian stock exchanges. This doctoral

thesis isdivided into two volumes. He included the study of history of stock

exchanges,fluctuations in stock market, investors’ risk and protection means,

37
investors’ complaintsand their solutions, stock market scams, role of banks,

regulatory frame work and muchmore. Ex-prime minister of India Atal Bihari

Bajpai and Prime Minister ManmohanSingh have appreciated this work.

SEPARATION AND COMBINATION (OR) INTEGRATION

DYNAMICS OF STOCK MARKETS

Market places are said to be separated when their returns are not affected by factors

other than domestic factors. Separation can also be termed as segmentation.

Therefore, events occurring in international markets do not impact the returns in

segmented markets because of which they offer different return for the same unit of

risk borne. The risk of such portfolio is therefore only its variance. Emerging markets

are perceived to offer higher rate of return compared to developed markets for the

same unit of risk borne by investors in the two markets. On the other hand markets are

said to be integrated if events occurring in other markets impact the returns in

domestic markets. The focus of attention here therefore is contribution of integrated

market to the risk of global portfolio; in other words its covariance. In such case

international diversification of portfolio may not yield suitable risk adjusted returns to

investors because of foreign influences. In fact in integrated market setting assets of

identical risk command same expected returns irrespective of their domicile. The

studies on stock market integration are numerous and available for developed as well

as emerging stock markets. Among the first studies to analyse integration was by

Taylor and Tonks (1989), Chan et al. (1992) and Arshanapali and Doukas (1993);

these studies employed the Engle and Granger two-step procedure of cointegration

(Engle and Granger, 1987) and examined integration among a pair of markets in a

bivariate system. Kasa (1992) was the first to use a multivariate system to investigate

whether stock market prices were cointegrated. He investigated the long-run

38
relationship among stock market indices for the US, Canada, Germany, Japan and the

UK. He found a single common factor which drove the five markets into equilibrium

in the long-run. Recent studies have focused on regional blocs of markets such as the

European Union (EU), the Association of South East Asian Nations (ASEAN) and the

area covered by the North American Free Trade Agreement (NAFTA). They have

documented that integration among these markets increased after the establishment of

the trading blocs. For example, Phengpis and Apilado (2004) found that the stock

markets of the European Economic and Monetary Union (EMU) countries were more

strongly integrated as compared to their Non-EMU counterparts. The authors argued

that economic ties among the countries contributed to the integration of these

countries stock markets. Using daily, weekly and monthly data covering both the pre-

and postNAFTA periods, Aggarwal and Kyaw (2005) concurred with this view. They

examined the NAFTA countries of Canada, Mexico and the US for the period 1988-

2001. Their results indicated that the markets were cointegrated in the post-NAFTA

period only. More recently, click and Plummer (2005) analyzed stock market

integration among the ASEAN countries. Using daily and weekly data over the period

from July 1998 to December 2002, they estimated a total of 15 VAR models for

different currencies, data frequencies and lag orders. Their results were consistent for

all models, and indicated that a single cointegrating vector was present irrespective of

the model specification employed. One issue with their analysis was the time period

studied; only four and a half years of data were tested. Any analysis of long-run

equilibrium relationships probably requires a longer time period (Aggarwal and

Kyaw, 2005).

39
DYNAMIC CO-MOVEMENT AMONG DEVELOPED COUNTRY

STOCK MARKETS

Arshanapalli B and Doukas J (1993) use bivariate cointegration to examine the

changes of dynamic interactions among international stock market indices. They

showed that there was no interdependence between US and international stock

markets prior to October 1987 crash. However, except for the Nikkei, the

comovements of stock prices increased significantly after the crash period. At the

same time evidence of unidirectional causality from the US to French, German and

the UK stock markets was documented. They attributed these findings to the

loosening of financial deregulation after the crisis. David (1994) in his working paper

studied the market linkages using Cointegration rank test with special application to

the US Natural Gas Industry. Likelihood based tests for cointegration was applied to

data from natural gas spot markets. The Johansen method was used to study the

spatial market linkages. The results indicated that the natural gas spot markets at

dispersed locations in the pipeline network are strongly connected. Out of 19 market

pairs examined, most of the market pairs (13) satisfied more stringent condition for

perfect market integration. Chan, Benton and Min (1997) conducted a study on

integration of stock markets by including 18 nations covering a 32 year period. These

markets were analysed both separately and collectively in regions to test for the weak

form market efficiency. The cross country market efficiency is tested by using

Johansen‘s cointegration test. The results showed that only small number of stock

markets shown evidence of cointegration with others. Cheung Y and Lai K (1998)

explores the potential existence and sources of longterm co-movements of stock

markets among three major member countries of the European Monetary System

(EMS), namely, France, Germany and Italy. The empirical study employs Gonzalo

40
and Granger's (1995) analysis of common permanent components, which permits a

decomposition of the dynamics of a multivariate system into permanent and transitory

components and allows for longterm co-movement analysis between sub-systems

under a cointegration framework. For a system or subsystem of variables, its long-run

behaviour is governed by a relatively small set of common permanent components.

These permanent components represent the underlying forces driving long-term co-

movements among the variables. By obtaining common permanent components in

different subsystems of variables, researchers can analyse whether there are long-term

co-movements within individual variable groups and whether the co-movements of a

specific group of variables can in turn blinked to those of others. In this study, the

authors investigate the potential linkage between the common permanent components

in four groups of variables, those of stock prices, the money supply, dividends, and

industrial production of three EMS countries. Using monthly Morgan Stanley Capital

International (MSCI) market indexes, covering the period from April 1979 through

June 1992, and macroeconomic factor data Cheung and Lai provide empirical results

that show that the stock markets in these countries display long-term co-movements.

The results also suggest the presence of two common permanent components driving

the long-run dynamics of these stock markets. It‘s found that although part of the

long-term co-movements of stock prices can be attributed to those co-movements of

several macro-economic variables (especially for the post-1987 period), the

explanatory power of the latter is far from strong. Nonetheless, the results confirm at

least a limited role of these macroeconomic variables in accounting for the relative

stock market movements among the three EMS countries. Wang C (1999) provides

empirical evidence on the systematic biases in international equity market correlations

based on different holding periods and establishes an analytical framework to correct

41
those biases. Wang et. al. Shows that average 18- country correlations tend to increase

with holding periods on the short end and decrease with holding periods over multiple

years. Correlations are usually the highest for three-month holding periods and much

lower for 1-day and 1-week holding periods on the short end and two- and three-year

holding periods on the long end. Correlations of long holding periods are low due to

the long-term mean-reversion of security prices. This term structure of correlations is

observed in the 18 developed equity markets, the G4 and G7 equity markets, and the

U.S. large cap and small cap indices. Connolly R and Wang F (1999) examine the

cross-market equity return and volatility linkages for the U.S., U.K., and Japan. They

investigate the extent to which these linkages can be explained by macroeconomic

news announcements in the three countries, including money supply, industrial

production, price inflation, unemployment rate, and trade deficit during the 1985-

1996 period. Specifically, using daily data for the sample period January 1, 1985

through December 31, 1996 and generalized standard GARCH conditional volatility

model the study models the impact of macroeconomic news announcements on daily

close-to-open and open-toclose mean returns, volatility, and co-variances among the

U.S., Japan, and the U.K. The U.S. economic news variables include money supply,

industrial production, consumer price inflation, wholesale price inflation, and the

merchandise trade balance. For U.K. Macroeconomic news announcements for the

U.K. are money supply, retail price inflation, industrial production, and the

unemployment rate while for Japan the variables include monthly announced value of

Japanese industrial production, money supply, consumer price inflation, and

wholesale price inflation. The results show that each domestic market's open-to-close

and close-to-open returns are significantly linked to the open-to-close returns of the

two previous foreign markets, even after controlling for the effect of economic news

42
announcements. Furthermore, the asymmetric return spill over patterns among the

three national stock markets persists in the study. Specifically, in the open-to-close

return series, the impact of the S&P500 on the Nikkei225 returns is five times the

impact of the Nikkei225 on the S&P500 Likewise, the impact of the FTSE100 on the

Nikkei225 is about three times the impact of the Nikkei225 on the FTSE100. Finally,

the impact of the FTSE100 on the S&P500 is ten times the size of the S&P500's effect

on the FTSE100 index return. In addition, they find little evidence that economic

news announcements in the three countries have systematic, independent effects on

the return process in any of the three national stock markets. The results also indicate

that some individual and mostly domestic, economic news announcements

significantly affect the size of return spill over‘s between markets. For example, U.S.

money supply news announcements significantly increase the size of the return spill

over from the Nikkei225 into S&P500, while significantly reduces the size of the

return spillover from the FTSE100. Thus, they conclude that while economic news

announcements by themselves do not directly affect the return process in each

national stock market, they play an important role in explaining the variation in the

return spillovers between markets. Bala and Mukund (2001) in their study examined

the nature and extent of linkage between the US and the Indian stock markets. They

used the theory cointegration to study the interdependence between the Bombay stock

exchange (BSE), the NYSE and NASDAQ. The data consisted of daily closing prices

for the three indices from January1991 through December 1999. The results supported

that the Indian stock market was not affected by the movements in US markets for the

entire sample period. Chiang K and Leonhard C (2002) use Volatility Decomposition

Method [Campbell, Lettau, Mandel, and Xu (2001)] to study the variance composition

of 18 major national indices of developed markets of Asia, Europe, US, UK and

43
Canada over the period 1974-2001. They find that over the sample period country-

specific volatility has increased and, accordingly, the benefits of international

diversification have remained substantial. They also find evidence in second moments

of returns suggesting that international equity markets, as a whole, have not been

more financially integrated over the sample. However, promoting economic

integration is not without financial implications. By focusing on 10 European Union

country indices, the study concludes that the benefits of regional diversification within

the EU have shrunk and the financial links among EU member states have been

considerably strengthen over the sample period. Rigobon (2002) Explanatory

variables include the intensity of trade relations, the degree of financial integration,

and the nature of the exchange rate regime. The study concludes that trade and

financial integration contribute positively to synchronization, while a fixed exchange

rate regime increases co-movements, in particular when the institutional mechanism

underlying the regime is mutual. Other factors such as the similarity of economic

structure across countries, informational asymmetries and a common language also

contribute to stock market synchronization. Hardouvelis G, Malliaropulos D and

Priestley R (2002) examine whether or not the convergence of European economies

towards Economic and Monetary Union (EMU) and the launch of the single currency

leads to an increase in stock market integration through a reduction in investment

barriers. Besides they investigate whether or not the influence of country-specific risk

factors on required returns has decreased in favour of EU-wide factors. The data set

include weekly, Deutschemarkdenominated, dividend adjusted and continuously

compounded stock returns based on Friday closing prices on the eleven Countries and

excess currency returns calculated as the continuously compounded difference in the

one-month Euro currency interest rates between a given country and Germany,

44
adjusted for the rate of depreciation visa-vis the Deutschemark. The study using

estimated Conditional Asset Pricing Model concludes that in the context of models of

partial integration, the reduction in investment barriers leads to an increase in cross-

border equity holdings, thus, decreasing home equity bias. The authors find that for a

given country, stock market integration is expected to be higher, the higher the

probability of the country joining EMU and the closer the calendar date to the time of

launch of the single currency, as restrictions on holding foreign assets become less

binding. This in turn leads to an increase in cross-border equity holdings, increasing

the relative weight of EU-wide risk in required returns. The authors discovered that in

the 1990s the degree of integration of local markets with the EU market is negatively

associated over time with the forward interest rate differential vis-à-vis Germany.

When this interest rate differential shrinks in 1997 and 1998, the markets converge

towards full integration, that is, expected returns are increasingly determined by EU-

wide market risk and less by local risk. Premaratne G (2003) ascertained the degree

and nature of volatility Co-movement between Singapore's stock market with those of

US, UK, Japan and Hong-Kong between 1992 and 2002 using time variant

unconditional correlation coefficients. The outcome of the study was that all the

displayed significant correlation coefficients showed that the effect of shocks took a

longer time to dissipate. Besides that, the impact of bad news did tend to have a larger

effect on Singapore stock market compared to other markets. Singapore and Hong-

Kong were shown to have stronger linkages. Also, Singapore market responded to

shock from Hong-Kong constantly and the effect lasted for approximately 3 days. In

contrast, the Singapore market's response to other markets was only for a day and

became insignificant thereafter. Hong-Kong and the US market influenced the

Singapore stock market very strongly and UK did not show any influence. Lastly it

45
was shown that there were small but significant volatility pullovers from Singapore to

Hong-Kong, Japan and the US markets. These findings are significant as they differ

from the usual belief that the spill over effects is significant from the dominant market

to the smaller market. Yang J, Min I and Li Q (2003) examines the possible impact of

the Economic and Monetary Union (EMU) on stock market linkages. Their study

allows for inference on international market integration from three different

perspectives: contemporaneous (based on return innovations), the short-run (using

Generalized VAR and impulse response analysis) and the long-run (by comparing

cointegration relations among the eleven European stock markets and the US in two

different periods: before and after EMU) and further explores the possible different

market behaviours between large and small stock markets. The data used in this study

consist of the daily stock index closing price of ten EMU countries, the UK and US.

Specifically, they include Germany, France, Italy, Netherlands, Austria, Belgium,

Finland, Ireland, Portugal, Spain, the UK and the US. They conclude that most EMU

stock markets are more integrated with large EMU countries after the EMU was

implemented. The impulse response analysis further confirms that each of the large

EMU stock markets (Germany, France, Italy and the Netherlands) became more

integrated with other large EMU markets in the short run after the EMU launched. For

example, the German stock market explains the error variance of the French stock

market much more significantly in post EMU period (6.1% in pre EMU period vs.

12.2%in post EMU period at day 20). On the other hand the three smallest EMU

markets (Austria, Belgium and Ireland) became more isolated from other EMU

markets after the EMU launched. In respect of such small markets the findings further

suggests that after controlling for macroeconomic environments, only too small a

market size may give rise to the concern of market liquidity and become an obstacle

46
for active participation of international investors. By following Pesaran and Shin

(1996) methodology of cointegrating vector analysis, the study concludes that

European stock markets as a whole are more integrated in the long run in period after

EMU as deviations from equilibrium are shorter lived. Interestingly, it is also found

that the EMU markets seem to be less integrated with the UK after establishment of

the EMU, which provides indirect positive evidence for significant impact of the

EMU on European stock market integration.

47
CHAPTER - IV
OBJECTIVES OF
THE STUDY

48
 Chapter – 4

OBJECTIVES OF THE STUDY

OBJECTIVES OF THE STUDY

 To understand functions of stock exchanges.

 To compare & contrast of Indian stock exchange with selected International

stockexchanges with respect to market capitalization and number of listed

securities.

 To compare listing agreement & circuit filters applicable in selected

internationalstock exchange and Indian stock exchange.

 To study of trading mechanism of Indian stock exchange and International

stockexchange.

49
CHAPTER - V
RESEARCH
METHODOLOGY

50
 Chapter – 5

RESEARCH METHODOLOGY

RESEARCH METHODOLOGY

Research Design:
The main objective of
this study is to capture
the trends, similarities
and patterns in the
activities and movements
of the Indian Stock
Market in comparison to
U.S. The aim is to
help the investors
(current and potential)
51
understand the impact of
important happenings
on the Indian Stock
exchange. This is
especially relevant in the
current scenario when the
financial markets across
the globe are getting
integrated into one big
market and the
impact of one exchange
on the other exchanges.
RESEARCH DESIGN:

The main objective of this study is to capture the trends, similarities and patterns in

theactivities and movements of the Indian Stock Market in comparison to U.S. The

aim is tohelp the investors (current and potential) understand the impact of important

happeningson the Indian Stock exchange. This is especially relevant in the current

52
scenario when thefinancial markets across the globe are getting integrated into one big

market and theimpact of one exchange on the other exchanges.

53
CHAPTER - VI
DATA ANALYSIS
&
INTERPRETATION

54
 Chapter – 6

Data Analysis and Interpretation

55
CHAPTER - VII
FINDINGS

56
 Chapter – 7

Findings

FINDINGS

 Due to covid-19 pandemic, Sensex lost 3,934.72 points (13.15%) to 25, 981.24

and Nifty lost 1,135 points (12.98%) to 7610.25.

 The biggest stock market crashes in India were caused mainly due to covid19

pandemic, 2008 financial crisis, Harshad Mehta scam.

 Nifty has less risk and higher liquidity than Sensex. Nifty suffer lower market

impact cost than Sensex.

 Covid-19, strong correlation with the trends and indices of the global market as

BSE Sensex and Nifty 50 fell by 38%. The total market cap lost a staggering

27.3% from the start of the year.

 Pre covid-19, market capitalisation on each major exchange in India was about

$2.6 trillion. The Sensex returned around 14% for the year 2019 prominently

featured blue chip companies such as HDTV bank, TCS, Infosys, Reliance, ICICI,

without which Sensex return would have been negative.

 Despite a population of over 1.2 billon, there exist only 20 million active trading

accounts in India.

 The banking sector have maximum risk and return of 1.9 and 10 respectively

ICICI in automobile sector Eicher motor have maximum return of 35.9 Ashok

Leyland have maximum risk of 1.9 IT sectors have maximum return of 17.7 and

maximum risk of Oracle of 6.6 and in fast moving consumer goods sector, Godrej

have maximum return of 14.8 and highest risk in ITC of 0.5.

57
CHAPTER - VII
LIMITATIONS OF
THE STUDY

58
 Chapter – 7

LIMITATIONS OF THE STUDY

LIMITATIONS OF THE STUDY

 Scope of the study is to understand the difference between the selected

international stock exchange and Indian stock exchange.

 This study is based on Historical and secondary data which leads to variation

inpresent and previous scenario

 This study is limited to selected stock exchanges.

 This study is purely based on secondary data and the qualitative approach is

usedfor the study.

59
CHAPTER - VIII
SUGGESTIONS
AND
RECOMMENDATIONS

60
 Chapter-8

Suggestions and Recommendations

SUGGESTIONS AND RECOMMENDATIONS

 To generate increased interest and awareness about the various other segments

ofthe market so that we can expect the operations to match its global counterparts

interms of volumes, frequency and variety of instruments traded.

 Market capitalization can increase through modification of listing agreements

forIndian stock exchange

 Listing of foreign companies should allow without establishment of

subsidieswith the consideration of increase market capitalization.

 There should be more focus on increase in market capitalization and

investmentawareness in India.

 FII considers measure factor by government where it can be increase of

marketcapitalization through Indian investors.

 Strategy to attract FII can be more profitable if it attracts foreign players to

getlisted in Indian Stock Exchange.

61
CHAPTER - IX
CONCLUSION

62
 Chapter-9
Conclusion

CONCLUSION

The comparison showed that Indian stock exchange has the governance system and

anefficient mechanism in place to be a world class institute, especially the

requirements ofClause 49 promulgated by SEBI and the advanced trading and

settlement mechanism ofNSE, respectively. However, unfortunately our

implementation of the same remains aproblem area with almost 15-20% of the listed

companies yet to align their operations asrequired under the law.Moreover, there are

also issues regarding the extent to which the sophisticated systems ofthe stock

exchanges (NSE, BSE) are utilized in terms of the volume and frequency

oftransactions and the range of instruments traded.One more reason that can be

attributed for the lag between a global benchmark likeNYSE and BSE or NSE

can be the fact that, in our country, listing of foreign companiesare still not allowed

fully companies with subsidies lunched in India can list for same.This can be due to

lack of depth and breadth of the market. the listing criteria differ interms of size as

well as their disclosure norms. This implies that the depth of the marketjudged by

the total capitalization is less for the Indian markets compared to

itscounterparts. Moreover, the disclosure norms affect the governance aspect as also

theinformation availability.One problem area that came out as a possible barrier in the

path of Indian stockexchanges attaining global level is the fact that India has a very

low rank in terms ofmarket capitalization NSE 10th and BSE 12th. All other stock

exchanges that we usedin our study rank above Indian stock exchange. This is in spite

63
of the fact that Indianstock exchanges have the highest number of companies listed

and BSE accounting foralmost 75%. Therefore, volume-wise, Indian market is still

pretty small.

64
BIBLIOGRAPHY

65
 BIBLIOGRAPHY

BIBLIOGRAPHY

BOOKS REFERRED

 Great Lakes Herald – April 2007 Volume 1, Issue 1 by Great Lakes Institute of

Management, Chennai

 Becker, K, Finery, J., & Gupta, M. (1990): ‘the Intertemporal Relation between

the US and Japanese Stock Markets’, Journal of Finance, 45, 1297-1306.

 IRACST – International Journal of Commerce, Business and Management

(IJCBM),ISSN: 2319–2828 Vol. 4, No .1, February 2015

WEBSITES

www.bseindia.com
www.nse-india.com
www.ebsco.com
www.tse.or.jp/english/index.shtm
www.hkex.com.hk/
www.krx.co.kr/webeng/index.jsp
www.tse.or.jp/english/index.shtml
www.nyse.com
www.rts.ru
www.kse.or.kr

66
ANNEXURE

67
 QUESTIONNAIRE

NAME:

68